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In re Bailey9/15/2005
n of the settlement funds to him, the amount owed to Dr. Garmon, $2,240.20, was not Ms. Haile's to lend, and Mr. Bailey did not suggest that Ms. Haile retain other counsel to review his loan request and his proposed promissory note. Nor did he advise Ms. Haile as to the prevailing rate of interest. In addition, Mr. Bailey failed to seek authority from Dr. Garmon to borrow the funds owed to the doctor. Thus, when Mr. Bailey's trust account fell below the $2,240.30 owed to Dr. Garmon, and the sums owed to the other medical providers, misappropriation occurred. See In re Davenport, 794 A.2d at 603. Indeed, by August 18, 1992, two months before Mr. Bailey sent payment to Dr. Garmon, Mr. Bailey's trust account showed only 0.11 cents remaining from the $25,000 settlement check.
The question now becomes whether the misappropriation was negligent, reckless, or intentional. Bar Counsel argues that Mr. Bailey's culpability was more than mere negligence. Bar Counsel agrees with the hearing committee's finding that the misappropriation committed by Mr. Bailey could not "be attributable to mere 'inadvertence.'" Because the hearing committee failed to find the "usual mitigating factors, let alone any extraordinary mitigating factors," it recommended a sanction of disbarment.
Bar Counsel agrees that Mr. Bailey should be disbarred because his actions fell in line with other intentional misappropriation cases. The Board, however, asserts that although it maintains that there was no misappropriation, if misappropriation is found, it merely amounted to negligence, and that Mr. Bailey's actions warranted a nine-month suspension.
As we have stated, misappropriation cases generally fall into three categories: (1) intentional misappropriation, (2) reckless misappropriation, and (3) negligent misappropriation. See In re Carlson, supra, 802 A.2d at 348. Here, the record indicates that Mr. Bailey used exceedingly poor judgment, but nevertheless acted under an "honest but mistaken belief" that the authorization did not convey Dr. Garmon a "right" to or an "interest" in the settlement funds, that the executed promissory note allowed him to borrow the settlement money, and that he had the authority to defer payment to Dr. Garmon and the other medical providers. The document on its face was expressly entitled " uthorization," not " uthorization and ssignment." Moreover, Mr. Bailey did not try to hide his borrowing of the settlement funds. Indeed, he was never charged with dishonesty under the Rules of Professional Conduct. He executed a "standard" promissory note enabling him to borrow $5,425.86 and included language in the settlement disbursement sheet which allowed him to borrow the entire settlement amount, including those funds earmarked for the medical providers. Mr. Bailey testified that he always intended to pay the medical providers, but that there would be a "deferral of payment" so he could use the funds to support his new firm.
In fact, he prepared a disbursement sheet which listed the medical providers and the fees owed to each of them but which also stated that Ms. Haile, who signed the settlement disbursement sheet, gave him authority "to borrow the funds awarded to use as deemed appropriate." Under these circumstances, although Mr. Bailey used exceedingly poor judgment, we are satisfied that Mr. Bailey's misappropriation was negligent, rather than intentional or reckless.
Finally, we consider the appropriate sanction. "A six-month suspension without a fitness requirement is the norm for attorneys who have committed negligent misappropriation of entrusted funds together with related violations (commingling, deficient record keeping) . . . ." In re Edwards, 870 A.2d 90, 94
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