Opinion ID: 2898045
Heading Depth: 2
Heading Rank: 1

Heading: Farris Committed the Charged Misconduct

Text: After reviewing the record before the DHP and the briefs and arguments of counsel in this Court, the Court finds the facts as set forth above. A clear preponderance of the evidence shows that Farris promised to hold $66,360.42 from Client A’s settlement in trust for her and her medical creditors. He committed to pay Client A’s medical creditors and to distribute any savings he might generate by negotiating reductions with those creditors to Client A. Instead, Farris never paid any of Client A’s providers, never negotiated discounts with any of them, and then lied to Client A by telling her that her hospital bill had been paid. Instead, the money Farris was to hold in trust was transferred to Farris’ office account and spent for Farris’ business and personal purposes. 12 The evidence also shows that Farris promised to hold $27,132.20 in trust for Client B and their medical creditors, to pay those creditors, and to distribute any savings he might generate from negotiating discounts with those providers to Client B. Farris failed to perform any of these promises. As with Client A, Farris never paid any part of any of Client B’s medical bills and never distributed the remaining settlement funds to Client B. Instead, the $27,132.20 he was supposed to be holding in trust for Client B and their medical creditors was transferred to Farris’ office account and spent for his benefit. As a result, Farris knowingly violated Rule 4-1.15(c) by failing to maintain more than $93,000 in his trust account as he promised for the benefit of Client A, Client B, and their medical creditors. He knowingly failed to distribute this property promptly to the rightful owners in violation of Rule 4-1.15(i). Farris knowingly commingled this property with the funds in his operating account and knowingly converted these funds when the balance of his operating account fell below the amount he was to have held in trust. This conduct constituted misconduct under Rule 4-8.4 because it involved dishonesty, fraud, deceit and misrepresentation. See In re Ehler, 319 S.W.3d 442, 450-51 (Mo. banc 2010) (“Converting client funds necessarily involves deceit and misrepresentation. Therefore, [respondent] has violated Rule 4–8.4(c).”); In re Phillips, 767 S.W.2d 16, 18 (Mo. banc 1989) (respondent engaged “in illegal and dishonest conduct when he received funds on behalf of [the client] and converted these funds to his own use by placing them in his office account without the consent of [the client]”). Farris contends he “did not know” about the improper transfers and expenditures because they were made by his then-wife, though with Farris’ authority and for his 13 benefit. The Court rejects this contention. By November 2011, the evidence shows that Farris knew nearly all of the $93,000 had been transferred to (and spent from) his operating account. Even if Farris ignored these facts, as he contends, he concedes that such knowledge became inescapable no later than November 2012, when the OCDC completed its investigation and confronted Farris with the facts. Accordingly, Farris has knowingly misappropriated these funds then and thereafter. For more than 30 months, therefore, Farris knowingly has failed to make good on his Rule 4-1.15 obligations to Client A and Client B (and their medical creditors). Even though restitution is no defense to charges of misappropriation, In re Mentrup, 665 S.W.2d 324, 325 (Mo. banc 1984), Farris’ dogged refusal to even attempt to make restitution in the face of indisputable evidence that he has misappropriated (and spent) $93,000 he was supposed to hold in trust for his clients and their creditors demonstrates that he acted knowingly. See In re Robison, 519 S.W.2d 1, 3 (Mo. banc 1975) (“transgression committed by respondent is a serious one and … respondent has made no effort to restore the funds”); In re Griffey, 873 S.W.2d 600, 603 (Mo. banc 1994) (lawyer’s “subsequent attempt to cover up the improper conduct [misappropriation] compounds the seriousness of the deeds and belies his argument of mistake”). In addition to the foregoing violations, the Court finds that Farris failed to provide a prompt and accurate accounting when Client A asked about her settlement. This is a violation of Rule 4-1.15(i). Instead, he lied to Client A by telling her that he had paid the hospital $66,360.42 and lied to her by telling her that this payment fully settled her debt to that provider. This conduct violated Rule 4-8.4. Because Client B relied on Farris’ 14 promises, they never asked whether he had fulfilled these promises, and Farris never told them that he had not done so. Nevertheless, Farris’ failure to make any attempt to follow through on his commitments to Client B shows that his initial promises to them, coupled with his subsequent misappropriation of their settlement proceeds, also violated Rule 4-8.4. Finally, when asked by the OCDC to provide records concerning Client A’s and Client B’s settlements, Farris provided tardy and incomplete responses and lied to OCDC as well. In an effort to corroborate the story he told Client A, Farris produced a photocopy of the hospital check that he claimed caused Client A’s check to bounce. He failed to disclose to the OCDC that the check had never been sent to the hospital, however, and that it was never presented for payment (or paid) from the trust account. Farris failed to produce the trust account records required by Rule 4-1.15(d), 12 and he claimed to be unable to locate the clients’ files even though he was required to retain those files for at least ten years following the conclusion of the representation. This conduct violated Rules 4-8.1, 4-8.4, and 4-1.15(d) and 4-1.15(m). B. Farris Cannot Avoid Responsibility by Blaming his Ex-Wife Farris does not deny that he was obligated to hold $93,000 in trust for these clients and their medical creditors. Nor does he deny that this money was transferred in his name to his office operating account, where it was spent for his benefit. Nevertheless, 12 After the 2012 amendment, this provision is now in Rule 4-1.15(f). 15 Farris insists that he committed no misconduct and violated no Rules because all of this was his ex-wife’s fault. Farris claims that his then-wife “took over and controlled the administrative, financial and accounting matters of the office.” Resp. Br. at 8. He testified to the DHP that he “shouldn’t have trusted a spouse who turned out to be a thief,” that he made a “mistake of trusting a thieving spouse,” and that this is merely a “case of an attorney who was taken advantage of by his thieving spouse that caused this problem.” The evidence tells a different story. The evidence shows it was Farris, not his wife, who told Client A and Client B that he would hold some of their settlement proceeds in trust and use it to pay their medical providers. The evidence shows it was Farris, not his wife, who told these clients he would try to negotiate discounts and distribute any resulting savings to his clients. The Court finds that Farris knew he had undertaken these obligations and knew he failed to honor them. The evidence also shows that Farris knew Client A was seeking information from him, not his wife, and he knew his responses were neither timely nor truthful. Farris knew the obligation to respond promptly and truthfully to the OCDC belonged to him, not his wife, and Farris knew he failed to fulfill that obligation as well. Finally, Farris knew that he – not his wife – had a duty under the Rules to maintain each client’s file for the requisite period and a duty to maintain “complete records” of his trust account showing the date, amount, source and explanation for each deposit or withdrawal. Farris knew he failed to do so. 16 Farris authorized his then-wife to make transfers from his trust account to his office operating account but now claims that he did not know what transfers she made or whether they were proper. Farris authorized his then-wife to pay his personal and professional expenses from his operating account but now claims that he did not know she was spending commingled client funds when she did so. The Court finds that Farris was not ignorant of these transactions or the fact that they were improper. 13 The evidence shows that the $93,000 that Farris was supposed to be holding in trust for Client A and Client B (or their medical providers) was siphoned out of Farris’ trust account and deposit into Farris’ office account, where it was spent for his benefit. This conversion was not the result of one or two accidental transfers, quickly reversed. It was the result of a continuous and systematic effort to drain money out of Farris’ trust account and convert it to his personal use. The DHP accurately summarized: “After many transfers for large, exactly even dollar amounts, Respondent began transfers of odd dollar amounts from his trust account, many for $9,999 without offering rational explanation.” DHP Decision at p. 15 (noting that transfers of less than $10,000 did not trigger the bank’s automatic federal reporting obligations). 13 Even if the Court believed that Farris did not know of the misappropriation of the $93,000 belonging to his clients and their medical creditors when each transfer occurred, the fragile bubble of Farris’ innocence burst long ago. By November 2011, a preponderance of the available evidence shows Farris knew all of this money was gone – not just from his trust account, but from his operating account as well. Farris admitted as much to Client A on November 15, 2011, when he noted that both his operating account and trust account were too “low” to permit him to pay the $15,000 he promised. The $66,360.42 check to Skaggs Hospital did not explain the absence of Client B’s money, and a single glance at his bank statements would have shown Farris that this check did not explain the absence of Client A’s funds either. 17 Farris claims his then-wife – not he – made each of these transfers, and he did not know they were improper. Farris cannot avoid responsibility so easily. Instead, as explained above, the Court finds that Farris knew all of the salient facts by November 2011. He knew that he had no right to the trust funds, that they had been transferred and commingled with his office operating account, and that his personal and business expenditures had drained this account so close to zero that nearly all of the $93,000 had been spent and converted to his personal use. See In re Schaeffer, 824 S.W.2d 1, 5 (Mo. banc 1992) (“When an attorney deposits the client’s funds into an account used by the attorney for his own purposes, any disbursement from the account for purposes other than those of the client’s interests has all the characteristics of misappropriation, particularly when the disbursement reduces the balance of the account to an amount less than the amount of the funds being held by the attorney for the client.”); In re Fenlon, 775 S.W.2d 134, 142 (Mo. banc 1989) . Accordingly, the Court agrees with the finding of the DHP on this issue: “Respondent misappropriated funds of clients. Respondent repeatedly transferred funds from the trust account to his operating account, where those funds were used for personal/non-business expenditures.” DHP Decision at p.14 (emphasis added). Not only is Farris’ argument refuted by the facts, it also is immaterial. Farris is not insulated from discipline so long as he authorizes someone else to make the improper transfers and expenditures instead of doing them himself. Nor is Farris insulated as long as he stays ignorant of the improper nature of each transfer or expenditure at the precise moment it occurs. Under Rule 4-1.15, Farris is accountable for the misappropriation of client funds whether he physically makes the transfers and expenditures himself or his 18 wife makes them with his authorization and for his benefit. The duty to safeguard and properly distribute trust account funds is non-delegable. If an attorney relies on a nonlawyer in fulfilling this duty, the attorney bears the risk of the other’s non-performance. Matter of Williams, 711 S.W.2d 518, 520 (Mo. banc 1986). Accordingly, regardless of whether Farris’ ex-wife misused the authority Farris had given her, Farris alone is responsible for fulfilling the obligations and responsibilities imposed upon him by the Rules. C. Farris Cannot Avoid Responsibility by Failing to Keep Records Even though Farris’ attempt to blame his ex-wife fails because the evidence shows he knew he had misappropriated his clients’ money, his defense raises a more significant issue. Rule 4-1.15(d) 14 requires each attorney to keep detailed records showing, among many other things, the source of every deposit to – and the purpose of every disbursement from – that attorney’s trust account. These records must also show, for each separate client or trust beneficiary, the source of all funds deposited, the identity of the client or third person for whom the attorney is holding those funds, and the date, payee and purpose of each disbursement of those funds. No attorney who has complied with Rule 4-1.15(d) can claim, as Farris does, that he “did not know” someone he had authorized to make transfers from his trust account was doing so improperly. Such a claim would be refuted both by the existence of the Rule 4-1.15(d) records and the fact that the attorney kept them. Thus, one of the twin 14 This provision is now found at Rule 4-1.15(f). 19 purposes of Rule 4-1.15(d) is to ensure that an attorney always knows what money is being moved into or out of the trust account and why. The other purpose of Rule 4-1.15(d) is to ensure that, if a problem arises with an attorney’s trust account, the OCDC and this Court are not forced to depend on the attorney’s self-serving memory and claims that he “did not know.” The Court abandons the purposes of Rule 4-1.15(d) if it allows a lawyer’s failure to maintain the required records to work to that attorney’s benefit. To avoid this result, the failure to comply with Rule 4-1.15(d) must give rise to an inference of knowledge, particularly when the attorney tries to defend a charge of misappropriating trust account funds on grounds that the required documents plainly would support or refute had the attorney kept them. Other courts routinely draw such an inference. Because of the specific, strict, and affirmative record-keeping obligations placed on attorneys in the maintenance and operation of their escrow accounts containing the trust funds of clients and third parties, the failure to maintain those records to document an attorney’s claim of how and when those funds were received and expended, as well as an attorney's claimed authorization to make disbursements, may be disbelieved and an adverse inference drawn where such required corroboration is not forthcoming. Attorney Grievance Comm’n of Maryland v. Nwadike, 6 A.3d 287, 297 (Md. 2010). Accordingly, the Court holds that Farris is charged with knowledge of what the records required by Rule 4-1.15(d) would have showed had he kept them. As a result, Farris is deemed to have known, no later than November 2011, that the $93,000 he was supposed to be holding in trust for Client A, Client B, and their medical creditors had been transferred improperly from his trust account, commingled with his operating account, and converted to his personal use by spending the balance of the operating 20 account below the level necessary to make good on the misappropriated trust funds. In this case, these facts are established by a preponderance of the evidence, but they also are to be inferred simply from the fact that Farris knowingly failed to keep the records required by Rule 4-1.15(d). The Court holds that Farris knew or should have known his then-wife was systematically looting the trust account by transferring funds to Farris’ operating account (where he and she spent it to pay Farris’ personal and business expenses) and, even if he did not, this knowledge must be inferred from Farris’ failure to keep the records required by Rule 4-1.15(d). Finally, the Court holds that Farris’ obligation to safeguard others’ property and distribute such property to its rightful owners promptly under Rule 4-1.15 is non-delegable and his reliance on his ex-wife to fulfill these obligations does not relieve him of the responsibility and accountability when (as he claims) she failed to do so. D. Disbarment is the Appropriate Discipline The DHP recommended that Farris be suspended with no leave to apply for reinstatement for six months. The panel’s recommendation is advisory, however, and may be rejected by this Court. In re Coleman, 295 S.W.3d 857, 863 (Mo. banc 2009). “The privilege to practice law is only accorded those who demonstrate the requisite mental attainment and moral character.” In re Haggerty, 661 S.W.2d 8, 10 (Mo. banc 1983). The principal aim in disciplinary proceedings is not punishment. In re Staab, 719 S.W.2d 780, 784 (Mo. banc 1986). Instead, discipline is intended to protect the public and preserve the integrity of the legal profession. In re Maier, 664 S.W.2d 1, 2 (Mo. banc 1984). “The discipline must be designed to correct any antisocial tendency on the 21 part of the attorney as well as to deter others who might tend to engage in similar violations.” In re Staab, 785 S.W.2d 551, 554-55 (Mo. banc 1990) (citing In re Montrey, 511 S.W.2d 805, 806 (Mo. banc 1974)). In this case, even though Farris committed an array of serious violations, the most serious is his misappropriation of nearly $93,000 that belonged to his clients and their medical creditors. Historically, this Court has refused to tolerate the misappropriation of a client’s money. The misappropriation of a client’s funds is a serious matter. It is always a ground for the disbarment of an attorney that he has misappropriated the funds of his client, either by failing to pay over money collected by him for his client or by appropriating to his own use funds entrusted to his care. That respondent has made restitution of the converted funds is no defense to these charges. In re Mentrup, 665 S.W.2d at 325 (citations omitted). To be clear, disbarment is not automatic. See In re Belz, 258 S.W.3d at 43 (“Disbarment is most often appropriate in misappropriation cases, but this Court will nonetheless consider the presence of aggravating and mitigating factors in each case when assessing the appropriate punishment.”). However, disbarment constitutes the “baseline sanction” for misappropriation. Id. at 42. See also Matter of Mendell, 693 S.W.2d 76, 78 (Mo. banc 1985) (“We follow our recent cases holding that an appropriate remedy for willful conversion or misappropriation of client’s funds is disbarment.”); In re Fenlon, 775 S.W.2d at 142 (“It is always grounds for disbarment when an attorney has misappropriated the funds of his client, either by failing to pay over money collected by him for his client or by appropriating to his own use funds entrusted to his care.”); 22 In re Oliver, 285 S.W.2d 648, 655 (Mo. banc 1956) (“‘Misconduct of attorneys in converting and using money held in a fiduciary capacity has been before us in other cases. We have uniformly held such conduct justifies disbarment.’”) (quoting In re Conner, 207 S.W.2d 492, 499 (Mo. banc 1948)). Nothing has changed to warrant a retreat from the firm stance taken in these cases. Attorneys today must hold just as much (or more) money in trust for their clients and others as in the past. This Court’s rules requiring attorneys to safeguard such property are as stringent now as ever before. And, most importantly, this Court’s obligation to protect the public and the profession from attorneys who violate this trust is as important today as ever. There simply is no room in this profession for attorneys who take property held in trust for others and use it as their own. One new feature on the disciplinary landscape since Mentrup is the Court’s reliance on the 1986 American Bar Association’s Standards for Imposing Lawyer Sanctions, as amended in February 1992 (the “ABA Standards”). 15 With no change to the substantive provisions of Rule 4, or to the procedural provisions of Rule 5, the Court began relying on the ABA Standards in 1994. See In re Coe, 903 S.W.2d 916, 922 (Mo. banc 1995) (Covington, J., dissenting) (collecting cases). But the ABA Standards are merely guidance, and they do not supplant this Court’s prior decisions. See In re Ehler, 319 S.W.3d at 451 (“This Court looks to the ABA Standards for Imposing Lawyer 15 These standards are now published in the ABA 2013 Edition of the “Compendium of Professional Responsibility: Rules and Standards,” pp. 437 - 469. 23 Sanctions for guidance when imposing attorney discipline but considers the ABA Standards advisory.”). Here, a proper application of the ABA Standards confirms that this Court’s cases are correct and disabarment is the presumptively appropriate discipline for misappropriating client funds. See ABA Standards § 4.11 (“Disbarment is generally appropriate when a lawyer knowingly converts client property and causes injury or potential injury to a client.”). See also In re Belz, 258 S.W.3d at 42 (noting that, in the absence of mitigating or aggravating circumstances, Standard §4.11 provides that disbarment is the “baseline sanction” for failing to preserve client property). Because Farris knowingly misappropriated nearly $93,000 belonging to his clients or their medical creditors, the Court holds that the presumptive discipline for Farris’ misconduct is disbarment.
Though disbarment is the presumptive discipline, the Court must consider mitigating and aggravating circumstances before determining whether to depart from this discipline in a particular case. In re Belz, 258 S.W.3d at 42. Mitigating factors do not constitute a defense to a finding of misconduct. Id. But they may justify a downward departure from the presumptively proper discipline. In re Ehler, 319 S.W.3d at 452. By the same token, an aggravating factor need not constitute a separate instance of misconduct. Instead, aggravating circumstances may justify a level of discipline greater than the presumed discipline or confirm that the presumed discipline is appropriate for the particular case. 24 Here, again, Farris contends that the conduct of his ex-wife is a mitigating circumstance that should compel the Court to stay any suspension and, instead, place him on probation. The Court disagrees. For the reasons stated above, Farris’ efforts to blame his wife did not provide the defense he claimed. For the same reasons, Farris’ efforts to blame his wife do not constitute a mitigating circumstance. By November 2011, there were enough warning signs for Farris to know that something was seriously wrong with his trust account. Farris knew he was supposed to be holding more than $93,000 for the benefit of his clients and their medical creditors. Then, in October 2011, the $31,756.11 trust account check Farris sent Client A was returned for insufficient funds. A mere glimpse at his bank records would have shown that this was not the result of a payment to Skaggs Hospital (or to any of Client A’s or Client B’s other medical providers). Instead, Farris would have seen that nearly all $93,000 had been bled into his operating account (usually in transfers of $9,999 or equally suspicious amounts). By November 11, 2011, the balance of Farris’ trust account was down to $3,056.63. Finally, as if to dispel any contention that Farris was guilty only of commingling, not misappropriation, the balance of Farris’ operating account on that same November 11 bottomed out at only $2,221.32. See In re Schaeffer, 824 S.W.2d at 5 (“on nineteen separate occasions between deposit of the check into the business account and payment to the client of the $3,000 owed to her, the balance in the business account dropped below $3,000”); In re Fenlon, 775 S.W.2d at 142 (“For substantial periods of time … the balance in the office account was insufficient to cover the amount owed.”). By November 2011, therefore, Farris knew his clients’ 25 settlement funds had been misappropriated and were gone. Farris insists he remained ignorant of these facts until November 2012 but concedes that the OCDC’s investigation showed him what he claims he previously missed. The Court holds above that the duty to comply with Rules rests with Farris, not his wife. In Matter of Williams, 711 S.W.2d at 520, the lawyer claimed that his wife’s mishandling of the trust account was to blame for his misconduct. Unlike the present case, the Court noted in Williams: “Although respondent recognizes his ultimate responsibility for the acts of his employee-wife regarding the trust account and therefore does not offer them in defense to the charges, he does offer his ignorance in mitigation.” Id. The Court rejected this mitigation argument, however, because the lawyer failed to review his trust account records in the months leading up to the overdraft. Id. at 521. In the wake of the overdraft, the Court found “he knowingly and intentionally failed to correct the ongoing problems or supervise the account … and that he should have reviewed the account and taken corrective action to ensure [the client] would receive the funds belonging to him.” Id. The Court held: We cannot allow an attorney to escape ultimate responsibility for mishandling of a client’s funds where he knowingly and intentionally ignores trust account problems and demonstrates an almost total disregard for the protection of those funds. Certainly where an attorney misappropriates a client’s funds, protection of the public is uppermost in our minds and disbarment is generally appropriate in such cases. Given the nature of the violation, and respondent’s long disregard for the protection of his clients’ funds, respondent’s testimony regarding recent improvements upon his accounting system does not offer sufficient safeguard to the public interest and therefore cannot alter the result here. Id. at 522. 26 Like in Williams, the Court holds that Farris’ efforts to blame his ex-wife do not constitute a mitigating circumstance. A lawyer cannot escape responsibility for misappropriation by blaming someone acting within the lawyer’s authority and for the lawyer’s benefit. The duty to safeguard and promptly deliver property held in trust for a client or third party belongs only to the lawyer, and the lawyer remains accountable for compliance with that duty. In re Griffey, 873 S.W.2d at 603 (office disarray, lack of organization, construction, and the loss of a secretary “are insufficient to mitigate the seriousness” of the lawyer’s misconduct). The Court also rejects Farris’ argument that his ill health is a mitigating factor weighing against disbarment. According to Farris, he suffered a pulmonary embolism in November 2010, which caused him to miss “at least two weeks” of work, and another embolism in 2013. These episodes came well before and well after the conduct at issue in this case. Farris does not explain what effect these events had on his actions or why they should be considered mitigating factors. Instead, Farris seems to argue that they contributed to his reliance upon his then-wife and her supposed misuse of the authority Farris gave her. Because his wife’s conduct is not a mitigating circumstance, Farris’ health – and any impact it may have had on his wife’s conduct – also is not a mitigating circumstance. Finally, Farris argues that evidence from satisfied clients should be considered in mitigation of the presumptive discipline for his misconduct. As the DHP noted, however, none of these clients “had been in similar situations where Respondent held large sums of settlement monies on their behalf in his trust account.” DHP Decision at p. 15. In fact, 27 Client B presumably would have been equally satisfied with Farris’ representation until they were told (as a result of the OCDC’s investigation into Client A’s complaint) that Farris had misappropriated $27,132.20 that should have been paid to them or their medical providers. Accordingly, the Court finds no mitigating circumstances sufficiently compelling to overcome the presumptive discipline of disbarment in this case.
Because of the absence of mitigating circumstances, the presumptive disciple applies and the Court does not need to consider aggravating circumstances. In this case, however, there is a wealth of aggravating circumstances that reinforce the Court’s conclusion that disbarment is the proper discipline in this case. A list of common aggravators is provided in ABA Standards § 9.22. This list is set forth below, and each factor is followed by a summary of the evidence establishing it in this case:
Farris was found to have violated Rules 1.4, 1.16(d) and 8.4(d) in 1998.
The Court finds, as did the DHP, that Farris’ “dishonest or selfish motive … is demonstrated by Respondent siphoning trust account funds into his office account and paying personal, non-office related bills and expenses.” DHP Decision at p.14.
The Court finds that the two counts in this case show a pattern of Farris: (1) telling clients that he was withholding a portion of their 28 settlement to pay their medical providers; (2) failing to negotiate discounts with these creditors or to his clients’ debts to them; and then (3) siphoning the money that should have gone either to the clients or their creditors to his operating account and spending it on his business and personal expenses.
Even though this opinion focuses principally on Farris’ two violations of Rule 4-1.15(d), the Court also finds that he violated: Rule 4-8.4(c) (two counts of misconduct “involving dishonesty, fraud, deceit and misrepresentation”); Rule 4-1.4 (failure to respond promptly to Client A’s reasonable requests for information); Rule 4-8.1 (two counts of failing to respond to lawful demands for information from the OCDC); Rule 4-1.15(m) (two counts of failing to securely store clients’ files for ten years after completion of the representation; and Rule 4-8.4(d) (two counts of conduct prejudicial