Opinion ID: 1296515
Heading Depth: 1
Heading Rank: 4

Heading: trust account activities

Text: ¶ 38. The referee made specific findings with respect to the large number of deposits or withdrawals in Webster's trust account during his suspension. The referee noted that as of June 2000 Webster's IOLTA trust account remained open; furthermore, between the time of his suspension in January of 1998 and the end of 1998, eight deposits totaling $97,527.01 had been made into that account. In addition, the referee found that at least 30 checks had been written on that account from the time of Webster's suspension to the end of 1998; the balance in the account at the end of 1998 was $8751.32. The referee determined that although the deposits and disbursements into the account had been made by Webster's legal assistant, she had acted under Webster's supervision by telephone while he was in prison. ¶ 39. In addition, the referee found that after Webster was released from prison, he restated the Articles of Incorporation for Oltman & Webster to provide that the firm offered accounting services rather than legal services. However, according to the referee, Webster maintained his same IOLTA account after that corporate restatement. The referee determined that during 1999, deposits into that account totaled $222,549.47 and disbursements from the account totaled $214,957.44, leaving a balance in Webster's IOLTA account as of June 2000 $7876.94. ¶ 40. In argument before the referee Webster asserted that his continued use of his IOLTA trust account during his suspension was permissible because there was no specific rule requiring an attorney to close his or her trust account during periods of suspension. In addition, Webster asserted that his fiduciary duty to his clients required him to maintain the trust account to safeguard his client's funds. ¶ 41. Although the referee acknowledged that there was no rule mandating that a lawyer must close his or her trust account during a period of suspension, the referee noted that SCR 22.26(2) explicitly prohibited Webster from practicing law during the period of suspension. The referee wrote: Logic, alone, would appear to dictate that depositing money into and disbursing monies from a trust account is the practice of law. After all, the money in a trust account are [sic] derived from the practice of law, and the movement of money into and from such an account is a necessary part of the practice of law. ¶ 42. It was even more significant, according to the referee, that the spirit of the rule against practicing law during a period of suspension, prohibited any activity during suspension that a person would have regularly engaged in as a licensed practicing attorney. The referee believed that Webster's maintaining and utilizing his trust account was just such an activity. The referee wrote: This is not a situation in which petitioner disbursed or transferred all of the monies in his trust accounts after his suspension and simply left the accounts open with a balance of $0. Nor is it a situation where the monies in the trust accounts at the time of suspension simply remained there with no additions or subtractions. If one of these two situations existed herein, my conclusion might be different. In this case, however, petitioner or petitioner's legal assistant under petitioner's supervision, activity moved money into and out of these accounts. Such activity certainly violates the intent of the prohibition against practicing law during the term of suspension. ¶ 43. Nor was the referee persuaded by Webster's other proffered explanation for keeping his trust account openi.e., the protection of his client's funds. The referee pointed out that Webster could have transferred all of the funds in his trust account to another attorney's trust account where they would have been equally safe. Although the referee said that would have required the consent of the client and the other attorney, in view of the fact that Webster had been able to make arrangements to transfer his active client files to other attorneys, the referee thought Webster could have made a similar arrangement to transfer his trust account funds. And, even if he could not, again, the referee said that Webster should have contacted BAPR to ascertain what he should have done with the trust account funds. ¶ 44. On appeal Webster argues that there is nothing in the prohibition in SCR 22.26 against practicing law while under suspension that would require a suspended attorney to close his or her trust account, nor is there anything in the rule requiring the attorney to disburse all the funds held by the attorney as a trustee. Webster points out that there have been no allegations that he abused his trust account in any way; rather, the only allegation was that the considerable deposit and withdrawal activity in his trust account during his period of suspension violated the spirit of SCR 22.26. According to Webster, simply because an attorney has been suspended, that does not relieve that attorney of the fiduciary responsibility the attorney accepted when receiving funds for others for deposit into the attorney's trust accounts. In this respect, Webster notes that the District 5 Professional Responsibility Committee found that it was appropriate for him while under suspension to maintain his trust account with respect to monies that were in dispute on matters involving his former clients and third-party claimants. According to the committee, it would not be realistic to expect an attorney's trust account to be closed upon suspension. ¶ 45. Webster also asserts that although the referee acknowledged that there was no explicit requirement that a suspended attorney must close his or her trust account, the referee incorrectly reasoned that simply maintaining a trust account constitutes the practice of law. Webster complains that this novel proposition ignores the fact that numerous other individuals and entities such as real estate brokers, title companies, escrow agents, etc., also utilize trust accounts as a regular part of their businesses. According to Webster, a trust account is nothing more than a dedicated bank account into which funds belonging to others are deposited. ¶ 46. Although Webster concedes that some of the monies he held in his trust account at the time of his suspension had been derived from his practice of law, he maintains that if the mere movement of funds from such an account constituted the practice of law as the referee believed, then an attorney's trust account would always be frozen at the time of suspension; that would mean, Webster argues, that the suspended attorney would thereafter be unable to disburse any funds from that account without violating the rule against practicing law. Webster insists that SCR 22.26 was not intended to prohibit a suspended attorney from engaging in all activities he or she would have regularly engaged in as a licensed practicing attorney; rather, the rule is intended to prohibit a suspended attorney from engaging in activities which require a license to practice law. In this respect, he contends SCR 22.26(2) is not intended to prohibit a suspended attorney from working as an accountant, tax return preparer, real estate broker, title insurance agent, or in any other occupation where, as part of that occupation, the suspended attorney may do work which is also done by an attorney and which may require a trust account. ¶ 47. In response OLR argues that the deposits and withdrawals from Webster's IOLTA account admittedly all done by Webster's legal assistant but under Webster's telephonic supervision from prison were activities that only an attorney could engage in and therefore constituted the practice of law. Moreover, OLR points out that the referee did not, as Webster contends, find that Webster was required to close his account; rather, the referee viewed the numerous transactions in Webster's trust account as demonstrating his attitude that it was simply business as usual despite his suspension. ¶ 48. We agree with Webster that SCR 22.26(2) is not intended to prohibit a suspended attorney from engaging in any activity he or she could have engaged in as a licensed practicing attorney; rather, that rule is simply aimed at prohibiting a suspended attorney from engaging in activities which require a license to practice law or which are customarily done by law-related personnel such as law clerks, law students, or paralegals. As noted above, in Hyndman, this court said that if acts would not constitute practicing law for a nonlawyer, then those same acts would not constitute practicing law for a lawyer whose license to practice has been revoked or suspended. Webster's activities in transferring funds in and out of his trust accounts, while undoubtedly a component of practicing law, are not necessarily something that could only be done by a person who has a license to practice law. Transferring monies into and out of trust accounts would not normally constitute practicing law for a non-lawyer and therefore it would not constitute practicing law for a suspended lawyer like Webster. ¶ 49. However, in this case, Webster's transactions involved his IOLTA trust account. We believe IOLTA accounts are sui generis in that only attorneys who are required to participate in the program may have an IOLTA account. See SCR 20:1.15 and SCR 13.04. [8] ¶ 50. Nonetheless, we find it unnecessary in this case to determine whether Webster's repeated deposits into and disbursals from his IOLTA trust account during his period of suspension constituted practicing law within the proscription in SCR 22.26(2) because Webster has in any event, not met the heavy burden placed on him by SCR 22.31 to obtain reinstatement. The referee's findings, which are not clearly erroneous, detailing Webster's activities during his suspension compel the conclusion that he has not met his burden to convince this court to grant his reinstatement petition. ¶ 51. When Webster filed his petition for reinstatement he submitted the required $200 advance deposit for costs of the reinstatement proceedings. See SCR 22.29(5). The OLR has now filed a Statement of Costs seeking a total of $9121.75 in costs beyond that $200 advance payment ($7224.10 for the costs incurred in the proceedings before the referee and an additional $1897.65 for costs incurred on this appeal). Webster has objected to OLR's request asserting that SCR 22.24 does not specifically provide for costs in reinstatement proceedings; in addition he claims that the imposition of costs in this matter would result in hardship and injustice to him. ¶ 52. Recently in In re Disciplinary Proceedings Against Penn, 2002 WI 5, 249 Wis. 2d 667, 638 N.W.2d 287, this court rejected the argument that there is no specific provision in SCR chapter 22 authorizing the imposition of costs in a reinstatement proceeding. In Penn we pointed out that SCR 22.29(5), as well as the general provision set out for disciplinary proceedings in SCR 22.11 through SCR 22.24, permit the imposition of costs against a petitioner in a reinstatement proceeding. Despite Webster's claim of inability to pay, under the circumstances of this case including the fact that during his suspension Webster collected significant fees for his representation of the trust in the foreclosure actions, we find it appropriate that Webster pay the full costs (with credit for his $200 advance deposit) of these reinstatement proceedings. See In re Disciplinary Proceedings Against Eisenberg, 122 Wis. 2d 627, 632, 363 N.W.2d 430 (1985). ¶ 53. IT IS ORDERED the petition of Leslie J. Webster seeking reinstatement of his license to practice law in this state is denied. ¶ 54. IT IS FURTHER ORDERED that within nine months of the date of this order, Leslie J. Webster pay to the Office of Lawyer Regulation the costs of this proceeding totaling $9121.75. If the costs are not paid within the time specified and absent a showing to this court of his inability to pay the costs within that time, the license of Leslie J. Webster to practice law in Wisconsin shall remain suspended until further order of the court. ¶ 55. IT IS FURTHER ORDERED that pursuant to SCR 22.33(4) [9] Leslie J. Webster may again file a petition for reinstatement nine months after the date of this order denying his petition for reinstatement. ¶ 56. JON P. WILCOX, J., did not participate. ¶ 57. DAVID T. PROSSER, J. (dissenting). Part of the mission of this court is to protect the public from unethical attorneys. We owe no sympathy to attorneys who steal or otherwise betray their clients. These bad appeals hurt people who have every right to trust them, and they reflect adversely on the integrity and standing of the bar. I take very seriously this court's duty to promote high ethical standards in the legal profession. ¶ 58. If I thought this case involved injury to the public or the legal profession, I would eagerly join the court's opinion. However, I see the case differently. Never have the molehills of unauthorized practice been elevated to such heights. ¶ 59. Attorney Webster's license to practice law in Wisconsin was suspended for two years beginning January 21, 1998. Now, almost four-and-a-half years after the onset of his suspension, Webster is denied reinstatement. He is demonized in the court's opinion and assessed the whopping sum of $9121.75 in costs. ¶ 60. A careful reading of the court's opinion will reveal the emergence of some potentially troublesome principles of law. The court is largely concerned with Webster's unauthorized practice of law while he was under suspension. It points indignantly to the use of some old office checks carrying the name Oltman & Webster, Ltd., Attorneys at Law to pay salaries and other bills during Webster's suspension, as well as the purchase of an ad in the local telephone book in anticipation of Webster's reinstatement. The referee relied on these peccadilloes as examples of Webster's unauthorized practice. The court writes cautiously that these actions might not constitute practicing law, majority op. at ¶ 31, yet it condemns them as unethical. What is the court saying? In the wake of these pronouncements, what rights do partners in a small law firm have when another partner is suspended? Do they have to remove the partner's name from the firm during the partner's period of suspension? Are they forbidden to advertise the name of a firm that includes the name of a suspended partner? ¶ 61. A comparison of the court's opinion with the material in the record will show that a lot of information favorable to Attorney Webster has been left out. A lot of information that puts his errors in context has been left out. For instance, during his suspension, Webster appeared in four foreclosure actions in behalf of members of his family, always in a capacity other than attorney. Three of these cases are correctly denominated as the unauthorized practice of law based on the Life Science decision. Life Science Church v. Shawano Co., 221 Wis. 2d 331, 585 N.W.2d 625 (Ct. App. 1998). One case involving his children is disregarded as being different. It happens to be the one case commenced before the decision in the Life Science case. ¶ 62. More than two years ago, 13 members of the District 5 Professional Responsibility Committee (Committee) met in La Crosse to review Webster's application for reinstatement. Certain problems were identified. The Committee followed up with a careful investigation and issued a 19-page report. Ultimately, the Committee found that, in several respects, Webster technically engaged in the unauthorized practice of law during the term of his suspension . . . . He did not intentionally violate the terms of his suspension and merely appeared as trustee on behalf of a family trust without knowledge of the Life Science decision. ¶ 63. The Committee's recommendation states in part: Based on the conclusion that Mr. Webster was engaged in the practice of law, he has not demonstrated by clear and convincing evidence full compliance with the terms of the suspension order and the requirements of SCR 22.26. Therefore, the Committee cannot recommend reinstatement under the standard of SCR 22.28(6). However, like Petition of Eisenberg, the recommendation for denial of reinstatement should be modified on the grounds that the denial may work an unjustifiably harsh result. The Committee is satisfied that Mr. Webster has the moral character to practice law within the standards expected of the bar and the administration of justice. . . . Mr. Webster has paid what the Committee considers to be a most serious penalty for his misconduct, in light of suspensions ordered for misconduct in other cases. As of the present time he has been suspended from the practice of law for 30 months. He will remain suspended until the Board makes it[s] recommendations to the Supreme Court, and the Supreme Court ultimately decides the matter. By that time Mr. Webster's suspension could approach or exceed three years and if his petition is denied, he will be precluded from again filing a petition for reinstatement for at least nine months following the denial. See, SCR 22.28(8). In Petition of Eisenberg, the referee felt compelled to recommend a denial of reinstatement because of the petitioner's unauthorized practice of law. However he recommended that the denial might work [an] unjustifiably harsh result by extending the term of the suspension for an inordinate period. The Supreme Court stated: Eisenberg's failure to ascertain beforehand the legal effect of an appearance before the hearing examiner does not excuse his conduct. We feel, however, that a denial of reinstatement of his license to practice law . . . would be too severe. The Committee recommends that the Board and Supreme Court adopt a similar rational[e] in this case. . . . The Board and the court should consider the harshness of this sanction in concluding that the Petition for Reinstatement should be granted. ¶ 64. I agree with the recommendation of the District 5 Professional Responsibility Committee. In deference to the Committee's judgment, I respectfully dissent.