Opinion
THE COURT.
The State Bar Court recommends that petitioner, Eugene Grossman, be disciplined for conduct involving the violation of a written retainer agreement with a client. Specifically, the State Bar urges that petitioner be suspended from the practice of law for one year, that his suspension be stayed and that petitioner be placed on conditional probation for one year.
This court concurs in the State Bar’s recommendation.
I.
On October 1, 1981, the State Bar filed a notice to show cause charging petitioner with violating his oath and duties as an attorney at law (Bus. &
Prof. Code, §§ 6067, 6068, 6103), wilfully violating rule 8-101
of the Rules of Professional Conduct and committing acts involving moral turpitude and dishonesty (Bus. & Prof. Code, § 6106).
The notice alleged two counts of unprofessional conduct. One was subsequently dismissed and is not at issue in this proceeding. In the remaining count, the State Bar charged that petitioner breached the terms of a written retainer agreement with client Mary Y. and misappropriated client’s funds for his own use. The notice alleged that after negotiating a settlement in Ms. Y.’s lawsuit, petitioner unilaterally determined the amount of his attorney fee. This amount was larger than the sum authorized by the terms of the agreement. Petitioner then withdrew the fee from the settlement funds.
II.
Petitioner was admitted to the State Bar in 1970. He has one prior incident of discipline on his record, a public reproval in 1981.
In late July of 1977, petitioner was retained by Mary Y. to represent her in a personal injury action. Ms. Y. had suffered injuries in an automobile accident earlier that month. She signed a written “Retainer for Legal Services” authorizing petitioner and his associate to prosecute any legal action she might have arising from the accident.
The agreement provided that “ [a]s compensation for their services, Attorneys are to receive Thirty-Three and One-Third Per Cent (33-1/3%) of all amounts received by compromise, provided that the action is settled at least thirty (30) days prior to the original trial date, and Forty Per Cent (40%) of all amounts received thereafter, whether by settlement or judgment.” The agreement also included a proviso granting the attorneys a lien against any sums recovered by Ms. Y. The lien covered attorney fees and any costs advanced on behalf of the client.
Approximately two years later, petitioner notified Ms. Y. by letter that he had received a settlement offer for the “maximum” amount of the other party’s insurance policy—$15,000. Petitioner advised her to accept the offer since it represented the maximum insurance coverage available and, in the event of an excess judgment, the other party “would not be able to pay the overage.” In a telephone conversation with petitioner, Ms. Y. stated that she was concerned with the amount of the settlement because she owed her daughter and son-in-law $1,500. Petitioner replied that “we will make [the settlement] sixteen five and we will set up a date to meet, and we will both sign.” Later Ms. Y. authorized petitioner to settle the case for $16,500. The settlement occurred more than 30 days before the original trial date. When petitioner received the settlement funds he signed his client’s name to the draft without Ms. Y.’s authorization and deposited the monies in his trust account. He did not immediately report receipt of the funds to Ms. Y.
During the next several months, petitioner made disbursements from the settlement funds to Ms. Y. and, at her direction, utilized the funds to pay off several thousand dollars in bills she owed to creditors. On January 30, 1980, Ms. Y. wrote to petitioner, asking him to contact her “regarding settling everything.” Petitioner responded four days later with a handwritten accounting of disbursements from the settlement funds and a check for the balance remaining in the account. The accounting indicated that petitioner had retained $6,600, or 40 percent of the settlement amount, as legal fees.
The accounting rendered by petitioner was the first indication to Ms. Y. that 40 percent of the settlement funds had been deducted as attorney fees.
Ms. Y. contacted petitioner’s associate, who assured her that, if the agreement provided for a fee of 33 Vá percent, only such a fee would be charged. However, on February 7, 1980, petitioner wrote to Ms. Y. indicating that he felt the 40 percent fee was fair. The letter did not directly address the provision regarding attorney fees in the retainer agreement. Rather, petitioner indicated that it was “very common in the personal injury fiel [sm] for attorneys to charge 40 percent once suit is filed . . . .’’He then listed several items of service which he alleged had been performed at no cost to Ms. Y., implying that some of the services were “over and above” those “normal[ly] expected.” In conclusion, petitioner asserted that “we feel entirely justified in taking the normal fee.”
III.
As petitioner concedes, it is well settled that under a fixed fee contract, an attorney may not take compensation over the fixed fee without the client’s consent to a renegotiated fee agreement. This is true even if the work becomes more onerous than originally anticipated.
(Reynolds
v.
Sorosis Fruit Co.
(1901) 133 Cal. 625 [66 P. 21];
Baldie
v.
Bank of America
(1950) 97 Cal.App.2d 70 [217 P.2d 111].) It is undisputed here that no such additional fee agreement was obtained by petitioner.
Nevertheless, petitioner contends that he did not intentionally overcharge Ms. Y. because he was acting upon an “honest misunderstanding” as to the terms of the retainer contract. The credibility of this explanation is doubtful. -phe record contains no testimony by petitioner or any other witness that the fee overcharge was a “mistake.”
Indeed, the evidence belies this assertion.
Petitioner’s letter to Ms. Y. of February 7, 1980, sought to justify the 40 percent fee as fair compensation for services rendered. He claimed in the letter that the 40 percent fee was consistent with “normal” practice in personal injury actions. Furthermore, the letter indicated that he had performed several additional services in the case without cost to his client. Thus, it appears that the 40 percent fee was not based on an “honest mistake” concerning the terms of the retainer agreement but on a deliberate, unilateral determination that such a fee was fair payment for petitioner’s services.
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Opinion
THE COURT.
The State Bar Court recommends that petitioner, Eugene Grossman, be disciplined for conduct involving the violation of a written retainer agreement with a client. Specifically, the State Bar urges that petitioner be suspended from the practice of law for one year, that his suspension be stayed and that petitioner be placed on conditional probation for one year.
This court concurs in the State Bar’s recommendation.
I.
On October 1, 1981, the State Bar filed a notice to show cause charging petitioner with violating his oath and duties as an attorney at law (Bus. &
Prof. Code, §§ 6067, 6068, 6103), wilfully violating rule 8-101
of the Rules of Professional Conduct and committing acts involving moral turpitude and dishonesty (Bus. & Prof. Code, § 6106).
The notice alleged two counts of unprofessional conduct. One was subsequently dismissed and is not at issue in this proceeding. In the remaining count, the State Bar charged that petitioner breached the terms of a written retainer agreement with client Mary Y. and misappropriated client’s funds for his own use. The notice alleged that after negotiating a settlement in Ms. Y.’s lawsuit, petitioner unilaterally determined the amount of his attorney fee. This amount was larger than the sum authorized by the terms of the agreement. Petitioner then withdrew the fee from the settlement funds.
II.
Petitioner was admitted to the State Bar in 1970. He has one prior incident of discipline on his record, a public reproval in 1981.
In late July of 1977, petitioner was retained by Mary Y. to represent her in a personal injury action. Ms. Y. had suffered injuries in an automobile accident earlier that month. She signed a written “Retainer for Legal Services” authorizing petitioner and his associate to prosecute any legal action she might have arising from the accident.
The agreement provided that “ [a]s compensation for their services, Attorneys are to receive Thirty-Three and One-Third Per Cent (33-1/3%) of all amounts received by compromise, provided that the action is settled at least thirty (30) days prior to the original trial date, and Forty Per Cent (40%) of all amounts received thereafter, whether by settlement or judgment.” The agreement also included a proviso granting the attorneys a lien against any sums recovered by Ms. Y. The lien covered attorney fees and any costs advanced on behalf of the client.
Approximately two years later, petitioner notified Ms. Y. by letter that he had received a settlement offer for the “maximum” amount of the other party’s insurance policy—$15,000. Petitioner advised her to accept the offer since it represented the maximum insurance coverage available and, in the event of an excess judgment, the other party “would not be able to pay the overage.” In a telephone conversation with petitioner, Ms. Y. stated that she was concerned with the amount of the settlement because she owed her daughter and son-in-law $1,500. Petitioner replied that “we will make [the settlement] sixteen five and we will set up a date to meet, and we will both sign.” Later Ms. Y. authorized petitioner to settle the case for $16,500. The settlement occurred more than 30 days before the original trial date. When petitioner received the settlement funds he signed his client’s name to the draft without Ms. Y.’s authorization and deposited the monies in his trust account. He did not immediately report receipt of the funds to Ms. Y.
During the next several months, petitioner made disbursements from the settlement funds to Ms. Y. and, at her direction, utilized the funds to pay off several thousand dollars in bills she owed to creditors. On January 30, 1980, Ms. Y. wrote to petitioner, asking him to contact her “regarding settling everything.” Petitioner responded four days later with a handwritten accounting of disbursements from the settlement funds and a check for the balance remaining in the account. The accounting indicated that petitioner had retained $6,600, or 40 percent of the settlement amount, as legal fees.
The accounting rendered by petitioner was the first indication to Ms. Y. that 40 percent of the settlement funds had been deducted as attorney fees.
Ms. Y. contacted petitioner’s associate, who assured her that, if the agreement provided for a fee of 33 Vá percent, only such a fee would be charged. However, on February 7, 1980, petitioner wrote to Ms. Y. indicating that he felt the 40 percent fee was fair. The letter did not directly address the provision regarding attorney fees in the retainer agreement. Rather, petitioner indicated that it was “very common in the personal injury fiel [sm] for attorneys to charge 40 percent once suit is filed . . . .’’He then listed several items of service which he alleged had been performed at no cost to Ms. Y., implying that some of the services were “over and above” those “normal[ly] expected.” In conclusion, petitioner asserted that “we feel entirely justified in taking the normal fee.”
III.
As petitioner concedes, it is well settled that under a fixed fee contract, an attorney may not take compensation over the fixed fee without the client’s consent to a renegotiated fee agreement. This is true even if the work becomes more onerous than originally anticipated.
(Reynolds
v.
Sorosis Fruit Co.
(1901) 133 Cal. 625 [66 P. 21];
Baldie
v.
Bank of America
(1950) 97 Cal.App.2d 70 [217 P.2d 111].) It is undisputed here that no such additional fee agreement was obtained by petitioner.
Nevertheless, petitioner contends that he did not intentionally overcharge Ms. Y. because he was acting upon an “honest misunderstanding” as to the terms of the retainer contract. The credibility of this explanation is doubtful. -phe record contains no testimony by petitioner or any other witness that the fee overcharge was a “mistake.”
Indeed, the evidence belies this assertion.
Petitioner’s letter to Ms. Y. of February 7, 1980, sought to justify the 40 percent fee as fair compensation for services rendered. He claimed in the letter that the 40 percent fee was consistent with “normal” practice in personal injury actions. Furthermore, the letter indicated that he had performed several additional services in the case without cost to his client. Thus, it appears that the 40 percent fee was not based on an “honest mistake” concerning the terms of the retainer agreement but on a deliberate, unilateral determination that such a fee was fair payment for petitioner’s services.
Moreover, even if petitioner’s withholding of the 40 percent fee were an honest error, once his client called the mistake to his attention he should have complied with the terms of the agreement. Instead, petitioner refused to correct the error and attempted to justify the overcharge in the February 7 letter.
Petitioner also asserts that the discipline recommended by the State Bar is too severe. He claims that because of mitigating factors his misconduct warrants only public reproval.
Petitioner forgets, however, that misappropriation of a client’s funds is a most serious breach of the duties of professional conduct. “In the absence of extenuating circumstances, [such misconduct] may well warrant disbarment.”
(Doyle
v.
State Bar
(1982) 32 Cal.3d 12, 23 [184 Cal.Rptr. 720, 648 P.2d 942].)
In this case, the record reveals circumstances sufficiently extenuating to preclude petitioner’s disbarment. Among those factors are the following. At his client’s request, petitioner paid several thousand dollars over a number of months to his client’s creditors, without any dishonesty. In addition, petitioner faithfully made interim disbursements to his client at the times they were requested. While he did not report to his client upon the initial receipt of the settlement funds, petitioner did render a prompt and accurate accounting upon the request of his client. He made no effort to disguise the amount of the fee he had kept for himself. Indeed, the State Bar conceded in its opening remarks before the hearing panel that petitioner deposited the settlement funds in his trust account and, with the exception of the excessive fee he retained, managed them properly at all times.
However, the evidence in mitigation is not so extenuating that less severe discipline than that recommended by the State Bar is warranted. This is especially true in light of the fact that petitioner has a prior record of discipline and failed to make restitution to his client for the overcharge.
“In this court’s independent review of the evidence, the findings of the [hearing panel] and the [review department] are entitled to great weight . . . .”
(Goldman
v.
State Bar
(1977) 20 Cal.3d 130, 139 [141 Cal.Rptr. 447, 570 P.2d 463].) Here, petitioner does not credibly show that his conduct in unilaterally setting the 40 percent fee and misappropriating the difference between that amount and the agreed fee was anything other than wilful. This court concludes, therefore, that the findings of the State
Bar are supported by convincing evidence which establishes petitioner’s misconduct to a reasonable certainty.
In addition, in light of the entire record in this case, this court adopts the discipline recommended by both the hearing panel and the review department.
Accordingly, it is ordered that petitioner be suspended from the practice of law for one year, that execution of the suspension be stayed and that petitioner be placed on probation for a period of one year on the conditions enumerated in the written decision of the hearing panel, filed July 9, 1982.