Opinion ID: 2320656
Heading Depth: 1
Heading Rank: 7

Heading: Re-examination in Light of Anderson and Fair

Text: The Board has reviewed the record in light of the Court's decisions in Anderson and Fair, and concludes that Bar Counsel satisfied her burden of establishing intentional and/or reckless misappropriation by clear and convincing evidence. Misappropriation. The Board confirms its prior conclusion that Respondent misappropriated the $357.64. The Court defines misappropriation as any unauthorized use of client's funds entrusted to [a lawyer], including not only stealing but also unauthorized temporary use for the lawyer's own purpose, whether or not he derives any personal gain or benefit therefrom. In re Harrison, 461 A.2d 1034, 1036 (D.C.1983) (quoting In re Wilson, 81 N.J. 451, 409 A.2d 1153, 1155 n. 1 (1979)). In Fair, the Court confirmed that it was misappropriation to take legal fees prior to Court approval. Fair, 780 A.2d at 1110 (citing In re Utley, 698 A.2d 446 (D.C. 1997)). Respondent's action in taking estate funds as legal fees was also misappropriation in that it violated his agreement with Ms. Wilson that his fees would be paid from non-estate funds. In shifting the $357.64 from his escrow account to his firm's operating account, without authorization by either the Court or his client, he committed misappropriation. See, e.g., Addams, 579 A.2d at 190 (unauthorized withdrawal of funds from trust account for legal fees held to constitute misappropriation). In his brief to the Board on remand, Respondent argues that Bar Counsel is using his return of the $357.64 to the successor personal representative and his petition for Court approval of his fees as evidence of misappropriation and that, prior to Bar Counsel's inquiry, Respondent had been guilty only of commingling. Resp. Brief at 3-4. Contrary to Respondent's argument, the misappropriation was complete when Respondent took the $357.64 in estate funds as his attorney's fees on March 29, 1996. Regardless of whether the funds were later returned, Respondent's action in taking the estate funds without Court approval and in contravention of his fee agreement with Ms. Wilson constituted misappropriation. Level of Culpability. In our view, the facts compel the conclusion that Respondent chose to treat the funds as [his] own, thereby establishing the level of culpability contemplated by the Addams rule. [6] Anderson, 778 A.2d at 339. First, despite his agreement with Ms. Wilson that his fees would be paid from non-estate funds, he removed the $357.64 from his firm's escrow accountwhere the monies were first placedand deposited them into his firm's operating account. He did this on the same day, March 29, 1996, that he rendered an invoice to Ms. Wilson for legal fees that did not disclose a payment in like amount. Second, each month thereafter for eight months, he rendered bills to Ms. Wilson for attorney's fees without ever disclosing the fact that he had received this money. Third, he failed to include the $357.64 in the inventory for the estate, thereby effectively concealing the fact that he had received the $357.64. Indeed, from the viewpoint of his client, Ms. Wilson, Ms. Costin, the personal representative, and the Probate Court, the $357.64 which Respondent had received from the original personal representative did not exist. By his actions, Respondent concealed from all interested parties the facts that he had received the $357.64 and that, rather than holding the funds in trust, he had used them as a payment of his legal fees. The existence of this money was not disclosed by Respondent until after Bar Counsel commenced an investigation into Respondent's handling of the probate representation. Respondent then returned the funds, but when he later applied for approval of the $357.64 by the Probate Court, he did so in violation of his agreement with Ms. Wilson that his fees would be paid from non-estate funds. Respondent suggests that his efforts after Bar Counsel initiated its inquiry into his handling of the estateto correct his mistakes should not be used to worsen his position. Resp. Brief at 3. Respondent's return of the $357.64 is a mitigating factor, but it does not excuse Respondent's misappropriation, In re Pierson, 690 A.2d 941, 950 (D.C.1997); In re Clarke, 684 A.2d 1276 (D.C.1996), nor does it qualify for treatment as special circumstances under Addams allowing for departure from disbarment as the prescribed sanction. Addams, 579 A.2d at 191. Respondent's petition to the probate court is, if anything, an aggravating factor, in that it conflicted with his fee agreement with Ms. Wilson, which provided for payment from non-estate funds. Finally, under Thompson, the Board does consider Respondent's failure adequately to explain his handling of the money as circumstantial evidence of his culpability. 579 A.2d at 218. In at least two cases in addition to Thompson, the Court has considered respondent's failure adequately to explain the use of trust money. See In re Godfrey, 583 A.2d 692 (D.C.1990) (per curiam) (no testimony or explanation from respondent); In re Burton, 472 A.2d 831 (D.C.1984) (per curiam), cert. denied, 469 U.S. 1071, 105 S.Ct. 563, 83 L.Ed.2d 504 (1984) (respondent's testimony claiming inadvertence not sufficient in light of subsequent conduct). Respondent had the opportunity to testify, and he chose not to do so, leaving the Hearing Committee and the Board with only his conclusory assertions of inadvertence. Anderson made clear that the burden of proving a respondent's intent must remain with Bar Counsel. Thus, a respondent's failure to explain the use of trust funds cannot, by itself, satisfy Bar Counsel's burden of proof. But where, as here, Bar Counsel has presented evidence that Respondent's misappropriation was intentional, Respondent's failure to offer anything other than conclusory assertions of inadvertence is a factor that bears on the ultimate issue of intent. In this case, the undisputed facts showing that Respondent treated the money as his own preclude a conclusion that his misappropriation was the result of inadvertence or simple negligence. As the Hearing Committee stated, drawing a check for the exact amount of funds received is not an act which can be described as merely negligent. H.C. Rpt. at 13-14. Similarly, Respondent's action on the same day he drew the check of sending out an invoice for legal fees to Ms. Wilson, without disclosing receipt of fees is inconsistent with the proposition that the misappropriation was inadvertent. Cf. Burton, 472 A.2d at 831. Other evidence pointing in the direction of intentionality includes Respondent's actions in effectively concealing his receipt of the money by failing to reflect it on numerous bills to his client and by failing to include it in the estate inventory. See e.g., In re James, 452 A.2d 163, 166 (D.C.1982) (scienter can be inferred from respondent's conduct); Clarke, 684 A.2d at 1280-81 (circumstantial evidence that misappropriation was dishonest). The Board also concludes that the Court's decision in Fair, 780 A.2d at 1106, does not suggest a different result. First, although Respondent did take the $357.64 as a fee without approval by the probate court, we do not consider that fact as evidence of intentionality; instead, we rely upon Respondent's other actions which effectively concealed his receipt of the money from Ms. Wilson and the successor personal representative, Ms. Costin. Second, while the Court in Fair found the evidence thin regarding Respondent's intent as to the $600 which she overpaid herself by mistake, here we believe that the record is clear and convincing that Respondent intended to keep the $357.64 as his own. His conclusory protestations of inadvertence do not alter the fact that, contrary to his fee agreement, he applied estate funds to his legal fees and concealed this action for many months by failing to reflect the $357.64 either on a series of invoices for fees or on the inventory of the estate. There can be little doubt that, but for Bar Counsel's investigation, Respondent never would have disclosed his receipt of this money. We also note Respondent's prior disciplinary record, which includes two instances of misuse of client funds. In In re Berkowitz, 702 A.2d 683 (D.C.1997) (per curiam), Respondent was found to have negligently misappropriated client funds when he used them for payment of firm obligations. The inquiry giving rise to this prior discipline occurred at the same time that Respondent misappropriated the $357.64 at issue here. In addition, as brought to the attention of the Board subsequent to the Hearing Committee Report, in 1992, Respondent received an informal admonition for disbursing fees to himself from a settlement check without obtaining advance approval from his client. This prior discipline confirms the conclusion that disbarment is the appropriate remedy here.