Opinion ID: 1608924
Heading Depth: 2
Heading Rank: 2

Heading: Unauthorized Fee and Failure to Account and Disburse Funds

Text: Ruth failed to provide an accounting or explanation for why he had not distributed the money to the beneficiaries. Later, the reason for delay in the distribution became apparent. Ruth took unauthorized fee payments in 1995 totaling $3526.50. He did not obtain court approval to withdraw these funds from the estate. This conduct violated DR 2-106(A): A lawyer shall not ... collect an illegal or clearly excessive fee. See, e.g., Iowa Supreme Ct. Bd. of Prof'l Ethics & Conduct v. D'Angelo, 619 N.W.2d 333, 337 (Iowa 2000); Iowa Supreme Ct. Bd. of Prof'l Ethics & Conduct v. Jay, 606 N.W.2d 1, 4 (Iowa 2000). Initially when Ruth paid himself the remaining one-quarter of his legal and executor fees absent court approval, it appeared he would eventually be entitled to those funds when he closed the estate. Because Ruth paid himself before earning the fees he is guilty of misappropriating his client's funds. See Iowa Supreme Ct. Bd. of Prof'l Ethics & Conduct v. Sullins, 648 N.W.2d 127, 134 (Iowa 2002); Iowa Supreme Ct. Bd. of Prof'l Ethics & Conduct v. Apland, 577 N.W.2d 50, 56 (Iowa 1998) (intentional taking of entrusted client funds as fees before earning them is misappropriation). Later, the situation changed because Ruth did not remain entitled to the initial amount of court-ordered legal and executor fees. At the time the court confirmed the agreement to reduce Ruth's fees, Ruth did not tell the court he had already taken the remaining one-quarter legal fees without approval. He did not tell the court he was trying to pay the unauthorized fees back into the estate. This does not change the nature of Ruth's violation. We still have before us a case of misappropriation. Ruth was unable to provide an accounting of estate funds because, at the time of the closing, the estate did not have the money needed to complete distribution. Ruth took the money from the estate for his personal use. Ruth's failure to provide any accounting violates DR 9-102(B)(3) which provides a lawyer shall maintain complete records of all funds, securities, and other properties of a client coming into the possession of the lawyer and render appropriate accounts to the client regarding them. Not only did Ruth fail to provide an accounting, but he failed to distribute funds in a timely fashion. See Iowa Supreme Ct. Bd. of Prof'l Ethics & Conduct v. Lemanski, 606 N.W.2d 11, 12-13 (Iowa 2000) (one-year delay in disbursing settlement funds to client and failure to render those funds resulted in violation of DR 9-102(B)(3) and (4), DR 1-102(A)(1), (5), and (6)); In re Baldwin, 246 Ga. 344, 271 S.E.2d 626, 626 (1980) (imposing indefinite suspension where a lawyer delayed four months before notifying client and making distribution of funds from real estate sale, distribution check then bounced though client suffered no financial loss); In re Lingle, 27 Ill.2d 459, 189 N.E.2d 342, 346 (1963) (disbarring attorney for delay of more than one year in distributing settlement proceeds and for other ethical violations); Disciplinary Counsel v. Zingarelli, 89 Ohio St.3d 210, 729 N.E.2d 1167, 1175 (2000) (imposing indefinite suspension for five-month delay in returning unearned fee to client following lawyer's earlier suspension and for other ethical violations). Ruth's failure to distribute bequests violates DR 9-102(B)(4) which provides a lawyer shall promptly pay or deliver to the client as requested by a client the funds, securities, or other properties in the possession of the lawyer which the client is entitled to receive.