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Board of Overseers of the Bar v. Karen M. Burke, Esq.

Docket No.: BAR-99-6

Issued by: Single Justice, Maine Supreme Judicial Court

Date: September 15, 2000

Respondent: Karen M. Burke, Esq.

Bar Number: 002940

Order: Reprimand

Disposition/Conduct: Conduct Prejudicial to the Administration of Justice; Conduct During Representation: Standards of Care and Judgment

FINDINGS, CONCLUSIONS and SANCTION

This matter was heard by the court on February 23, March 1, and March 2, 2000, pursuant to an information filed by the Board of Overseers of the Bar. The Board was represented by Assistant Bar Counsel, Geoffrey S. Welsh. Karen M. Burke, Esq., Maine Bar #2940, was present and represented by Philip P. Mancini, Esq.

The information filed by the Board alleged violations of the Maine Bar Rules occurring in the course of Burke's representation of three separate clients. Specifically, the Board charged Burke with violating Bar Rules 3.1(a), 3.2(f)(2)-(4), 3.3(a), 3.4(f)(2)(i), 3.6(a)(1), (2) & (3), and 3.7(b) & (e)(l)(i).

During the hearing, both sides submitted a number of exhibits and the court heard testimony from Burke's former clients, Gail and Robert Beesley, Carolee Weglarz, and Stephen Weston; attorneys Waldeman Buschmann, Daniel Peterson, and Donald Gasink; Heidi Pushard; Rhonda Cook and Cheryl Cutliffe, as well as testimony from Burke, herself. Based on this testimony and the record evidence, the court finds the following facts and draws the following conclusions:

I. FINDINGS AND CONCLUSIONS

Karen Burke, a sole practitioner, operates a law practice in Winthrop, Maine.

A. THE BEESLEYS

In May 1996, Gail and Robert Beesley sought the services of Burke with regard to their financial situation.

Burke was relatively experienced in the bankruptcy field having clerked for the United States Bankruptcy Court following law school.

After contacting Burke and meeting with her in person, the Beesleys were under the impression that Burke would handle all matters associated with their Chapter 7 bankruptcy for a flat fee of $750, in addition to the filing fee of $175. Supporting the Beesleys' belief that a flat fee arrangement had been agreed upon is Burke's own Rule 2016(b) statement (FED. R. BANKR. P. 2016(b)) dated June 13, 1996, in which Burke represented that the $750 was to cover all the routine tasks associated with what proved to be an unremarkable Chapter 7 bankruptcy.

The Beesleys paid $750 to Burke the day of their first meeting and paid the $175 filing fee roughly a month later.

Burke filed the bankruptcy petition on behalf of the Beesleys in June 1996.

Burke believed that the $750 was merely a retainer to be applied toward her fees and expenses, and she billed the Beesleys monthly for her services on an hourly basis. Although Burke was unable to produce a fee agreement signed by the Beesleys, she did produce an addendum to the fee agreement signed by the Beesleys agreeing to hourly charges for work done by a newly hired paralegal.

Burke billed the Beesleys for $903.24 in addition to the original $750, and was paid $478.24 beyond the $750.

The Beesleys paid the monthly bills for a period of time and, as the bills mounted, worked out a payment plan with Burke which allowed them to pay $25 a month and thereby avoid interest charges on the remaining balance due.

The Beesleys received their bankruptcy discharge in October 1996.

Eventually, however, the Beesleys retained other counsel because they felt they had been misled about the nature of their fee arrangement with Burke.

Through their new attorney, the Beesleys sought to reopen their bankruptcy case and sought an order compelling Burke to disgorge the fees they had paid to her up to that point in time.

As a result, it came to the attention of the Bankruptcy Court that Burke's Rule 2016(b) fee disclosure statement to the court either did not accurately state the terms of her fee arrangement with the Beesleys, or Burke had billed her clients not in accordance with that arrangement.

Burke's response to the Beesleys' motion to reopen was aggressive. She claimed that the additional charges were entirely appropriate pursuant to her fee agreement with the Beesleys and that her Rule 2016(b) statement accurately disclosed this fee arrangement.

The Bankruptcy Court made short but painful work of this "first line of defense.? In addition to concluding that Burke "abused her clients badly" and "misled the court" with her Rule 2016(b) statement, the Bankruptcy Court wrote:

Were I to conclude, as Attorney Burke contends, that she and her clients agreed to an "hourly against retainer" fee arrangement, she would be left to explain why her Rule 2016(b) statement misrepresented that arrangement to the trustee, to creditors, and to the court. As it stands, her situation is little different. Having undertaken the Beesleys' representation for a flat fee, and having disclosed that arrangement to the court in plain English, she deliberately proceeded to bill the debtors on an altogether different basis.

Beesley v. Burke (In re Beesley), Case No. 96-10686 (Bankr. D. Me. Aug. 15, 1997) (footnote omitted).

The court granted the Beesleys relief, ordered that Burke disgorge all fees paid to her by the Beesleys ($1139.42): and determined that the Rule 2016(b) disclosure statement described a flat fee arrangement that was inconsistent with the hourly charges for which Burke had been billing the Beesleys.
The court also ordered that Burke discharge the Beesleys' remaining balance ($425) and pay their attorney fees associated with the disgorgement petition ($1,776.04).
Finally, the court ordered that Burke appear at another hearing, pursuant to 11 U.S.C.A. ? 105(a) (1993) and FED. R. BANKR. P. 9029:

to show cause why additional sanctions, including suspension from practice in this court and enjoining collection of post-petition fees from clients similarly situated to the Beesleys, should not be ordered.

Between the show cause order and the hearing, Burke softened her approach. She explained in an affidavit to the court that the inconsistencies between her billing practices and the Rule 2016(b) statement, the form for which she had borrowed from another lawyer, were the result of inattention rather than any "intent to deceive this Court or my clients."
Burke wrote to all her bankruptcy clients with outstanding balances (6) and canceled their unpaid balances ($6,400).
At the show cause hearing, the court determined that no further sanctions were appropriate, noting the remedial measures Burke had taken to address the issue of the accuracy of future Rule 2016(b) statements and her efforts with respect to other bankruptcy clients.
The court accepted Burke's disclaimer that she did not harbor a subjective intent to mislead the court regarding her fee arrangements.
The court admonished Burke, however, about her reliance on a form that she had used routinely but that did not accurately reflect her fee arrangements with her bankruptcy clients.
This court concludes that the Beesley matter was caused by Burke's failure to clearly explain and document her fee arrangement with the Beesleys which resulted in their perception that they had not been treated fairly by the individual that was their advocate. Her subsequent remedial measures, however, which included revising the form in which she discloses her fee agreements to the court and discharging the balance owed by former clients, reflect a renewed attention to the details of her bankruptcy practice and her dealings with bankruptcy clients. When the shortcomings in her conduct before the Bankruptcy Court were brought to her attention, she corrected them in an appropriate manner.
With respect to her specific representation to the court regarding the source of the initial $750 payment made by the Beesleys, Burke had indicated in her fee disclosure statement that the money had come from the Beesleys' wages and earnings.
In their first interview with Burke the Beesleys told Burke that they had taken a cash advance the previous week.¹
Because the advance was not more than $1000, it was of marginal relevance on the issue of the dischargeability of the Beesleys' credit card debt. See 11 U.S.C.A. ? 523(a)(2)(A) & (C) (1993) (establishing the presumption that cash advances greater than $1000 taken 60 days before filing a bankruptcy petition are extensions of credit obtained by false pretenses or fraud and therefore constitute nondischargeable debt).
Burke also testified that she did not believe that the money used to pay her had come from the cash advance.
The record reflects that Mr. Beesley's average weekly income at the time was in excess of $800.
Notwithstanding Burke's attempt to "paint the Beesleys as bad people by pointing to credit card cash advances they supposedly took on the eve of bankruptcy," Beesley, Case No. 96-10686, this court accepts Burke's testimony that she did not believe these credit card funds were used to pay her fees.
The court concludes with regard to this issue that, regardless of Burke's good faith belief, the recent credit card cash advance should have prompted more inquiry from Burke regarding the disposition of this cash advance for purposes of her Rule 2016(b) statement. While Burke may not have willfully misrepresented the source of the Beesleys' payment to her, Burke's failure to inquire further may have resulted in the court not being fully informed on matters relevant to the bankruptcy proceedings. As noted above, however, Burke has since amended her practice to provide both more accurate and more detailed disclosures regarding her fee arrangements, demonstrating an appropriate response to the problem.
The court is satisfied that Burke's conduct was prejudicial to the administration of justice in violation of Maine Bar Rule 3.2(f)(4). The court is not persuaded as the Board has alleged that Burke's conduct amounted to a violation of Maine Bar Rules 3.2(f)(2-3), 3.3(a), 3.7(b) and 3.7(e)(1)(I). The court is also satisfied that Burke's bankruptcy billing practice and her representations regarding it were the product of negligence rather than venality.

B. CAROLEE WEGLARZ

In November 1992, Carolee Weglarz and Daniel Austin contacted Burke regarding the purchase of a piece of property. Burke had represented Weglarz previously in a divorce.

Prior to contacting Burke, Weglarz and Austin had entered into a purchase and sale agreement with respect to the property.

At their request, Burke issued a certificate of title opinion indicating that the seller of the property had marketable title to the property, free and clear of all encumbrances.

The title opinion specifically excepted matters that a physical inspection or survey of the property would reveal. Burke admitted, however, that she came to the legal conclusion at the time of her title opinion that the sellers had a right of way to a nearby lake.

Burke then prepared a warranty deed for transfer of the property. The deed purported to convey the property and a right of way to the lake. Additionally, the deed contained a warranty of title on behalf of the seller.

When searching and certifying the title and drafting the deed, Burke made several mistakes. She did not appreciate that the deed did not convey a right of way over retained lands of the grantor, Manter; the out-conveyances referenced by Burke in the deed had conveyed the previous owner's. i.e., Haskell's, property abutting the lake; Haskell had retained only a personal (and probably) nontransferable right of way to the lake: and Haskell's deed to Manter only conveyed the first segment of Haskell's three-segment right of way to the lake.

These deficiencies should have been apparent without physically inspecting the property or obtaining a survey.

Two years later, Burke represented Weglarz in matters surrounding the end of her relationship with Austin.

Burke prepared and Austin executed a quitclaim deed ceding his interest in the property to Weglarz.

Burke's representation of Weglarz in these and other matters had been concluded by April 1996.

In late August 1996, Burke received a letter from an attorney representing the owners of the land over which Weglarz believed she had a right of way.

The attorney, having been informed that Burke had done the title work, indicated that before contacting Weglarz he was contacting her to provide her an opportunity to clear up the question of whether a right of way in fact existed across his clients' property.

Burke testified that she believed that she forwarded a copy of the attorney's letter to Weglarz.

Weglarz testified that she did not see a copy of the letter until December of 1998.

The court finds that Weglarz's recollection in this regard is not reliable. A copy of the letter was sent to her directly by the attorney for the landowners in June 1997 and she references the letter in her complaints to the Board of Overseers of the Bar in July and October 1998.

Additionally, Weglarz testified to a contact between herself and the property owners in the Summer of 1996 regarding the right of way. Both Burke and Weglarz testified to a conversation occurring roughly contemporaneously with the August 1996 letter in which Burke informed Weglarz that a right of way did not entitle her to keep her canoe in the vicinity of the landowners' dock.

Furthermore, this court credits Burke's testimony that Burke did not formally respond to the August 1996 letter from the landowners' attorney because she had not been authorized by Weglarz to communicate with this attorney on her behalf, i.e., Weglarz had not asked Burke to represent her at that time in the dispute concerning the right of way.

The attorney for the landowners sent a letter to Weglarz directly in June 1997 enclosing a copy of his earlier letter to Burke and informing Weglarz that she did not have a right of way to the lake.

Weglarz and Burke communicated in the fall of 1997 about the disputed right of way. Although Weglarz did not recall specifically authorizing Burke to enlist the services of another attorney, she did recall telling Burke to take care of the problem.

It was reasonable for Burke to conclude from her communications with Weglarz that she was authorized at that time to represent Weglarz in the matter, including doing what was necessary to confirm the existence of the right of way to the lake.

Burke's client notes indicate that she spoke with Weglarz in the early part of November 1997 and she testified that Weglarz agreed to a retainer of $200 at that time. Burke failed to memorialize this agreement, however.

Although Burke did not receive the retainer, she nevertheless pursued the right of way matter.

Burke at this point admittedly had two reasons to resolve this dispute: first, she had given a title opinion arguably certifying the existence of a right of way to the lake, and second, her client had asked her to take care of the problem.

Burke asked a colleague to research the existence of the right of way.

Burke conceded that if the colleague found a title problem that she should have caught in her prior research, she would have taken responsibility for her colleague's charges and for resolving the dispute.

The colleague, mistakenly, as it turns out, confirmed the existence of a right of way to the lake and indicated that any ambiguity could be resolved by a couple of corrective deeds from the client's grantor (Manter), and the estate of the grantor's grantor (Haskell).

Burke forwarded the results of her colleague's research to both Weglarz and the attorney for the landowners contesting the right of way.

The attorney for the landowners promptly responded that the twenty foot right of way referenced in Weglarz's deed did not run to the lake and Haskell's fifteen-foot right of way to the lake was personal to him (i.e., could not have been conveyed to others), had been abandoned by Haskell before his death, and in any event had not been conveyed to Manter, Weglarz's grantor.

Notwithstanding opposing counsel's response, Burke, again aggressively took the position with Weglarz that the defect, if any, in the right of way conveyed by Manter was not attributable to the quality of Burke's title search or her drafting of the warranty deed.

Although in this regard she was in error, based on the memorandum prepared by her colleague claiming that Weglarz had a right of way to the lake, Burke's position was not necessarily unreasonable, at least originally, and did not constitute a misrepresentation on her part.

Consistent with her view that she had not erred, Burke sent her client a bill for her services and that of her colleague.

When her client filed a grievance, Burke persisted in her belief that her performance was entirely appropriate.²
Although Burke's actions in 1996 and 1977 were not unreasonable, the title problem was the result of Burke's inadequate title work.

The court is satisfied that Burke's handling of the original title work was "without preparation adequate in the circumstances" in violation of Maine Bar Rule 3.6(a)(2). The court is not persuaded, as the Board has alleged, that Burke's conduct amounted to a violation of Maine Bar Rules 3.2(f)(3), 3.2(f)(4), 3.3(a), 3.6(a)(1) and 3.6(a)(3).

B. STEPHEN WESTON

Burke first represented Stephen Weston in a lengthy and protracted divorce.

She continued to represent him in post-divorce proceedings and in a foreclosure action related to the divorce.

These matters were concluded by the early fall of 1997.

In the course of these proceedings, Weston incurred substantial attorney fees pursuant to two written fee agreements between himself and Burke which also provided for the accrual of interest on unpaid balances. By the fall of 1997, Weston had an outstanding balance of roughly $11,000 with Burke.

Although Weston's and Burke's testimony conflict about who first proposed the arrangement they agreed that Burke would lease office space in a building owned by Weston and that the rental payments would be applied to offset Weston?s outstanding balance.³

Burke moved into the space at the end of November 1997 without a written lease.

Burke asked Weston repeatedly for a written lease, but he did not provide one.

Weston stated in his testimony to this court that he did not do business that way.

Burke eventually took the initiative and, following discussions with Weston, attempted to memorialize the terms of their rental agreement in a written lease which they both signed at the end of January 1998.

Weston testified that, although he had not read the final draft of the lease at the time he signed it, the lease did not in fact reflect his understanding of the terms of his agreement with Burke.

Simultaneously with these lease negotiations. Burke assisted Weston with an application to the Winthrop Planning Board that would allow Weston to make commercial use of his property, including renting space to Burke and using the remaining portion of the building for his furniture restoration business.

Burke appeared before the Planning Board along with Weston.

Although the parties did not have a written fee agreement specifically addressing her representation of Weston in the Planning Board matter, Burke billed Weston for her Planning Board services.

The Board has failed to demonstrate that Burke's lease of office space in lieu of a collection action was tantamount to an impermissible business transaction with a client.

Even if such an arrangement were a business transaction requiring the opportunity to consult outside counsel. Burke urged Weston to contact another attorney on several occasions in her efforts to secure a written lease.

Although Weston testified that Burke never suggested that he see another attorney, this court credits Burke's testimony on this point.⁴

Lastly, while Burke's monthly rental amounts were being credited against Weston's balance, interest continued to accrue on the unpaid balance as provided in the written fee agreement.

Although Burke had a practice of suspending interest accrual if a client made monthly payments, Burke was not required to make this accommodation pursuant to the terms of her fee agreements with Weston.

There is no evidence that the lease arrangement incorporated an agreement to suspend interest. Therefore, it does not appear that Burke's failure to suspend interest was unreasonable.

The court is not persuaded, as the Board has alleged, that Burke's conduct amounted to a violation of Maine Bar Rules 3.2(f)(3) & (4), 3.3(a), 3.4(b)(f)(1) & (2), 3.5(a)(2), 3.6(e)(2)(iv), 3.7(b), 3.7(e)(1)(i) and 3. 7(h)(2).

II. SANCTION

The Court must consider the appropriate sanction in light of the findings and conclusions stated above and the violations found. In this consideration, the Court's determinations must be guided by the Maine Bar Rules' directive that the purpose of this disciplinary action "is not punishment but protection of the public and the courts from attorneys who by their conduct have demonstrated that they are unable, or likely to be unable, to discharge properly their professional duties." See M. Bar R. 2(a).

The Board urges the Court to briefly suspend Burke as a result of her violations of M. Bar R. 3.2(f)(4) (conduct prejudicial to the administration of justice) [Beesleys] and 3.6(a)(2) (handling a legal matter without preparation adequate in the circumstances) [Weglarz]. The Board's recommendation is based on what it considers to be aggravating factors:

First, Burke had substantial experience in practicing law, especially doing bankruptcy work. Second, she engaged in multiple violations of the bar rules. Third, Burke did not timely acknowledge the wrongful nature of her misconduct, doing so only after she had initially and aggressively responded to those allegations. Fourth, as bankrupt clients, the Beesleys were vulnerable victims. Fifth, Burke took a particularly crabbed, indifferent view to making restitution to the Beesleys, the Bankruptcy Court completely rejecting her defense that her Rule 2016(b) statement accurately disclosed her fee arrangement with them.

Although, not unmindful of these factors, the Court is also aware of several mitigating factors:

Burke practices alone in a largely rural area of Maine. The breadth of her practice and perhaps that of many solo practitioners is substantial. A solo practitioner offering a large menu of legal services is going to make mistakes. Even a specialist in a department of specialists in a large law firm makes mistakes. When the State is required to provide an indigent person with a lawyer, we do not require perfection only the performance of an "ordinary fallible attorney." See Aldus v. State, 2000 ME 47, ? 12, 748 A.2d 463, 467. Mistakes are a fact of life. We should not suspend or disbar lawyers for garden variety negligence. I will not do so here.

Secondly, Burke's "aggressive," "see no error," posture may have been taken on the advice of counsel.

Third, to the extent that Burke tended to exacerbate the situation when she was challenged by clients, it may have been caused by the stress of being overworked and understaffed.

Finally, consistent with the many written testimonials submitted in her behalf, the Court is satisfied that Burke is a thoughtful, caring, hardworking professional.

Although Burke violated two bar rules, neither a disbarment nor a suspension is necessary to protect the public, secure compliance with the rules or acknowledge the seriousness of the violations. The violations are sufficiently serious however, that the Court will impose a reprimand.

It is therefore ORDERED that respondent Karen M. Burke is hereby reprimanded for her violations of M. Bar R. 3.2(f)(4) and 3.6(a)(2).

For the Court

Hon. Howard H. Dana Jr., Associate Justice - Maine Supreme Judicial Court

Footnotes

^1. Burke's interview notes, as well as her testimony, fixes the amount at $1000. Mrs. Beesley testified, however, that the amount was $750.

^2. Weglarz has warranty covenants from her grantor and so far as the record indicates, has chosen not to remedy her situation by pursuing them. This is particularly puzzling because, it appears, that her grantor. Mrs. Manter, is presently in a position to deed her alternate access to the lake.

^3.Also, in the course or their professional relationship, Weston provided Burke goods and services through his furniture restoration business that would be credited against his bills. Burke and Weston were eventually forced to go through fee arbitration to ultimately resolve the amount that was owed to Burke following the breakdown of their relationship. The court will not go into further detail regarding the goods and services arrangement, however, as it does not form the basis of any of the Board's allegations or misconduct.

⁴The Board also alleges that the terms of the lease were unfair to Weston because of the absence of a termination and forfeiture clause for Weston's benefit. In view of Weston's debt to Burke, this deficiency does not render the lease, as a whole, unreasonable.