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Disciplinary Counsel v. Smith

Supreme Court of Ohio

December 19, 2017

Disciplinary Counsel

          Submitted April 5, 2017

         On Certified Report by the Board of Professional Conduct of the Supreme Court, No. 2011-072.

          Scott J. Drexel, Disciplinary Counsel, and Stacy Solochek Beckman, Assistant Disciplinary Counsel, for relator.

          Montgomery, Rennie & Jonson, L.P.A., and George D. Jonson, for respondent.

          PER CURIAM.

         {¶ 1} Respondent, Scott Clifford Smith of Pepper Pike, Ohio, Attorney Registration No. 0039828, was admitted to the practice of law in Ohio in 1988. In August 2011, relator, disciplinary counsel, charged Smith with multiple violations of the Rules of Professional Conduct and the Disciplinary Rules of the Code of Professional Responsibility, arising from his alleged use of unethical billing practices and charging of excessive fees in five separate cases involving three clients who operated nursing homes in Ohio.

         {¶ 2} The Board of Professional Conduct found that Smith engaged in the charged misconduct, and it recommended that Smith be indefinitely suspended from the practice of law and required to make restitution to his former firm, which had issued substantial refunds to the affected clients. After this court remanded the cause to allow for additional discovery, see Disciplinary Counsel v. Smith, 143 Ohio St.3d 325, 2015-Ohio-1304, 37 N.E.3d 1192, ¶ 15, a panel of the board conducted a second hearing and issued a report reaffirming its original findings and recommending the same sanction.

         {¶ 3} Smith objects to the board's findings and recommended sanction and argues that (1) the findings are based on insufficient evidence and are against the manifest weight of the evidence, (2) his former firm and clients thwarted his attempts to obtain discovery after this court remanded the cause for that purpose, thereby depriving him of due process, and (3) the ethical violations found by the board do not support the recommended sanction.

         {¶ 4} For the reasons that follow, we sustain Smith's objection to the recommended sanction but overrule his remaining objections. We adopt the board's findings of fact and misconduct and find that a two-year suspension from the practice of law and an order that Smith pay $20, 796.50 in restitution to his former law firm is the appropriate sanction in this case.

         Procedural History and Findings of Fact and Misconduct

         {¶ 5} Smith joined the law firm of Weston Hurd, L.L.P., in 1989, became a partner in 1996, and served as the firm's managing partner from 2004 or 2005 until his resignation in 2007. In March 2007, a member of Smith's practice group informed partner Victor DiMarco that Smith had altered firm billing records to take credit for work that DiMarco had performed as an associate at the firm. DiMarco reviewed the billing records and alerted the firm's management committee of apparent irregularities. The firm commenced an internal investigation into Smith's billing practices and, on the advice of outside ethics counsel, reviewed the billing records in five of Smith's cases: Seigmund v. Edgewood Manor Nursing Home, Ottawa County Court of Common Pleas case No. 06-CV-087; Maxey v. Altercare of Canton, Stark County Court of Common Pleas case No. 2006-CV-03231; Lawson v. Altercare of Wadsworth Ctr. for Rehabilitation & Nursing Care, Inc., Medina County Court of Common Pleas case No. 05-CIV-0980; Hanson v. Valley View Nursing & Rehabilitation Ctr., Summit County Court of Common Pleas case No. CV-2005-03-1379; and Heppner v. Beverly Enterprises-Ohio, Inc., Lake County Court of Common Pleas case No. 05-CV-002059.[1] Smith participated in the investigation to some degree but resigned after the firm informed him that it would be contacting his clients about the billing irregularities.

         {¶ 6} As part of the investigation, the firm examined the bills for 88 cases involving the three clients at issue, identified the suspicious entries in each bill, and met with the clients to discuss their findings. The firm reduced the questionable time by 50 to 60 percent and ultimately issued refunds totaling more than $350, 000 to the affected clients. The firm also filed the grievance that gives rise to this disciplinary action.

         {¶ 7} In the resulting disciplinary complaint, relator alleged that while Smith was employed by Weston Hurd, he billed work as his own though it had actually been performed by another attorney, billed time in excess of the time actually spent on particular tasks, billed for work that was never performed by anyone at the firm, and billed multiple cases and clients for identical services and time on the same day.

         {¶ 8} The board found that Smith's billing narratives were false and that in some instances, his billing practices resulted in clearly excessive fees. The board also found that Smith acted in direct conflict not only with his firm's general billing practices but, more importantly, with his clients' express expectations and instructions.

         {¶ 9} Specifically, the board found that under Weston Hurd's billing practices, attorneys tracked their billable time on handwritten sheets that included a narrative description of the tasks performed and the amount of time expended on the task. The firm's administrative staff compiled the data and generated monthly billing memoranda. After the lead attorney on a case reviewed the billing memoranda and made any necessary changes or adjustments, the firm's accounting department generated and sent invoices to the firm's clients and their affiliates, including accountants, third-party administrators ("TPAs") and monitoring counsel for the client's insurance carriers, and the individual nursing homes involved in the cases.

         Tim Johnson, a Weston Hurd partner at the time of the internal investigation, participated in the review of Smith's billing records. Johnson testified that Smith used "the same terminology * * * over and over again for a lot of these different entries" and that the entries were "either at the wrong point in the litigation for what was going on" or recorded "clearly excessive time for what the activity was." He noted a "disturbing number" of instances in which Smith had recorded the same time entry and narrative on multiple files on the same day using ditto marks. Johnson also noted that while the five client files at issue in this case were available for purposes of cross-referencing time entries against work product during a meeting that the firm held with Smith in July 2007 so that he could explain his time entries, "[v]ery little [cross-referencing] happened because it became pretty obvious as we went into the process, * * * there wasn't going to be anything in [the files]." In addition to those irregularities, the board also found at least one billing entry in which Smith had crossed out the initials of then-associate Victor DiMarco, replaced them with his own initials to claim credit for the work, and increased the amount of time billed for the activity.

         {¶ 10} Throughout this disciplinary proceeding, Smith's testimony focused on the alleged billing practices of Beverly, which was the only affected long-term-care company to use electronic billing and document-management programs to interface with the firm. Smith claimed that he maintained bare-bones files at the firm because he uploaded the majority of his work product directly to Serengeti, a billing system, and PowerBrief, a repository for documents and pleadings. According to Smith, others at Weston Hurd had limited or no access to these systems and aside from Smith and three others, "no one else was approved to even see these * * * secret files."

         {¶ 11} At his first disciplinary hearing, Smith testified that each Beverly case had a "matrix, " which he described as an eight- to eleven-page document that graphed out the litigation phases. He claimed that a preapproved budget was assigned to each phase and that he would bill generically against a preapproved billing entry and matrix budget for each phase. At his deposition, Smith testified that although he believed the amount of time he billed was accurate, it would be impossible to correlate his billing narratives with work product in the file because "the narratives and the dates [attached to that time] were not relevant." He openly admitted that his billing narratives did not accurately describe his work. But he argued that his clients had requested and approved generic billing narratives to avoid revealing confidential information that might later be used to support an award of punitive damages against them under the Ohio Nursing Home Patients' Bill of Rights, codified at R.C. 3721.10 et seq. Alternatively, he suggested that the work described in a billing narrative might have been performed in a different case altogether because Beverly allegedly instructed him to bill other matters to the company's open files.

         {¶ 12} The board found Smith's explanation for his billing practices "incredible, " for four reasons. First, during the firm's internal investigation, Smith "submitted exceedingly brief, unhelpful responses" to written questions and failed to adequately explain his billing practices. For example, the board noted that Smith could have logged onto Serengeti or PowerBrief to show his work product to his partners at the outset of the investigation (when he still had access to the systems) but that he never offered to do so. The board also found that he vacillated between stating that his client-confidentiality agreements prohibited him from disclosing the electronic content related to the ...

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