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David E. Fennell (WSBA No. 15274, admitted 1985), of Bellevue, was suspended for one year, effective May 11, 2004, by order of the Washington State Supreme Court following a hearing. This discipline was based on his conduct between 1996 and 1998 involving marking up costs in nonjudicial foreclosure actions.
Mr. Fennell supervised and conducted nonjudicial foreclosures for his firm's Washington and Oregon clients. Mr. Fennell, through his firm, contracted with outside vendors for posting of notices required in real property nonjudicial foreclosure actions. In February 1996, Mr. Fennell and the other firm partner incorporated Posters, Inc. (Posters). Posters contracted with other outside vendors to provide posting services to the law firm's foreclosure clients. The law firm employees coordinated the posting services before and during Posters' existence.
Posters marked up the cost of the posting service between 50 and 100 percent ($10 to $20). The costs for the posting services, even after the 100 percent markup, were within the range of charges for these services in the geographical area. Firm employees created invoices with these marked-up costs and placed them in the client files, but did not send them to the clients. Mr. Fennell and his firm disclosed a financial interest in vendors to some, but not all, clients. In May 1998, the firm disclosed the cost markup for the first time. The disclosure stated "Posters marks up the amount charged by its subcontractors to cover overhead allocated to Posters by the law firm, risk undertaken by Posters and profit." The firm did not allocate overhead to Posters, although it intended to do so.
Mr. Fennell's conduct violated RPCs 1.8(a), prohibiting knowingly obtaining a pecuniary interest adverse to the client, unless the transaction terms are fair and reasonable to the client and are fully disclosed in writing to the client and the client consents, after a reasonable opportunity to seek the advice of independent counsel; 1.5(b), requiring lawyers who have not regularly represented a client or if the fee agreement is substantially different from previous agreements, to communicate the basis of the fee and factors in its determination to the client, preferably in writing; and 8.4(c), prohibiting conduct involving dishonesty, fraud, deceit, or misrepresentation.
John R. Ruhl and Jean K. McElroy represented the Bar Association. William E. Fitzharris represented Mr. Fennell. Geoffrey G. Revelle was the hearing officer.
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