Brief Of Office Of Disciplinary Counsel, Lawyer Disciplinary Board V .

passage ofthe bar exam on November 2,2005, and, as such, is subject. to the disciplinary jurisdictionofthe Supreme Court of Appeals of West Virginia and its properly constituted Lawyer DisciplinaryBoard.Prior to attending law school, Respondent held various jobs involving marketing. Afterearning an MBA, he operated a charter air service and flight school. After that he purchased a golfcourse. (Tr. Vol. II p. 33.) Respondent's first employment as a lawyer was with attorney Jan Dils,. who maintained a practice focused on representing social security claimants (Tr. Vol. II pp. 33-34.)Respondent received a base salary and bonuses. In 2007, Respondent grossed 172,820.48, with abase salary of 160,000.00. He expected to receive an increase in salary and bonuses in 2008. (Tr.Vol. II pp. 34; ODC Ex. 17, Bates 655.) Respondent signed an authorization allowing the firm todeposit Social Security Administration (SSA) fee award checks issued in his name directly in thefirm's operating account without his signature. (Tr. Vol. III pp. 88-90.)Attorney fees are highly regulated by the SSA. First, a claimant must complete a formappointing the attorney to act as representative. The SSA only accepts the name of one individualattorney per form; law firnls may not be named. See http://www.ssa.gov/online/ssa-1696.pdf. Theclient may sign a written contingent fee agreement with the attorney that charges 25% of past duebenefits up to a fixed dollar amount. During the pertinent time period, it was 5,300.00. The feeagreement must be submitted to the SSA prior to a favorable decision being rendered; otherwise, anattorney must submit a fee petition. If the fee is approved, the SSA, which withholds a certainamount from the past due benefits, will issue a check made payable in the name of theindividual attorney named as a representative.While working for Jan Dils' firm, Respondent ran into Steve Hastings, from the Charlestonlaw firm of Hendrickson & Long (H&L), who asked Respondent if he would refer personal injuryaOOS714S.WPD4

claims of his social security clients to H&L. Respondent referred one case and following thesuccessful resolution ofthat case, Mr. Hastings began discussing with Respondent about affiliatingwith Hendrickson & Long. (Tr. Vol. II pp. 35-37.) Respondent testified that he was not interestedin working for another law firm, but instead wanted to develop his own social security practice. Hetestified he made this clear to Mr. Hastings. (Tr. Vol. II pp. 38-39.) Therefore, despite contraryassertions by H&L, the Hearing Panel Subcommittee concluded that the discussions with Mr., Hastings were centered around H&L providing Respondent an office and resources for him todevelop his social security practice. In return, Respondent testified it was his understanding that hewould refer any and all personal injury claims arising out ofsocial security disability claims to H&L.(Tr. Vol. II pp. 39-40.)Respondent created a spreadsheet March 17, 2008, showing the growth of his practice withJan Dils during the time he was there. The purpose was to demonstrate to H&L the potential numberof clients, the time it takes to build a social security practice, and how the fees "trail". (Tr. Vol. IIppAO-43; Respondent Exhibit 18.) Respondent and his wife attended a dinner at DavidHendrickson's house. The only persons present during the discussion about joining H&L were Mr.Hendrickson and Scott Long, who are the only equity partners in the firm, and Respondent and hiswife.! (Tr. Vol. Ip. 8; Vol. II pp. 47-48.) At this meeting, according to Respondent, he and his wifetold Mr. Hendrickson and Mr. Long that Respondent could not join H&L for less than what he wascurrently earning which was 160,000.00 per year. Mr. Hendrickson said other associate attorneysin the firm did not make that amount of money; nevertheless, the discussion focused on how toachieve this. (Tr. Vol. II pp. 48-49.) Respondent testified Mr. Hendrickson proposed to pay a salary1 OO5714SWPDRespondent's wife did not testifY at the disciplinary hearings .5

of 80,000.00 per year plus provide a loan of 80,000.00 that "could be paid back from bonuses anda split [of social security fees]." Respondent testified that he understood he would receive a salaryof 80,000.00 per year and a loan of 80,000.00 every year until he was "self-sustaining" and hedidn't need a loan, "and we would split that [social security] fee to pay back the 80,000.00 ."Nothing was written or signed at that time. (Tr. Vol. II p. 49.) David Hendrickson did not testifyabout the substance ofthe discussions or negotiations with Respondent that occurred at the meetingat his house, but he did testify that the parties reached a verbal agreement "that eventually gotmemorialized into a letter by our office manager Rick Fisher.,,2 (Tr. Vol. I pp. 9,11.) Scott Long alsodid not testify to the substance of the negotiations or discussions with Respondent that occurredduring the meeting at Mr. Hendrickson's home, except he recalled "discussion about what[Respondent's] compensation historically had been." (Tr. Vol. I pp. 84-85.)Rick Fisher, H&L's office manager, testified Mr. Hendrickson advised him of the terms ofRespondent's employment. He then prepared and signed a letter to Respondent dated March 25,2008, which he calls a "term sheet." (Tr. Vol. I pp. 191-192,308-309.) The March 25, 2008 letteroffers Respondent the position of "Associate Attorney" as an at-will employee, with employmentto begin "on or around the first of April 2008." The "terms of employment" are listed as follows:1.2.3.4.5.Your beginning salary will be 80,000.00 per year; plus a loan amount up to 80,000.00 per year, to be paid back from your bonus amounts. Terms oftheloan will be under a separate agreement to be worked out mutually.You will be eligible for the firm's Quarterly bonus;You will be reviewed each July, starting in 2009 with the rest ofthe staff fora ralse;You will be entitled to enroll with our profit sharing plan pursuant to theterms and conditions established by that plan;We will pay your parking;This employment tenn letter does not reflect that any SSA fees would be subject to division byRespondent and H&L.2aOOS714S.WPD6

6.7.8.9.10.We will pay your reasonable CLE expenses;We will pay your West Virginia Bar dues and other related dues as approved;We will offer you health care in a health plan consistent with the rest of ourstaff;We will offer you the disability and life insurance plans consistence [sic] withthe staff;You will be given vacation and personal time consistent with a beginningemployee .(ODC Exhibit 6, Bates 221-222.)Mr. Hendrickson testified the agreement with Respondent required him to turn over to thefinn all social security fees he earned (Tr. Vol. I pp. 18-19). The Panel noted that the March 25, 2008letter says nothing about social security fees 3 The March 25, 2008 letter refers to bonuses and statesthe annual loan ofup to 80,000.00 is to be paid back from Respondent's "bonus amounts," there isno testimony anyone explained to Respondent prior to or at the start ofhis employment how H&L'sbonus plan was structured. Mr. Hendrickson testified Respondent's employment with the firm wasthe same as other associates. That is, Respondent would be paid a salary and the firm would pay forparking and a percentage of health care benefits. His CLE's would be paid by the firm, he couldparticipate in the firm's profit sharing plan, and he would share in the bonus plan. Respondent wasalso provided office equipment, supplies and secretarial help. Mr. Hendrickson expected, as with allother associates and members ofthe firm, the fees Respondent earned belonged to the firm. (Tr. Vol.I pp. 11-19.) Further, Mr. Hendrickson testified the 80,000.00 loan was to help Respondent "untilhe started participating in the bonus pool, and then we were hoping it would be paid back." OnceRespondent started generating an income "[h]e could pay that note back, and then share in a bonuspool and he would also have a salary." (Tr. Vol. I p. 14.)As Respondent was an employee ofthe law firm, it would seem axiomatic that the fees generatedfrom that employment situation and its resources would be firm fees.3a0057145.WPD7

The March 25, 2008 letter provides the terms ofthe loan "will be under a separate agreementto be worked out mutually." (ODC Ex. 9, Bates 221.) Respondent understood this language to meanthat how the loan was to be paid back would be determined later. Despite no written language in theMarch employment terms, Respondent testified that he understood that the loan was not just to bepaid back with bonuses, but also by a split ofthe social security fees between him and H&L, whichsplit would be determined later. (Tr. Vol. II pp. 50-51.) Eventually, he would not need a salary or abonus from the firm. (Tr. Vol. II pp. 199-201.) Respondent began working at H&L Apri1200S. Hereceived a bi-monthly check reflecting a yearly salary of 80,000.00 with appropriate deductions.He also received bi-monthly checks of 3,333.34 as loan draws. (Tr. Vol. I pp. 192-194; ODe Ex.17, Bates 559.)Because the SSA issues attorney fee payments in the name ofthe individual attorney, not thefirm name (Tr. Vol. II p. 85.), as social security checks began coming in to the firm in Respondent'sname, Respondent would endorse the checks and return them to the office manager, Mr. Fisher.Respondent testified that he believed that these checks were intended by him as payments on the loanbalance. (Tr. Vol. II pp. 62-63.) Mr. Fisher testified Respondent told him the social security feechecks had to made out to the responsible attorney, not the firm. Mr. Fisher verified this with anotherattorney in the firm. Thereafter, when the fee checks came to the firm, Mr. Fisher had them deliveredto Respondent to be endorsed. (Tr. Vol. I pp. 207-208.)On September 30, 2008, Respondent signed aLine ofCredit Promissory Note for 80,000.00.The document recited that Respondent may borrow up to 80,000.00 from the firm in regularinstallments not to exceed 3,333.33 to be drawn only on the fifteenth day and the last day of eachcalendar month until December 31, 2009 at no interest. The principal was to be paid in full by May1,2011, or within one year ofthe date Borrower ceased to be an employee ofH&L, whichever cameaOOS714S.WPD8

first. The principal was also to be paid in full no later than May 1, 2011, ifH&L ceased to operateas an active business through merger, sale or otherwise. The note further provided that "all bonuses,as calculated under the Hendrickson and Long, P.L.L.C. employee bonus program, to whichBorrower may be entitled shall be applied to any outstanding principal under this note rather thanbeing paid over to Borrower." He could also prepay all or any part of the note over and above anysuch bonus amount without penalty. (ODC Ex. 9, Bates 219-220).The Hearing Panel Subcommittee noted that the terms ofthe promissory note differed fromthe "term" letter of March 25, 2008. Mr. Fisher testified he requested Steve Shwartz, an attorneyin the firnl, to prepare the note. Mr. Fisher told the attorney the substance of the terms. The letterstated that H&L would loan Respondent 80,000.00 "annually" and the loan would be paid backthrough bonuses. However, the note provided for a line of credit in the amount of 80,000.00available until December 31, 2009. Further, Respondent was required to repay by May 1, 2011, or.within one year from termination of employment, whichever is earlier, regardless of whether heearned sufficient bonuses. Respondent testified he was given no opportunity to negotiate the termsof the promissory note. But, Mr. Fisher testified that he presented it to Respondent three or fourtimes and that Respondent did not want to sign the note. At Respondent's request, H&L made "smallchanges" to the agreement and it was presented to him on pay day, September 30, 2008, by Mr.Fisher who told him ifhe didn't sign he couldn't have his check. (Tr. VoL II pp. 66-67.) He couldnot explain why the term letter he prepared provided for an 80,000.00 loan "per year" and the notehad an 80,000.00 line ofcredit available until December 2009. He denied the promissory note wasprepared in connection with an impending merger. (Tr. Vol. I pp. 211-214,256-297.)As Mr. Hendrickson was out oftown, prior to signing the same, Respondent talked to ScottLong about the proposed promissory note and told Mr. Long that this was not their originalaOOS714S.WPD9

agreement. According to Respondent, Mr. Long told him he could not remember what the agreementwas, but "Scott just assured me, that, Ben, this doesn't change the relationship." (Tr. Vol. II p. 68.)At this time, H&L was exploring a merger with the Pittsburgh, Pennsylvania law firm EckertSeamans Cherin and Mellot (Eckert Seamans), and according to Respondent, Mr. Long told him thepromissory note was needed for H&L's records because the firm was being reviewed by EckertSeamans "and they find that your pay is unusual and they need documentation that they're not goingto be stuck with . : this 80,000.00." (Tr. Vol. II p. 68.) Respondent signed the note because of Mr.Long's assurances and because he believed ifhe didn't sign, he would not receive a check. (Tr. Vol.II pp. 208-209.) Mr. Long testified he met with Respondent about the promissory note, but he can'trecall what was said. (Tr. Vol. I p. 80.) Mr. Long also did not explain why the promissory noteprovides for a line of credit for fifteen months up to 80,000.00 when the March 25, 2008 letter. provided for an annual loan of 80,000.00. (Tr. Vol. I pp. 86-87.)Respondent testified that in October of2008 he learned how the H&L bonus program workedwhen Mr. Fisher presented him with a notebook called "WIP" for work in progress. This was acalculation of the overhead costs attributed to Respondent's practice. In order to be eligible for thebonus, his practice had to be profitable. Respondent learned at this time that 100,000.00 inoverhead was attributed to him. According to Mr. Fisher, all fees he earned had to first be appliedto Respondent's overhead before he would receive a bonus. Respondent asked Mr. Fisher how muchofhis social security fee splits were being credited to repayment ofhis loan and Mr. Fisher told himhe did not know what he was talking about. (Tr. Vol. II pp. 69-73.)At the disciplinary hearing, Mr. Fisher explained the firm's quarterly bonus program.Essentially, if any attorney is to receive a bonus, first the whole firm has to profitable and then thatindividual attorney has to be profitable. (Tr. Vol. I pp. 194-197.) Respondent never received aaOOS714S.WPD10

quarterly bonus because "[h]e was never profitable." (Tr. Vol. I p. 254.) The quarterly bonusprogram is also set forth in a document titled "Hendrickson and Long Bonus Plan." Respondentcontends it was never presented to him until obtained by subpoena during the disciplinaryproceedings. (Tr. Vol. II p. 215; ODe Exhibit 20, Bates 801-804.)Respondent began conducting intake and having claimants hire him as their representativeMay 1,2008. During May 2008, all of the clients but one were former clients of Jan Dils whosecases he had previously worked on. (ODe Ex. 17, Bates 636 - 638; Respondent Ex. 6.) On thesecases, Jan Dils had the opportunity to claim a portion of the fee through the SSA. Respondent didnot begin to obtain clients through advertising until June 20, 2008. (ODe Ex. 17, Bates 639;Respondent Ex. 6.) It wasn't until February, 2009 that advertising accounted for the majority ofclients. (ODe Ex. 17, Bates 647; Respondent Ex. 6.)The first fee award check that Respondent recalled receiving was for a favorable decision inthe case of T. A. Clark. It was issued on September 9, 2008, in the amount of 5,221.00.(Respondent Ex 16.) Respondent did not endorse the back of the check; it only contains a ForDeposit Only stamp for the H&L bank account at Huntington National Bank. A deposit slipsubpoenaed from Huntington National Bank established that it was, in fact, deposited into H&L'saccount on September 16,2008. (Respondent Ex. 22.) The first check Respondent actually receivedwas on behalfofEIizabeth Myers. It was issued on August 14,2008, in the amount of 5,300.00.(See ODe Ex. 20, Bates 834.) Thereafter, Respondent endorsed all ofthe fee award checks that weredelivered to him and returned them to H&L for deposit until approximately February 9, 2009. Thesechecks 0/16/200811 447.65 282.74 4,051.25

128/200811105/200811106/200811/10/200801/29/2008 2,187.50 2,540.15 2,037.00 5,221.00 5,221.00 1,262.00 3,601.75(ODC Ex. 17, Bates 607; ODe Ex 20, Bates 807- 808.)During the months leading up to January 1,2009, H&L was in the process of merging with, Eckert Seamans. Mr. Hendrickson insisted that as part of the merger, Eckert Seamans would haveto employ all persons at H&L, including Respondent. (Tr. Vol. I p. 20.) During the transition periodin December 2008, Respondent filled out the personnel forms provided by Eckert Seamans, such asdirect deposit, health insurance, etc. (Respondent Ex. 8.) He was liste

BRIEF OF THE OFFICE OF DISCIPLINARY COUNSEL . Rachael . 1. Fletcher Cipoletti [Bar No. 8806] Chief Lawyer Disciplinary Counsel Office of Disciplinary Counsel City Center East, Suite 1200C 4700 MacCorkle Avenue SE Charleston, West Virginia 25304 (304) 558-7999 (304) 558-4015 -facsimile rfcipoletti@wvodc.org