Court Opinion

ID: 8313742
Source: CourtListenerOpinion
Date Created: 2022-10-17 17:25:48.895221+00
Date Added: 2024-06-11T10:47:44.663398
License: Public Domain

Robinson, J.,
concurring.
While the commingling of an attorney’s personal funds with clients’ funds is almost always impermissible under our ethical rules, see V.R.Pr.C. 1.15, the commingling at issue here was as benign as commingling can be. Although attorney placed personal funds in subaccounts within his client trust account, those accounts were separately labeled as attorney’s personal funds, the funds were deposited separately into these accounts, and attorney maintained a separate ledger to ensure that he would not confuse client and personal funds. Attorney made an honest mistake in believing that keeping separate personal “escrow” accounts within his account was permitted. Upon learning that his understanding was mistaken, attorney arranged for a wide-ranging, extensive audit, and he self-reported more than Disciplinary Counsel would have sought to *152uncover. For all of these reasons, the end point of the hearing panel’s, and now the majority’s, analysis is reasonable and appropriate, and for reasons set forth below, I concur in the result.
¶ 27. I write separately because I believe the path to that result chosen by the hearing panel and endorsed by the majority confuses the applicable law and sets a dangerous precedent for future cases involving improper handling of client property.1 In determining the presumptive sanction, before considering aggravating and mitigating factors, the majority rightly focuses on the distinction between § 4.12 and § 4.13 of the American Bar Association (ABA) Standards for Imposing Lawyer Discipline. ABA Ctr. for Profl Responsibility, Standards for Imposing Lawyer Sanctions (1986) (amended 1992) [hereinafter ABA Standards]. The former describes the presumptive sanction “when a lawyer knows or should know that [he or she] is dealing improperly with client property and causes injury or potential injury to a client.” Id. § 4.12. The latter describes the presumptive sanction “when a lawyer is negligent in dealing with client property and causes injury or potential injury to a client.” Id. § 4.13. The majority asserts that the line between these standards is blurred because the former section applies when an attorney either knows or “should know” that his or her conduct violates the rules. Ante, ¶ 15. I believe these sections are clear and distinct, and that the majority, not the ABA, has created confusion with respect to the application of these standards. The reasoning embraced by the majority is, essentially, that if a lawyer knowingly takes actions that constitute commingling of personal and client funds, but does not actually know that his or her actions violate the rules, then the lesser presumptive sanction for negligent conduct may apply. I gather the theory is that “should know” is a concept that sounds in negligence.
¶ 28. The problems with this approach are manifold. First, it completely reads the phrase “or should know” out of § 4.12. The majority’s suggestion that the presumptive sanction of suspension only applies when a lawyer actually knows that he or she is dealing improperly with client property is at odds with the plain language of the standards. The commentary to the ABA Stan*153dards makes this point even clearer. The commentary to § 4.12 states that suspension should be reserved “for lawyers who engage in misconduct that does not amount to [knowing] misappropriation or conversion” and that “[t]he most common cases involve lawyers who commingle client funds with their own, or fail to remit client funds promptly.” By contrast, the commentary to § 4.13 of the ABA Standards explains that “reprimand is appropriate for lawyers who simply fail to follow their established procedures. Reprimand is also appropriate when a lawyer is negligent in training or supervising his or her office staff concerning proper procedures in handling client funds.” This description applies squarely to the bookkeeping errors and overdrawn subaccounts for which attorney in this case was sanctioned, both of which resulted from a negligent failure to follow established procedures. But it does not describe the class of violations involving an attorney knowingly following practices that, although attorney did not realize it, amount to improper commingling under the rules.
¶ 29. Second, this approach departs significantly from our own case law. In In re Farrar, we considered a case in which a lawyer had his bookkeeper regularly transfer $200 from the lawyer’s business account to the trust account as a sort of savings plan for the lawyer. 2008 VT 31, ¶¶ 2-3, 183 Vt. 592, 949 A.2d 438 (mem.). The bookkeeper reconciled the trust account on a monthly basis; the lawyer’s money was never used to counteract a deficit in the client trust account; the lawyer’s clients never suffered actual harm; and the lawyer had no selfish or dishonest motive. Id. The hearing panel recommended a private admonition and placed the lawyer on probation with the condition that he write an article for the Vermont Bar Journal about proper trust-account management. Id. ¶4. This Court, reviewing the hearing panel’s recommendation on its own motion, rejected the private admonition as inappropriately lenient. In determining the presumptive sanction, this Court wrote:
[Respondent's practice of putting his own money in his client trust account violated his duty to his clients to preserve their property. Respondent had full knowledge of his bookkeeper’s regular practice of putting nonclient funds into his client trust account, and respondent continued this practice for many years. Respondent should have known that his handling of his trust account was in *154violation of his professional responsibilities. As explained, respondent’s actions did not actually harm his clients, but there was the potential for injury. Under these circumstances, . . . the presumptive sanction ... is suspension.
Id. ¶ 11. Considering the mitigating factors, this Court imposed the sanction of public reprimand, rather than suspension. We specifically rejected the lawyer’s argument that the lawyer should not be subject to more than a private admonition because he made an honest mistake and did not cause any injury. We explained:
[W]hile recognizing that respondent did not act selfishly, we will not minimize his infraction merely because he was unaware that his acts violated the rules of professional conduct. “If a failure to understand the most central Rules of Professional Conduct could be an acceptable defense for a charged violation, even in cases of good faith mistake, the public’s confidence in the bar, and more importantly, the public’s protection against lawyer overreaching would diminish considerably.” The prohibition against lawyers commingling private monies with client funds is a fundamental precept. “[Mistake about the applicability of an ethical rule cannot excuse or even mitigate misconduct when the lawyer has violated a rule fundamental to governance of the legal profession.”
Id. ¶ 10 (citation omitted) (quoting In re Smith, 817 A.2d 196, 202 (D.C. 2003)).
¶ 30. The majority tries to distinguish Farrar by suggesting that the potential for injury to clients here was less severe than in Farrar. Ante, ¶ 22. But the majority ignores Farrar’s, express holding that suspension is the presumptive sanction under the ABA Standards for knowing conduct that amounts to commingling, even if the lawyer did not realize that the bookkeeping practice violated the ethical rule. The majority also makes no attempt to reconcile its holding with this Court’s recognition in Farrar that a “mistake about the applicability of an ethical rule cannot excuse or even mitigate misconduct.” The majority’s holding in this case contradicts our decision in Farrar on these points.
¶ 31. Although Farrar squarely addresses the presumptive sanction for commingling personal and client property under the ABA *155Standards, the majority instead relies on the analysis in In re Fink, which deals only obliquely with the issue before us in this case. 2011 VT 42, 189 Vt. 470, 22 A.3d 461. In Fink, we concluded that the evidence supported the hearing panel’s finding that the lawyer knew he was supposed to put a contingent fee in writing and.knew he had not done so. Id. ¶39. As a result, we agreed that this violation was knowing. Id. But with respect to another violation, the charging of an excessive fee, the lawyer was merely negligent because he had erroneously thought that he would play a bigger role, and would contribute to a greater degree to the client’s ease. Id. ¶40.
¶ 32. The Court’s general discussion of the different states of mind described in the ABA Standards does not support the conclusion that a lawyer’s mistaken understanding of the ethical rules concerning commingling of property lowers the presumptive sanction for improper commingling to a public reprimand. In fact, in its discussion, the Court noted:
In the context of sanctions . . . knowing conduct does not encompass both knew or should have known. If the definition extended to constructive knowledge then “no misconduct would be negligent because rather than failing to heed a substantial risk we would always assume the lawyer should have known the substantial risk.”
Id. ¶ 41 (quoting In re Stansfield, 187 P.3d 254, 263 (Wash. 2008)). The problem is, as noted above, in the context of sanctions for dealing improperly with client property, the category of violations subject to a presumptive sanction of suspension specifically does include violations where the lawyer knew or should have known that the offending conduct violated the rules.
¶ 33. I fear that the Court’s holding in this case will have the unintended consequence of reducing the presumptive sanction to public reprimand in the vast majority of cases involving improper dealings with client property. I have no doubt that the vast majority of lawyers who maintain their trust accounts in a way that violates the rule against commingling do not realize that their practice violate the rules. But I can imagine a wide range of practices that we would agree a lawyer should know violate the rules. If we read the “should know” prong out of the description of the presumptive sanction in § 4.12, then we are essentially setting up ignorance of the applicable ethical rules as a defense *156(or at least a mitigating factor) in a disciplinary proceeding arising from a violation of those rules. This approach undermines the ability of the Professional Responsibility Board and this Court to ensure compliance with the rules, and can only undermine public confidence in our effective regulation of the bar.
¶ 34. If what is driving the majority’s decision is the parties’ stipulation that attorney’s “mental state with respect to the violation of IOLTA requirements was one of negligence,” then the majority should limit its decision to that rationale. If the majority interprets this stipulation as a concession that § 4.13 (rather than § 4.12) applies,2 then it should acknowledge that based on the rest of the record the stipulation does not appear to jibe with the relevant ABA Standards. Rather than describing the applicable law in a way that reads an important prong out of § 4.12, the majority should simply conclude that the parties essentially stipulated to a presumptive sanction that is less severe than that ordinarily required by the ABA Standards for commingling of the sort attorney committed here.
¶ 35. Although I disagree with the majority about the presumptive sanction in this case, I concur in the majority’s judgment because even though suspension is the presumptive sanction in this case, the abundance of mitigating factors warrants a rare two-level sanction reduction to a private admonition. In Farrar, we disapproved of such a substantial reduction from the presumptive sanction of suspension on facts similar to those before us in this case. As I argued above, the distinctions between- this case and Farrar noted by the majority — such as the substantially greater risk to client funds resulting from the lawyer’s practices in Farrar relative to the risk in this case — have no bearing on which presumptive sanction applies to bookkeeping practices that improperly commingle personal and client funds. However, the distinctions are relevant to explain my departure from Farrar with respect to the extent of mitigation from the presumptive sanction in this case. See ABA Standards § 9.32 (listing thirteen “[factors which may be considered in mitigation”). Most important, in this case, there was very little actual risk to client funds. Id. § 3.0(c) *157(“In imposing a sanction ... a court should consider . . . the potential or actual injury caused by the lawyer’s misconduct . . . .”). Moreover, upon realizing that his handling of client funds had violated the rules, attorney’s aggressive and proactive self-scrutiny and disclosure in this case were exemplary. Id. § 9.32(d) (noting that “timely good faith effort to make restitution or to rectify consequences of misconduct” is mitigating factor). Our sanction structure ought to create an incentive for members of the Bar to emulate his self-examination. Given these considerations, a two-level reduction — from the presumptive sanction of suspension to private admonition — is warranted.
¶ 36. For these reasons, although I do not join the majority’s analysis, I concur in the result, and agree that private admonition is the appropriate sanction in this case.
¶ 37. I am authorized to state that Judge Durkin joins in this concurrence.

 I agree completely with the majority’s analysis with respect to the bookkeeping errors and overdrawn subaccounts. I depart from the majority’s analysis only with respect to the commingling of client and personal funds.

 Although this sentence in isolation appears to represent such a concession, in the context of the stipulation as a whole, it is unclear whether the stipulation represents a concession that ABA Standard applicable to negligent violations applies rather than simply an acknowledgment that attorney made an honest mistake.