Court Opinion

ID: 4311490
Source: CourtListenerOpinion
Date Created: 2018-09-12 12:36:41.649554+00
Date Added: 2024-06-11T14:43:31.185469
License: Public Domain

2018 WI 95

                  SUPREME COURT          OF   WISCONSIN
CASE NO.:               2017AP1275-D
COMPLETE TITLE:         In the Matter of Disciplinary Proceedings
                        Against Michael P. Erhard, Attorney at Law:

                        Office of Lawyer Regulation,
                                  Complainant,
                             v.
                        Michael P. Erhard,
                                  Respondent.

                            DISCIPLINARY PROCEEDINGS AGAINST ERHARD

OPINION FILED:          September 12, 2018
SUBMITTED ON BRIEFS:
ORAL ARGUMENT:

SOURCE OF APPEAL:
   COURT:
   COUNTY:
   JUDGE:

JUSTICES:
   CONCURRED:
   DISSENTED:
   NOT PARTICIPATING:   DALLET, J., did not participate.

ATTORNEYS:
                                                                           2018 WI 95
                                                                   NOTICE
                                                     This opinion is subject to further
                                                     editing and modification.   The final
                                                     version will appear in the bound
                                                     volume of the official reports.
No.    2017AP1275-D

STATE OF WISCONSIN                               :            IN SUPREME COURT

In the Matter of Disciplinary Proceedings
Against Michael P. Erhard, Attorney at Law:

Office of Lawyer Regulation,                                            FILED
           Complainant,
                                                                   SEP 12, 2018
      v.
                                                                      Sheila T. Reiff
                                                                   Clerk of Supreme Court
Michael P. Erhard,

           Respondent.

      ATTORNEY        disciplinary        proceeding.        Attorney's        license

suspended.

      ¶1   PER CURIAM.          We review the report of Referee William

Eich, in which he found, based on the admissions of Attorney

Michael P. Erhard, that Attorney Erhard had committed 11 counts

of professional misconduct, and in which he recommended that

Attorney   Erhard's      license     to    practice    law    in    this    state      be

suspended for a period of six months.                After carefully reviewing

the   matter,    we    accept    Attorney     Erhard's       admission        that     he
committed the first ten counts of misconduct alleged in the
                                                                                No.     2017AP1275-D

complaint filed by the Office of Lawyer Regulation (OLR).                                    We do

not   decide        whether       Attorney     Erhard's        conduct          in    obtaining    a

cashier's check made payable to a third party constitutes a

violation of former Supreme Court Rule (SCR) 20:1.15(e)(4)a, as

alleged in Count 11, because that determination would not change

the     level       of   discipline       we      impose.            We    conclude        that    a

suspension          of     three    months        is     the       appropriate          level     of

discipline to be imposed under the particular facts of this

case.      As the OLR advises that there are no client funds to

restore, we do not impose any restitution award.                                     We do require

Attorney        Erhard       to     pay     the        costs       of     this        disciplinary

proceeding, which were $3,190.26 as of April 17, 2018.

      ¶2    Attorney Erhard has been admitted to the practice of

law in Wisconsin since August 1973.                                He has practiced in a

number of private law firms since his admission.                                 At the time of

the   events        underlying       this    disciplinary               proceeding,       Attorney

Erhard was a member of Erhard and Payette, LLC in Madison.                                       That

firm is no longer in existence.
      ¶3    Attorney Erhard has been the subject of professional

discipline on one prior occasion.                            In 2002 he was privately

reprimanded          for    professional          misconduct             that        consisted    of

acquiring       a    proprietary      interest          in     a   client       matter,     making

misrepresentations in a complaint filed in connection with the

                                                  2
                                                                No.    2017AP1275-D

client matter, and failing to notify the client when the civil

action had been dismissed.           Private Reprimand 2002-3.1

    ¶4     The      OLR   filed   its    complaint   alleging    11    counts    of

misconduct     in     July   2017.        Attorney    Erhard's        answer    and

affirmative defenses admitted most of the allegations of the

complaint, but did object to a number of factual allegations and

did provide some additional explanatory information.                      Despite

those   objections,       Attorney      Erhard's   answer   admitted      all    11

counts of misconduct.

    ¶5     All of the allegations of misconduct in this matter

arise out of Attorney Erhard's handling of his firm's client

trust account.        The Erhard and Payette firm maintained both a

client trust account and an operating account for the business

of the firm.        Initially, those accounts were maintained at Chase

Bank.    On May 16, 2014, Attorney Erhard opened a new client

trust account at Johnson Bank.                For a few months, both trust

accounts were in existence.2             On August 14, 2014, the law firm

closed the Chase Trust Account.
    ¶6     It appears that Attorney Erhard was the person at the

firm primarily in charge of the client trust account.                   He signed

    1
       Copies of private reprimands are ordinarily available on
the court's website.    This reprimand is not available on the
court's website, but a copy could be obtained by contacting the
OLR.
    2
       For the sake of brevity and clarity, this opinion will
refer to the two client trust accounts as the Chase Trust
Account and the Johnson Trust Account.

                                          3
                                                                        No.     2017AP1275-D

checks drawn on the account and made the electronic transfers to

and from the account that are the subject of this proceeding.

The firm employed a paralegal, who was responsible for providing

an accounting firm with the necessary information so that the

accountants         could       prepare       checks     for      Attorney           Erhard's

signature.          The     accounting       firm     also     maintained       the     trust

account records for the firm.

       ¶7        Most of the allegations in the OLR's complaint relate

to Attorney Erhard's handling of trust account funds connected

to two client matters involving civil actions—one on behalf of

E.A. and one on behalf of J.O.                     We will divide the allegations

between the periods prior to and after the switch of the client

trust accounts from Chase Bank to Johnson Bank.

       ¶8        With respect to the E.A. matter during the time period

in which the Chase Trust Account was being used, between May 2,

2014, and May 29, 2014, Attorney Erhard made seven disbursements

in the total amount of $200,000 from the Chase Trust Account to

E.A., M.A., S.A., and the law firm's operating account.                                     The
four     disbursements         to    the     operating        account    were        made    by

electronic transfers.                These seven disbursements exceeded the

amount      in    the   Chase       Trust    Account    for     the     E.A.    matter        by

$100,000, which resulted in funds from other clients covering

these disbursements.

       ¶9        On May 30, 2014, a deposit of $537,000 for E.A. was

wired into the Chase Trust Account.                      This repaid the $100,000

that   had       been   taken    from       other    client    accounts        and    left     a
positive      balance     of     $437,000      for     E.A.      On     that    same        date
                                               4
                                                                       No.    2017AP1275-D

Attorney     Erhard        made    two      additional      electronic         transfers

totaling $125,000 from the Chase Trust Account to the firm's

operating account.          In June 2014, Attorney Erhard issued three

checks to E.A., M.A., and S.A. in the total amount of $267,315

and   made    two   electronic           transfers    in    the    total     amount    of

$2,673.38 from the Chase Trust Account to the firm's operating

account.      Thus, at the end of these transactions, there was a

balance of $42,011.62 in funds belonging to E.A. in the Chase

Trust Account.

      ¶10    With respect to the J.O. matter specifically, there

were three particular transactions that formed the basis for

allegations of misconduct.                First, on June 25, 2014, Attorney

Erhard purchased two cashier's checks out of the Chase Trust

Account with funds belonging to J.O.                   The two cashier's checks,

totaling     $68,256.75,          were     made    payable        to   the     Wisconsin

Department of Revenue (DOR).                Attorney Erhard caused those two

cashier's checks to be sent to the DOR in payment of the income

tax liability for J.O. and his wife.                   On July 1, 2014, Attorney
Erhard electronically transferred $178,125 from the Chase Trust

Account to the law firm's operating account as payment for legal

fees.       On that same date he also electronically transferred

$211,590.15 to J.O.'s checking account.

      ¶11    The     OLR's        complaint        also     contains         allegations

regarding the transfer of funds from the Chase Trust Account to

the   Johnson      Trust     Account.         On     July   2,    2014,      the   firm's

operating account had a balance of $167,135.33.                           On that date
Attorney Erhard signed a hand-written check for $400,000 drawn
                                             5
                                                                          No.    2017AP1275-D

on   the    operating      account       and       payable    to    the    Johnson       Trust

Account.     The check was deposited with Johnson Bank on that same

date.        On     July     3,     2014,      Attorney       Erhard       electronically

transferred $400,000 from the Chase Trust Account to the firm's

operating account to cover the check he had deposited the day

before.     Nearly all of that $400,000 belonged to nine clients.

After this transfer there remained a balance of $17,986.86 in

the Chase Trust Account.

      ¶12    On     August    1,     2014,     Attorney       Erhard       electronically

transferred        $17,000        from   the       Chase     Trust    Account       to     the

operating account.           These funds were used to cover a number of

checks     and    electronic       withdrawals        from    the    operating      account

that were used to pay business expenses and to pay a $5,000 draw

to Attorney Erhard.           On that same date, however, Attorney Erhard

deposited        $17,000   from      another        source    to    the    Johnson       Trust

Account to replenish the trust account funds.

      ¶13    On August 14, 2014, Attorney Erhard transferred the

remaining $986.86 in the Chase Trust Account into the firm's
operating account.           As with the earlier movement of the $17,000,

on that same date Attorney Erhard deposited a check from the

operating account into the Johnson Trust Account.                                 With the

transactions on both August 1 and August 14, 2014, Attorney

Erhard effectively moved client funds from one trust account to

the other, but for some reason he routed them through the firm's

operating account.

      ¶14    The    OLR's     complaint        also    contains      some       allegations
regarding the disbursement of funds for E.A. after the firm's
                                               6
                                                                          No.     2017AP1275-D

switch to the Johnson Trust                   Account.        After Attorney Erhard

moved      the    firm's        client    trust     funds     to    the    Johnson        Trust

Account,      the       balance     of    trust     account       funds    for     E.A.     was

$42,011.62.            From September 15, 2014, to December 12, 2014,

Attorney     Erhard        made    four     disbursements          totaling      $124,573.62

related to the E.A. matter.                 One of the four disbursements was a

$10,000     check        from    the     Johnson    Trust    Account      to     the     firm's

operating account in payment of legal fees.                          The first of these

four disbursements created a negative balance of nearly $27,000

for the E.A. matter in the Johnson Trust Account.                                 After the

last of the four disbursements, the negative balance had grown

to $82,562.            This meant that funds from other clients were used

to cover the four disbursements.                    Approximately six months after

the last of these four disbursements, Attorney Erhard deposited

$82,562 into the Johnson Trust Account to replenish the funds

belonging        to     the     other    clients     and     eliminate      the     negative

balance for E.A.

      ¶15        The    OLR's     complaint        charged    Attorney          Erhard     with
committing 11 separate counts of professional misconduct arising

out   of    the        facts    described    above.         The     complaint,      however,

alleged multiple counts for the same conduct.                                 For example,

Counts 1, 2, and 3 all alleged that over a roughly three-week

period in May 2014 Attorney Erhard had improperly disbursed from

the Chase Trust Account $100,000 more in connection with E.A.'s

matter than was in the trust account for that client.                                  Count 1

                                              7
                                                   No.     2017AP1275-D

alleged      that    this     conduct   had     violated       former

SCR 20:1.15(f)(1)b.3    Count 2 alleged that this same conduct had

violated SCR 20:1.15(b)(1).4      Count 3 alleged that this same

conduct had violated SCR 20:8.4(c).5

     ¶16    Counts 4, 5, and 6 repeated this pattern with respect

to Attorney Erhard's excessive disbursements in connection with

     3
       Effective July 1, 2016, substantial changes were made to
Supreme Court Rule 20:1.15, the "trust account rule." See S. Ct.
Order 14-07, (issued Apr. 4, 2016, eff. July 1, 2016). Because
the conduct underlying this case arose prior to July 1, 2016,
unless otherwise indicated, all references to the supreme court
rules will be to those in effect prior to July 1, 2016.

     Former SCR 20:1.15(f)(1)b provided:

          A subsidiary ledger shall be maintained for each
     client or 3rd party for whom the lawyer receives trust
     funds that are deposited in an IOLTA account or any
     other pooled trust account.    The lawyer shall record
     each receipt and disbursement of a client's or 3rd
     party's   funds   and  the   balance   following  each
     transaction.   A lawyer shall not disburse funds from
     an IOLTA account or any pooled trust account that
     would create a negative balance with respect to any
     individual client or matter.
     4
         SCR 20:1.15(b)(1) provides:

          A lawyer shall hold in trust, separate from the
     lawyer's own property, that property of clients and
     3rd parties that is in the lawyer's possession in
     connection with a representation.        All funds of
     clients and 3rd parties paid to a lawyer or law firm
     in connection with a representation shall be deposited
     in one or more identifiable trust accounts.
     5
       SCR 20:8.4(c) provides:  "It is professional misconduct
for a lawyer to engage in conduct involving dishonesty, fraud,
deceit or misrepresentation."

                                  8
                                                                   No.     2017AP1275-D

the E.A. matter over the period of September to December 2014.

Count    4   alleged        that    this       conduct     had    violated     former

SCR 20:1.15(f)(1)b.         Count 5 alleged that this same conduct had

violated SCR 20:1.15(b)(1).                Count 6 alleged that this same

conduct had violated SCR 20:8.4(c).

       ¶17   Count 7 related to Attorney Erhard's routing of the

$400,000 in trust funds through the firm's operating account

when    moving   the    money      from   the    Chase    Trust   Account     to   the

Johnson Trust Account on July 3, 2014.                   The OLR alleged in Count

7 that the electronic transfer of the $400,000 in client funds

to the firm's operating account had violated SCR 20:1.15(b)(1).

       ¶18   Counts 8 and 9 related to the routing of the $17,000

in client trust funds through the firm's operating account on

August 1, 2014, and the use of those funds for other purposes.

Specifically, Count 8 alleged that the initial transfer of the

$17,000 in client trust funds from the Chase Trust Account to

the operating account and the use of those funds to pay business

expenses and a monthly draw to Attorney Erhard had violated
SCR 20:1.15(b)(1).          Count 9 alleged that this same conduct also

had violated SCR 20:8.4(c).

       ¶19   Count     10   addressed      all     electronic      transfers       that

Attorney Erhard had made out of the Chase Trust Account to the

firm's operating account, as well as the July 1, 2014 electronic

transfer     from    the    Chase     Trust      Account     to   J.O.'s     checking

                                           9
                                                                            No.   2017AP1275-D

account.         This count alleged that the use of such electronic

transfers had been in violation of former SCR 20:1.15(e)(4)c.6

       ¶20    Finally,       Count        11     alleged       that   Attorney      Erhard's

purchase of two cashier's checks payable to the DOR using funds

from       the      Chase         Trust         Account        had    violated         former

SCR 20:1.15(e)(4)a.7              The OLR characterized this as two separate

transactions.         It alleged that Attorney Erhard first withdrew

cash from the Chase Trust Account and then used that cash to

purchase      the     two        cashier's       checks.        It    alleged      that     the

withdrawal of cash had constituted the ethical violation.

       ¶21    Attorney       Erhard's          answer    admitted     all    11   counts      of

misconduct in the OLR's complaint.                       The answer even admitted the

violation of former SCR 20:1.15(e)(4)a in Count 11, although the

answer disputed that the purchase of the cashier's checks had

constituted a withdrawal of cash from the trust account.

       ¶22    Given Attorney Erhard's admission of all 11 counts in

the    complaint,       the        only    issue        that    was   addressed       at     the

evidentiary hearing in this proceeding was the appropriate level
of    discipline.           In    addition       to     testifying    himself,      Attorney

Erhard       called    four        witnesses,           including     a     federal        judge

appearing in response to a subpoena, all of whom had extensive

       6
       Former SCR 20:1.15(e)(4)c provided:   "A lawyer shall not
make deposits to or disbursements from a trust account by way of
an Internet transaction."
       7
       Former SCR 20:1.15(e)(4)a provided: "No disbursement of
cash shall be made from a trust account and no check shall be
made payable to 'Cash.'"

                                                 10
                                                                 No.     2017AP1275-D

experience with Attorney Erhard as a practicing lawyer and spoke

highly of his competence as a lawyer and his good character and

integrity.

      ¶23   The    referee     ultimately         recommended       a        six-month

suspension   and    the    imposition      of    two   conditions       on    Attorney

Erhard's return to the practice of law following the suspension:

(1) that Attorney Erhard never hold responsibility for any trust

property or trust account in the future and (2) that Attorney

Erhard annually certifies to the OLR that he is not responsible

for overseeing any trust property or trust account.                     The referee

agreed with the OLR that several aggravating factors——the number

of charges (11), the existence of a "pattern" of misconduct, and

the amount of money involved——required a suspension.                           On the

other   hand,     the   referee     concluded      that    several       mitigating

factors cited by Attorney Erhard——his lack of intent or malice,

the restitution he made by depositing personal funds into the

trust account, and his cooperation with the OLR throughout the

investigation and disciplinary proceeding——required a suspension
shorter than the nine-month suspension sought by the OLR.

      ¶24   Attorney      Erhard   filed     a   motion   for    reconsideration

that focused on Count 11 regarding the purchase of the cashier's

checks payable to the DOR.           He urged the referee to reconsider

the   referee's    conclusion      that    Attorney     Erhard    had        admitted,

without qualification, that his purchase of the two cashier's

checks had been a cash withdrawal from the trust account in

violation of former SCR 20:1.15(e)(4)a.                He asserted that he had
substantially complied with the spirit and purpose of that rule
                                        11
                                                                               No.    2017AP1275-D

and had not converted or misappropriated any client funds.                                        He

suggested that it would be more appropriate to find that the

manner of the purchase and the nature of the checks had not

complied      with      the    formalities             of   a    different       rule,      former

SCR 20:1.15(f)(1)e(1).                He further asked the referee to reduce

the recommended suspension to one just shy of six months so that

he   would     not      have    to     go       through       the     formal     reinstatement

process.

       ¶25    The referee denied the reconsideration motion.                                      The

referee      refused     to     amend       his      report     because    he        stated    that

Attorney     Erhard      had        indeed      admitted        the   violation        of   former

SCR 20:1.15(e)(4)a in Count 11.                         The referee also refused to

reduce the recommended suspension, stating that he had taken

into account Attorney Erhard's lack of intentional or malicious

conduct in recommending a suspension less than the nine-month

suspension sought by the OLR.

       ¶26    When we review a referee's report and recommendation

in an attorney disciplinary case, the standard of review we
utilize is well-established.                    We affirm a referee's findings of

fact    unless    they        are    found      to     be   clearly     erroneous,          but   we

review the referee's conclusions of law on a de novo basis.                                        In

re Disciplinary Proceedings Against Inglimo, 2007 WI 126, ¶5,

305 Wis. 2d 71, 740 N.W.2d 125.                         We determine the appropriate

level of discipline to impose given the particular facts of each

case,     independent           of        the     referee's           recommendation,             but

benefiting       from    it.         In    re     Disciplinary         Proceedings          Against
Widule, 2003 WI 34, ¶44, 261 Wis. 2d 45, 660 N.W.2d 686.
                                                  12
                                                                        No.    2017AP1275-D

    ¶27        The first ten counts of alleged misconduct and the

factual allegations supporting those counts do not present any

concerns.       Given Attorney Erhard's admission of the allegations,

we adopt the referee's findings of fact and we conclude that

those findings demonstrate that Attorney Erhard committed the

misconduct alleged in Counts 1-10.

    ¶28        Count 11, however, is not so easily resolved.                        We have

not previously decided whether purchasing a cashier's check made

payable to a third party on behalf of a client using funds in an

attorney's client trust account constitutes a withdrawal of cash

in violation of former SCR 20:1.15(e)(4)a.                      We determine that we

need not do so here because we conclude that a decision on

whether    or    not     there    was      a    technical      violation       of    former

SCR 20:1.15(e)(4)a would not impact the level of discipline we

would impose.

    ¶29        We now turn to the issue of the appropriate level of

discipline       that    should       be   imposed      for     the   ten      counts     of

misconduct we have found.                  It is clear that Attorney Erhard
failed    to    manage    his    firm's        client   trust    account      as    he   was

ethically      required    to    do.       Moreover,      this    was    not    a    single

occurrence, but a repeated shortcoming.                       On the other hand, we

conclude that the number of counts of misconduct alleged in the

complaint overstates the instances of misconduct.                         The complaint

used the same conduct to allege multiple counts.                         If it had not

done so, there would have been five or six counts instead of 11.

Moreover,       there    are     no     allegations       here    that        any    client
ultimately suffered lasting harm.                   The referee found that the
                                               13
                                                                    No.   2017AP1275-D

level of discipline should be mitigated by Attorney Erhard's

lack of intent or malice, and we agree.                    Attorney Erhard has a

substantial history as a practicing lawyer in this state, and

the   testimony    that   he    presented      at    the    evidentiary         hearing

supports    a   conclusion     that    his    failure      to    manage   his     trust

account properly was an aberration, rather than an indication of

his character.      He has cooperated with the OLR's investigation,

admitted    his   misconduct,         returned      all    funds    to    the    trust

account, and expressed remorse for his failings.

      ¶30   Under these specific facts, we determine that a three-

month suspension would accomplish the goals of discipline.                           We

agree with the referee that a reprimand would unduly depreciate

the seriousness of Attorney Erhard's failings, but we do not

believe that it is necessary to require Attorney Erhard to go

through the formal reinstatement process.                       While the level of

appropriate discipline must be determined on the basis of the

facts in each case, we have imposed similar levels of discipline

in other cases involving a lawyer's failure to properly hold and
manage client funds in the lawyer's trust account.                        See, e.g.,

In re Disciplinary Proceedings Against Kitto, 2018 WI 71, 382
Wis. 2d 368, 913 N.W.2d 874 (60-day suspension imposed for five

counts of misconduct, including failing to hold client funds in

trust and converting over $10,000 for the lawyer's personal use,

where lawyer admitted misconduct and had made full restitution);

In re Disciplinary Proceedings Against Clark, 2016 WI 36, 368
Wis. 2d 409, 878 N.W.2d 662 (four-month suspension imposed on
experienced attorney for eight counts of misconduct, including
                                         14
                                                                  No.     2017AP1275-D

failing      to    hold   client   funds    in    trust,     disbursing    funds   in

excess of amounts held in trust for a particular client, making

cash withdrawals from a trust account, and hiding income or

assets from taxing authorities).

       ¶31    We do not impose the condition as recommended by the

referee.          It is almost impossible for a practicing lawyer to

"never [have] responsibility for any fiduciary or trust property

or account."         A client delivering to a lawyer a check for an

advanced fee imposes a fiduciary obligation on that lawyer, even

if the lawyer's obligation is simply to hand over the check to

another person in the law firm that supervises the firm's client

trust account.            We do require Attorney Erhard to attend six

credits of continuing legal education on the subject of trust

account management within the next 12 months, as approved by the

OLR.

       ¶32    As is our usual custom, we also find it appropriate to

assess the full costs of the proceeding against Attorney Erhard.

This case presents no reason for departing from our standard
practice      of    imposing   costs   on       respondent    attorneys     on   whom

discipline is imposed.

       ¶33    IT IS ORDERED that the license of Michael P. Erhard to

practice law in Wisconsin is suspended for a period of three

months, effective October 12, 2018.

       ¶34    IT IS FURTHER ORDERED that Michael P. Erhard shall

attend six credits of continuing legal education on the subject

of trust account management within the next 12 months, to be
approved by the Office of Lawyer Regulation.
                                           15
                                                          No.   2017AP1275-D

    ¶35    IT IS FURTHER ORDERED that within 60 days of the date

of this order, Michael P. Erhard shall pay to the Office of

Lawyer   Regulation    the   costs   of   this    proceeding,   which   are

$3,190.26 as of April 17, 2018.

    ¶36    IT IS FURTHER ORDERED that Michael P. Erhard shall

comply with the provisions of SCR 22.26 concerning the duties of

an attorney whose license to practice law has been suspended.

    ¶37    IT   IS    FURTHER   ORDERED    that    compliance   with    all

conditions of this order is required for reinstatement.                 See

SCR 22.28(2).

    ¶38    REBECCA FRANK DALLET, J., did not participate.

                                     16
    No.   2017AP1275-D

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