Opinion ID: 2083024
Heading Depth: 2
Heading Rank: 1

Heading: Principles

Text: Our disciplinary cases define misappropriation as any unauthorized use of client's funds entrusted to [the 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) (citation and quotation marks omitted). Bar Counsel must prove unauthorized use of client funds by clear and convincing evidence, see, e.g., In re Gilchrist, 488 A.2d 1354, 1357 (D.C.1985), in keeping with the general rule that [t]he burden of proving the [disciplinary] charges rests with Bar Counsel[,] and factual findings must be supported by clear and convincing evidence. In re Williams, 464 A.2d 115, 119 (D.C.1983); see also In re Mitchell, 727 A.2d 308, 313 (D.C.1999) (It is Bar Counsel's burden to establish by clear and convincing evidence that respondent violated the Rules of Professional conduct.). In the case of misappropriation, however, that proof requirement is not a demanding one, because misappropriation occurs whenever the balance in [the attorney's operating] account falls below the amount due to the client. Misappropriation in such situations is essentially a per se offense; proof of improper intent is not required. Micheel, 610 A.2d at 233 (citations omitted). In Addams, this court sat en banc to consider the proper sanction for misappropriation. Before us was the case of an attorney whose actions constituting misappropriation were not the result of simple negligence but were, as he admit[ted], intentional, 579 A.2d at 199. Because we were satisfied that [t]he Bar of the District of Columbia has had sufficient notice of the gravity with which the court views intentional misappropriation, id. at 198, we reaffirmed that in virtually all cases of misappropriation, disbarment will be the only appropriate sanction unless it appears that the misconduct resulted from nothing more than simple negligence. Id. at 191. While not adopting a per se rule, we adhere[d] to the presumption [of disbarment] laid down in our prior decisions regarding non-negligent misappropriation, and held that we would regard a lesser sanction as appropriate only in extraordinary circumstances. Id. [1] Bar Counsel, relying principally on Addams, contends that once misappropriation has been proved, the burden shifts to the attorney to persuade the Board and the court that the misconduct has resulted from nothing more than simple negligence. Bar Counsel derives her position from the way we phrased the presumption of disbarment in Addams (disbarment will be the . . . sanction unless it appears. . .), as well as from her conviction that placing the burden to prove more than negligence on Bar Counsel would effectively create a presumption the other way  i.e., of negligent or inadvertent misappropriation  thereby vitiat[ing] the . . . purpose of the strict sanction announced in Addams  (Supp. Br. for Bar Counsel at 8). The Board disagrees. It contends that a rule of presumptive disbarment upon proof by Bar Counsel of an essentially per se offense, placing upon the attorney the burden to prove the lesser degree of culpability necessary to avoid that sanction, would be excessive and, equally important, inconsistent with our decisions, chiefly In re Thompson, 579 A.2d 218 (D.C.1990). We think the Board has the better of the argument. As pointed out, the issue before the court in Addams was the appropriate sanction for Addams' intentional misappropriation of client funds. 579 A.2d at 192. Before and since Addams, however, our decisions have made clear that misappropriation resulting from more than simple negligence need not be intentional or purposeful to warrant disbarment. Rather, as the Board aptly formulates the standard, disbarment will be presumptively required if the attorney's conduct demonstrated an unacceptable level of disregard for the safety and welfare of entrusted funds, see, e.g., Micheel, 610 A.2d at 236, a showing the Board and the court have consistently summed up in the term reckless. We discuss that standard further in part II. A.2., infra. For present purposes, however, the important fact about Addams is that the attorney's state of mind or level of culpability was not at issue there  he admitted intentionality  and the court thus had no occasion to consider who had the burden of proving more than ordinary negligence. In another case, Thompson, decided shortly after Addams, the court was effectively confronted with that issue when asked to decide whether Bar Counsel's general obligation to prove disciplinary violations should be qualified to take account of the special difficulties of proof in misappropriation cases. In Thompson, Bar Counsel had charged the attorney with dishonest misappropriation of a client's funds in violation of then-DR 1-102(A)(4) (dishonesty) and DR 9-103(A) (commingling and misappropriation). Thompson, 579 A.2d at 218, 220. The Board, although acknowledging Bar Counsel's burden to prove both dishonesty and misappropriation by clear and convincing evidence, had sought to overcome the extreme difficulty Bar Counsel sometimes faces in tracing funds from one attorney account to another when investigating possible unauthorized use of entrusted funds. The Board had therefore adopted and applied in Thompson a rule that whenever a lawyer takes his clients' funds for any non- de minimis period of time without authorization and without any proper accounting for them, the law creates a rebuttable presumption that the lawyer has dishonestly misappropriated those funds, whereupon the burden of going forward with explanatory evidence shifts to the lawyer. Id. at 221 (quoting Board Opinion). In this court, Thompson challenged that rule as effectively shifting the burden to him to prove that he had not acted dishonestly. The court recognized that the Board had been careful to leave the burden of persuasion by clear and convincing evidence with Bar Counsel, id., but it was nonetheless concerned that, [i]n these circumstances, a shift in the burden of explanation may blend imperceptibly with a shift in the burden of proof. Id. at 223. The court therefore concluded that it is neither necessary nor advisable to invoke a formal rebuttable presumption whenever Bar Counsel has proven an unauthorized taking of client funds for a non-de minimis period and without a proper accounting. Id. at 221. It held instead that the Board may weigh, together with all of the other evidence, an attorney's explanation for  or conversely inability to explain satisfactorily  the use of a client's funds in deciding whether Bar Counsel has met its burden of proving dishonest misappropriation by clear and convincing evidence. Id. It reiterated that Bar Counsel may properly offer the inadequacy (or non-existence) of the attorney's explanation for the use of client funds as one significant  and even decisive  factor in proving dishonest misappropriation, id. at 222, but it limited the significance of that explanation to circumstantial evidence which the Board may consider, along with all the other evidence, in determining whether Bar Counsel has proven dishonesty by clear and convincing evidence. Id. at 223. When misappropriation is alleged separately to have also constituted dishonesty, accordingly, Thompson makes clear that Bar Counsel retains the burden of proving that the misappropriation was of such character as to require presumptive disbarment under Addams. That is true even though the respondent's explanation for the misconduct may be considered by the factfinder along with the other evidence in assessing the sufficiency of Bar Counsel's case. But what if Bar Counsel does not charge the misappropriation separately as an act of dishonesty? The Board informs us that since the decision in Addams, Bar Counsel's practice has changed and that in contrast to the former practice exemplified by Thompson of charging dishonesty for (and along with) misappropriation, Bar Counsel now regularly charges intentional or reckless misappropriation as a violation of Rule 1.15(a) only (the successor to DR 9-103(A) (misappropriation)), alleging dishonesty (Rule 8.4(c)) only when there has been separate though related conduct of that description. [2] We agree with the Board, nonetheless, that the fact that misappropriation is not alleged to have been dishonest  but rather intentional or reckless  should not mean a reallocation of the burden of proof. The Addams sanction of near-automatic disbarment for misappropriation resulting from more than negligence is a strict one; it should not be triggered, in our judgment, solely by proof by Bar Counsel  even by clear and convincing evidence  that the attorney let the funds in his operating account drop below the obligated level, leaving it to him to prove that he lacked the requisite intent or level of culpability. Addams itself does not imply the contrary. There we were careful to state that disbarment would be the usual sanction for misappropriation not involving simple negligence, 579 A.2d at 196 (emphasis added), and that once that level of misconduct is established the inquiry turns to whether mitigating factors have been shown sufficient to rebut the presumption of disbarment. Id. at 199 (emphasis added). The clear implication is that the attorney's obligation to rebut arises only when non-negligent misappropriation has been demonstrated by Bar Counsel. In Pels, we read Addams as having placed upon the attorney the burden of proving `extraordinary circumstances' that justify departure from the presumptive rule of disbarment, 653 A.2d at 389 (quoting Addams, 579 A.2d at 191), but the reference to Kersey -equivalent extraordinary circumstances (see note 1, supra ) clearly indicated our understanding that the attorney must prove that the presumed sanction of disbarment is inappropriate for his particular case of intentional or reckless misappropriation. See also id. at 397-98. Despite ambiguous language in some of our decisions, [3] we are convinced that our law places the burden of proving the requisite level of culpability on Bar Counsel. As was stated in In re Ray, 675 A.2d 1381, 1388 (D.C.1996), If [the attorney's] conduct was not deliberate or reckless, then Bar Counsel proved no more than simple negligence.
We pointed out earlier that misappropriation resulting from more than simple negligence, hence subject to Addams disbarment, does not require proof that the attorney acted intentionally or deliberately. Although the question of sanction under Addams has sometimes been posed as whether the misappropriation was intentional or [instead] negligent, see, e.g., In re Berryman, 764 A.2d 760, 768 (D.C. 2000), we have consistently recognized that misappropriation revealing an unacceptable disregard for the safety and welfare of entrusted funds  in short, that is reckless  will warrant disbarment under Addams. [4] The hallmarks of such misconduct revealed by our cases include: the indiscriminate commingling of entrusted and personal funds; a complete failure to track settlement proceeds; total disregard of the status of accounts into which entrusted funds were placed, resulting in a repeated overdraft condition; the indiscriminate movement of monies between accounts; and the disregard of inquiries concerning the status of funds. See, e.g., Utley, 698 A.2d at 450; Pels, 653 A.2d at 390-91; Micheel, 610 A.2d at 232-33. All of these actions reveal an intent by the attorney to deal with and use funds escrowed for clients as his own or an unacceptable disregard for the security of client funds. Hines, 482 A.2d at 380. In Micheel, for example, we held that recklessness was shown by the attorney's indiscriminate writing of checks on a commingled account, with no attempt to keep track of client funds, at a time when the attorney knew or should have known the account was overdrawn. Micheel, 610 A.2d at 236. In Pels, the determination of recklessness was based on (i) the indiscriminate mingling of personal and client funds for over nearly a year, with the drawing of a large number of personal checks and unrelated checks on an operating account where settlement funds had been deposited; (ii) the repeated overdraft condition of the account and repeated dishonoring of checks to a medical provider; (iii) the pervasive failure to maintain contemporaneous records of client funds in accounts; and (iv) the failure to account for or to deliver to the client funds owed her, which may have been the result of accounting records and procedures . . . so hopelessly inadequate that [respondent] may have been incapable of rendering an accounting. Pels, 653 A.2d at 392 n. 8. And in Utley, we stated that [r]espondent's flagrant disregard of the court's inquiries [into her actions in taking unauthorized fees from an estate] for nearly two years is an aggravating factor of sufficient magnitude to compel us to conclude that she was reckless [in taking unauthorized commissions and retaining unauthorized estate funds]. Utley, 698 A.2d at 450. These and other decisions, see Berryman, 764 A.2d at 768-70 (summarizing cases), demonstrate that the central issue in determining whether a misappropriation is reckless is how the attorney handles entrusted funds, whether in a way that suggests the unauthorized use was inadvertent or the result of simple negligence, or in a way that reveals either an intent to treat the funds as the attorney's own or a conscious indifference to the consequences of his behavior for the security of the funds. See Micheel, 610 A.2d at 236 (respondent's conduct revealed a recklessness disregard for the security of his client's funds); BLACK'S LAW DICTIONARY 1277 (7th ed.1999) (recklessness is a state of mind in which a person does not care about the consequences of his or her action); 57 AM.JUR.2D Negligence § 302 (1989) ([R]eckless misconduct requires a conscious choice of a course of action, either with knowledge of the serious danger to others involved in it or with knowledge of facts that would disclose this danger to any reasonable person.).