Opinion ID: 2509532
Heading Depth: 1
Heading Rank: 20

Heading: Analysis Under Case Law

Text: Knowing conversion consists simply of a lawyer taking a client's money entrusted to him, knowing that it is the client's money and knowing that the client has not authorized the taking. People v. Varallo, 913 P.2d 1, 11 (Colo.1996) (quoting In re Noonan, 102 N.J. 157, 506 A.2d 722, 723 (1986)). Neither the lawyer's motive in taking the money, nor the lawyer's intent regarding whether the deprivation is temporary or permanent, are relevant for disciplinary purposes. Id. At 10-11. The Colorado Supreme Court has indicated that lawyers are almost invariably disbarred for knowing misappropriation of client funds. Id. at 11; People v. McGrath, 780 P.2d 492, 493 (Colo.1989) (the Court would not hesitate to enter an order of disbarment if there was no doubt that the attorney engaged in knowing conversion of his client's funds); In re Thompson, 991 P.2d at 823; People v. Lavenhar, 934 P.2d 1355 (Colo.1997); People v. Lefly, 902 P.2d 361 (Colo.1995); People v. Young, 864 P.2d 563 (Colo.1993) (conversion of clients' funds warrants disbarment even absent prior disciplinary history and despite cooperation and making restitution). However, under exceptional circumstances, even conversion of client funds may warrant a sanction less than disbarment. See People v. Dice, 947 P.2d 339 (Colo.1997) ([w]e have repeatedly held that a lawyer's knowing misappropriation of funds ... warrants disbarment except in the presence of extraordinary mitigating factors). For example, in People v. Lujan , the Supreme Court approved a suspension rather than disbarment for conversion because the respondent presented substantial evidence of mental disability, and proved that the mental disability actually caused the misconduct. 890 P.2d at 112-113. Other mitigating factors were also present, including good character and reputation as well as interim rehabilitation. Id. Recently, the Supreme Court has reminded hearing boards not to overlook significant mitigating factors that may overcome the presumption of disbarment. In the Matter of Fischer, 89 P.3d 817 (Colo.2004). Thus, it is incumbent upon hearing boards to properly consider evidence in mitigation, and to recognize that each case presents unique facts and perhaps a need for a different sanction. In Fischer, the Court disapproved disbarment. Id. That case, however, did not involve stealing client money. Rather, the attorney had deviated from a separation agreement disbursement schedule without first obtaining court approval. Mitigating factors included the lack of an attempt to falsify, deceive or conceal the misconduct. In addition, the attorney accepted personal responsibility for all the debts subject to the separation agreement and all additional expenses. Finally, the Court believed that, while the attorney knowingly misappropriated third party funds, he thought he was simply attempting to overcome hurdles in liquidating assets and it had not occurred to him that he was violating a court order. Fischer is thus readily distinguishable from cases in which the attorney flagrantly abuses a client's trust by treating client funds as his own. Id. at 821. The People assert that the only sanction appropriate for Respondent's conversion of client funds is disbarment. Respondent urges the Hearing Board to follow the Fischer rationale in finding that disbarment is not mandated in this case. Respondent argues that the mitigating factors present outweigh the aggravating factors. The Hearing Board agrees that it must appropriately balance the duty breached, Respondent's mental state, the injury he caused, and the mitigating and aggravating factors before arriving at the appropriate sanction, despite Respondent's admission that he converted client funds. After doing so, the Hearing Board finds that disbarment is the appropriate sanction. The Hearing Board notes that the cases in which the Colorado Supreme Court has ordered a sanction short of disbarment for knowing conversion of funds are few, and distinguishable from the present case. For example, Respondent did not offer evidence that he suffered from a serious mental disorder that caused his misconduct, as was the case in Lujan. 890 P.2d at 112-113. This is not a case of technical conversion, where Respondent simply acted negligently with trust fund money. See People v. Dickinson, 903 P.2d 1132, 1138 (Colo.1995). Further, the lawyer in Fischer did not convert client funds in the way that Respondent did. See In re Fischer, 89 P.3d at 821. In fact, Fischer is readily distinguishable from the present case in a number of ways. Most important, Fischer did not violate any duties owed to his client. Id. The nature of Fisher's actions shows that he was much less culpable than Respondent. Unlike Respondent, Fischer: 1. took no client money; 1. did not treat the funds he took as his own; 2. did not benefit from the misappropriation of client funds; 3. did not conceal his actions in taking third party funds; 4. had not been fully paid for the work he did for the client before taking money he earned; and 5. acted out of a belief, albeit misguided, that he was zealously representing his client's best interests in not paying money to a third party. See id. Finally, the Hearing Board finds that Fischer's evidence in mitigation was quite compelling. See id. Here, Respondent admitted that he knowingly used funds belonging to three clients. The evidence shows that he had knowledge of his actions and acted with the intent to deprive his clients of funds that rightly belonged to them, even if he may not have intended to permanently deprive them of their money. While Respondent acted with a motive to save his firm, this does not diminish the harm he caused his clients, the public, and the legal profession. At its core, Respondent's misappropriation of client funds demonstrates a lack of integrity that necessarily raises a serious question about his fitness to practice law. The Hearing Board understands that Respondent acknowledged his misconduct and promptly paid restitution (or made arrangements to pay restitution) to his clients. The Hearing Board also understands that Respondent admitted his misconduct to the OARC and fully cooperated in this proceeding. This evidence demonstrates an acceptance of personal responsibility that could diminish the need for further public protection if the facts were closer to those in Fischer. [2] However, the conduct in this case goes well beyond the open misapplication of third party funds in violation of a court-approved settlement. See id. Though Respondent attempted to ameliorate the damage he caused, the mitigating factors are not sufficient to take this case out of the category of cases calling for disbarment. For example, while Respondent testified regarding some interim rehabilitation efforts, the Hearing Board was required to evaluate Respondent's character and reputation from the conflicting testimony of Mr. Japha and Respondent. Though we have found seven mitigating factors and only three in aggravation, the totality of all the factors outlined in ABA Standard 3.0, including (1) duty, (2) injury, (3) state of mind, and (4) aggravation, outweigh the mitigating factors and support a recommendation of disbarment. While Fischer stands for the proposition that the Hearing Board must properly balance the mitigating and aggravating factors, it does not mandate that these and the other factors be weighed individually or equally, but rather in totality. Here, the Hearing Board finds that the combination of Respondent's conscious conversion of client funds, the multiple offenses he committed, and his clients' dependence upon him to act with integrity in their affairs, outweighs his efforts to rectify the damage he caused. Accordingly, the Hearing Board concludes that the mitigation offered was not of the quality and quantity sufficient to overcome a presumption of disbarment.