Opinion
2024-SC-0196-KB
08-22-2024
IN RE: BARRY NATHANIEL SULLIVAN
OPINION AND ORDER
VANMETER, CHIEF JUSTICE
Barry Nathaniel Sullivan moves this Court to enter a negotiated sanction pursuant to Supreme Court Rule (SCR) 3.480(2) to resolve a pending disciplinary proceeding against him. The Kentucky Bar Association (KBA) has no objection. After consideration, we conclude that the proposed sanction is adequate but revise the amount of refund owed to Sullivan's former client and the repayment terms. We note preliminarily that Sullivan, KBA Member Number 91634, was admitted to the practice of law on July 30, 2006. His bar roster address is 1612 Reidinger Ridge, New Albany, Indiana 47150.
BACKGROUND
Shayana Fields hired Sullivan in 2018 to assist Jonathan Davis in administering her late grandmother's estate. Ruthan Fields attempted to execute a will prior to her death naming Davis, her financial advisor, as administrator of her future estate. Due to errors with the signatures, Ruthan's will was invalidated and she died intestate in June 2018. Ruthan was survived by her only child, Christopher Fields, and his only child, Shayana. Sullivan met with Davis, Christopher, and Shayana shortly after Ruthan died and asked them to sign affidavits requesting that Davis be appointed administrator and that Ruthan's wishes for the disposal of her assets, as expressed prior to her death, be honored.
At the time of her death, Ruthan owned a house and a car of minimal value. She had previously owned annuities, which were transferred to Shayana outside of her estate prior to her death, and she maintained a life insurance policy with Christopher and Shayana named as beneficiaries. These assets had an estimated value of $308,000. Due to his inexperience in handling estate matters, Sullivan incorrectly included assets which passed outside the estate and estimated the estate's total value to be $378,000. He further misconstrued Kentucky Revised Statute (KRS) 395.150 in determining the percentage of the estate's value that could be paid to the representative as compensation. Therefore, he informed Shayana that he required a $32,000 non-refundable retainer to assist Davis in handling the estate that had assets worth approximately $70,000 when it entered probate. There was no written agreement or any document explaining the basis for his fees.
Because Ruthan died intestate, her real property immediately passed by operation of law to her son, Christopher, as her heir-at-law, and was not properly an estate asset subject to administration and/or probate. Turner v. Perry Cnty. Coal Corp., 242 S.W.3d 658, 660 (Ky. App. 2007).
Davis messaged Shayana on September 5, 2018, and instructed her to write a $32,000 check to Sullivan's IOLTA account. The money Shayana wired came from Shayana's portion of Ruthan's life insurance policy proceeds. Sullivan filed a probate petition in Fayette District Court on September 12, 2018, and on September 17, 2018, he paid JT Davis Asset Management, LLC $9,060 out of the retainer in his IOLTA account. The probate court appointed Davis as administrator of Ruthan's estate on October 24, 2018. However, Davis failed to file an estate inventory within two months as required by KRS 395.250. Sullivan filed for an extension of time on Davis's behalf, and the probate court granted Davis until February 1, 2019, to file the inventory. Subsequently, the probate court issued a show cause order against Davis for his continued failure to file an estate inventory. Davis also took no steps to resolve the notices of claim filed against Ruthan's estate by her creditors.
During the same time period, Sullivan received notice from Ruthan's former employer of a motion to reopen a worker's compensation claim adjudicated in 2000. The sole issue was determining responsibility for bills from a hospital stay in 2017. Sullivan claims that he discussed entering his appearance on behalf of the estate with Davis, Christopher, and Shayana due to his expertise in this area of the law, and they all agreed.
Sullivan paid JT Asset Management an additional $2,540.53 from the funds in his IOLTA account on March 21, 2019, for a total payment of $12,140.53. The record discloses no basis or reason for the payment of this fee. And, as noted, the minimal value of the estate subject to administration would have entitled Davis to a nominal fee, absent court approval of extraordinary services. KRS 395.150. At this time, the relationship between Ruthan's son and granddaughter began to deteriorate due to conflict over the distribution of her assets. Shayana petitioned for an emergency protective order from Christopher, and Christopher hired his own attorney and filed a motion to have Davis and Sullivan removed as estate representatives on April 8, 2019. While these matters were pending, Sullivan formally entered his appearance in the workers' compensation case.
The probate court entered an agreed no contact order between Shayana and Christopher on May 9, 2019, and a second order replacing Davis and Sullivan with the Public Administrator. Davis was also ordered to submit a full accounting of the estate within thirty days. Sullivan sent the Public Administrator the few documents in his possession and mentioned that he was still representing the estate in the worker's compensation matter. When Shayana learned that Davis and Sullivan were no longer handling Ruthan's estate, she attempted to contact them to determine whether she was owed a partial refund of the $32,000 retainer.
Meanwhile, Sullivan participated in three telephonic conferences related to the workers' compensation case before the Administrative Law Judge (ALJ) who entered an order finding in favor of Ruthan's former employer regarding the responsibility for medical bills relating to her 2017 hospital stay. The ALJ's order, dated June 28, 2019, directed all attorneys to submit their fees for approval within thirty days pursuant to KRS 342.320. Sullivan failed to do so.
The Public Administrator submitted the first and final settlement in Ruthan's estate on July 8, 2019. Ruthan's house passed to Christopher via an affidavit of descent and her car was returned to the lienholder. The Public Administrator deemed the estate insolvent and notified the creditors who had filed a claim against the estate that there were no assets from which their claims could be paid. The estate was closed on January 22, 2020. In November 2020, Shayana hired an attorney to help her contact Davis and Sullivan after discovering that Sullivan's phone was disconnected. Her attorney was able to contact Davis, who responded with hostility, and refused to help her locate Sullivan.
Shayana filed a Bar Complaint against Sullivan on December 28, 2020, seeking an accounting and a refund of the unearned portion of her retainer. In his response, Sullivan maintained he did not owe Shayana anything because she agreed to allow him to bill his customary hourly rate for the worker's compensation matter against the retainer she paid him in the estate case. Shayana categorically denies this conversation ever occurred, and there is no written documentation to support Sullivan's claim. Regardless, Sullivan was barred from collecting in the worker's compensation matter because he failed to submit his fees to the ALJ for approval.
Shayana also disputed the billing statement Sullivan provided the Office of Bar Counsel. For example, one of the dates given by Sullivan for a meeting with Davis, Shayana, and Christopher was before Ruthan's funeral and Shayana is certain that she did not meet with anyone related to her grandmother's estate so quickly after her passing. Sullivan, who no longer had access to the billing and time management software used while he was providing legal services in these matters, attempted to reconstruct his billable hours, which may account for some of the discrepancies.
As a result of the Bar Complaint, the Inquiry Commission of the KBA issued a six-count Charge against Sullivan. Sullivan responded to the Charge on April 12, 2021. Count I alleges violation of SCR 3.130(1.5)(a) for charging an unreasonable fee. Although he asserts his errors regarding the estimated value of the estate and percentage he was entitled to collect as compensation were unintentional, Sullivan acknowledges that his actions violated this rule. Count II alleges violation of SCR 3.130(1.15)(e) for withdrawing unearned fees from his IOLTA account. Sullivan requests that Count II be dismissed. SCR 3.130(1.15)(e) provides: "[e]xcept for advance fees as provided in 1.5(f), a lawyer shall deposit into a client trust account legal fees and expenses that have been paid in advance, to be withdrawn by the lawyer only as fees are earned or expenses incurred." Although Sullivan made an almost-immediate payment to Davis for his services, he contends insufficient evidence exists to conclude that he withdrew fees payable to himself from his IOLTA account before they were earned. The KBA has no objection to dismissal of this Charge.
Count III alleges violation of SCR 3.130(1.16)(d) for failure to refund unearned fees when the representation was terminated. Sullivan acknowledges that Shayana was owed a refund of $16,359.47 upon termination of his representation. Count IV alleges violation of SCR 3.130(3.4)(c) for knowingly disobeying an obligation under the rules of a tribunal. Sullivan admits that he was required to have the ALJ approve his fees in the workers' compensation matter and that he failed to submit a request for fee approval after being ordered to do so. Count V alleges violation of SCR 3.130(8.1)(a) for knowingly making a false statement of material fact in connection with a disciplinary proceeding and Count VI alleges violation of SCR 3.130(8.4)(c) for engaging in conduct involving dishonesty, fraud, deceit, or misrepresentation. Sullivan admits there is sufficient evidence to conclude that he falsely represented the agreement between himself and Shayana for him to apply funds from the estate retainer case towards his legal services in the worker's compensation matter.
Sullivan now asks this Court to impose a negotiated sanction of a 181-day suspension, probated for three years, subject to conditions. The KBA has no objection to the proposed discipline.
ANALYSIS
The negotiated sanction rule provides that "[t]he Court may consider negotiated sanctions of disciplinary investigations, complaints or charges" if the parties agree. SCR 3.480(2). Upon receiving a motion under this Rule, "[t]he Court may approve the sanction agreed to by the parties, or may remand the case for hearing or other proceedings specified in the order of remand." Id. Thus, acceptance of the proposed negotiated sanction falls within the discretion of this Court.
Case law supports the imposition of the sanction Sullivan proposes. In Chewning v. Kentucky Bar Association, 605 S.W.3d 332, 333 (Ky. 2020), an attorney pled guilty to criminal attempt to commit eavesdropping, a Class A misdemeanor, and the Inquiry Commission issued a two-count Charge. The attorney admitted to violating two rules of professional conduct, and the Court accepted his proposed sanction of a thirty-day suspension, probated for two years, with conditions. Id. at 334.
In Kentucky Bar Association v. McMahon, 337 S.W.3d 631, 632 (Ky. 2011), this Court accepted a negotiated sanction of a 181-day suspension, probated for two years, with conditions for violations of two rules. The attorney admitted he improperly provided financial assistance to his client, in violation of SCR 3.130(1.8)(e), and failed to act with reasonable diligence and promptness in representing his client, which violated SCR 3.130(1.3). Id. at 633.
Kentucky Bar Association v. Cook, 281 S.W.3d 290, 291 (Ky. 2009) involved two disciplinary cases in which Attorney Cook failed to submit answers to discovery requests and failed to respond to trial court orders, resulting in a claim being dismissed with prejudice. In addition, the client's numerous attempts to contact Cook were unsuccessful and Cook improperly retained an unearned portion of a fee. Id. Cook also filed untimely responses throughout the disciplinary proceedings. Id. Cook admitted to violating the rules and the Court imposed a two-year suspension, thirty days to serve with the remainder probated for two years and ordered KYLAP supervision. Id. at 292.
Similarly, in Bamberger v. Kentucky Bar Association, 36 S.W.3d 758 (Ky. 2001), Attorney Bamberger failed to respond to his client's requests for information and did not take reasonable measures to finalize the client's divorce proceedings. Bamberger admitted to violating two rules of professional conduct and, as a result, agreed to a thirty-day suspension, probated for one year, with conditions. Id. at 758-59.
These cases are all similar to Sullivan's in that multiple rules were violated and the Court accepted a probated suspension. In addition to caselaw, the ABA Standards for Imposing Lawyer Sanctions support the proposed discipline. While Sullivan has previously received two private admonitions, was charged with multiple offenses, submitted false evidence or false statements of fact during the disciplinary process, and has substantial experience in the practice of law, he has admitted his violations of the rules and displays remorse for his actions. The proposed sanction of a 181-day suspension, probated for three years, is consistent with the sanctions this Court outlined herein for similar conduct.
However, we disagree with the amount of refund owed to Shayana. Sullivan relied on KRS 395.150 to justify the $3,500 fee he paid himself, but that statute applies only to the fiduciary's fee. The probate petition Sullivan filed listed the estate's assets as a piece of real property, a vehicle, two IRAs, and a life insurance policy totaling an estimated $382,000. Sullivan admits he mistakenly believed that Kentucky law allowed personal representatives to collect 10% of the value of the estate as a fee. In fact, KRS 395.150 only allows the personal representative of an estate to collect a fee of 5% of the value of the estate, plus 5% of the income collected by the executor or the administrator for the estate. Furthermore, Sullivan was not the executor or the personal representative of the estate, and the only item actually included in the estate was the vehicle. The 5% should have applied to Davis's fee, not Sullivan's.
Ultimately, Sullivan paid Davis $12,140.53 for performing no work as administrator of the estate. Davis did not submit an estate inventory by November 24, 2018, as required by law. Even after receiving an extension of time to file the inventory and receiving a show case order against him for failure to file the estate inventory, Sullivan paid Davis an additional sum of $2,540.53. Davis never filed an estate inventory. Now, Sullivan seeks to retain $3,500 of the $32,000 Shayana paid.
While Sullivan did some work in the estate matter and provided a recreated version of his accounting in response to a request from Bar Counsel, the time spent in the estate matter was spent misdirecting his client. While an attorney can charge fees for work performed, and indeed Sullivan documented time spent performing legal services, his time was not appropriately spent, and the services performed did not function for the benefit of his client. Sullivan has a duty to be competent pursuant to SCR 3.130(1.1), and a duty to safekeep and properly account for a client's property pursuant to SCR 3.130(1.15). He clearly violated both rules by grossly overpaying Davis.
In sum, Sullivan is entitled to retain $500 for the initial work he performed in the probate matter and is therefore required to reimburse Shayana $31,500.
CONCLUSION
After review, we agree that a 181-day suspension, probated for three years with conditions, is appropriate discipline.
ACCORDINGLY, IT IS HEREBY ORDERED THAT:
1. Barry Nathaniel Sullivan, KBA Member Number 91634 is hereby suspended for 181 days, probated for three years, for his violation of SCR 3.130(1.5)(a), 3.130(1.16)(d), SCR 3.130(3.4)(c) and 3.130(8.1)(a), and SCR 3.130(8.4)(c) in KBA file 20-DIS-0251. Count II, alleging violation of SCR 3.130(1.15)(e), is dismissed.
2. The suspension is probated for three years on the following terms and conditions:
a. Sullivan shall have no more disciplinary charges filed against him.
b. Sullivan shall not commit any crimes, including misdemeanors and felonies.
c. Sullivan shall timely pay his KBA membership dues.
d. Sullivan shall timely satisfy all continuing legal education requirements.
e. Sullivan shall attend, at his expense, and successfully complete the Ethics and Professionalism Enhancement Program and the Trust Account Management Program offered by the Office of Bar Counsel, separate and apart from his fulfillment of any other continuing legal education requirement, within twelve months after entry of this Order.
3. Sullivan shall pay restitution in the amount of $31,500.00 to Shayana Fields. He is directed to pay a minimum of $1,000.00 towards this sum every ninety days beginning ninety days from the entry of this Order. Sullivan shall provide contemporaneous proof, in the form of copies of the payment instrument, to the Office of Bar Counsel. The restitution sum must be paid in full within one year of the date of entry of this Opinion and Order.
4. If Sullivan violates the terms of probation within three years from the date of this Order, the Kentucky Bar Association may file a motion with the Supreme Court requesting the issuance of a show cause order directing Sullivan to show cause, if any, why the three-year suspension should not be imposed.
5. In accordance with SCR 3.450, Sullivan is directed to pay all costs associated with these disciplinary proceedings against him, said sum being $180.56, for which execution may issue from this Court upon finality of this Opinion and Order.
All sitting. All concur.