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In re Gilbert

Supreme Court of Colorado, En Banc

April 6, 2015

In the Matter of Juliet Carol Gilbert

Appeal from the Hearing Board, 12PDJ085.

SYLLABUS

In this attorney discipline proceeding, the supreme court considers whether an attorney violated Colo. RPC 1.16(d) -- which requires attorneys to refund upon termination any advance payment of fee that " has not been earned" -- by failing to return all of an advance fee when her flat fee agreement did not describe what payment, if any, the clients would owe the attorney if the representation ended early. The Hearing Board determined that the attorney in this case had earned part of the advance fee under a quantum meruit theory by performing services for the clients, and therefore she did not violate the ethical rules by retaining this amount after her discharge. The supreme court affirms the Hearing Board and holds that, under the facts of this case, the attorney did not violate Rule 1.16(d) by failing to return the portion of an advance fee to which she was entitled in quantum meruit for services rendered for her clients.

For Complainant-Appellant: Office of Attorney Regulation Counsel, James C. Coyle, Regulation Counsel, Adam J. Espinosa, Assistant Regulation Counsel, Denver, Colorado.

For Respondent-Appellee: MiletichCohen PC, Nancy L. Cohen, Denver, Colorado.

JUSTICE MÁ RQUEZ delivered the Opinion of the Court. CHIEF JUSTICE RICE dissents, and JUSTICE COATS and JUSTICE EID join in the dissent.

OPINION

Page 1019

Original Proceeding in Discipline

MÁ RQUEZ, JUSTICE.

In this attorney discipline proceeding, the respondent, Juliet Carol Gilbert, agreed to provide certain immigration-related legal services to Christopher Henderson and Victoria Peters for a flat fee. The written fee agreement did not include milestones or otherwise describe what payment, if any, the clients would owe Gilbert if the representation ended before she completed all of the specific tasks identified in the agreement. When her clients terminated the representation early, Gilbert retained a portion of the fees advanced by the clients as compensation for the approximately four-and-a-half hours of work she had performed on the case to that point.

The Office of Attorney Regulation Counsel brought a disciplinary action against Gilbert alleging, among other things, that she violated Colorado Rule of Professional Conduct 1.16(d), which requires attorneys, upon termination, to refund any advance payment of fee that " has not been earned." The Office of Attorney Regulation Counsel argued that Gilbert was obligated to refund the entire advance fee paid by the clients because the fee agreement did not provide for either the assessment of a fee in the event of early termination or for any hourly fee. The Hearing Board determined, however, that Gilbert was entitled to a portion of the fee in quantum meruit because she had provided legal services for the clients and it would be unjust for the clients to retain the benefit of those services without compensating Gilbert. Because Gilbert had earned a portion of the advance fee in quantum meruit, the Board concluded that Gilbert did not violate Rule 1.16(d) by retaining the funds earned.[1]

The Office of Attorney Regulation Counsel seeks review of the Hearing Board's determination. We conclude that the Hearing Board did not err when it determined that Gilbert did not violate Rule 1.16(d) under the circumstances of this case. Accordingly, we affirm the Board's order.

I. Facts and Procedural History

Gilbert was a sole practitioner specializing in immigration law. In May 2011, she agreed to represent Victoria Peters in removal proceedings before the immigration court.

Peters, a Trinidad and Tobago native, married Christopher Henderson in 2004. Henderson, however, had previously married Carmen Sanchez, a native of the Dominican Republic, and had never terminated or annulled that marriage. When Henderson filed a Form I-130 " Petition for Alien Relative" to classify Peters as his spouse, Henderson did not disclose his first marriage or the fact that the U.S. Citizenship and Immigration Services (" USCIS" ) had determined that his marriage to Sanchez was a sham. USCIS representatives met with Henderson and Peters and determined that the couple had married only to obtain lawful immigration status for Peters. The USCIS therefore denied the I-130 Petition, and the U.S. Department of Homeland Security initiated removal proceedings against Peters.

Henderson and Peters met with Gilbert a week before Peters' first appearance in immigration court for a master calendar

Page 1020

hearing. Gilbert advised them that Peters had no relief other than voluntary departure from the United States. However, Gilbert told the couple that she could help them file a second I-130 Petition to demonstrate that they had a bona fide marriage and that the immigration judge would continue Peters' removal case until the second I-130 Petition was adjudicated. Gilbert also explained that Henderson could not file the second I-130 Petition until he legally terminated or annulled his marriage to Sanchez. During the meeting, Gilbert showed the couple her standard fee schedule, which listed an hourly rate of $250 for " Miscellaneous Immigration and Consumer Rights Cases."

Gilbert followed up their meeting by mailing an engagement letter to Henderson and Peters defining the scope of her representation, which the couple signed and returned. The agreement provided that, for a flat fee of $3,550, Gilbert would perform three tasks: represent Peters at the master calendar hearing, assist the couple with the second I-130 Petition, and accompany them to their interview with USCIS. Notably, the fee agreement did not include benchmarks or milestones to indicate when Gilbert would earn portions of the advance fee, nor did it explain what payment, if any, the clients would owe Gilbert if the representation ended before she completed all three tasks.

Between May and August 2011, the couple paid installments totaling $2,950 toward Gilbert's $3,550 flat fee. Gilbert represented Peters at the master calendar hearing at the end of May, and the immigration court granted a continuance so that Henderson could seek an annulment of his first marriage. During the summer, Gilbert conducted legal research on the case and corresponded with the clients. By November, however, communication between Gilbert and the couple had broken down, and they discharged Gilbert. In an email to Gilbert terminating her representation, Peters and Henderson acknowledged that Gilbert was entitled to payment for one hour for her appearance at the May hearing. They requested that Gilbert refund their payments, minus her hourly fee for the master calendar appearance. They also asked what her hourly charge was, noting that the fee agreement did not contain an hourly rate.

Once the immigration court granted her motion to withdraw, Gilbert mailed Henderson and Peters a letter and a partial refund of the advance fee payment. Gilbert's letter explained that she had spent 4.41 hours on legal work at $250 an hour -- including the court appearance, travel time, research, correspondence, and the motion to withdraw -- and that she had incurred $11.64 in costs. She therefore retained $1,114.14 as compensation for the work performed and refunded the remaining $1,835.86 of the advance fee payment. Henderson and Peters disputed the amount that Gilbert retained as earned fees.[2]

Henderson and Peters contacted the Office of Attorney Regulation Counsel and requested an investigation. The Office of Attorney Regulation Counsel filed a complaint against Gilbert, alleging several violations of the Colorado Rules of Professional Conduct in her dealings with Henderson and Peters. The Hearing Board ultimately held that Gilbert violated Colo. RPC 1.15(a), 1.15(c), and, in turn, 1.5(f),[3] because she commingled her clients' funds with her own by immediately placing the couple's fee payments in her business account upon receipt, before she earned them. For these violations, the Hearing Board ordered Gilbert suspended from the practice of law for three months, stayed upon the successful completion of six months' probation.[4] The Board concluded that the Office of Attorney Regulation Counsel had not proven the other alleged violations, including its claims that Gilbert violated Colo. RPC 8.4(c), which prohibits conduct involving dishonesty, fraud,

Page 1021

deceit, or misrepresentation, and Colo. RPC 1.15(b), which requires attorneys to provide a prompt accounting when requested. The Office of Attorney Regulation Counsel does not challenge these rulings.

Relevant here, the Hearing Board dismissed the claim that Gilbert failed to refund unearned fees in violation of Colo. RPC 1.16(d) when she retained part of the advance fee payment as compensation for the work she had performed instead of refunding the entire amount upon her discharge. To determine whether Gilbert violated Rule 1.16(d), the Hearing Board first ascertained whether the funds that Gilbert retained had been " earned" for purposes of the Rule. The Board found that Gilbert showed Henderson and Peters her standard fee schedule, which indicated that she charged an hourly rate of $250 for " miscellaneous immigration" cases, but that this schedule was not part of the written fee agreement. The Hearing Board also found that the written fee agreement did not describe what payment, if any, would be due if the representation ended before Gilbert completed the three tasks she agreed to perform. However, the Board observed that this court has recognized an attorney's right to quantum meruit recovery for the reasonable value of services the attorney provided before being discharged. The Hearing Board reasoned that, under the circumstances of this case, Gilbert was entitled to recover a portion of her fee in quantum meruit. Accordingly, the Board concluded that Gilbert did not violate Rule 1.16(d) by retaining a portion of the fee she believed she had earned.

Specifically, the Hearing Board concluded that the elements of quantum meruit were present here because: Gilbert " unquestionably provided legal services" ; Peters received a benefit from Gilbert's services; and it would be unjust in light of the parties' intentions and expectations for Peters to retain the benefit of Gilbert's services without paying for them. The Hearing Board observed, for example, that Peters acknowledged in her email terminating Gilbert that Gilbert was entitled to a fee for her appearance at the hearing. The Board found that although Peters and Henderson may not have realized that Gilbert had also performed legal research on the case, it was " entirely reasonable" for Gilbert to have done so and to have billed her clients for the time she spent communicating with them.[5] Finally, the Hearing Board found that Gilbert's misconduct in this case did not bar her from quantum meruit recovery because " although she violated Colo. RPC 1.15(a), 1.15(c), and 1.5(f), her misconduct was not willful, it did not vitiate the value of her legal services, and her clients were made whole." [6] Thus, the Hearing Board concluded that because Gilbert was entitled to a portion of her fee in quantum meruit, she did not violate Rule 1.16(d) by failing to return unearned funds.

Pursuant to C.R.C.P. 251.1(d) and C.R.C.P. 251.27(a), the Office of Attorney Regulation Counsel now seeks review of the Hearing Board's determination that Gilbert did not violate Rule 1.16(d).

II. Standard of Review

Under C.R.C.P. 251.27(b), this court affirms the decision of the Hearing Board unless we determine, based on the record, that the Hearing Board's findings of fact are clearly erroneous or unsupported by substantial evidence in the record, or that the form of discipline imposed (1) bears no relation to the conduct, (2) is manifestly excessive or insufficient in relation to the needs of the public, or (3) is otherwise unreasonable. C.R.C.P. 251.27(b); In re Haines, 177 P.3d 1239, 1244 (Colo. 2008). We review the Board's conclusions of law de novo. C.R.C.P. 251.27(b); In re Haines, 177 P.3d at 1245.

III. Analysis

Colorado Rule of Professional Conduct 1.16(d) protects clients' interests by requiring attorneys to refund unearned fees when the representation ends:

Page 1022

Upon termination of representation, a lawyer shall take steps to the extent reasonably practicable to protect a client's interests, such as giving reasonable notice to the client, allowing time for employment of other counsel, surrendering papers and property to which the client is entitled and refunding any advance payment of fee or expense that has not been earned or incurred.. . .

( Emphasis added.) A discharged attorney violates this rule if she fails to refund unearned fees in a timely fashion. In re Sather, 3 P.3d 403, 415 (Colo. 2000). Thus, whether Gilbert violated Rule 1.16(d) by failing to refund unearned fees turns on whether she " earned" the portion of the advance fee that she retained as compensation for the work she performed before she was discharged.

The Office of Attorney Regulation Counsel argues that Gilbert violated Rule 1.16(d) because the flat fee agreement in this case did not expressly provide for compensation for work performed short of completing all three tasks identified: appearing at the hearing, filing the second I-130 Petition, and attending the interview with USCIS. In support of its argument, the Office of Attorney Regulation Counsel relies on Colo. RPC 1.5(b), which requires an attorney who has not regularly represented the client to communicate the basis or rate of her fee and expenses to the client, in writing, before or within a reasonable time after commencing the representation. The Office of Attorney Regulation Counsel also points to comment 11 to Rule 1.5, which states that the written statement explaining the basis or rate of the fee " should include a description of the benefit or service that justifies the lawyer's earning the fee," as well as " a statement describing when a fee is earned."

Rule 1.5(f) explains that an attorney earns the fee when she " confers a benefit on the client or performs a legal service for the client." Colo. RPC 1.5(f); see also In re Sather, 3 P.3d at 410 (" [A]n attorney earns fees only by conferring a benefit on or performing a legal service for the client." ). The Office of Attorney Regulation Counsel points to comment 12 to this rule, which states that advance fees are earned " only as the lawyer performs specified legal services or confers ...


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