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Hornbeck v. Board of Professional Responsibility of Supreme Court of Tennessee

Supreme Court of Tennessee, Nashville

February 16, 2018


          Session June 1, 2017

          Direct Appeal from the Chancery Court for Davidson County No. 15-509-III Ben H. Cantrell, Special Judge

         In this attorney disciplinary appeal, upon petition by the Tennessee Board of Professional Responsibility, this Court ordered the temporary suspension of the attorney from the practice of law based on the threat of substantial harm he posed to the public. For a time, the attorney was placed on disability status; later he was reinstated to suspended status. Subsequently, after an evidentiary hearing, a hearing panel found multiple acts of professional misconduct, including knowing conversion of client funds with substantial injury to clients, submitting false testimony and falsified documents in court proceedings, engaging in the unauthorized practice of law, violating Supreme Court orders, and defrauding clients. The hearing panel determined that the attorney should be disbarred. On appeal to the chancery court, the attorney argued inter alia that the disbarment should be made retroactive to the date of his temporary suspension. The chancery court affirmed the decision of the hearing panel. On appeal to this Court, the attorney does not question the disbarment but argues that it would be arbitrary and capricious not to make his disbarment retroactive to the date of his temporary suspension, in order to advance the date on which he may apply for reinstatement of his law license. We disagree. In contrast to suspension, which contemplates that the lawyer will return to law practice, disbarment is not a temporary status. Disbarment is a termination of the individual's license to practice law in Tennessee. Therefore, we decline to make the effective date of the attorney's disbarment retroactive to the date of his temporary suspension. Accordingly, we affirm.

         Tenn. Sup. Ct. R. 9, § 1.3 (2006) (currently Tenn. Sup. Ct. R. 9, § 33.1(d) (2014)) Direct Appeal; Judgment of the Chancery Court Affirmed

          William W. (Tripp) Hunt III, Nashville, Tennessee, [1] for the appellant, Sean K. Hornbeck.

          William C. Moody, Brentwood, Tennessee, for the appellee, Board of Professional Responsibility of the Supreme Court of Tennessee.

          Holly Kirby, J., delivered the opinion of the Court, in which Jeffrey S. Bivins, C.J., and Cornelia A. Clark and Sharon G. Lee, JJ., joined. Roger A. Page, J., not participating.



         Factual and Procedural Background

         This appeal arises out of attorney disciplinary proceedings against Appellant/Respondent Sean Hornbeck. Mr. Hornbeck graduated from law school in 1996 and became licensed to practice law in New York and the District of Columbia in 1997. After serving as a federal law clerk, Mr. Hornbeck practiced law in the District of Columbia and then at a large firm in Delaware. Later, he obtained his Tennessee law license by way of reciprocity and opened his own law practice, Hornbeck Law, in Nashville.

         In 2008, a Texas businessman introduced Mr. Hornbeck to Harish Raghavan, a businessman working in the finance industry in New York City. After the introduction, Mr. Hornbeck proposed a financial venture to Mr. Raghavan that entailed the advancement of very substantial funds to Mr. Hornbeck. Under Mr. Hornbeck's proposed plan, Mr. Raghavan would advance Mr. Hornbeck funds to be held in an escrow account; these funds would then serve as essential equity behind a huge leverage transaction on a trading platform that would in turn produce large profits. Mr. Hornbeck assured Mr. Raghavan that the advanced funds would be "blocked, " meaning they would not be used in investments or moved out of the escrow account without Mr. Raghavan's express permission.

         Mr. Raghavan agreed to Mr. Hornbeck's proposal. He transferred between $5 million and $5.5 million into a Wachovia Bank escrow account that was maintained by Mr. Hornbeck in his capacity as an attorney. Although Mr. Raghavan gave Mr. Hornbeck permission to move the escrow account to a different, suitably rated financial institution, [2] Mr. Raghavan never gave Mr. Hornbeck permission to transfer any of the money out of the escrow account.

         Mr. Hornbeck promised Mr. Raghavan payouts from the transactions within thirty days, to be paid to Mr. Raghavan in June or July 2008. The payouts to Mr. Raghavan did not occur as promised.

         After the promised payouts failed to materialize, Mr. Raghavan began to pursue Mr. Hornbeck for a return of the monies he had advanced. On August 12, 2008, Mr. Hornbeck arranged for a return of $1 million to Mr. Raghavan's bank account. However, Mr. Hornbeck did not return the remaining balance of between $4 million and $4.5 million. Mr. Hornbeck never gave Mr. Raghavan an accounting of what happened to his money.

         In the fall of 2008, Mr. Raghavan intervened in a lawsuit filed in the chancery court for Davidson County and named Mr. Hornbeck as a defendant. Mr. Raghavan sought an accounting of the funds held in trust by Mr. Hornbeck. In October 2008, the chancery court ordered Mr. Hornbeck to provide a detailed accounting of the approximately $5.5 million Mr. Raghavan had deposited in his trust account. It also ordered him to file unredacted copies of his bank statements at Wachovia Bank and Credit Suisse.

         In November 2008, Mr. Hornbeck filed with the chancery court a purported bank statement showing a balance in excess of $5.5 million in his trust account at Credit Suisse, as well as a purported email from Credit Suisse confirming a balance of over $5.5 million in the account. However, these documents were falsified to indicate that Mr. Hornbeck's trust account had $5.5 million when it did not. Jeff Weaver, an administrative employee of Mr. Hornbeck's law firm, later testified that he prepared the false financial documents and the accompanying email Mr. Hornbeck submitted to the chancery court.

          Accurate and unredacted records of Mr. Hornbeck's trust account revealed that, in June and July of 2008, Mr. Hornbeck transferred large sums of money from the trust account to third party individuals and entities, as well as to his law firm's operating account. During this time, Mr. Hornbeck also made multiple over-the-counter withdrawals from the trust account. All of these transfers and withdrawals occurred without the knowledge of Mr. Raghavan.

         On November 26, 2008, the chancery court ordered Mr. Hornbeck to transfer all of the funds remaining in the Credit Suisse trust account to the clerk and master of the court. Mr. Hornbeck did not comply with this order. Instead, he instructed Credit Suisse to transfer the remaining funds in his trust account, less than $200, 000, to the Regions Bank account of his law firm employee, Jeff Weaver.

         On December 15, 2008, this Court issued an order temporarily suspending Mr. Hornbeck from the practice of law. The order was based on a petition of the Tennessee Board of Professional Responsibility ("the "Board"), as well as the verified complaint in intervention and certified orders from the chancery court of Davidson County. Mr. Hornbeck then asked this Court to instead place him on disability inactive status; the request was supported by an affidavit from Mr. Hornbeck's physician. This request was granted in January 2009; the Court ordered that Mr. Hornbeck's license to practice law be transferred to disability inactive status until further order of the Court.[3] On October 21, 2011, upon an agreement that Mr. Hornbeck was no longer disabled, the Court ordered Mr. Hornbeck's disability inactive status dissolved. His law license resumed its status as temporarily suspended pending the resolution of disciplinary proceedings.

         On November 13, 2013, the Board filed a petition for discipline against Mr. Hornbeck. Proceedings before a hearing panel were held on December 3, 2014. The Board presented to the hearing panel the evidence, arising out of the financial dealings with Mr. Raghavan described above, that led to the temporary suspension of Mr. Hornbeck's law license in 2008. Asked in his testimony to the hearing panel about how the transaction with Mr. Raghavan was supposed to generate a profit or how he would be compensated, Mr. Hornbeck claimed he had a poor memory of this time period. He attributed his poor memory to a head injury he allegedly sustained in the summer of 2008, when he was "jumped" and hit in the head with a metal pipe. The claimed head injury, Mr. Hornbeck said, affected his mental state and caused him to have to take various medications. The injury roughly coincided with the time period in which Mr. Hornbeck engaged Mr. Raghavan in the ill-fated financial venture.

         In his testimony to the hearing panel, Mr. Hornbeck claimed that, when he submitted the falsified financial documents to the chancery court in the prior proceedings, he believed them to be true. At the time of his testimony to the chancery court, Mr. Hornbeck said, he was experiencing multiple family crises and still suffering from the effects of the 2008 head injury, for which he was taking numerous medications. However, Mr. Hornbeck also said that, despite the medications, he believed that he was truthfully answering the questions asked of him.

         In the proceedings before the hearing panel, the Board presented evidence to support multiple other complaints against Mr. Hornbeck as well. The evidence on these other complaints is outlined below.

         Complainants Joseph and Linda Dougherty retained Mr. Hornbeck in May 2007 to represent them in a dispute over earnest money paid to Turnberry Homes on a contract to purchase a house. Mr. Dougherty met Mr. Hornbeck for the first time over the phone and they discussed the contract dispute. In the conversation, Mr. Hornbeck insisted that Mr. Dougherty pay him a $5, 000 retainer over the phone in order to proceed with the lawsuit. Mr. Hornbeck did not discuss with Mr. Dougherty the basis on which he would be billed. Mr. Dougherty paid the retainer and Mr. Hornbeck filed the lawsuit for the Doughertys in May. Mr. Hornbeck communicated with the lawyer for Turnberry Homes a couple of times and met with Mr. Dougherty at his office in July 2007. After the July 2007 meeting, the Doughertys received no further communications from Mr. Hornbeck, despite their repeated attempts to reach him by telephone, e-mail, and in person. Mr. Dougherty finally contacted another attorney to pursue the return of his $20, 000 earnest money from Turnberry Homes.

         In the disciplinary proceedings on Mr. Hornbeck, the attorney for Turnberry Homes, Todd Panther, testified that, on June 27, 2007, he sent Mr. Hornbeck a letter regarding the Doughertys' case, outlining proposed terms of settlement. In spite of numerous attempts to follow up with Mr. Hornbeck, Mr. Panther got no response. On August 21, 2007, Mr. Panther sent another letter to Mr. Hornbeck. The second letter referenced Mr. Hornbeck's failure to respond to Mr. Panther's first letter. It informed Mr. Hornbeck that Turnberry Homes was actively marketing the disputed property in order to mitigate its damages. The second letter also mentioned their agreement that Turnberry Homes had an indefinite extension to answer the complaint Mr. Hornbeck had filed, given the ongoing settlement discussions. Mr. Hornbeck did not communicate any of these matters to the Doughertys. In the disciplinary proceedings, the Doughertys testified that they would not have agreed to the indefinite extension mentioned in Mr. Panther's second letter. The second letter from Mr. Panther also went unanswered. In 2009, with assistance from the Consumer Affairs Division of the Tennessee Department of Commerce and Insurance, the Doughertys settled their case with Turnberry Homes.

         Because Mr. Hornbeck did not perform the services for which they retained him, the Doughtertys pursued Mr. Hornbeck for a return of their $5, 000 retainer. Mr. Hornbeck sent the Doughertys a proposed settlement agreement, but he did not advise them to get advice from another attorney before entering into a settlement agreement with him. The draft settlement agreement was never executed and the Doughertys never got a refund from Mr. Hornbeck.

         Complainant Elizabeth Garland, a registered nurse assistant, retained Mr. Hornbeck to represent her in a contract matter with a third party related to a house fire she experienced. She hired Mr. Hornbeck on May 21, 2008, and paid him a $1, 500 retainer. Mr. Hornbeck wrote one letter to the adverse party on her behalf, and then apparently did no further work on Ms. Garland's matter. After May 2008, Mr. Hornbeck stopped communicating with Ms. Garland. She and her husband called Mr. Hornbeck multiple times and left messages; he never returned their phone calls or sent them any emails. Ms. Garland never received a refund of the retainer she paid Mr. Hornbeck and only received her file after she filed a complaint against Mr. Hornbeck in March 2009.

         In 2010, after Mr. Hornbeck's license to practice law had been temporarily suspended and he was placed on disability inactive status, Mr. Hornbeck worked as an assistant for attorney Mary Clement at her law office in Sumner County. He typed pleadings, greeted clients, answered the phone, met with prospective clients, and performed basic legal research and marketing for Ms. Clement. On one occasion he sat at counsel table in court with Ms. Clement and handed her exhibits as she asked for them. Ms. Clement billed clients for Mr. Hornbeck's time.

         During the time in which Mr. Hornbeck was working at Ms. Clement's office, Ms. Clement represented Mr. Glover Palmer Smith on a criminal matter. While Mr. Smith's case was ongoing, Mr. Hornbeck called him and suggested they meet to discuss Mr. Smith's case and some financial matters. They met at a Mexican restaurant. After discussing the appeal of his criminal case, Mr. Hornbeck told Mr. Smith that Ms. Clement needed two $5, 000 checks from him. Mr. Hornbeck assured Mr. Smith that he would receive an itemized statement later. Mr. Smith wrote two $5, 000 checks as requested and made them payable to Ms. Clement. He gave both checks to Mr. Hornbeck. One check was endorsed by someone other than Ms. Clement and deposited into Mr. Hornbeck's bank account. In the disciplinary proceedings, Ms. Clement testified that Mr. Hornbeck had no reason to meet with Mr. Smith and that she had not asked Mr. Hornbeck to collect any money from Mr. Smith. Ms. Clement testified that Mr. Hornbeck was not authorized to deposit checks for her.

         After the hearing, the hearing panel issued its judgment on March 25, 2015. The hearing panel found that Mr. Hornbeck violated Tennessee Supreme Court Rule 8, Rules of Professional Conduct (2006) ("RPC"), including RPC 1.3 (Diligence)[4]; RPC 1.4 (Communication)[5]; RPC 1.8(h) (Conflict of Interest)[6]; RPC 1.15(a) (Safekeeping Property and Funds)[7]; RPC 1.16(d) (Declining or Terminating Representation)[8]; RPC 3.2 (Expediting Litigation)[9]; RPC 5.5 (Unauthorized Practice of Law)[10]; and RPC 8.4(a), (b), (c), (d) and (g) (Misconduct)[11]. The hearing panel concluded that the Board had proven these violations by a preponderance of the evidence and that Mr. Hornbeck's acts of dishonesty seriously and adversely reflected on his fitness to practice law.

         As required by Tennessee Supreme Court Rule 9, section 8.4 (2006), [12] the hearing panel then considered the American Bar Association Standards for Imposing Lawyer Sanctions ("ABA Standards") applicable to this case:

4.11 FAILURE TO PRESERVE THE CLIENT'S PROPERTY Disbarment is generally appropriate when a lawyer knowingly converts client property and causes injury or potential injury to a client.
Suspension is generally appropriate when a lawyer knows of a conflict of interest and does not fully disclose to a client the possible effect of that conflict, and causes ...

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