Opinion ID: 2448503
Heading Depth: 3
Heading Rank: 2

Heading: The Disciplinary Board Imposed An Appropriate Sanction On Rice.

Text: We apply our independent judgment when determining appropriate attorney sanctions. [15] In this case, independent review leads us to agree with the Disciplinary Board recommendation that Rice be subject to a four-year suspension, with one year conditionally stayed. This conclusion is consistent with both the ABA Standards for Imposing Lawyer Sanctions and our own precedent.
The American Bar Association has developed standards for imposing lawyer sanctions, by which we are guided but not constrained. [16] Under the ABA model, a court imposing sanctions must consider four factors: (1) the duty breached by the attorney; (2) the attorney's mental state; (3) the injury caused by the attorney's actions; and (4) aggravating and mitigating factors. [17] The initial determination of the appropriate sanction is made after the court addresses the first three factors. After its initial sanction determination, the court considers aggravating and mitigating factors to determine whether the sanction should be increased or decreased according to specific circumstances. [18]
Rice's trust accounting violations breached his duty to clients under ABA Standard 4.1, Failure to Preserve the Client's Property. In addition, Rice's trust accounting violations breached his duty to the public under ABA Standard 5.1, Failure to Maintain Personal Integrity. The latter provision covers cases involving commission of a criminal act that reflects adversely on the lawyer's honesty [and] trustworthiness ... or in cases with conduct involving dishonesty, fraud, deceit, or misrepresentation. Rice emphasizes that he was not found by the Area Hearing Committee to have engaged in either felonious or dishonest conduct. But the Hearing Committee's finding that Rice knowingly... misappropriated client funds by making uninvoiced payments to himself implies conduct that violates the duty to maintain personal integrity, even though the Hearing Committee did not find criminal conduct. By failing to produce records in cooperation with the Bar's investigation, Rice violated Alaska Bar Rule 15(a)(4). He breached his duty to the legal system under ABA Standard 6.2, Abuse of the Legal Process, which covers cases involving failure to expedite litigation or bring a meritorious claim, or failure to obey any obligation under the rules of a tribunal.
The ABA Standards model assumes three possible mental states: intent (when the lawyer acts with the conscious objective or purpose to accomplish a particular result), knowledge (when the lawyer acts with conscious awareness of the nature or attendant circumstances of his or her conduct both without the conscious objective or purpose to accomplish a particular result), and negligence (when a lawyer fails to be aware of a substantial risk that circumstances exist or that a result will follow, which failure is a deviation from the standard of care that a reasonable lawyer would exercise in that situation). [19] The Hearing Committee found that Rice acted knowingly (albeit not necessarily with the intent to deprive his clients of property) by commingling and misappropriating client funds and by failing to keep adequate records. The Disciplinary Board implicitly adopted these findings of fact when it adopted the Hearing Committee's recommendations. Rice has not met his burden of demonstrating that the Hearing Committee's findings were incorrect. [20] The Hearing Committee further found that Rice willfully failed to cooperate with the Bar's investigation, thus imputing intent to Rice's behavior. Rice has failed to discredit this finding. As discussed, the primary explanation Rice offered for his failure to submit subpoenaed documents, i.e., that he had pending motions to quash the Bar's subpoena and for a protective order, is unavailing. For several months before Rice filed these motions, he knew of the subpoena and he was aware that the CD had arrived broken at the Bar's office. Yet he still failed to respond to the Bar's request. This ongoing refusal to comply with the Bar's unambiguous request supports the finding that Rice acted with intent when he failed to cooperate.
Under the ABA Standards, [t]he extent of the injury is defined by the type of duty violated and the extent of actual or potential harm. [21] Rice emphasizes repeatedly in his briefing that he was not found to have caused financial loss to any client and that the potential harm to clients posed by his trust accounting practices was limited by his careful safeguarding of funds so that at all times he held the funds necessary to meet all of his fiduciary obligations. But, as the Hearing Committee noted in its findings and conclusions, Rice's ability to cover his obligations relied in part on a mistaken view of trust funds as fungible assets, such that one client's funds could be used to pay another client. Moreover, the Hearing Committee determined that Rice may have simply been very lucky in being able to manipulate account balances to cover his need to provide funds, masking a high potential for harm to his clients. We have held that the public suffers injury whenever a lawyer fails to maintain personal integrity by improperly handling funds held in trust. [22] We agree with Bar Counsel that Rice's violation of Alaska Bar Rule 15(a)(4) delayed an accounting, causing potential harm to clients whose money was exposed to mismanagement for a longer period of time, and harmed the reputation of the legal profession for integrity, competence, and effective self-regulation.
ABA Standard 6.21 provides that disbarment is appropriate when a lawyer knowingly violates a court order or rule with the intent to obtain a benefit for the lawyer or another, and causes serious injury or potentially serious injury to a party or causes serious or potentially serious interference with a legal proceeding. By failing to respond to the Bar's subpoena, Rice intended to obtain the benefit of delaying and impeding the Bar's investigation; his delay which arguably lasted from the time of the Bar's initial records request up through the present, given his continuing failure to produce some of the requested information caused serious interference with the investigation and the formal proceedings that followed from it. Disbarment is therefore a permissible sanction under ABA Standard 6.21. Under ABA Standard 4.12, [s]uspension is generally appropriate when a lawyer knows or should know he is dealing improperly with client property and causes injury or potential injury to a client. Rice's actions caused at least potential injury to his clients. It also appears that, consistent with the Hearing Committee's findings, his misappropriation of client property was knowing; Rice knowingly paid himself out of client trust funds without having properly invoiced clients for services (regardless of whether he believed he had earned the payments), thus violating his fiduciary duties. The initial sanction indicated under ABA Standard 4.12 is suspension.
Rice argues that a number of the issues the Bar considers to be aggravators are actually mitigators. For example, he claims he cooperated with the Bar and that his cooperation in providing the documents used to convict him should actually be a mitigator. He also argues that the Hearing Committee should have considered as a mitigator the fact that none of his clients was harmed or even complained. We do not find these arguments convincing. As noted above, the fact that the documents Rice provided were used to establish the Bar's case against him does not excuse his failure to provide other documents requested by the Bar and to otherwise cooperate with the Bar's investigation. The fact that no client was shown to suffer a financial loss is not a mitigating factor; potential harm is sufficient to trigger even the most severe sanctions under the ABA model. [23] Further, the lack of client complaints only establishes that no client was aware of any misconduct on Rice's part. The Bar, meanwhile, argues that [p]ractically every aggravator listed in ABA Standards... 9.22(a)-(k) applies to Rice. Specifically, the Bar cites what it characterizes as Rice's dishonest and selfish motives, repeat and multiple offenses, bad faith obstruction of the discipline process, false and deceptive conduct, lack of remorse, exploitation of vulnerable clients, substantial legal experience, and potential criminal conduct. The Bar contends that Rice's only mitigating factor is his lack of a prior discipline record. We judge this assessment to be too harsh. Rice engaged in repeat offenses and obstructed the discipline process; he does have substantial legal experience and has exhibited no remorse. But his trust accounting misconduct, although knowing and potentially harmful, does not seem to have had the bad intent which the Bar attributes to it. Nothing in the record indicates that he had dishonest and selfish motives beyond an unwillingness to comply with accounting requirements, or that he engaged in deceptive conduct (except to the extent that taking client payments without proper documentation is intrinsically deceptive). Admittedly, there is also little in the record to definitively exclude less benign interpretations of Rice's behavior, but the Bar has the burden of demonstrating its initial charges against a respondent attorney. Thus, we exclude these factors from the applicable aggravators in evaluating the appropriate sanction for Rice's conduct. The ABA Standards do not provide guidance on how mitigating and aggravating factors are to be weighted in determining sanctions. [24] In the absence of such guidance, we are inclined to place a great deal of weight on the absence of dishonest and selfish motives, which seems to distinguish Rice's conduct from more serious offenses such as the deliberate and calculated theft of client funds. Rice's conduct is more accurately summarized as irresponsible accounting and estimated, uninvoiced (but, in Rice's view, not unearned) payments to himself. The absence of dishonest and selfish motive, combined with the fact that Rice has no prior disciplinary offenses, is sufficient to reduce his punishment from the disbarment indicated under ABA Standard 6.2 to suspension. The appropriate period of suspension is further analyzed below, with reference to our precedent for attorney discipline.
We have previously issued holdings in a number of cases dealing with client trust fund misconduct by attorneys. In order to provide context for the unique facts of this case, we focus here on five cases representing the spectrum of offenses and sanctions in the trust fund misconduct category. In In re Mann, an attorney misappropriated $2,001 obtained on a referral collection for the benefit of another law firm and used the money to make mortgage payments on his home. [25] He subsequently turned himself in (resulting in a criminal conviction for misapplication of property), returned the misappropriated funds, and publicly informed the community of his misconduct. [26] We noted that disbarment would typically be the appropriate sanction for Mann's conduct, but held that mitigating factors, chiefly Mann's voluntary disclosure, restoration of the misappropriated funds, and remorse, reduced the appropriate sanction to a three-year suspension. [27] In In re Friedman, an attorney deposited an $81,000 settlement contribution in his client trust account. Without permission from the other plaintiffs' attorneys, he then drew on the account to advance funds to his client and pay himself attorney's fees in the case that were not yet due. He also later drew on the trust account to pay himself fees in the unrelated matters of five other claimants before he had deposited settlement funds in those matters. [28] We held that Friedman had engaged in misconduct including dishonest conduct [29] and illegal conduct involving moral turpitude, [30] violations that called for disbarment, absent mitigating factors. [31] Taking mitigators into account, however, we found that Friedman's misconduct was similar to Mann's and that a similar three-year suspension period was therefore appropriate. We noted that Mann had taken less money than Friedman and had self-reported, but cited several circumstances that convinced us a longer suspension would be too harsh: (1) Friedman's lack of a prior disciplinary record; (2) the absence of loss or injury to his clients; (3) his undisputed dedication to his clients and outstanding commitment to pro bono and public service; and (4) the significant measures that Friedman took to remedy the problems caused by his conduct. [32] In In re Brion, an attorney was charged with misconduct relating to failure to perform client services with reasonable diligence and promptness and failure to communicate with clients regarding legal matters and fees. [33] Bar Counsel also charged him with failing to account properly for client funds; Brion overdrew a trust account on one occasion and misrepresented the source of the money he deposited in the trust account to correct the overdraft. [34] We applied the ABA sanctions standards for cases involving lack of diligence and found that suspension was the appropriate sanction; based on the aggravating factors in the case (including multiple offenses, the vulnerability of Brion's out-of-state clients, and Brion's substantial legal experience), we imposed a three-year suspension, with two of those years stayed. [35] In In re Stepovich, Bar Counsel determined that an attorney had failed to maintain sufficient funds in his operating account to cover shortages in his trust account throughout ... 1996-2003; on one occasion, Stepovich waited five months to disburse settlement monies to a client, then wrote the client a check that was returned for insufficient funds. [36] The Disciplinary Board found that this amounted to misappropriation of client funds. [37] We imposed a three-year suspension, with one year stayed. [38] In In re Buckalew, an attorney embezzled $67,000 from two client trust accounts in order to pay clients in another matter that he falsely claimed to have settled. [39] We held that Buckalew's misconduct included defrauding a client by fabricating a `settlement agreement' and intentionally representing the same as genuine, abuse of the legal process by forging a judge's signature, and the embezzlement of client funds, in violation of state and federal law [40] and that the ABA Standards would generally require disbarment for such misconduct. [41] Although the Disciplinary Board had recommended a five-year suspension based on mitigating factors, we determined that the relevant mitigators (including the fact that Buckalew had no prior record of misconduct and had turned himself in only after his misconduct was discovered by a colleague) were not sufficient to preclude disbarment in light of the severity of Buckalew's misconduct. [42] Both parties devote extensive portions of their briefs to identifying the points of similarity and distinction between these cases and Rice's. Rice argues that Friedman, Stepovich, Mann, and Brion are distinguishable on various grounds: Friedman was found to have engaged in illegal activities, Stepovich was found to have harmed a client, Mann took client trust funds that he had not earned, and Brion (who received a relatively lenient sanction) was cited for lack of diligence and failure to communicate with his clients as well as for trust fund violations. We do not find these points of distinction particularly compelling. It is true that, unlike Friedman, the Hearing Committee in this case did not explicitly find that Rice had engaged in illegal activities, but it did find that Rice had misappropriated client funds. Rice may not have caused actual harm to clients as he argues Stepovich did, but he did cause them potential harm, which is sufficient under the ABA Standards to justify even the harshest sanctions; [43] and he did arguably cause actual harm to public trust in the legal system. Based on the Bar's analysis of Rice's records, the Hearing Committee concluded that Rice, like Mann, appeared to have paid himself funds he had not yet earned; Rice provided no evidence of client invoicing to challenge this conclusion. And although Rice was not cited for lack of diligence as Brion was, his trust account misconduct appears to have been more extensive than Brion's single trust account overdraft. Moreover, unlike Friedman, Mann, or Stepovich, Rice failed to cooperate with the Bar's investigation in addition to his trust accounting misconduct. The Bar emphasizes that there were mitigating factors in the cited cases that are not present in Rice's case. For example, it notes that Mann's misconduct was isolated compared to Rice's and that Mann, unlike Rice, turned himself in. Similarly, the Bar argues that, [u]nlike Friedman, Rice cannot show that he harmed no client ... [,] has no record of dedication to clients or public service... [,] tried to conceal his problems and blamed the Bar, and ... still denies misconduct. The Bar contends that Rice's conduct was closest to Buckalew's insofar as each attorney misappropriated large sums, over a long time, and tried to conceal it, offend[ing] public trust by his misconduct. While we agree that Rice lacked a number of the mitigating factors present in Mann and Friedman, the Bar's comparison to Buckalew is misplaced. Buckalew misapplied a large sum of money as part of a larger scheme to deceive clients into accepting a fabricated settlement agreement. Rice's misappropriations and overdraws appear to have been, at least in part, the result of irresponsible accounting and invoicing practices, and were not accompanied by additional attempts to mislead his clients. Based on our analysis of the relevant case law, we hold that the four-year suspension recommended by the Disciplinary Board is appropriate. Rice's trust accounting misconduct was probably most similar to that of Friedman and Stepovich; in all three cases, attorneys withdrew funds from client trust accounts in advance of having earnedor at least properly invoicedthem, but they do not appear to have intended to permanently deprive clients of money. Friedman received a three-year suspension, while Stepovich received a three-year suspension with one year stayed. Like Friedman, Rice had no record of prior misconduct. But unlike Friedman, who introduced substantial evidence of his public service and the quality of his work, there is no evidence in the record of Rice's prior history of service to clients. More importantly, Rice, unlike either Friedman or Stepovich, was found to have deliberately interfered with the Bar's investigation. This lack of cooperation, constituting an independent violation under the ABA Standards, merits additional disciplinary action. A suspension that is a year longer than the discipline imposed on Friedman is therefore reasonable in Rice's case, particularly given the possibility of a one-year stay should Rice fulfill certain conditions. [44]