Opinion ID: 835498
Heading Depth: 2
Heading Rank: 1

Heading: First Cause of Complaint: DR 9-101(A) and DR 9-101(C)(3)

Text: In its first cause of complaint, the Bar alleged that the accused (1) failed to maintain client funds in a trust account, in violation of DR 9-101(A); [10] and (2) failed to maintain complete records of and render appropriate accounts for client funds in his possession, in violation of DR 9-101(C)(3). [11] The trial panel found that the Bar had established by clear and convincing evidence that the accused had violated DR 9-101(A) because the balance in his trust account had reached $46.13 in November 2001. The trial panel also found that the Bar had established by clear and convincing evidence that the accused had violated DR 9-101(C)(3) because he never gave Anderson a written accounting of the funds held in trust for costs associated with her case.
The accused first argues that the trial panel erred in finding that he had violated DR 9-101(A) because his failure to maintain Anderson's $75 in his trust account was nothing more than negligence, and negligence is not a disciplinary matter. The accused points to the following statement in In re Gygi, 273 Or. 443, 450-51, 541 P.2d 1392 (1975), to support that proposition: Although negligence may be a sufficient basis for civil liability under Rule 10b-5 in a federal securities suit, we are not prepared to hold that isolated instances of ordinary negligence are alone sufficient to warrant disciplinary action. The accused's reliance on Gygi is misplaced. Gygi was a case in which this court refused to give preclusive effect to a federal trial court's ruling in a securities action that the accused lawyer had been negligent, because that civil proceeding required proof of the accused lawyer's negligence by only a preponderance of the evidence, whereas the subsequent disciplinary proceeding required the Bar to prove the accused lawyer's unethical negligent conduct by clear and convincing evidence. Nevertheless, Gygi is often cited, as it is here, for the proposition that an isolated instance of ordinary negligence alone is insufficient to warrant disciplinary action. As this court has stated before, however, Gygi does not support such a broad rule: The accused contends this court has held that isolated instances of negligence are not grounds for discipline. That is too broad a statement. In [ Gygi ], we held an attorney's negligence in preparing a corporate annual report was not sufficient to warrant disciplinary action. However, we contrasted In re Marvin G. Hollingsworth, 272 Or. 319, 536 P.2d 1244 (1975), in which we held that negligence in making court appearances and disbursing funds did warrant discipline. A breach of the Code is a subject of disciplinary action if done negligently and if the breach is apt to cause the harm the Code sought to prevent. In re McCaffrey, 275 Or. 23, 28, 549 P.2d 666 (1976). In further support of his position, the accused relies on In re Starr, 326 Or. 328, 952 P.2d 1017 (1998), where this court stated in a that it never has held that DR 9-101(A) is a strict liability offense. Id. at 337 n. 3, 952 P.2d 1017. The Bar responds by pointing to In re Phelps, 306 Or. 508, 760 P.2d 1331 (1988), where this court stated, Failing to maintain funds in a trust account does not require intent[.] Id. at 513, 760 P.2d 1331. The Bar argues that Phelps held that proving that a lawyer failed to maintain funds in a lawyer trust account does not require proof of any particular mental state. As we shall explain, however, this case does not present circumstances requiring us to consider the merits of that argument by the Bar. Here, following the termination of his services on September 20, 2001, the accused did not account for or disburse to Anderson the remaining $75 of the $300 that she had advanced for filing fees. Rather, two months after that termination, he made out three checks from the trust account to himself in the amounts of $450, $250, and $50, drawing down the balance to $46.13. Based on our de novo review of the record, we find that the accused was negligent in handling his lawyer trust account. The record does not contain clear and convincing evidence to support the claim that the accused knowingly withdrew trust account funds that belonged to Anderson, and, indeed, the accused may not have been aware that the balance in his trust account was below $75 in November 2001. However, it is undisputed that the accused never reconciled his monthly bank statements, and, when asked whether he had prepared a trust account ledger to keep track of his clients' funds, he responded that he kept track of those funds in his head. Defendant was negligent in failing to maintain records from which he would have known the amount of money in his trust account and in writing checks to himself that caused the balance in that account to fall below the level required to maintain the funds that belonged to Anderson. In sum, the accused negligently failed to comply with DR 9-101(A), and the rule is satisfied by proof of that kind. The accused raises an alternative argument, which he claims justifies his actions with respect to Anderson's funds in the trust account. He contends that he was not required to return the balance of Anderson's cost advance upon termination because that amount was disputed, in light of the remaining $1,335 that he asserts Anderson owed to him. DR 9-101(A)(2), however, prohibits the withdrawal of disputed funds from a lawyer trust account until the dispute is finally resolved. Here, the accused withdrew a portion of Anderson's funds from his lawyer trust account even though she disputed the amount. Thus, he also failed to adhere to the rule's requirement with respect to disputed funds. Finally, the accused asserts that his conduct did not violate DR 9-101(A) because he later replaced the money, the amount involved was  de minimis,  and the money was not of concern to the client. We reject those contentions without discussion. We find that the Bar has proved by clear and convincing evidence that the accused failed to maintain client funds in his lawyer trust account, in violation of DR 9-101(A).
The accused argues that the trial panel erred in finding that he had failed to maintain appropriate trust account records or to provide Anderson with an accounting in violation of DR 9-101(C)(3) because (1) there were records of his dealings with Anderson; (2) he accounted for the $75 as part of the investigation; and (3) that rule does not specify that an accounting is to be made at a particular time. The accused further contends that the rule does not require an accounting until the client requests one. Thus, according to the accused, because his correspondence with Anderson does not reveal a specific request on her part for an accounting, he was not required to provide one. First, the facts discussed above prove by clear and convincing evidence that the accused failed to maintain complete records of Anderson's $300 filing-fee advance, as required by DR 9-101(C)(3). Moreover, the accused admitted that he kept track of his clients' account balances in his head. That conduct is insufficient to comply with the rule. Second, with respect to the accused's contention that the accounting requirement contained in DR 9-101(C)(3) is dependent upon a request for an accounting from the client, this court previously has rejected that argument. See In re Gildea, 325 Or. 281, 290-91, 936 P.2d 975 (1997) (concluding that text of DR 9-101(C)(3) makes clear that requirement that lawyer render all appropriate accounts is not preconditioned on client first asking for an accounting). In any event, Anderson's letter terminating her lawyer-client relationship with the accused, in which she requested an itemized statement detailing the services rendered to her by the accused and the return of any unused portion of the initial fee, constituted a request for an accounting of all funds provided to the accused. The accused nevertheless argues that DR 9-101(C)(3) does not specify that a lawyer must make an accounting at a particular time. The facts of this case do not make that argument available to the accused. As this court put the matter in Gildea: Whatever efficacy it might have in other circumstances, that argument cannot aid the accused here, because the rule clearly requires an accounting at some time, and the accused never made one. 325 Or. at 291 n. 10, 936 P.2d 975 (emphasis in original). Although the accused eventually sent Anderson a bill that detailed the services that he had provided to her, that bill did not provide an accounting of Anderson's funds in the accused's lawyer trust account. We hold that the Bar has proved by clear and convincing evidence that the accused failed to maintain complete records of and render appropriate accounts for client funds in his possession, in violation of DR 9-101(C)(3).