FOR THE RESPONDENT FOR THE INDIANA SUPREME COURT
Terry L. Smith Donald R. Lundberg,
Smith & DeBonis 115 West Washington Street
9696 Gordon Drive Suite 1165
Highland, IN 46322 Indianapolis, IN 46204
SUPREME COURT OF INDIANA
IN THE MATTER OF )
) Case No. 45S00-9904-DI-233
MICHAEL J. GALANIS )
March 19, 2001
The respondent, Michael J. Galanis, agreed in writing to represent a client in
her personal injury lawsuit in exchange for forty percent (40%) of her recovery.
The respondent ultimately retained fifty percent (50%) of the recovery $20,000
more than agreed and refused the clients demands for the return of
the excess fees. We suspend the respondent from the practice of
law in Indiana for ninety (90) days for such misconduct.
Having been admitted to the bar of this state in 1979, the respondent
is subject to our disciplinary jurisdiction. A hearing officer was appointed to
this case, and, after a hearing, tendered his report to this Court.
The hearing officer determined the respondent violated Ind.Professional Conduct Rule 1.5(a) by charging
an unreasonable fee.
Neither the respondent nor the Disciplinary Commission has petitioned this Court for review
of the hearing officer's report. Where the hearing officer's report is unchallenged,
we accept and adopt the findings contained therein but reserve final judgment as
to misconduct and sanction. Matter of Kristoff, 611 N.E.2d 116 (Ind. 1993).
Within that review framework, we now find a client hired the respondent in
1993 to represent her in her pending claim for personal injuries arising from
an automobile accident. The fee agreement signed by the respondent and his
client called for the respondent to receive a contingent fee of forty
percent (40%) of the gross amount recovered by the filing of a lawsuit,
plus expenses. The agreement further provided that the client would pay an
additional ten percent (10%) of the gross settlement if it were appealed by
another party to the litigation.
A jury returned a verdict of $250,000 for the client. The
defendant filed a motion to correct errors in which she urged that the
damages awarded by the jury which were $150,000 more than her available
insurance coverage were excessive and should be reduced. The respondent, on
behalf of his client, filed a brief opposing the motion to correct errors.
The trial court denied the motion.
The respondent began investigating the availability of collecting directly from the defendant the
$150,000 of the judgment not covered by insurance. He determined that the defendant
had been declared incompetent and was under a guardianship. He further determined
that the guardianship did not have sufficient assets to satisfy the excess judgment.
That led the respondent to investigate whether the defendant might have grounds for
a claim against the defendants insurer for bad faith. The respondent ultimately
determined a factual basis for that claim existed. The respondent negotiated with
the defendants attorney, seeking an agreement under which the defendant would assign her
claim of bad faith judgment to the client in exchange for a covenant
not to execute the judgment against the defendant. In response, the defendants
attorney initially offered to resolve the personal injury lawsuit for $150,000 -- $100,000
less than the judgment but $50,000 more than available insurance coverage. Eventually,
the respondent and the defendants attorney negotiated a $200,000 settlement which did not
include assignment of any bad faith claim which the defendant had against her
On or about April 28, 1994, the client went to the respondents office
to approve the disbursement of the settlement. The respondent gave the client
a disbursement statement calling for his retention of $100,000 in attorney fees
the equivalent of fifty percent (50%) of the total settlement. The statement
indicated the settlement was for a claim of damages arising out of the
automobile accident and did not indicate that any of the fees were calculated
on an hourly basis. The statement also made no reference to compensation
for an independent bad faith claim against the insurer.
The client later objected to the disbursement, claiming that the respondent was entitled
to forty percent (40%) of the settlement proceeds, not fifty percent (50%), because
the case was not appealed. Though not disputing that no appeal occurred,
the respondent refused to return the ten percent (10%). He testified at
hearing that he spent more than eighty-three (83) hours researching the potential bad
faith claim against the defendants insurer and that his normal billing rate was
$250 per hour. Thus, he asserted his time on the bad faith
claim was worth about $21,000.
We find that the respondent violated Prof.Cond.R. 1.5(a) by charging an unreasonable fee.
Under the fee agreement, he was entitled to forty percent (40%) of
the $200,000 -- $80,000. The hearing officers findings indicate the respondent justified
the $100,000 fee by asserting he was entitled to $20,000 in hourly fees
for his work on the bad faith claim in addition to the forty
percent (40%) of the $200,000 settlement authorized by the fee agreement. This
approach rests on his assertion that the bad faith claim was a separate
action to which a different fee structure applies.
The respondents argument fails. First, the fee agreement does not specify that
the respondent is entitled to an hourly rate nor does it specify an
hourly rate. The fee agreement only refers to a percentage recovery of
any gross amount recovered from the lawsuit. Moreover, the disbursement statement does
not reflect any hourly billing rate. It notes a total settlement of
$200,000 and attorney fees of $100,000. While the respondent contends the bad
faith claim was separate from the clients personal injury claim, the respondent and
the client negotiated and finalized only one fee agreement. Nothing in that
fee agreement suggests that the personal injury and bad faith claims are separate
actions to which separate billing procedures will apply.
In fact, the bad faith claim was not a separate action in which
the respondent was representing his client and for which he was entitled to
separate fees totaling $20,000. The bad faith claim belonged to the defendant
in the personal injury lawsuit, not the respondents client. The defendants possible
bad faith claim against her insurer was an asset of the defendant which
the respondent discovered during his efforts to collect his clients personal injury judgment.
To the extent that the respondent researched the merits of a
bad faith claim against the insurer, he did so only as a means
of collecting the judgment in his clients personal injury lawsuit.
Where there is a written fee agreement specifying the amount of legal fees
the client will pay, an attorneys retention of a fee greater than that
specified in the agreement is strongly indicative of an unreasonable fee. Matter
of Lehman, 690 N.E.2d 696 (Ind. 1997). In this case, the respondent
retained fifty percent (50%) of the settlement when the fee agreement provided for
forty percent (40%). He has failed to establish any legitimate grounds for
retaining the additional ten percent (10%) as fees. Accordingly, we find the
respondent charged an unreasonable fee, in violation of Prof.Cond.R. 1.5(a).
Given our finding of misconduct, we must determine an appropriate sanction. In
doing so, we consider the misconduct, the respondents state of mind underlying the
misconduct, the duty of this court to preserve the integrity of the profession,
the risk to the public in allowing the respondent to continue in practice,
and any mitigating or aggravating factors. Matter of Mears, 723 N.E.2d 873
(Ind. 2000). The reasonableness of an attorneys fee is an important question
of public import with broad implications; it has an impact on the availability
of legal services to the public and the administration of justice, and, ultimately,
reflects on the attorneys status. Matter of Benjamin, 718 N.E.2d 1111 (Ind.
The respondent attempted to take fifty percent (50%) of his clients recovery
when he was entitled to only forty percent (40%). When the client
objected and sought return of the excess fees, the respondent refused and, to
justify his excessive fee, claimed that he was entitled to $20,000 in hourly
fees. In light of the substantial amount of the unreasonable fee,
we find that the respondents misconduct warrants a significant period of suspension.
It is, therefore, ordered that the respondent, Michael J. Galanis, is hereby suspended
from the practice of law for ninety (90) days, beginning April 23, 2001.
At the conclusion of this suspension, he shall be automatically reinstated if
he has: 1) fully reimbursed the client the $20,000 in fee overcharges; 2)
provided proof of such reimbursement to the Commission before the 80th day of
his suspension; and 3) paid the costs assessed in this proceeding. If
such conditions are not met before the expiration of the ninety (90) day
suspension, the respondents suspension shall continue until he successfully petitions for reinstatement pursuant
to Ind. Admission and Discipline Rule 23(4).
The Clerk of this Court is directed to provide notice of this order
in accordance with Admis.Disc.R. 23(3)(d) and to provide the Clerk of the United
States Court of Appeals for the Seventh Circuit, the Clerk of each of
the United States District Courts in this state, and the Clerk of each
of the United States Bankruptcy Courts in this state with the last known
address of the respondent as reflected in the records of the Clerk.
Costs of this proceeding are assessed against the respondent.