Court Opinion

ID: 4203788
Source: CourtListenerOpinion
Date Created: 2017-09-15 14:07:24.047882+00
Date Added: 2024-06-11T07:47:36.555425
License: Public Domain

IN THE SUPREME COURT OF IOWA
                              No. 17–0879

                       Filed September 15, 2017

IOWA SUPREME COURT ATTORNEY DISCIPLINARY BOARD,

      Complainant,

vs.

LUKE D. GUTHRIE,

      Respondent.

      On review of the report of the Iowa Supreme Court Grievance

Commission.

      The grievance commission found the respondent committed

multiple ethical violations and recommends a three-month license

suspension. LICENSE REVOKED.

      Tara M. van Brederode, Des Moines, and Andrew J. Boettger of

Hastings, Gartin & Boettger, Ames, for complainant.

      David L. Brown and Tyler R. Smith of Hansen, McClintock & Riley,

Des Moines, for respondent.
                                      2

ZAGER, Justice.

      The Iowa Supreme Court Attorney Disciplinary Board (Board) filed

a complaint against an attorney alleging multiple violations of our ethical

rules including the misappropriation of funds in his representation of

three clients. The Board also alleged the attorney violated ethical rules

arising from his conviction for domestic abuse assault.          The Iowa

Supreme    Court    Grievance   Commission      (commission)   found   eight

violations of our ethical rules and recommended a three-month

suspension.    For the reasons outlined below, we revoke the attorney’s

license to practice law in the state of Iowa.

      I. Background Facts and Proceedings.

      Attorney Luke Guthrie has been licensed to practice law in the

state of Iowa since 2006. At the time of the conduct giving rise to this

disciplinary action, Guthrie was practicing law at Roberts, Stevens,

Prendergast, and Guthrie, PLLC, in Waterloo, Iowa. On November 11,

2015, Guthrie was arrested for domestic abuse assault, first offense, in

Grundy County, Iowa.       On November 12, Guthrie informed his law

partners that he was self-admitting himself into a substance-abuse

treatment program and took a leave of absence from the firm.           After

becoming aware of other potential ethical violations, the firm terminated

Guthrie’s partnership on November 24. As part of the termination, the

firm informed Guthrie he would need to self-report his potential ethical

violations or the firm would do so. Guthrie self-reported the potential

ethical misconduct to the Board on December 7. The ethical misconduct

arose out of his handling of billings and trust account issues in three

separate client matters, in addition to Guthrie’s arrest for domestic

abuse assault.
                                      3

        A. Vogel   Matter.     Guthrie    represented   Brian   Vogel     in    a

modification action which was finalized by decree on July 22, 2015. A

notice of appeal was filed by the opposing party on August 21.                 On

September 25, Guthrie and Vogel signed a fee contract and Vogel paid a

retainer of $4965.50, which was deposited into the firm’s trust account.

On October 16, the appellant voluntarily dismissed the appeal.            This

voluntary dismissal of appeal was electronically received by Guthrie and

his office at 10:35 a.m. that same date. Guthrie was notified by staff of

the dismissal, but directed staff not to notify Vogel of the dismissal.

        On the same day as the voluntary dismissal, Guthrie billed Vogel

for 4.1 hours of work amounting to $717.50. Guthrie claimed that this

time was for work on the proof brief and designation. On October 22,

Guthrie billed Vogel for two hours of time for work on the final

brief/reply brief in the amount of $350. On October 23, Guthrie billed

Vogel for two hours of work on the final proof brief in the amount of

$350.    On October 26, Guthrie billed Vogel for two hours of time for

receipt and review of appellant’s brief in the amount of $350. Finally, on

October 28, Guthrie billed Vogel for 1.8 hours of work on his brief in the

amount of $315. There was also an additional charge for fees of $190

after the voluntary dismissal.        Therefore, following the voluntary

dismissal, Guthrie billed Vogel an additional 8.6 hours in the amount of

$1505 for work that was never performed.

        A staff member prepared a preliminary bill for review by Guthrie.

At that time, she questioned what would happen if the client requested

copies of Guthrie’s work product he had billed for. Guthrie told the staff

person that he doubted Vogel would ever ask for copies of the work

product he billed him for, but if he did, he would have to figure
                                     4

something out.    Guthrie had performed no work on the proof brief,

designation of appendix, or reply brief for which he billed Vogel.

        On November 6, Guthrie directed staff at the firm to transfer

$3797.50 from Vogel’s trust subaccount to the firm’s general account.

That same day, Guthrie withdrew $600 as a check for fees in the Vogel

case.    Vogel was not advised of the dismissal of the appeal until

November 15, nine days after the unearned fees were taken and three

days after Guthrie took his leave of absence from the firm.          The firm

refunded Vogel all funds for the unearned fees.

        B. Dizdarevic Matter.      Guthrie also represented Muhamed

Dizdarevic in a child custody case. On November 6, 2015, Guthrie billed

Dizdarevic $262.50 for a 1.5 hour telephone conference with opposing

counsel. Guthrie admitted no telephone conference occurred, which was

also confirmed by opposing counsel. On the same day, Guthrie directed

staff at the firm to transfer $332.50 from Dizdarevic’s trust subaccount

to the firm’s general account. He thereafter withdrew $600 as a check

for fees in the Dizdarevic case. The firm reimbursed Dizdarevic for the

unearned fees.

        C. Petrick Matter.   Guthrie represented Christina Petrick in a

family law case in 2015. On November 3, 2015, Guthrie billed Petrick for

1.5 hours for discovery review and a telephone conference totaling

$262.50. On November 4, Guthrie billed Petrick for two hours of work in

the amount of $350 for the receipt and review of a client file allegedly

received from her previous attorney. On November 6, Guthrie directed

staff at the firm to transfer $743.75 from Petrick’s trust subaccount to

the firm’s general account. Guthrie then withdrew $600 as a check for

fees. In reviewing this billing, another partner determined that Guthrie

could not have received and reviewed the other attorney’s file as she
                                           5

herself received the file on November 12 after Guthrie had left the firm.

As the file could not yet have been received by Guthrie, he did not receive

or review Petrick’s client file on November 4 as billed. Later on, another

attorney at the law firm reviewed the file and determined the firm would

be unable to represent Petrick due to a conflict of interest.                 The firm

refunded Petrick the entire retainer she had paid in trust in the amount

of $2500. This included the fees that Guthrie had billed.

       D. Domestic Assault.            On November 11, 2015, Guthrie was

arrested for domestic abuse assault for assaulting his girlfriend. On May

9, 2016, Guthrie pled guilty to domestic abuse assault in violation of

Iowa Code section 708.2A(2)(a)(2015).            The court entered an order for

deferred judgment and probation.

       E. Proceedings.         On November 10, 2016, the Board filed its

complaint against Guthrie.          It charged him with two counts: Count I

alleged Guthrie violated six ethical rules in his representation of Vogel,

Dizdarevic, and Petrick. 1 It alleged he misappropriated client funds in an

amount exceeding $500 but not $1000 in value. This was in conjunction

with the alleged theft of funds.          Count II alleged Guthrie violated one

ethical rule due to his guilty plea to domestic abuse assault. 2                     On
December 6, Guthrie filed his answer, admitting all of the allegations. In

the original complaint, the Board recommended that Guthrie’s license be

revoked.

       1These were Iowa Rules of Professional Conduct 32:1.5(a) (charging or collecting
an unreasonable fee), 32:1.15(c) (depositing client funds into trust account), 32:1.15(d)
(promptly delivering client funds or property), 32:1.15(f) (handling of client trust
accounts), 32:1.16(d) (refunding of advance fees or payments), 32:8.4(b) (committing a
criminal act reflecting adversely upon the lawyer’s fitness to practice law—theft, and
32:8.4(c)  (engaging     in   conduct    involving    dishonesty,   fraud,   deceit,   or
misrepresentation).
       2This  rule was 32:8.4(b) (committing a criminal act reflecting adversely upon the
lawyer’s fitness to practice law—domestic abuse assault).
                                     6

      The commission conducted an evidentiary hearing on April 12,

2017. Guthrie submitted a stipulation of facts and rule violations at the

time of the hearing. The stipulation was not timely submitted pursuant

to Iowa Court Rule 36.16. However, the commission elected to receive it

as an exhibit constituting an admission to the facts and rule violations

alleged in the complaint.

      The commission found Guthrie committed eight violations of the

Iowa Rules of Professional Conduct: 32:1.5(a) (charging or collecting an

unreasonable fee), 32:1.15(c) (depositing client funds into a trust

account), 32:1.15(d) (promptly delivering client funds or property),

32:1.15(f) (handling of client trust accounts), 32:1.16(d) (refunding of

advance fees or payments), 32:8.4(b) (committing a criminal act reflecting

adversely upon the lawyer’s fitness to practice law—theft), 32:8.4(b)

(criminal act reflecting adversely upon the lawyer’s ability to practice

law—domestic abuse assault), and 32:8.4(c) (engaging in conduct

involving dishonesty, fraud, deceit, or misrepresentation). Based upon

Guthrie’s admission to the rule violations, the hearing primarily focused

on the consideration of pertinent mitigating and aggravating factors. In

its findings of fact, conclusions of law, and recommendations, the

commission    considered    the   rule   violations,   the   mitigating   and

aggravating   circumstances,      and    recommended         a   three-month

suspension.    Upon our review, Guthrie requests either a public

reprimand or a thirty-day suspension.           The Board continues to

recommend revocation.

      II. Standard of Review.

      We review attorney disciplinary cases de novo. Iowa Supreme Ct.

Att’y Disciplinary Bd. v. Willey, 889 N.W.2d 647, 653 (Iowa 2017). “The

Board must prove attorney misconduct by a convincing preponderance of
                                      7

the evidence, a burden greater than a preponderance of the evidence but

less than proof beyond a reasonable doubt.”        Iowa Supreme Ct. Att’y

Disciplinary Bd. v. Stoller, 879 N.W.2d 199, 207 (Iowa 2016) (quoting

Iowa Supreme Ct. Att’y Disciplinary Bd. v. Cross, 861 N.W.2d 211, 217

(Iowa 2015)). We give the commission’s findings and recommendations

respectful consideration, but we are not bound by them. Id. If we find

the Board proved attorney misconduct, it is within our discretion to

impose a sanction that is lesser or greater than that recommended by the

commission. Willey, 889 N.W.2d at 653.

      While stipulations of fact are binding on the parties in a

disciplinary proceeding, Iowa Supreme Ct. Att’y Disciplinary Bd. v.

Pederson, 887 N.W.2d 387, 391 (Iowa 2016), “[a]n attorney’s stipulation

as to a violation is not binding on us,”       Willey, 889 N.W.2d at 653

(alternation in original) (quoting Iowa Supreme Ct. Att’y Disciplinary Bd.

v. Kingery, 871 N.W.2d 109, 117 (Iowa 2015)).        “Even if an attorney’s

stipulation concedes a rule violation, we will only find that a violation

occurred if the facts are sufficient to support the stipulated violation.”

Id.

      III. Analysis.

      A. Rule Violations.       Count I of the complaint alleges Guthrie

violated a number of ethical rules with regard to client trust accounts.

However, at the core, the Board alleged, and the commission found, that

Guthrie misappropriated client funds.       Because of the severity of the

allegation,   we   first   consider   the    violations   alleging   Guthrie

misappropriated client funds.

      Rule 32:8.4(c) provides that it is a violation of our ethical rules for

an attorney to “engage in conduct involving dishonesty, fraud, deceit, or

misrepresentation.”    Iowa R. Prof’l Conduct 32:8.4(c).       An attorney
                                    8

violates this rule when he or she commits theft by misappropriating

client funds.   Iowa Supreme Ct. Att’y Disciplinary Bd. v. Green, 888

N.W.2d 398, 404 (Iowa 2016). A person commits the criminal act of theft

by misappropriation when the person

      [m]isappropriates property which the person has in trust, or
      property of another which the person has in the person’s
      possession or control, whether such possession or control is
      lawful or unlawful, by using or disposing of it in a manner
      which is inconsistent with or a denial of the trust or of the
      owner’s rights in such property, or conceals found property,
      or appropriates such property to the person’s own use, when
      the owner of such property is known to the person.

Iowa Supreme Ct. Att’y Disciplinary Bd. v. Thomas, 844 N.W.2d 111, 116

(Iowa 2014) (quoting Iowa Code § 714.1(2) (2011)). While we utilize the

same definition, we do not require a criminal conviction for theft in order

to find a violation of our rules. Id.; see also Comm. on Prof’l Ethics &

Conduct v. Hall, 463 N.W.2d 30, 35 (Iowa 1990) (“It is also immaterial

that respondent was not charged or convicted of a crime.        A criminal

conviction is not a condition precedent to a discipline proceeding when

the facts themselves warrant discipline.”). This is due in part to the fact

that we only require allegations of theft in the context of attorney

disciplinary cases to be proved by a convincing preponderance of the
evidence. Green, 888 N.W.2d at 404. “[A] criminal law defense is not a

defense in a disciplinary proceeding since the purpose of a disciplinary

hearing is not primarily intended to punish the lawyer but rather to

protect the public.” Id. (quoting Iowa Supreme Ct. Att’y Disciplinary Bd.

v. Khowassah, 837 N.W.2d 649, 655 (Iowa 2013)).

      Additionally, we must also find that the attorney acted with “some

level of scienter” when there has been an alleged misappropriation of

client funds. Id. at 403 (quoting Iowa Supreme Ct. Att’y Disciplinary Bd.

v. Haskovec, 869 N.W.2d 554, 560 (Iowa 2015)). Scienter requires that
                                     9

the attorney acted knowingly, intentionally, or with the aim to mislead.

See, e.g., Iowa Supreme Ct. Att’y Disciplinary Bd. v. Ricklefs, 844 N.W.2d

689, 698–99 (Iowa 2014).

        While it may be debatable whether Guthrie misappropriated client

funds involving Dizdarevic and Petrick, it is clear that Guthrie

misappropriated client funds in the Vogel case. In Vogel’s case, Guthrie

was advised on October 16, 2015, that the appeal had been dismissed.

At that time, Guthrie knew there was no remaining work to be performed

on the appeal. However, Guthrie continued to bill Vogel for unperformed

work for weeks thereafter.    Even when questioned by staff about his

billing practices, Guthrie simply stated that he doubted Vogel would

notice or ask for copies of the work for which he was billed.

        But Guthrie not only continued to bill Vogel for unperformed work

for weeks following the voluntary dismissal of the appeal, he also directed

the transfer of client funds from Vogel’s trust subaccount to the firm’s

general account.     Guthrie later personally withdrew client funds for

unearned fees. Additionally, Guthrie acted knowingly when withdrawing

the client fees.   Guthrie admits that he authorized the transfer of the

client funds to “maintain the illusion that [he] was competent and that

[his] numbers looked normal to [his] partners for that month.”        And

clearly, Guthrie knew that he had not performed the work or earned the

fees.

        There is also a clear acknowledgement by Guthrie of the

misappropriation and conversion of client funds contained in the

stipulation of facts and rule violations he signed. The stipulation

contains the following paragraphs:

             21. In   all  three   instances  described    above,
        Respondent converted funds from Mr. Vogel, Mr. Dizdarevic,
                                    10
      and Ms. Petrick’s retainers being held in the law firm’s trust
      accounts.

             22. Respondent, by authorizing and directing the
      transfer of the above three clients’ funds from the trust
      account into the firm’s general account, and upon taking a
      draw check in the wake of that directive, did, in fact, receive
      client funds.

            23. Respondent misappropriated or converted for
      personal use the funds referenced . . . above without a
      colorable future claim thereto.

      We find by clear and convincing evidence that Guthrie knowingly

misappropriated and converted client funds in the Vogel case in violation

of rule 32:8.4(c).

      B. Sanctions. We apply a range of sanctions for a violation of rule

32:8.4(c), spanning from a public reprimand all the way to license

revocation.   Iowa Supreme Ct. Att’y Disciplinary Bd. v. Cepican, 861

N.W.2d 841, 844 (Iowa 2015). The severity of the sanction depends upon

whether the attorney had a colorable future claim to the funds or

whether the attorney engaged in the theft of client funds. Id. (laying out

the test for determining whether suspension or revocation is the

appropriate sanction for a rule 32:8.4(c) violation). An attorney’s failure

to follow the rules governing fees normally results in a less severe

sanction; however, theft of client funds is grounds for revocation.     Id.

Although the Board carries the burden to show that misappropriation of

funds has occurred, the attorney carries the burden of producing

evidence that he or she had a colorable future claim to those funds. Id.

      Our professional standards regarding the protection of client funds

“are well known and . . . long-standing.”        Iowa Supreme Ct. Att’y

Disciplinary Bd. v. Carter, 847 N.W.2d 228, 232 (Iowa 2014) (quoting

Iowa Supreme Ct. Bd. of Prof’l Ethics & Conduct v. Anderson, 687 N.W.2d

587, 590 (Iowa 2004)).    Our sanctions in cases involving client funds
                                    11

hinges upon whether the attorney had a colorable future claim to the

funds. E.g., id.

      If the attorney does have a colorable future claim to the funds

converted, we will not revoke the attorney’s license. E.g., Thomas, 844

N.W.2d at 117. In those cases, the attorney’s violation rests not upon

the misappropriation of client funds, but upon the failure to follow our

rules with regard to the safekeeping of a client’s funds.     Carter, 847

N.W.2d at 232.

      However, in nearly every case where an attorney converts client

funds without a colorable future claim, we revoke the attorney’s license

to practice law.   See, e.g., Iowa Supreme Ct. Att’y Disciplinary Bd. v.

Stowe, 830 N.W.2d 737, 742 (Iowa 2013) (quoting numerous cases

wherein we held revocation was the appropriate sanction when attorneys

converted client funds); Iowa Supreme Ct. Att’y Disciplinary Bd. v. Nelsen,

807 N.W.2d 259, 266 (Iowa 2011) (“It is almost axiomatic that we will

revoke the license of an attorney who converts a client's funds to his or

her own use.”); Iowa Supreme Ct. Bd. of Prof’l Ethics & Conduct v.

Williams, 675 N.W.2d 530, 533 (Iowa 2004) (revoking attorney’s license

for fictitious billing); Iowa Supreme Ct. Bd. of Prof’l Ethics & Conduct v.

Lett, 674 N.W.2d 139, 145 (Iowa 2004) (revoking attorney’s license for

stealing client funds); Iowa Supreme Ct. Bd. of Prof’l Ethics & Conduct v.

Bell, 650 N.W.2d 648, 655 (Iowa 2002) (revoking attorney’s license for

misappropriating funds); Iowa Supreme Ct. Bd. of Prof’l Ethics & Conduct

v. Leon, 602 N.W.2d 336, 339 (Iowa 1999) (revoking the license of an

attorney who misappropriated client funds); Comm. on Prof’l Ethics &

Conduct v. Ottesen, 525 N.W.2d 865, 866 (Iowa 1994) (revoking

attorney’s license for converting client funds to his own use); Comm. on
                                    12

Prof’l Ethics & Conduct v. Tullar, 466 N.W.2d 912, 913 (Iowa 1991)

(stating revocation is appropriate when attorneys convert client funds).

      “There is no place in our profession for attorneys who convert

funds entrusted to them.” Thomas, 844 N.W.2d at 117 (quoting Ottesen,

525 N.W.2d at 866). Additionally, the amount of money converted does

not lessen the sanction imposed. Thomas, 844 N.W.2d at 117; Anderson,

687 N.W.2d at 590. Although in this case the firm later returned all the

unearned fees, and therefore the clients did not suffer a financial harm,

“restitution of client funds does not preclude us from revoking an

attorney’s license as a sanction.” Thomas, 844 N.W.2d at 118; see also

Anderson,   687   N.W.2d    at   590     (revoking   attorney’s   license   for

withdrawing funds from an escrow account for his personal use, even

though the attorney later replaced the funds).

      Based upon our de novo review of the record, and the stipulated

facts, we find Guthrie did not have a colorable future claim to the funds

he withdrew in the Vogel matter, thus leading us to hold that he

misappropriated client funds.    In the stipulated facts, Guthrie admits

that he did not have a colorable future claim to the funds and that this

resulted in the misappropriation of client funds. Guthrie presented no

evidence to the contrary. This finding is critical to the outcome of this

proceeding and makes it unnecessary for us to discuss the other rule

violations in detail.   Likewise, we need not consider mitigating and

aggravating factors that may be present here.

      However, we do find it necessary to make note of several facts.

First, the conduct giving rise to the ethical violations occurred over a

period of approximately one month during a time when Guthrie’s

substance abuse reached its peak. Second, since the violations, Guthrie

took immediate steps to address his substance-abuse issues.           Guthrie
                                    13

sought treatment and has successfully maintained his sobriety. Finally,

there have been no further violations of our ethical rules since that time.

Guthrie should be commended for addressing his substance-abuse

issues and remaining sober. However, due to Guthrie’s misappropriation

of client funds, we find that revocation is the appropriate sanction.

      IV. Conclusion.

      The license of Luke D. Guthrie to practice law in the state of Iowa

is hereby revoked.      Pursuant to our rules, Guthrie may apply for

reinstatement after a period of at least five years.      See Iowa Ct. R.

34.25(7).   In the event of application for reinstatement, Guthrie must

demonstrate that he is of good moral character and worthy of

readmission to the bar. See id. r. 34.25(9). Guthrie must also pay all

fees. See id. r. 34.25(9)(d).

      LICENSE REVOKED.