Court Opinion

ID: 4107908
Source: CourtListenerOpinion
Date Created: 2016-12-16 15:04:29.500218+00
Date Added: 2024-06-11T07:46:08.289598
License: Public Domain

IN THE SUPREME COURT OF IOWA
                              No. 16–1551

                         Filed December 16, 2016

IOWA SUPREME COURT ATTORNEY DISCIPLINARY BOARD,

      Complainant,

vs.

BRIAN MICHAEL GREEN,

      Respondent.

      On review of the report of the Grievance Commission of the

Supreme Court of Iowa.

      Grievance commission reports respondent committed ethical

misconduct and recommends the revocation of the attorney’s license.

LICENSE REVOKED.

      Tara M. van Brederode and Amanda K. Robinson, Des Moines, for

complainant.

      Brian Michael Green, Des Moines, pro se.
                                      2

ZAGER, Justice.

      The Iowa Supreme Court Attorney Disciplinary Board (Board) filed

a complaint charging an attorney with violations of two of our ethical

rules. The attorney did not answer the complaint, and the facts of the

complaint were deemed admitted pursuant to rule 36.7. See Iowa Ct. R.

36.7. After a hearing, which the attorney failed to attend, the Grievance

Commission of the Supreme Court of Iowa (commission) found the

attorney violated our ethical rules and recommended we revoke the

attorney’s license.   Upon our de novo review, we conclude the Board

proved by a convincing preponderance of the evidence a violation of rule

32:8.4(c) and resulting misappropriation.     Accordingly, we revoke the

attorney’s license to practice law.

      I. Background Facts and Proceedings.

      Attorney Brian Green was licensed to practice law in Iowa at the

time of the actions in this case. Because Green failed to file an answer to

the Board’s complaint, the facts as alleged in the complaint are admitted.

See Iowa Ct. R. 36.7; see also Iowa Supreme Ct. Att’y Disciplinary Bd. v.

Kallsen, 814 N.W.2d 233, 236 (Iowa 2012).        The facts alleged in the

complaint are as follows.

      Green rented office space from Troy Strawhecker (Strawhecker)

and James Myers (Myers) in the name of his company, Third Inning

Solutions (3IS, L.L.C.).    Strawhecker and Myers are commercial real

estate developers in central Iowa and Nebraska.      After a few months,

Strawhecker and Myers approached Green for help raising equity for a

business project. While the majority of the services Green provided to

Strawhecker and Myers involved raising equity, he did provide legal

services to them on an occasional basis.     Generally, Strawhecker and
                                            3

Myers utilized the services of other attorneys for their regular, ongoing

business needs.

      Green provided legal consultation and also drafted incorporation

documents for at least one business for Strawhecker and Myers. In early

2012, Strawhecker and Myers approached Green about a potential

business venture with a prosthetics company, GMS of Rochester, Inc.

(GMS). They agreed to create a management company, Summit Quest

Holdings, L.L.C. (Holdings), with Green acting as the Chief Executive

Officer   (CEO).         The   business     arrangement       was   to   be   between

Strawhecker        and     his    limited       liability   company,     Strawhecker

Development1, L.L.C. (collectively Strawhecker); Myers and his limited

liability company, Archangel Development, L.L.C. (collectively Myers);

and Green and a limited liability company under his control, 3IS, L.L.C.

(collectively Green).

      In February 2012, Green represented to Strawhecker and Myers

that he had created Holdings. Each of them was to hold equal ownership

interest in Holdings and share equally in the business income and profits

of Holdings. The intent was that Holdings would enter into an agreement

with GMS to provide management services for a period of time, with the

ultimate goal of finding a buyer for this business.

      While Green represented to Strawhecker and Myers that he had

created Holdings to accomplish this goal, Green never incorporated

Holdings. Instead, Green created Summit Quest Capital, L.L.C. (Capital),

a Delaware limited liability company with its principal place of business

in Polk County, Iowa.            Green and his wife were the sole members.

Unbeknownst to Strawhecker and Myers, Green entered into an exclusive

management agreement with GMS on June 1, 2012, utilizing his

personal company, Capital, rather than the agreed upon Holdings.
                                    4

       Also in June 2012, Green asked Strawhecker to personally

guarantee a residential lease in Rochester, Minnesota.           Green told

Strawhecker he needed the accommodations in order to perform services

under Holdings’ agreement with GMS.        Green apparently could not

secure the lease without a guarantor based on his poor credit. Green

never made any of the monthly lease payments.            Strawhecker had to

terminate the lease and was personally responsible for approximately

$2700 in rent due to Green defaulting on the lease.

       Between June 1, 2012, and February 11, 2013, Green represented

to Strawhecker and Myers that he was performing CEO duties on behalf

of Holdings.      At various times throughout this time period, both

Strawhecker and Myers requested documentation about Holdings, GMS,

and the agreement between the parties.     Green failed to produce any

information or documentation.     Pursuant to the agreement with GMS,

Green received monthly payments of $27,500 as the agent for Capital.

The agreement between Strawhecker, Myers and Green was that

Holdings would receive this $27,500 per month and Green would be

compensated $12,000 per month as CEO.             The remaining amounts

would be equally divided between Strawhecker and Myers. Despite their

agreement, Green disbursed little or nothing to Strawhecker and Myers,

even after they requested disbursements.      Ostensibly from Holdings,

both   received    from   Green   reimbursement    for    several   business

expenditures—$5000 and $7500, respectively. Later, Strawhecker and

Myers requested a distribution of income from Green. When Green was

unwilling or unable to disburse any money, they requested accountings

from Green to determine where the funds were going. No accountings

were ever provided. Strawhecker and Myers also requested information

regarding the services provided to GMS and status reports of Green’s
                                         5

activities under the contract. Green did not provide the information or

status reports.

        On or about February 11, 2013, GMS informed Strawhecker and

Myers it was terminating the management agreement. GMS alleged that

Green violated multiple terms of the agreement, including but not limited

to making false representations to GMS, violating policies under the

agreement, and “massive” wage and benefit misappropriations.                     After

they received this information from GMS, Strawhecker and Myers

learned for the first time that Green never created Holdings. Instead, all

the funds paid by GMS were received by Green on behalf of Capital and

misappropriated by Green. None of the proceeds remained in Capital.

Strawhecker and Myers learned that the monthly checks of $27,500 were

written directly to Green, rather than to the company that they thought

Green     had   incorporated.      Despite      repeated    requests    for   more

information, Green never communicated with Strawhecker or Myers and

refused to provide any information regarding the creation of the business

entities or the agreement. Strawhecker and Myers filed their complaint

with the Board on February 11, 2014.

        Green wrote the Board a letter in which he generally denied

Strawhecker and Myers’s allegations but concluded as follows

              However, I no longer live in Iowa. I haven’t practiced
        law in over four years and my license has been on inactive
        status for about three years. I have no desire to practice law
        now or in the future. As such, to save the State of Iowa, the
        Disciplinary Board and all of the parties’ time and resources
        (of which I don’t have any), I am willing to voluntarily give up
        my law license in perpetuity to resolve this matter.

        The Board filed its complaint on March 23, 2016, alleging that

Green     violated   rules   32:8.4(c)       (dishonesty,   fraud,     deceit,     or

misrepresentation) and 32:1.8(a) (business transactions with clients).
                                        6

Green was served with the complaint on April 1. Green failed to timely

file an answer within twenty days from completed service and was

commanded by the commission to file an answer by May 3. See Iowa Ct.

R. 36.7.    Green again failed to file an answer.         On May 4, the Board

moved for a ruling pursuant to Iowa Court Rule 36.7 determining that

the allegations contained in the complaint were considered admitted due

to Green’s failure to file an answer. See id. On May 16, the commission

granted the order and considered the allegations in the complaint

admitted.

       On June 9, the Board served eight interrogatories and a request to

produce documents on Green.           The answers to the discovery requests

were   due    by   July   11,   but   Green   did   not    timely   answer   the

interrogatories.   The Board filed a motion to compel on July 26.            On

August 9, the commission ordered Green to serve his responses and

produce documents by August 11. No response was ever received.

       The commission held a hearing on August 15.              Green was not

present at the hearing, nor was he represented by counsel. He did not

request a continuance or an alternate way to participate in the hearing.

The hearing was briefly postponed to allow Green extra time in case he

was late, but Green never appeared.

       After the hearing, the commission filed its proposed findings of

fact, conclusions of law, and recommendation of sanction on August 29,

and filed an amended version on September 16. The commission found

that Green violated rules 32:8.4(c) (dishonesty, fraud, deceit, or

misrepresentation) and 32:1.8(a) (business transactions with clients).

The Board raised the doctrine of issue preclusion because Green was
                                         7

found civilly liable for the same conduct. 1        However, because the final

order in the case was entered as a result of a default and not as a final

judgment on the merits, the commission did not apply issue preclusion

to the district court judgment.        Based on the commission’s finding of

ethical violations and the misappropriation of funds, the commission

recommended that Green’s license to practice law be revoked.

        II. Standard of Review.

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

Att’y Disciplinary Bd. v. Weiland, 885 N.W.2d 198, 205 (Iowa 2016). “The

Board must prove attorney misconduct by a convincing preponderance of

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. Att’y Doe No. 792, 878 N.W.2d 189, 193 (Iowa 2016)

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

211, 217 (Iowa 2015)). While we give the findings and recommendations

of the commission respectful consideration, we are not bound by them.

Weiland, 885 N.W.2d at 205. We may impose a sanction that is greater

or lesser than recommended by the commission.                Id.   Because Green

failed to file an answer to the Board’s complaint, the facts as alleged in

the complaint are admitted.          See Iowa Ct. R. 36.7; see also            Iowa

Supreme Ct. Att’y Disciplinary Bd. v. Strand, 841 N.W.2d 600, 603 (Iowa

2014).

        III. Analysis.

        As a preliminary matter, issue preclusion does not apply in this

case.    Generally, the difference in the burden of proof required in an

        1Strawheckerv. Green, Case No. EQCE073916 (Polk Cty. Dist. Ct. Aug. 6, 2013).
Strawhecker and Myers received a judgment totaling $687,727.33 but had not collected
any of the judgment as of the date of the hearing before the commission.
                                     8

ordinary civil case and that required in an attorney disciplinary action

results in civil actions not having preclusive effect in disciplinary cases.

Iowa Supreme Ct. Att’y Disciplinary Bd. v. Cepican, 861 N.W.2d 841, 845

(Iowa 2015). Further, we require an issue to be actually litigated before

we apply issue preclusion. Id. “In the case of a judgment entered by

confession, consent, or default, none of the issues is actually litigated.”

Winnebago Indus., Inc. v. Haverly, 727 N.W.2d 567, 572 (Iowa 2006)

(quoting Restatement (Second) of Judgments § 27 cmt. e, at 257 (Am.

Law Inst. 1982)). Because the district court issued a default judgment in

Green’s civil case, the underlying issue was never actually litigated and

issue preclusion does not apply.

      A. Rule 32:8.4(c) Violation (Dishonesty, Fraud, Deceit, or

Misrepresentation). Under rule 32:8.4(c), it is a violation of our ethical

rules for a lawyer to “engage in conduct involving dishonesty, fraud,

deceit, or misrepresentation.”     Iowa R. Prof’l Conduct 32:8.4(c).     An

attorney–client relationship does not need to exist between the attorney

and the person on the receiving end of the attorney’s dishonesty, fraud,

deceit, or misrepresentation in order for us to find a violation of rule

32:8.4(c).   Iowa Supreme Ct. Att’y Disciplinary Bd. v. Haskovec, 869

N.W.2d 554, 560 (Iowa 2015).

      To find a violation of rule 32:8.4(c), we must find that the attorney

acted with “some level of scienter” rather than mere negligence. Id. This

requires that 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).        An attorney’s “casual, reckless

disregard for the truth” also establishes a violation of the rule.     Iowa

Supreme Ct. Att’y Disciplinary Bd. v. Clarity, 838 N.W.2d 648, 656 (Iowa
                                      9

2013) (quoting Iowa Supreme Ct. Att’y Disciplinary Bd. v. Isaacson, 750

N.W.2d 104, 109 (Iowa 2008)).

         An attorney violates this rule when he or she commits theft by

appropriation of funds. See, e.g., Iowa Supreme Ct. Att’y Disciplinary Bd.

v. Thomas, 844 N.W.2d 111, 116 (Iowa 2014). An attorney commits theft

by appropriation when he or she

         [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.

Id. (quoting Iowa Code § 714.1 (2011)). However, we do not require a

criminal conviction in order to find a violation of our ethical 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.”).

         Even when an attorney is not criminally charged for theft, the lack
of prosecution does not alter the fact that theft is a violation.        Iowa

Supreme Ct. Att’y Disciplinary Bd. v. Khowassah, 837 N.W.2d 649, 654

(Iowa 2013). This is, in part, because we require that allegations of theft

in the context of attorney discipline only be proved by a convincing

preponderance of the evidence.       Id. “[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. at 655 (quoting Comm. on Prof’l Ethics & Conduct

v. Williams, 473 N.W.2d 203, 206 (Iowa 1991)).
                                    10

      The range of our sanctions for a violation of rule 8.4(c) spans from

a public reprimand all the way to license revocation. See Cepican, 861

N.W.2d at 844.    We ask whether the attorney had a colorable future

claim to the funds or if the attorney engaged in 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). While the Board

carries the burden of demonstrating misappropriation of funds has

occurred, the attorney has the burden of producing evidence that he or

she had a colorable future claim to those funds. Id.

      Because Green failed to file an answer to the Board’s complaint,

the facts as set forth by the Board in the complaint were admitted.

Strand, 841 N.W.2d at 603. Pertinently, the complaint states that Green

“had a history of providing legal assistance/advice” to Strawhecker and

Myers and that “Green entered into a business transaction with his

clients without fully disclosing to the clients the true terms of the

arrangement in writing.” Additionally, the complaint alleges that Green

misrepresented that the legal entity created by him that would be

entering into the relationship with GMS (i.e., Holdings) was one in which

Green, Strawhecker, and Myers would have an equal interest. Instead,

the entity created by Green that contracted with GMS (i.e., Capital) was

solely owned by Green.

      Thus, Green made representations to Strawhecker and Myers that

were intended to mislead them into thinking an entirely different

business entity was created. Green misled Strawhecker and Myers into

believing they were creating a business entity with Green and they would

share equally in the business income and profits.        In reality, Green

created a separate business entity that only named him and his wife as

members with rights to share in the business income and profits. For
                                    11

months, Green represented to Strawhecker and Myers that he was

performing CEO duties on behalf of Holdings. Although they repeatedly

requested documents and accountings, Green refused to produce

documents.

      Further, Green misappropriated all of the revenue under the

fraudulent entity (Capital) for himself, disbursing little or nothing to

Strawhecker and Myers.       The revenue made from the management

agreement with GMS was not received by Holdings, but was all

misappropriated to the entity controlled by Green, Capital. After Green

dishonestly and fraudulently received the monthly payments under the

agreement, Green misappropriated all of the funds for his own use. None

of the money remained in Capital by the time Strawhecker and Myers

learned of the misappropriation.    We agree with the commission.      We

hold that the Board proved a violation of rule 32:8.4(c) by a convincing

preponderance of the evidence and that there was a misappropriation of

funds.

      B. Sanction.    In nearly every case, we revoke the license of an

attorney who converts client funds without a colorable future claim. See

Strand, 841 N.W.2d at 604; 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. Nelson,

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.”). We have consistently found revocation the appropriate

sanction in embezzlement cases, even when the embezzled funds were

returned. See, e.g., Iowa Supreme Ct. Bd. of Prof’l Ethics & Conduct v.

Anderson, 687 N.W.2d 587, 590 (Iowa 2004). This is because
                                    12
      [w]e do not tolerate theft by Iowa lawyers. A license to
      practice law is not a license to steal. Revocation is the
      appropriate sanction when attorneys convert funds, because
      it “is the only way to impress on [the attorney] and others the
      seriousness of these offenses.”

Stowe, 830 N.W.2d at 742 (citation omitted) (quoting Comm. on Prof’l

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

      This case involves the misappropriation and theft of funds in

connection with an attorney–client relationship, and like our other such

cases, it requires the same sanction. See, e.g., Strand, 841 N.W.2d at
604. We revoke the license of Brian Green to practice law in this state.

Because we find that Green violated rule 32:8.4(c) and determine that

revocation is the appropriate sanction, it is not necessary to address the

rule 32:1.8(a) violation. Id.

      IV. Conclusion.

      The license of Brian Green to practice law in the state of Iowa is

hereby revoked.

      LICENSE REVOKED.