Court Opinion

ID: 4250073
Source: CourtListenerOpinion
Date Created: 2018-02-28 21:23:00.010986+00
Date Added: 2024-06-11T14:17:02.921411
License: Public Domain

IN THE SUPREME COURT OF IOWA
                             No. 14 / 07-1701

                         Filed February 22, 2008

IOWA SUPREME COURT ATTORNEY
DISCIPLINARY BOARD,

      Appellee,

vs.

EDWARD L. WINTROUB,

      Appellant.

      On review of the report of the Grievance Commission.

      Iowa Supreme Court Grievance Commission recommends a two-

year suspension of the respondent’s license to practice law to run

concurrently with a previous suspension. ATTORNEY REPRIMANDED.

      Waldine H. Olson, Omaha, Nebraska, and David A. Richter,

Council Bluffs, for appellant.

      Charles L. Harrington and Wendell J. Harms, Des Moines, for

appellee.
                                   2

APPEL, Justice.

      In this case, we consider the sanctions recommended by the Iowa

Supreme    Court   Grievance   Commission    (Commission)    against   a

previously suspended Iowa lawyer who allegedly engaged in improper

business transactions with a client, neglected a client matter, and

improperly retained an unearned fee. For the reasons expressed below,

we reprimand the lawyer for his misconduct, but impose no further

sanction in addition to his previously imposed two-year suspension.

      I. Background Facts and Prior Proceedings.

      A.   Introduction.   Edward J. Wintroub is a lawyer whose Iowa

license was suspended in 2004 through reciprocal discipline after his

Nebraska license was suspended by that state’s supreme court. In the

Nebraska matter, Wintroub was found to have committed a series of

transgressions including misappropriating client funds and comingling

personal funds with those of his clients.        Wintroub denied the

allegations, asserted affirmative defenses of laches and estoppel, and

further suggested that at all relevant times he was taking medications

prescribed by physicians for a variety of medical conditions. Wintroub

alleged that the known side effects of such medications included

confusion, decreased concentration, decreased mental clarity, impaired

memory, temporary memory loss, sleep disturbances, slurred speech,
and seizures.

      The Nebraska Supreme Court suspended Wintroub’s license for

two years, placed him on an additional two-year term of probation, and

imposed a number of additional conditions upon his reinstatement.

State ex rel. Counsel for Discipline, Nebraska Supreme Ct. v. Wintroub,

678 N.W.2d 103 (Neb. 2004). Pursuant to our rules, we imposed a two-
                                   3

year suspension on Wintroub’s Iowa license as a result of the Nebraska

decision.

      B.    Allegations of the Board.   In May 2006, the Iowa Supreme

Court Attorney Disciplinary Board (Board) filed a new three-count

complaint against Wintroub. Count I alleged that Wintroub had engaged

in improper business dealings with a client, Ronald S. Bergman, in

violation of various ethical rules.     Count II alleged that Wintroub

neglected a file when a client matter was dismissed for failure to

designate an expert in a timely fashion. Count III alleged that Wintroub

improperly handled funds received from a client, Mildred Van Winkle.

The events giving rise to these allegations all occurred between 1999 and

2002, approximately the same time period in which Wintroub committed

his prior ethical transgressions. The matter was tried to the Commission

on stipulated facts.

      C. Bergman Matters. The undisputed facts reveal that Wintroub

and Bergman were close personal friends for many years before the two

entered into an attorney-client relationship.      Over time, Bergman

retained Wintroub to represent him on legal matters, usually involving

litigation. Bergman frequently employed more than one attorney on the

same matter, however, and Wintroub was not Bergman’s attorney for

business, corporate, or personal financial matters.         The parties
stipulated that Bergman believed that Wintroub was acting in his best

interest at all times relevant to this disciplinary proceeding and that

Bergman trusted Wintroub to do what was right.

      In January 1994, Wintroub formed a Nebraska corporation called

Takara Enterprises, Inc. for the purpose of buying, promoting, and

selling artwork created by Seikichi Takara. In January 1999, at a time

when Wintroub was representing Bergman in at least two lawsuits,
                                    4

Wintroub sold Bergman 22.5 shares of stock in Takara, Inc. for the sum

of $150,000. Wintroub did not advise Bergman, a sophisticated investor,

to seek independent counsel in connection with the transaction.

      Shortly thereafter, Wintroub also procured a personal loan from

Bergman. By May 25, 1999, loans totaling $275,000 from Bergman to

Wintroub were memorialized in a promissory note drafted by Wintroub.

The loan was unsecured and bore a rate of zero percent interest.

      Prior to formalizing the loan, Wintroub made several disclosures to

Bergman. He told Bergman that (1) he had monies owed to him from his

principal client; (2) he had expanded his business in reliance on this

client; (3) he had invested his personal financial resources to pay the

expenses of his law practice; (4) he had exhausted his credit; (5) he had

no other source of funds to keep his law practice in operation; (6) without

the loan he might have to cut back his law practice, but would continue

to represent Bergman; and (7) he had no idea when he would be able to

repay the loan, but that it would certainly be a while. Wintroub did not

advise Bergman to seek independent counsel to review the loan

documents or transaction.

      In 2000 and 2001, Bergman asked Wintroub to start paying on the

promissory note, but Wintroub was unable to do so. In December 2000,

Wintroub released John Sens, an associate, from his law firm. Sens had
previously been assigned several of the Bergman matters.               On

February 21, 2001, Bergman terminated Wintroub’s representation in a

litigation matter adverse to James Moyer. Bergman then retained Sens

as counsel. Sens sent Wintroub letters dated February 27, March 28,

April 4, and June 13 asking Wintroub to deliver the Moyer file to him.

Wintroub had conversations with Sens and Bergman in an attempt to

persuade them to allow him to continue the representation.         Among
                                      5

other things, Wintroub claimed that he intended the attorney’s fees

earned in the Moyer matter to be a source of repayment of the Bergman

loan. Bergman, however, refused and, on September 12, 2001, filed a

declaratory judgment action against Wintroub that, among other things,

sought the return of the Moyer file. At this point, Wintroub returned the

file. He also declared bankruptcy, thereby frustrating efforts by Bergman

to collect on the loan.

      D. Pack Matter. Wintroub was engaged by Randall and Laraine

Pack in connection with an action against Drake University and others,

including a nurse practitioner, related to the suicide of their son. During

the engagement, an attorney in Wintroub’s office failed to designate an

expert within the time limitations of Iowa Code section 668.11.       As a

result, the action was dismissed.

      E. Van Winkle Matter. In December 2000, Mildred Van Winkle

hired Wintroub to sue her former husband for personal injuries arising

from an alleged assault and battery and intentional infliction of

emotional distress. Suit was filed in March 2001. In connection with the

representation, Van Winkle signed a contingency fee agreement, but the

agreement was not signed by Wintroub or any member of his firm. On

January 11, 2002, Wintroub filed a motion to withdraw from the case

“for the reason that [Van Winkle] has retained other counsel to represent
her.” The district court allowed the withdrawal on the date the motion

was filed, but Van Winkle and her new husband met with Wintroub the

next day to discuss the case. At that time, Van Winkle signed a contract

that reduced Wintroub’s contingency fee to 25%, but required immediate

payment of $5000 “for work previously done and as a non-refundable

engagement retainer.” Wintroub did not deposit the $5000 payment in

his trust account.        Ultimately, the lawsuit was eventually resolved
                                      6

adverse to Van Winkle on summary judgment because she had failed to

reserve the tort action in her marriage dissolution.          This case was

dismissed through no fault of Wintroub or his firm.

      F.   Recommendations of the Commission.                The Commission

took no testimony and deliberated on the basis of the undisputed

stipulations of fact and related exhibits.    The Commission determined

that the Board proved by a convincing preponderance of the evidence

that Wintroub committed ethical violations in connections with Counts I

and III.   The Commission dismissed the claim in Count II.             In its

recommendation, the Commission did not specifically detail which

disciplinary rules were violated.

      With respect to Count I involving business relationships with a

client, the Commission emphasized that Wintroub failed to meet his

burden of showing that his transactions with his client were done with

full and fair disclosure.   With respect to Wintroub’s sale of stock to

Bergman, the Commission stated that no accounting or other financial

records were provided.      In connection with the personal loan, the

Commission stated that an attorney exercising professional judgment

would insist, at a minimum, that sufficient collateral be required to

secure the loan.       Finally, with respect to the Moyer matter, the

Commission observed that it should not have taken seven months and
the filing of a declaratory judgment action for Bergman and his counsel

to obtain the case file.

      On Count II, dealing with the failure to timely designate experts in

a malpractice action, the Commission expressed concern regarding

Wintroub’s attempt to avoid responsibility for the problem.              The

Commission,     however,    stated   that   the   problem,    while   perhaps

appropriate for a malpractice claim, did not rise to an ethical violation.
                                     7

      On Count III involving the Van Winkle payment, the Commission

simply did not believe Wintroub’s explanation that the $5000 fee was

received for earned work. The Commission noted that Wintroub filed a

motion to withdraw claiming that Van Winkle had retained other

counsel.    Van Winkle denied any such claim.            As a result, the

Commission found that Wintroub engaged in retainer fraud and

misrepresentation.

      On the matter of sanction, the Commission noted that Wintroub

incurred a two-year suspension of his Iowa license on May 8, 2003 as a

result of reciprocal discipline for events that occurred during the same

time period as the current violations. Although the Commission believed

that the current violations warranted a suspension of Wintroub’s Iowa

license for two years, it recommended that the suspension run

concurrently with the prior Iowa suspension.         Because the previous

suspension has expired, the Commission recommended that Wintroub be

allowed to apply for reinstatement of his Iowa license, if he so desires.

      II. Standard of Review.

      This court reviews attorney disciplinary actions de novo. Iowa Ct.

R. 35.11(3). The Board must prove all ethical violations by a convincing

preponderance of the evidence. Iowa Supreme Ct. Att’y Disciplinary Bd.

v. Walker, 712 N.W.2d 683, 684 (Iowa 2006). On review, the court is free
to adopt, increase, or reduce the sanction recommended by the

commission. Iowa Supreme Ct. Bd. of Prof’l Ethics & Conduct v. Eich, 652
N.W.2d 216, 217 (Iowa 2002).

      III. Discussion.

      A.   Business Relations with Client.       Wintroub engaged in two

business transactions with a client in which he and his client admittedly

had conflicting interests. While there is no blanket prohibition on such
                                     8

transactions, our ethical rules in this area are very demanding. We have

long held that when an attorney engages in business transactions with a

client involving conflicting interests, the burden is on the attorney to

show that he acted in good faith and made full disclosures. Comm. on

Prof’l Ethics & Conduct v. Mershon, 316 N.W.2d 895, 899 (Iowa 1982). As

a result of this burden, a record that fails to show affirmatively that a

client was fully advised about the facts of a transaction or its legal

consequences leads to an ethical violation.     Id.; Donaldson v. Eaton &

Estes, 136 Iowa 650, 656, 114 N.W. 19, 21 (1907).

      We have further found that full disclosure means more than simply

disclosing the material terms of a transaction. Full disclosure means the

use of active diligence on the part of the attorney to “fully disclose every

relevant fact and circumstance which the client should know to make an

intelligent decision concerning the wisdom of entering the agreement.”

Mershon, 316 N.W.2d at 898. Further, the attorney must give the same

kind of legal advice that the client would have received if the transaction

involved a stranger and not the attorney. Id. at 899. More recently, we

emphasized that lawyers engaged in business transactions with clients

involving conflicting interests “ ‘have a duty to explain carefully, clearly

and cogently why independent legal advice is required.’ ” Iowa Supreme

Ct. Bd. of Prof’l Ethics & Conduct v. Wagner, 599 N.W.2d 721, 727–28
(Iowa 1999) (quoting In re Wolk, 413 A.2d 317, 321 (N.J. 1980)).

      Wintroub made significant material disclosures in connection with

both of the Bergman transactions. In connection with the sale of stock

in Takara, Inc., however, the stipulation upon which this case was tried

did not show that Wintroub disclosed the financial performance of the

company    through    financial   statements,   annual   reports,   or   oral

summaries for the period beginning in January 1994, when Wintroub
                                      9

formed Takara, until the time of Bergman’s investment in January 1999.

As a result, Wintroub has failed to meet his burden of showing full

disclosure of every relevant fact and circumstance as required by our

cases involving business relations with clients. Mershon, 316 N.W.2d at

898.    Further, there is no record that Wintroub advised Bergman

regarding the lack of liquidity ordinarily associated with minority

interests in closely held corporations or the lack of control minority

interests have over management. Finally, Wintroub admits that he did

not advise Bergman of the need to obtain independent counsel in

connection with the transaction.          Because of Wintroub’s failure to

demonstrate full factual disclosure and his failure to urge Bergman to

seek independent counsel, we conclude Wintroub violated DR 5–104(A)

(a lawyer shall not enter into a business transaction with a client if they

have differing interests therein and the client expects the lawyer to

exercise professional judgment therein for the protection of the client

unless the client has consented after full disclosure).

       In connection with the personal loan, Wintroub made a robust

disclosure of his own dire financial circumstances.              Nevertheless,

Wintroub committed an ethical violation when he failed to urge Bergman

to seek independent counsel prior to entering into this substantial

transaction and to explain why independent counsel was important. In
connection with the loan transaction, competent independent counsel

would have engaged in an interactive process that would have questioned

the unsecured nature of the loan, the lack of interest or timetable for

repayment,    and   possible    contingencies    that   could    arise,   likely

demonstrating why the unstructured nature of the loan was not in

Bergman’s best interests. While Wintroub may have fairly disclosed his

financial   circumstances,     competent    counsel   would     have   explored
                                     10

Bergman’s own financial needs and the potential for the unstructured

loan transaction serving as a point of contention in the future.         The

record is devoid of evidence that Wintroub made any of these disclosures.

We conclude that Wintroub violated DR 5–104(A) in connection with the

loan transaction.

      We reiterate, again, our statement in Mershon that perhaps the

safest and best course for an attorney is to decline to personally

participate in business transactions where the attorney and the client

have differing interests.   Id. at 899.   The high standard of disclosure

expected in these situations is difficult to meet.    By insisting that the

client obtain independent legal advice, the attorney may avoid any

perception that his communications with his client have been colored or

less than candid on the transaction in question, but even so, full

disclosure of all relevant facts and circumstances is required.

      B.   Failure to Return the Client File. In the aftermath of the

loan transaction, Bergman ended Wintroub’s representation in the Moyer

matter.    Thereafter it took seven months, the exchange of multiple

letters, and ultimately the filing of an action for declaratory judgment, for

new counsel to obtain the file. A seven-month effort to convince a client

to change his mind regarding the surrender of a file, culminating in the

necessity of filing a declaratory judgment action to enforce the client’s
rights, is not the kind of behavior expected of attorneys under our

disciplinary rules. Clients have a right to the return of their property,

including their file. Iowa Supreme Ct. Bd. of Prof’l Ethics & Conduct v.

Plumb, 589 N.W.2d 746, 748 (Iowa 1999).            Through such behavior,

Wintroub violated DR 9–102(B)(4) (a lawyer shall promptly deliver to the

client as required by a client the properties in the possession of the

lawyer which the client is entitled to receive).
                                     11

      C.     Missed Expert Deadline.      The Board has charged Wintroub

with neglect based upon the failure of an associate in his firm to meet an

expert deadline in a medical malpractice action.        We agree with the

Commission that this one incident does not give rise to an ethical

breach. Iowa Supreme Ct. Att’y Disciplinary Bd. v. Tompkins, 733 N.W.2d
661, 666–67 (Iowa 2007).

      D. Payment from Van Winkle. With respect to the payment of

$5000 from Van Winkle, the parties stipulated that the payment was

made “for work previously done and as a non-refundable engagement

retainer” and that the $5000 was not deposited in Wintroub’s trust

account.     While an attorney must deposit unearned fees into a trust

account and cannot convert unearned fees for his own use, Iowa

Supreme Court Board of Professional Ethics & Conduct v. Apland, 577
N.W.2d 50, 55 (Iowa 1998), the precise nature of the $5000 payment is

not clear. As a result, we conclude that the Board has not established,

on the present record, by a convincing preponderance of the evidence

that the $5000 payment was unearned. As a result, we find no Apland

violation.

      E.     Laches and Equitable Estoppel.     Wintroub asserts that the

affirmative defenses of laches and equitable estoppel preclude the Board

from proceeding with the charges against him.           In the alternative,
Wintroub argues that the delay in resolving these matters is a factor

which mitigates any potential sanction.

      The Bergman matters arose during a two-and-a-half-year time

frame from January 1999 to June 2001. The Board received a complaint

against Wintroub relating to Bergman in February 2002.          The Board,

however, did not file its charges in this matter for four-and-a-half years.
                                        12

      Wintroub argues that the events for which he is now charged

occurred during the same time frame that gave rise to charges in

Nebraska, which ultimately led to his suspension from the practice of law

in Nebraska for two years. If all these matters had been considered at

once, Wintroub argues, he would have received one consecutive period of

suspension beginning in 2004.

      With   respect     to   laches,   Wintroub   makes   only   generalized

arguments that he has been prejudiced by the delay in bringing the

proceedings. There is nothing in the factual stipulation which identifies

witnesses that have died, specific exculpatory evidence that has been

destroyed, or specific matters that cannot be developed due to faded

memories.    We have generally required a factual showing of concrete

prejudice before a defense of laches may be invoked. Iowa Supreme Ct.

Bd. of Prof’l Ethics & Conduct v. Mulford, 625 N.W.2d 672, 680 (Iowa

2001).

      On the equitable estoppel issue, Wintroub’s argument has similar

factual shortcomings. Even assuming that equitable estoppel applies in

attorney grievance proceedings, nothing in the record of this case

supports the claim that Wintroub has relied upon any action of the Iowa

authorities to his detriment. See The Florida Bar v. McCain, 361 So. 2d
700, 706 (Fla. 1978) (holding equitable estoppel in disciplinary
proceeding requires inducement to change position).        In this case, the

Iowa complaints were filed, the investigations were opened, and the

proceedings initiated.    There is nothing in the record to indicate that

Iowa authorities made any representation or took any action to induce

Wintroub into changing his position in reliance. While it is true that the

dates of the Bergman matters overlap with other matters for which

Wintroub was sanctioned by Nebraska and by Iowa, the mere existence
                                      13

of overlapping time frames does not establish a basis for asserting an

estoppel defense.

       Yet, Wintroub does have a point. He has been severely sanctioned

for his past misconduct, but has had no recent misconduct. In addition

to a two-year suspension, he complied with the terms of an additional

two-year probation in Nebraska. Further, some of his past misconduct

appears to have been associated with various medical conditions, which

appear to have been resolved.        Wintroub’s license to practice law in

Nebraska has been reinstated.

       While Wintroub has not yet sought reinstatement of his Iowa

license, an additional period of suspension in Iowa could lead to

reciprocal sanctions in Nebraska, thereby unfairly disrupting Wintroub’s

efforts at rehabilitation. While this disruptive feature does not establish

a complete defense, we do find it a factor that should be considered in

mitigation. Indeed, it appears that the Commission, which recommended

its   two-year   suspension    run   concurrently   with    Wintroub’s   past

suspension, agreed with Wintroub on this point.            The impact of the

Commission’s recommendation would be that no further period of

suspension would be required and Wintroub could seek reinstatement in

Iowa at any time.

       F. Sanction. Based on the ethical violations found in Count I, we
must consider the appropriate sanction for Wintroub.            As indicated

above, we agree with Wintroub that the lengthy delay in the proceedings

is a mitigating factor.       Wintroub has already served his two-year

suspension in Nebraska and Iowa, and has satisfied the terms of his

probation in Nebraska. He has apparently addressed medical problems

that the Nebraska Supreme Court found to be a contributing factor in his

ethical lapses. Without this history, Wintroub’s ethical violations would
                                       14

require suspension of his license for a three- to six-month period of time.

See Plumb, 589 N.W.2d at 749 (imposing two-month suspension for

failure to return client file upon request from new attorney); Comm. on

Prof’l Ethics & Conduct v. Hall, 463 N.W.2d 30, 35–36 (Iowa 1990) (noting

that sanctions for conflicting business relations vary from public

reprimand to revocation).

        In light of all the facts and circumstances, however, and rather

than imposing an additional suspension to run concurrently with

Wintroub’s already completed suspension as recommended by the

Commission, we find it more appropriate to issue a public reprimand to

Wintroub for the violations therein described. We are confident that this

additional sanction in light of the unusual historical circumstances of

this file will not be interpreted as a relaxation of our approach to

situations where attorneys engage in business relations with clients,

which remain subject to the strictest scrutiny, or to the need for

attorneys to return client property.

        IV. Conclusion.

        We impose a public reprimand on Wintroub rather than the

concurrent suspension recommended by the Commission.           We tax the

costs of this action to Wintroub pursuant to Iowa Court Rule 35.25.

        ATTORNEY REPRIMANDED.
        All justices concur except Wiggins and Hecht, JJ., who take no

part.