Opinion
2020-SC-0294-KB
06-17-2021
KENTUCKY BAR ASSOCIATION, Movant v. Judson Bayard WAGENSELLER, Respondent
OPINION AND ORDER
Judson Bayard Wagenseller was admitted to the practice of law in the Commonwealth of Kentucky on November 18, 1983. The KBA Inquiry Commission issued a seven-count charge against Wagenseller on January 11, 2019, in KBA File Number 17-DIS-0034. The disciplinary action was heard before the Trial Commissioner on September 17, 2019. The Trial Commissioner's report, containing findings of fact, conclusions of law, and recommendation, was filed with the Disciplinary Clerk on December 6, 2019. The Trial Commissioner's report came to the Court in due course, as required by SCR 3.360(4).
Wagenseller's KBA (Kentucky Bar Association) number is 73500, and his bar roster address is 423 Hillsmere Drive, Annapolis, MD 21403.
Supreme Court Rule.
Neither party appealed the Trial Commissioner's recommendations, but our order entered August 20, 2020 gave notice to the KBA and Wagenseller under SCR 3.370(8) of our intention to review this matter. Accordingly, the KBA then submitted its brief asking the Court to adopt the Trial Commissioner's findings of misconduct and impose upon Wagenseller a minimum suspension of 180 days. Wagenseller has not filed a response. For reasons explained below, we impose a one-year suspension from the practice of law.
I. FACTUAL AND PROCEDURAL BACKGROUND
Wagenseller represented Anthony Huff for nearly 20 years, from 1996 to 2015, until Huff was imprisoned for federal fraud convictions. During those years, Wagenseller provided Huff's affiliate companies with general counsel legal services. Wagenseller maintained an office space in Huff's offices from 1998 until 2015. In 2010, Brandon Simmons, Huff's son-in-law, joined into business ventures with Huff. Thereafter, Huff, Simmons, and Wagenseller maintained adjacent offices in the same building. While Huff had roughly thirty business ventures, Wagenseller was primarily involved in three: Trinity HR, LLC; Trinity HR Services, LLC; and OBE LLC.
Trinity HR was a holding company for potential business interest. Simmons ran OBE which operated entertainment companies and held real estate interests. Trinity HR Services was a payroll-service company, which ended in 2013 when the company was transferred.
When Huff went to prison, Simmons took over running the business ventures and Wagenseller continued providing legal representation. Wagenseller never entered into any form of representation or fee agreement with Huff or Simmons, and he never kept an accounting of legal work he performed or legal fees he earned.
But beginning around 2007 or 2008, Huff paid Wagenseller $2,000 weekly for legal work associated with Huff's extended family and myriad business ventures. After Huff's indictment in 2012, payment became sporadic. But Wagenseller, maintained representation, and companies associated with Huff or Simmons paid his fees. Wagenseller's fees were most often paid through transactions that had already generated funds in his IOLTA account. Wagenseller would typically ask Huff's former assistant, Michelle Brown, for permission to withdraw payments from his escrow account as needed and as the funds were available. This verbal consent was rarely documented but might have been documented via email.
A. The $12,500 advance
In 2014, Wagenseller received a $12,500 advance from Huff through either Trinity HR or OBE. Information about this exchange is lacking because it was not documented in any way. Additionally, Huff and Simmons were not represented by outside counsel, nor were they advised to retain outside counsel. Wagenseller did not deposit these funds into the IOLTA account, but instead, maintains he repaid this advance through his legal services. But he made no accounting other than his own calculation that he worked off his debt by doing their "corporate legal" and "litigation" work every week at a rate of $2,000 per week.
B. The defamation suit
In 2013, Wagenseller represented himself, Simmons, Simmons's wife, and two of their business affiliates in a suit in the Jefferson Circuit Court for defamation, wrongful use of civil proceedings, and abuse of process. Wagenseller was co-counsel with Kentucky attorney Michael A. Valenti. The suit was ultimately dismissed, but Wagenseller did not obtain informed written consent from the Simmonses to represent them in this suit while he was also a named plaintiff. He did not enter into a representation agreement relating to this litigation, nor did he explain to the Simmonses the potential conflict of representing their interests while also representing his own.
The suit was eventually settled, generating multiple settlement agreements, and the dates and terms of settlement are unconfirmed. Wagenseller produced a blank "Settlement Agreement, General Release, and Covenant Not to Sue," although he produced no evidence that the document was ever signed. Wagenseller did produce a document dated December 6, 2013, purporting to document receipt of $158,000 in settlement of this suit.
In 2012, when Huff's criminal charges became clear, Wagenseller asked Huff be allowed keep the $158,000 settlement for payment of his continued legal services, even though Huff was not a party to defamation suit. The Simmonses were never informed of this deal. Huff initially agreed to the payment, but later retracted full payment, insisting the money should go to the Simmonses. Wagenseller refused, claiming that the Simmonses had no damages in the defamation suit, so it was fair for him to take the entire amount. Wagenseller later accepted $75,000 of the settlement proceeds. This was documented in a settlement agreement, but the Simmonses were never aware that Wagenseller signed it on their behalf. Wagenseller maintains that he believed Huff was authorized to act as the Simmonses’ representative. Wagenseller kept these funds for his personal use and continued providing legal services to the Simmonses, Huff's family, and business affiliates but did not receive any additional payment.
C. Loan from Wagenseller to Simmons
Around the time Huff went to jail, Wagenseller loaned Simmons $43,000 through OBE. In fact, the settlement proceeds from the defamation suit funded the loan. At the time of loan, Wagenseller was providing legal services to Simmons and OBE and no separate counsel was consulted. Some $37,000 of the loan was paid directly to Simmons while $6,000 was paid to Kagen Law Firm. The payment to the law firm was made via a check signed by Wagenseller on behalf of Simmons.
In 2016, Wagenseller's representation of Simmons ended. No formal documents have been produced. Simmons defaulted on the loan to Wagenseller. Wagenseller eventually filed suit against Simmons and OBE to recover the loan amount and won a judgment in his favor against OBE.
II. THE CHARGE
The charge against Wagenseller, consisting of seven counts, is based upon the above facts and include:
1. Violation of SCR 3.130 (8.1)(b) by Wagenseller's failure to respond to the Office of Bar Counsel's May 2018 letter and by failing to comply with a subpoena issued on September 12, 2018.
2. Violation of SCR 3.130 (1.4)(a)(1) for representing himself and both Simmonses in the same matter without their informed consent to enter into a settlement agreement on their behalf in Jefferson Circuit Court.
3. Violation of SCR 3.130 (1.5)(b) for failing to enter into fee contracts with the Simmonses or their business affiliates and when he took settlement proceeds in Jefferson Circuit Court 13-CI-2864 as part of his legal fee for future legal services without informing his clients.
4. Violation of SCR 3.130 (1.15)(a) for failing to maintain his IOLTA account records, by failing to explain the deposits and withdrawals from it, and for commingling his personal funds with his clients in the IOLTA account.
5. Violation of SCR 3.130 (1.7)(a)(2) for representing the Simmonses in a suit even though he was also a party to that suit.
6. Violation of SCR 130(1.9)(a) for representing individuals in suits against Simmons and his business affiliates without informed consent and for filing a suit against the Simmons for defaulting on the $43,000 loan.
7. Violation of SCR 3.130 (8.4)(c) for accepting services of a civil suit as an agent of Simmons's company, OBE, LLC, in a suit that he filed on behalf of CRT Leasing against OBE, LLC.
III. DISCIPLINE
We find adequate support in the record to support the Trial Commissioner's findings. The Trial Commissioner recommended that Wagenseller be suspended from the practice of law for at least 180 days’ suspension and complete the Ethics and Professionalism Enhancement Program offered by the KBA. We find a one-year suspension is more appropriate considering Wagenseller's professional misconduct.
In Kentucky Bar Association v. Ward , we imposed a one-year suspension on an attorney who commingled client funds with his own and violated client confidences. In that case, we stated that we will impose sanctions for commingling funds ranging from a public reprimand to a two-year suspension. Here, not only has Wagenseller commingled funds but he has also engaged in gross conflicts of interests and dishonesty in his legal practice over a prolonged period.
467 S.W.3d 785 (Ky. 2015).
Wagenseller's conduct is akin to that in Grinnell v. Kentucky Bar Association . Grinnell faced fourteen charges and fifty-one counts of misconduct. His charges stemmed from his failure to do work paid to him by multiple clients, failing adequately to consult with multiple clients, failing to act with promptness and diligence in representing multiple clients, failing to return unearned advance payments, failing to respond to disciplinary authority, as well as several other negligent acts. We ultimately imposed a two-year suspension.
602 S.W.3d 784 (Ky. 2020).
Id. at 793.
Id.
In explaining our finding that a two-year suspension was appropriate in Grinnell , we contrasted Grinnell's conduct from that in Howell v. Kentucky Bar Association. Howell's conduct was similar to Grinnell's, as she engaged in multiple acts of failing to protect client interests, failing to respond to lawful demand of information from disciplinary authority, failing to act with reasonable diligence and promptness in representing her clients, and failing to protect her client's interest by giving them reasonable notice, surrendering their file, and returning any unearned fee. Overall the trial commissioner found she had committed thirty-one counts of misconduct arising from ten consolidated charges. She additionally had three prior admonitions. We imposed a 180-day suspension.
568 S.W.3d. 857 (Ky. 2019).
Id. at 859-861.
Id. at 863.
Id. at 858.
Id. at 863.
Wagenseller's acts of misconduct fall somewhere in between Howell and Grinnell . We find it appropriate to impose a one-year suspension. Wagenseller engaged in multiple acts of conflict of interest, failed fully to disclose material information to his clients, failed to acquire the required informed consent for representation in several matters, and violated the trust of his clients. Specifically, his acts include failing to maintain records of his IOLTA account, accounting for legal funds he was paid, failing to explain critical conflicts of interests to his clients, taking settlement funds from his clients, filing lawsuits against his former clients, and acting in his own self-interest instead of those he represented. Because Wagenseller has had only one prior private admonition and admitted to his actions in this matter, we find a one-year suspension to be appropriate.
IV. CONCLUSION
For the reasons stated, this Court concludes that Judson Bayard Wagenseller is guilty of all professional misconduct as alleged in the Charge and that a one-year suspension is appropriate.
ACCORDINGLY, IT IS HEREBY ORDERED THAT:
1. Judson Bayard Wagenseller, being guilty of professional misconduct as described above, is suspended from the practice of law for one year.
2. The period of suspension shall commence ten days after the date of the entry of this Order and shall continue until Wagenseller is reinstated to the practice of law by Order of this Court under SCR 3.510.
3. Wagenseller must pay all costs associated with the investigation and prosecution of this proceeding under SCR 3.370.
4. If he has not already done so, under SCR 3.390, Wagenseller must promptly take all reasonable steps to protect the interests of his clients, including, within ten days after the issuance of this Order, notifying by letter all clients of his inability to represent them and of the necessity and urgency of promptly retaining new counsel and notifying all courts or other tribunals in which Wagenseller has matters pending. Wagenseller must simultaneously provide a copy of all such letters to the Office of Bar Counsel.
5. If he has not already done so, under SCR 3.390, Wagenseller must immediately cancel any pending advertisements; must terminate any advertising activity for the duration of the term of suspension; and must not allow his name to be used by a law firm in any manner until he is reinstated.
6. Under SCR 3.390, Wagenseller must not, during the term of suspension and until reinstatement, accept new clients or collect unearned fees.
/s/ John D. Minton, Jr.
CHIEF JUSTICE
All sitting. All concur.