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In re Application for Disciplinary Action against Lee

Supreme Court of North Dakota

August 29, 2013

In the Matter of the Application for Disciplinary Action against Ervin J. Lee, a Member of the Bar of the State of North Dakota Disciplinary Board of the Supreme Court of the State of North Dakota, Petitioner
v.
Ervin J. Lee, Respondent

Paul W. Jacobson, for petitioner.

Ronald H. McLean (argued) and Ian McLean (appeared), for respondent.

APPLICATION FOR DISCIPLINARY ACTION

PER CURIAM.

[¶ 1] Disciplinary Counsel objected to a report of a hearing panel of the Disciplinary Board that concluded Ervin Lee had violated N.D.R. Prof. Conduct 1.5(b) and (c) and 1.15(a), (d), and (e), and that recommended Lee be suspended from the practice of law for 60 days and pay the costs of the disciplinary proceeding in the amount of $7, 147.51. We conclude there is clear and convincing evidence Lee violated N.D.R. Prof. Conduct 1.5(b) and (c) and 1.15(a), (d), and (e), but there is not clear and convincing evidence Lee violated N.D.R. Prof. Conduct 1.5(a) or N.D.R. Lawyer Discipl. 1.2A(2) or (3). We order Lee be suspended from the practice of law for 60 days and pay the costs of the disciplinary proceeding in the amount of $7, 147.51.

I

[¶ 2] In 2008, Wilbur Wilkinson hired Lee to represent him in litigation arising from Wilkinson's involvement in oil and gas ventures. Wilkinson and Lee were acquaintances and had worked together in the past. The parties agreed to a 10 percent contingent fee, but the fee agreement was not reduced to writing.

[¶ 3] The litigation was complex, involving numerous parties and multiple actions in federal, state, and tribal courts in Texas and North Dakota. A final judgment had been entered against Wilkinson in Texas for more than $1.4 million. In addition, Wilkinson had entered into a 50 percent contingent fee agreement with his prior attorney, and attorney's liens had been filed. Lee represented Wilkinson for more than two years, and estimated he spent between 800 and 1, 000 hours on the case.

[¶ 4] The numerous parties to the oil and gas litigation eventually entered into a global settlement of all disputes. As part of the settlement, Lee secured agreements that the $1.4 million Texas judgment against Wilkinson would not be enforced; Wilkinson would receive a bonus payment of $140, 000; Wilkinson would receive.5 percent of an overriding royalty interest on production from certain oil and gas wells; and Wilkinson's prior attorney would waive his 50 percent contingent fee and release the attorney's liens. The final settlement agreement expressly provided that 10 percent of the $140, 000 bonus payment would be paid directly to Lee and that 10 percent of Wilkinson's share of the overriding royalty interest would be assigned to Lee.

[¶ 5] Lee received a wire transfer of the $140, 000 settlement payment into his trust account. He immediately withdrew $14, 000 by check. He began withdrawing additional amounts from the settlement balance, and eventually withdrew the full $140, 000. The parties dispute whether Lee told Wilkinson he had received the settlement payment, and Lee claims Wilkinson expressly agreed to let him keep the entire $140, 000 as payment toward his fee.

[¶ 6] After a dispute arose over Lee's handling of the settlement proceeds, Lee provided a written calculation of the fees to which he claimed he was entitled. Lee claimed the parties had agreed Lee would be entitled to 10 percent of any monetary benefit Wilkinson received from the representation, and Lee included the value of the $1.4 million judgment against Wilkinson, which was effectively voided by the settlement agreement, as a monetary benefit when calculating his contingent fee. Lee thus claimed his contingent fee and expenses totaled more than $160, 000, and allowed him to retain the entire $140, 000 settlement payment toward satisfaction of the fees owed by Wilkinson.

[¶ 7] Wilkinson subsequently filed a disciplinary complaint against Lee. Disciplinary Counsel filed a petition for discipline alleging Lee had violated N.D.R. Prof. Conduct 1.5(a) and (b) (charging an unreasonable fee and failing to communicate to the client the basis, rate, or amount of the fee); N.D.R. Prof. Conduct 1.5(c) (failing to put a contingent fee agreement in writing); N.D.R. Prof. Conduct 1.15(a), (d), and (e) (failure to hold property of a client separate from the lawyer's property, failure to notify the client of funds received, and failure to keep disputed property separate); N.D.R. Prof. Conduct 8.4(b) and N.D.R. Lawyer Discipl. 1.2A(2) (committing a criminal act reflecting adversely on the lawyer's honesty, trustworthiness, or fitness as a lawyer); and N.D.R. Prof. Conduct 8.4(c) and N.D.R. Lawyer Discipl. 1.2A(3) (engaging in conduct involving dishonesty, fraud, deceit, or misrepresentation). The hearing panel found that Lee had violated N.D.R. Prof. Conduct 1.5(b) and (c) and 1.15(a), (d), and (e), by failing to properly communicate with the client, failing to put the contingent fee agreement in writing, and failing to provide notice of receipt and safekeeping of the client's property. The hearing panel found Lee had not charged an unreasonable fee or engaged in a criminal act or in conduct involving dishonesty, fraud, deceit, or misrepresentation, and therefore had not violated N.D.R. Prof. Conduct 1.5(a), 8.4(b), or 8.4(c), or N.D.R. Lawyer Discipl. 1.2A(2) or (3). The hearing panel recommended Lee be suspended from the practice of law for 60 days and be ordered to pay the costs of the disciplinary proceeding in the amount of $7, 147.51.

[¶ 8] Under N.D.R. Lawyer Discipl. 3.1F(2), Disciplinary Counsel has objected to the report of the hearing panel, alleging the fee charged by Lee was unreasonable, the record established that Lee committed a criminal act and engaged in conduct involving dishonesty, fraud, deceit, or misrepresentation, and the appropriate sanction was disbarment or a long period of suspension.

II

[¶ 9] We have summarized our standard of review in disciplinary proceedings:

This Court reviews disciplinary proceedings de novo on the record. Disciplinary counsel must prove each alleged violation by clear and convincing evidence, which means the trier of fact must be reasonably satisfied with the facts the evidence tends to prove and thus be led to a firm belief or conviction. The evidence need not be undisputed to be clear and convincing. We give due weight to the findings, conclusions, and recommendations of the Disciplinary Board, but we do not act as a mere rubber stamp for the Board. To decide which sanction, if any, is appropriate, each disciplinary matter must be considered on its own facts.
Because the hearing panel has the opportunity to hear witnesses and observe their demeanor, we accord special deference to the panel's findings on matters of conflicting evidence. Similarly, we defer to the hearing panel's findings on the credibility of a witness, because the hearing panel has the opportunity to observe the witness's demeanor and hear the witness testify.

Disciplinary Board v. Stensland, 2011 ND 110, ¶ 10, 799 N.W.2d 341 (quoting Disciplinary Board v. Askew, 2010 ND 7, ¶¶ 8-9, 776 N.W.2d 816).

III

[¶ 10] The hearing panel found that Lee's failure to put the contingent fee agreement in writing, his failure to immediately notify Wilkinson of receipt of the $140, 000 settlement proceeds, and his handling of the settlement proceeds after they were received violated N.D.R. Prof. Conduct 1.5(b) and (c) and 1.15(a), (d), and (e). The parties have not objected to or otherwise challenged these findings of fact and conclusions of law of the hearing panel. We have reviewed the record and find that Lee's conduct violated N.D.R. Prof. Conduct 1.5(b) and (c) and 1.15(a), (d), and (e).

IV

[¶ 11] Disciplinary Counsel contends Lee charged an unreasonable fee in violation of N.D.R. Prof. Conduct 1.5(a), which provides:

(a) A lawyer shall not make an agreement for, charge, or collect an unreasonable fee or an unreasonable amount for expenses. The factors to be considered in determining the reasonableness of a fee include the following:
(1) the time and labor required, the novelty and difficulty of the questions involved, and the skill requisite to ...

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