Opinion ID: 1145445
Heading Depth: 1
Heading Rank: 3

Heading: withholding clients' funds

Text: A. Cost Refund. In two instances, the accused unilaterally withheld client funds. In the first, a client seeking dissolution contacted one of the accused's three branch offices. The matter was handled by one of the accused's salaried lawyers whose relationship with the accused's office terminated during the course of the representation of the dissolution client. The accused's office filed a dissolution in Multnomah County. Filing fees were paid with funds advanced for costs by the client. Thereafter, upon learning that the client's spouse previously had filed for dissolution in Yamhill County, the accused's associate applied for and received a refund of those filing fees from the Circuit Court for Multnomah County. The refund was made by a check payable to the named client, but was mailed to and directed in care of the salaried attorney. The accused personally endorsed the client's name on the check and deposited it in his lawyer's trust account of his firm. The accused did not notify the client that the refund was received nor that the money she had paid for filing fees was in the law firm's trust account. The Bar charges violation of DR 1-102(A)(3), quoted in note 3 above (dishonesty or deceit); ORS 9.527(4), quoted in text above (willful deceit or misconduct in the legal profession); DR 9-101(B)(1), (3), and (4), quoted in note 6 below (failure to notify client of receipt of funds, to pay them promptly to client, or to maintain records showing the client's interest in the funds). This court has considered a variety of cases in which a lawyer has endorsed a check payable to the lawyer's client or someone else other than the lawyer. Two such cases provide sufficient background for reaching a decision in the present case. This court observed in In re Sassor, 299 Or. 570, 576, 704 P.2d 506 (1985): The accused defends his actions by contending that he believed that the check had been delivered to his client with authority to endorse the check and that his course of action was in compliance with the decree of dissolution. There is no evidence that the accused intended to keep the money for himself, but the record is clear that the accused knew he had no authority from his client's former husband to sign the husband's name to the check. He therefore engaged in misrepresentation proscribed by DR 1-102(A)(4) and we conclude that he is guilty of a violation thereof. And, as this court further observed in In re Magar, 312 Or. 139, 142, 817 P.2d 289 (1991): In any event, the accused misses the point. He negotiated an instrument without authority and forwarded it through his bank (which had notice) to the payor bank and its client (which did not), an act of dishonesty and misrepresentation with respect to the endorsement. Even when dealing for him or herself, and not for any client, a lawyer is one of those `who profess the law, [and thereby] profess honest and dispassionate resolution of conflicts.' In re Hopp, 291 Or 697, 702, 634 P2d 238 (1981). Self-help of this kind was utterly inconsistent with those professions. Concerning the violations of disciplinary rules and statutes relating to this endorsement of his client's name, the accused argues that he subjectively believed that a salaried lawyer handling the case who had left the law firm at about that time and who could not be contacted previously had told the client that the case had become contested and, therefore, that more attorney fees would be due. That argument fails to address the main issues of whether the client had been told that a refund check had been received, endorsed by others without the client's consent, and placed in the accused's trust account, and whether the accused deceitfully endorsed the client's name on the check. The accused's handling of the trust funds violates each of the three subsections of DR 9-101(B) as charged. [6] He failed to notify the client of the receipt of the funds; he failed to account to the client for those funds; and he failed to maintain records from which he could account. By endorsing another person's name on the check, the accused also is guilty of a willful violation described by ORS 9.527(4) and of deceit, violating DR 1-102(A)(3). As before, we consider the accused's state of mind accompanying those violations and find it to be intentional. B. Disability Payments. In the second instance, another salaried lawyer working for the accused in another of the accused's branch offices charged a new client $150 as a flat fee and wrote that the flat fee was to terminate a guardianship. That was an inaccurate description of the work requested by the client. The client had, a number of years earlier, been conservator for her disabled nephew who received social security disability payments. That conservatorship had been terminated several years earlier, and it appears that the order terminating the conservatorship was delivered to the accused's salaried associate and was in the file when the accused later saw that file. What the client sought, instead of termination of an already terminated guardianship, was that the lawyer help her find a third person to substitute for her in the task of assisting her nephew. The third person was needed in order to qualify to receive the nephew's disability checks directly from the social security agency, relieving the client of that responsibility. The third person would then pay any expenses related to the disabled nephew from those funds. For some reason, the salaried lawyer asked that over $3,300which the client had saved from the past social security payments for the client's nephewbe deposited with the law firm. The client turned those funds over to the firm as requested. They were placed in the firm's trust account. Thereafter, the relationship of that salaried lawyer with the accused's law firm was terminated. Although a written flat-fee agreement had been used to establish the $150 initial amount, it appeared to the accused when he reviewed the file that substantially more had been earned by his departed salaried employee. The accused apparently did not grasp the limited nature of the client's actual request for assistance. The accused decided that much more should have been charged. Accordingly, the accused withheld an additional sum from the $3,300 in his trust account and, after a time, refunded the remainder of the nephew's funds to the former client. At the time that the accused withheld the additional sum, he knew about the flat-fee agreement. He also knew that the money belonged to the nephew, who had never been his client and who had not requested any services. The accused denies the charge of exacting an excessive fee in violation of DR 2-106(A), [7] which is the only charge made by the Bar regarding this second instance of withholding client funds. As part of his defense, the accused points out that the additional fee amount, although withheld from the former client, was not withdrawn by him from his trust account. Under the circumstances of this case, leaving the money in his trust account provides the accused with no defense to the excessive-fee charge. Withholding the sum in the first place violated DR 2-106(A) as charged, because any work done was agreed to be covered by the flat-fee agreement and the client did not request additional work. See In re Gastineau, 317 Or. 545, 551, 857 P.2d 136 (1993) (exacting a second fee for the same work as that for which first flat fee was paid violates excessive fee prohibition). The accused's mental state, when he directed that a portion of the money be withheld in trust while the remainder was refunded in response to the client's demands, was that of acting intentionally to retain funds that he knew belonged to the disabled nephew.