Court Opinion

ID: 9882122
Source: CourtListenerOpinion
Date Created: 2023-10-05 14:24:11.788258+00
Date Added: 2024-06-11T14:58:49.867315
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             DISTRICT OF COLUMBIA COURT OF APPEALS

                                 No. 22-BG-0906

                   IN RE GEORGE A. TEITELBAUM, RESPONDENT,

        A Member of the Bar of the District of Columbia Court of Appeals
                        (Bar Registration No. 370926)

           On Report and Recommendation of the Board of Professional
                  Responsibility Ad Hoc Hearing Committee
                 Approving Petition for Negotiated Discipline
                             (DDN 2019-D161)

                            (Decided: October 5, 2023)

      Before MCLEESE and DEAHL, Associate Judges, and WASHINGTON, Senior
Judge.

      WASHINGTON, Senior Judge: This is a negotiated discipline case. Under

D.C. Bar R. XI, § 12.1(d), this opinion may not be cited as precedent in contested-

discipline cases except as provided in D.C. App. R. 28(g). This opinion may,

however, be cited as precedent in negotiated-discipline cases.

      This appeal concerns a petition for negotiated discipline that involves

misconduct that may merit a charge for an ethical violation that the petition did not

include. In the amended petition here, respondent George A. Teitelbaum admitted

to violating D.C. R. Pro. Conduct 1.15(a) by failing to keep complete records of

account funds. The agreed-upon sanction reflects that charge. The stipulated facts
                                         2

also reflect that the funds in the account were insufficient to meet the financial

obligations Mr. Teitelbaum had to his client, although the representation did not

result in any financial loss to his client. The Board on Professional Responsibility

(“Board”) argues that the fact that the account had insufficient funds established

misappropriation of the funds, and therefore we must reject the negotiated

disposition and order further factual development to assess if the recommended

sanction is too lenient. The Office of Disciplinary Counsel (“ODC”), which co-

filed the petition with respondent, counters that the sanction is appropriate because

its “investigation did not uncover clear and convincing evidence” that the

deficiency at issue was “negligent, reckless, or intentional.” We conclude that a

determination that Mr. Teitelbaum committed misappropriation in violation of the

Rules of Professional Conduct would depend on the resolution of unsettled legal

questions and on facts that do not amount to clear and convincing evidence of

misappropriation. We also conclude that, under the circumstances of this case,

proposed discipline that does not include a charge of misappropriation is not

unduly lenient.    We therefore approve the amended petition for negotiated

discipline.
                                         3

                                   I. Background

      Respondent served as a co-personal representative of an estate being

administered in the Probate Division of the Superior Court (hereinafter the

“probate court”).     The probate court appointed respondent as co-personal

representative to assist José Morgan (one of the estate’s legatees) in administering

the estate. Among respondent’s duties was disbursing the funds from the estate’s

bank account as follows: two $2,500 legacies with the remaining balance (after his

own fees and costs) evenly divided among five legatees. Respondent submitted an

accounting of the disbursements to the probate court, 1 which approved the

disbursements. Respondent wrote checks to himself and the legatees in 2018.

Subsequently, Morgan received notice that the account was overdrawn by $256.81,

although the bank honored the final check to the final legatee and closed the

account.

      Respondent could not explain the overdraft to Morgan, he did not investigate

it until ODC inquired, and his eventual explanation (that it was attributable to fees

the bank agreed not to charge) could not be fully reconciled with the bank records.

The bank was supposed to send monthly account statements to respondent and to

Morgan as joint signatories on the account, but respondent did not receive them.

      1
        Respondent’s accounting mistakenly concluded that the account contained
sufficient funds to cover the disbursements.
                                         4

Those statements would have revealed any fees charged by the bank. Respondent

avers that he occasionally sought copies of the bank statements from Morgan, but

had stopped trying to obtain them from the bank after an “unsuccessful” but

unspecified “effort.” Instead, he relied on his firsthand knowledge of what funds

were spent from the estate account by keeping the account’s checkbook.

      ODC opened an investigation into respondent’s conduct after receiving a

complaint from his former client. Respondent and ODC immediately engaged in

the negotiated discipline process. 2 Ultimately, ODC found that its “investigation

d[id] not reveal evidence that the overdraft involved misappropriation.”

Respondent admitted he failed to maintain complete financial records pertaining to

the estate’s bank account in violation of D.C. R. Pro. Conduct 1.15(a), a lesser

offense than misappropriation under Rule 1.15(a). 3 As a result, the parties agreed

      2
           The record does not indicate that ODC initiated formal disciplinary
proceedings by charging respondent in a petition under oath. Negotiated discipline
is available to attorneys who either are charged with misconduct in a petition filed
under D.C. Bar R. XI, § 8(c), or are “the subject of an investigation by Disciplinary
Counsel,” but not facing charges. D.C. Bar R. XI, § 12.1(a); see id. § 8(b) (“Upon
the conclusion of an investigation, Disciplinary Counsel may . . . institute formal
charges.”); id. § 8(c) (“Formal disciplinary proceedings before a Hearing
Committee shall be instituted by Disciplinary Counsel by the filing of a petition
[that] . . . . shall be sufficiently clear and specific to inform the attorney of the
alleged misconduct.”).
      3
       Rule 1.15(a) encompasses both failures to keep complete records and the
more serious violation of misappropriation, which carries a presumptive sanction
of disbarment, at least where the misappropriation occurred with a culpable
                                        5

to a sanction consisting of a 30-day suspension with proof of fitness for

reinstatement, stayed in favor of one year of probation with conditions. ODC and

respondent submitted their petition for negotiated discipline to the assigned

Hearing Committee.      The Hearing Committee recommended that this court

approve the negotiated discipline. However, the Hearing Committee’s report, and

a confidential appendix to it, also recognized that whether respondent’s conduct

amounted to misappropriation was a “close question.” Exercising our discretion

under D.C. Bar R. XI, § 12.1(d), we sought the Board’s views on the

appropriateness of the negotiated disposition in light of the misappropriation

question.

      The Board recommended that the negotiated discipline be rejected because

the stipulated facts established misappropriation. The Board called for further

factual finding to determine respondent’s state of mind or intent, which it

contended would affect whether the agreed-upon sanction was too lenient. ODC

responded by arguing that no misappropriation occurred here because that offense

mindset greater than negligence and was not mitigated by extraordinary
circumstances. See In re Schuman, 251 A.3d 1044, 1050-53, 1055 (D.C. 2021); In
re Daniel, 11 A.3d 291, 301 (D.C. 2011). Commingling funds also violates Rule
1.15(a), but is not relevant to this case and our analysis. See, e.g., Schuman, 251
A.3d at 1047 (evaluating charges of “commingling and intentional
misappropriation of client funds” and “failure to keep proper records” brought
under Rule 1.15(a)); In re Gray, 224 A.3d 1222, 1225 (D.C. 2020) (per curiam)
(same).
                                        6

requires an “unauthorized” use of funds, and here the probate court’s order

authorized the use of funds by approving (albeit based on respondent’s mistaken

representations about the account’s funds) the disbursements that overdrew the

estate’s account. In response, the Board recognized that ODC’s argument about

the court order “authorizing” the disbursements “appears to be a question of first

impression,” but argued that ODC’s interpretation was wrong as a matter of law.

ODC replied by challenging the Board’s analysis of the court-approval issue and

arguing that it would be unfair to sanction respondent based on a theory of “first

impression.” Further, ODC highlighted that respondent and Morgan were joint

signatories because both of their signatures were required on checks authorizing

payments from the account.        Therefore, ODC posited, when respondent’s

misconduct occurred in 2018, the law was unsettled as to whether he was

“entrusted” with estate funds that he could misappropriate. See In re Harris-

Lindsey, 242 A.3d 613, 620, 624 (D.C. 2020).

                                    II. Analysis

      Our analysis proceeds in two parts. We first explain when we will reject a

negotiated disposition for not stipulating a particular charge, and why we accept

the disposition here despite it not stipulating a charge of misappropriation. We

then address why the agreed-upon sanction for respondent’s record-keeping
                                         7

violation is “justified and not unduly lenient.” In re Harmon, 268 A.3d 849, 849

(D.C. 2022) (per curiam).

   A. The Petition for Negotiated Discipline’s Finding on Misappropriation

        The Board argues that we must reject the petition for negotiated discipline

because its sanction would be unduly lenient. This alleged lenience stems from the

petition’s finding that ODC’s “investigation does not reveal evidence that the

overdraft involved misappropriation.”        That finding, the Board contends, is

erroneous and merits rejecting the negotiated disposition because it does not

stipulate, and thus its sanction does not account for, a misappropriation charge.

We disagree. Negotiated discipline may generally omit to charge a violation if,

after reasonable factual investigation, there is a substantial risk that ODC would

not be able to establish the violation by clear and convincing evidence. Such a risk

can arise not only from uncertainty about the facts but also from uncertainty about

unresolved legal issues that would have to be decided in order to establish a

violation. Here, given the facts and our case law at the time of the offense, it is

unclear that ODC could support a misappropriation charge with clear and

convincing evidence. Therefore, the failure of ODC to include a stipulated charge

of misappropriation does not require rejection of the negotiated disposition in this

case.
                                         8

           1. When a Negotiated Disposition Must Stipulate a Specific
              Charge
      We judge a negotiated disposition’s sanctions by considering, among other

things, what sanctions would be appropriate in a contested case. See In re Mensah,

262 A.3d 1100, 1104 (D.C. 2021) (per curiam) (“[S]anctions in negotiated-

discipline cases may [not] become completely unmoored from the sanctions that

would be appropriate in contested-discipline cases.”). A negotiated sanction’s

appropriateness depends in part on the severity of the offenses an attorney could

have been charged with and sanctioned for in a contested case.            See In re

Agwumezie, 268 A.3d 823, 825 n.1 (D.C. 2022) (per curiam) (“[T]he nature and

seriousness of the misconduct must be considered when determining whether the

proposed sanction is justified.”); In re Johnson, 984 A.2d 176, 181 (D.C. 2009)

(per curiam) (explaining that a Hearing Committee’s review of a negotiated

disposition’s sanction may give “some consideration” to “what charges might have

been brought”).    Therefore, our review of a negotiated disposition’s sanction

requires us to compare the petition for negotiated discipline’s stipulated charges

with what could be charged and proven in a contested case.

      The Board and ODC agree that ODC can assess litigation risks vis-à-vis

what would happen in a contested case when determining which charges to

stipulate. Those litigation risks could include legal or factual uncertainties in the

case. The parties disagree, however, about the standard governing when ODC
                                          9

considers whether to stipulate a charge. The Board advances a probable cause

standard, which governs the “charging stage” of the disciplinary process. ODC, on

the other hand, contends it must have “clear and convincing evidence” of the

charge in order to stipulate it.

      The clear-and-convincing-evidence standard governs. As explained above,

we evaluate the stipulated charges in negotiated discipline cases by asking whether

a charge would succeed in a contested case, not whether it could be charged. After

all, “under the negotiated-discipline process, the test is whether the agreed-upon

sanction is justified.”    Mensah, 262 A.3d at 1104 (emphasis added) (internal

quotation marks omitted). The sanction in a contested case depends on charges

that are proven by clear and convincing evidence. See In re Mitchell, 727 A.2d

308, 313 (D.C. 1999) (“It is [ODC’s] burden to establish by clear and convincing

evidence that respondent violated the Rules of Professional Conduct.”); Harris-

Lindsey, 242 A.3d at 620 (“To prove misappropriation, [ODC] bears the burden of

establishing each element by clear and convincing evidence.”).             Therefore,

negotiated discipline may generally omit to charge a violation if, after reasonable

factual investigation, there is a substantial risk that ODC would not be able to

establish the violation by clear and convincing evidence. Such a risk can arise not

only from uncertainty about the facts but also from uncertainty about unresolved

legal issues that would have to be decided in order to establish a violation.
                                           10

      It is worth emphasizing that stipulating a specific charge does not compel a

specific sanction.     As Mensah explains, “the negotiated-discipline process

necessarily contemplates some additional flexibility in determining an appropriate

sanction.” 262 A.3d at 1104. That case illustrates ODC’s leeway in negotiating

the sanction for the charges that ODC must stipulate in the circumstances

discussed above.     See id. at 1104-05.        In Mensah, a petition for negotiated-

discipline stipulated a charge of reckless misappropriation, which in a contested

case would require disbarment absent extraordinary circumstances. Id. at 1101-02

(citing In re Addams, 579 A.2d 190, 191 (D.C. 1990) (en banc)). However, we

approved a lesser sanction than disbarment because the sanction was imposed in

the more flexible negotiated-discipline process. Id. at 1105. Thus, even if a charge

would succeed in a contested case, the sanction for that charge in a negotiated-

discipline case need not mirror the sanction in a contested case.

      In sum, we will not reject a negotiated discipline because it declines to

stipulate a violation if, after reasonable factual investigation, there is a substantial

risk that ODC would not be able to establish the violation by clear and convincing

evidence. Conversely, we will reject a negotiated discipline if ODC does not

stipulate a charge that clear and convincing evidence, as set forth in the stipulated

facts, supports. In that latter scenario, the failure to stipulate the charge results in a

sanction that is not justified and therefore may be unduly lenient.
                                         11

             2. Litigation Risks Justified Omitting Misappropriation

      We now apply this standard to respondent’s negotiated discipline. ODC

gives several reasons why it did not stipulate a misappropriation charge. Without

addressing every reason ODC provided, we conclude that, on these facts, litigation

risks from three unsettled legal questions about misappropriation justified omitting

a misappropriation charge. These risks could reasonably lead ODC to conclude,

based on its reasonable investigation of the alleged misconduct, that it lacked clear

and convincing evidence of misappropriation. 4 We therefore decline to reject the

petition for negotiated discipline because of its finding that misappropriation did

not occur.

      Before addressing those three unsettled questions, we briefly summarize our

misappropriation law. “The three elements of misappropriation are (1) that client

funds were entrusted to the attorney; (2) that the attorney used those funds for the

attorney’s own purposes; and (3) that such use was unauthorized.” Harris-Lindsey,

242 A.3d at 620. The attorney need not “derive[] any personal gain or benefit”

from the unauthorized use. Id. (quoting In re Abbey, 169 A.3d 865, 872 (D.C.

      4
        Neither party suggests that we owe deference to ODC’s views about what
charges can or cannot be proved by clear and convincing evidence, and we need
not reach the issue of whether any such deference is owed. ODC’s reasons for
omitting certain charges from a petition are subject to discretionary review by the
Hearing Committee and to this court’s requests for further information, if
necessary. See D.C. Bar R. XI, § 12.1(c)-(d).
                                                  12

2017)). Rather, we have explained that “[a]n attorney commits misappropriation

when the balance of the attorney’s account holding client funds drops below the

amount the attorney owes to the client and/or owes to third parties on the client’s

behalf.” In re Ekekwe-Kauffman, 267 A.3d 1074, 1080 (D.C. 2022). Beyond these

established principles, there are three legal uncertainties about misappropriation

(one of which has been resolved since respondent’s misconduct occurred) that

create litigation risks here. We do not resolve these uncertainties but merely

highlight the litigation risks they raise.

                                             i.

      First, our case law is unsettled on whether culpability is an element of

misappropriation. We essentially said as much in our recent decision in In re

Krame, 284 A.3d 745 (D.C. 2022). That opinion expressly declined to respond to

an argument “that a culpable state of mind is not an element of misappropriation,”

which would make misappropriation a per se offense. Id. at 750 (internal quotation

marks omitted).      Instead, we explained that “[t]his court has suggested that

misappropriation is ‘essentially a per se offense,’ but we have never sustained a

Rule 1.15(a) charge absent some finding of a culpable mindset at least rising to the

level of negligence. . . . Th[at] question[] remain[s] for another day . . . .” Id. at

767 n.11 (citations omitted).
                                        13

      This explanation in Krame cuts against the Board’s reliance on cases stating

that misappropriation occurs “when the balance of the attorney’s account holding

client funds drops below the amount the attorney owes” to a client or third party

for the proposition that no culpable mental state is required. Ekekwe-Kauffman,

267 A.3d at 1080; see, e.g., In re Bailey, 883 A.2d 106, 121 (D.C. 2005). For

example, the Ekekwe-Kauffman court concluded that “the[] misappropriations

crossed the line from negligent to at least reckless”—meaning that they involved

culpable conduct. 267 A.3d at 1083. So too in Bailey, where this court suspended

an attorney after determining that his “misappropriation was negligent, rather than

intentional or reckless.” 883 A.2d at 123. The misappropriation in those cases

involved culpable mindsets, even if the cases considered the level of culpability

separately from the issue of whether misappropriation occurred. Further, our cases

sometimes define one element of misappropriation as an attorney using funds “for

the attorney’s own purposes.” Harris-Lindsey, 242 A.3d at 620; e.g., In re Travers,

764 A.2d 242, 250 (D.C. 2000). The phrasing of this element may imply that

misappropriation requires some level of culpability.

      All of this demonstrates the uncertainty around whether misappropriation

requires a culpable mindset. Here, this uncertainty created litigation risks given

the limited information about respondent’s state of mind in the stipulated facts.

The Board even acknowledged that respondent’s culpability is unclear—it asked us
                                            14

to remand for further factual finding on that very question. The legal uncertainty

of whether misappropriation requires culpability, paired with the factual

uncertainty surrounding respondent’s culpability, created litigation risks that

helped justify ODC’s decision not to stipulate a misappropriation charge in

respondent’s negotiated discipline.

                                      ii.

      The second legal uncertainty is that, when the misconduct occurred in 2018,

it was an open question whether a joint signatory (like respondent) could be

“entrusted” with estate funds. See Harris-Lindsey, 242 A.3d at 620. We since

resolved that question in 2020 in Harris-Lindsey, clarifying for the first time that

an attorney who is a joint signatory on an account is “entrusted” with estate funds.

Id. at 620, 624-25. This holding only applies prospectively. Id. at 624-25. Thus,

because respondent was a joint signatory (both his and Morgan’s signatures were

required on the trust account’s checks) when he disbursed the money in the estate’s

account, it was unsettled whether he was entrusted with client funds such that he

could commit misappropriation. This unanswered question raised litigation risks

that further assure us that a misappropriation charge may not have succeeded in a

contested case.
                                              15

      The Board attempts to distinguish Harris-Lindsey, but it is unclear if that

distinction makes a difference. The attorney in Harris-Lindsey owed no fiduciary

duty to the estate because she merely represented a client who was an estate’s

fiduciary. See id. at 617. By contrast, respondent owed a fiduciary duty to the

estate as its personal representative. 5 Notably, our misappropriation case law does

not specify whether a joint signatory’s fiduciary duty to an estate establishes that

the joint signatory is “entrusted” with the estate’s funds. That there is no clear

answer to this question further demonstrates the litigation risks surrounding

respondent’s joint-signatory status.

                                       iii.

      Finally, our case law leaves unsettled whether court-approved disbursements

such as respondent’s can be “unauthorized” under our misappropriation

precedents. “‘[U]nauthorized use’ of funds can be established by proving either

that the client did not consent to the attorney’s use of the funds, or, regardless of

whether there is client consent, that the funds or assets were accessed without

required advance approval by a court.” Id. at 624. Using more money than a court

approves also constitutes unauthorized use. See In re Pye, 57 A.3d 960, 969-70

      5
         See In re Estate of Green, 912 A.2d 1198, 1209 (D.C. 2006) (“In the
District of Columbia, ‘[a] personal representative owes a fiduciary duty to the
estate and its beneficiaries.’” (alteration in original) (quoting In re Estate of Hines,
715 A.2d 116, 119 (D.C. 1998))).
                                         16

(D.C. 2012) (per curiam) (adopting appended Board report). But we have never

held that court-approved disbursements that cause an entrusted account to dip

below the amount owed to clients and third parties are “unauthorized.” 6 Even the

Board recognizes that “[t]his appears to be a question of first impression.” This

unanswered legal question generated additional litigation risks given that the

probate court approved respondent’s disbursements that prompted this case. 7

                                        ***

      In conclusion, litigation risks made it uncertain whether a misappropriation

charge against respondent could be proven in a contested case by clear and

convincing evidence. Because of this uncertainty, we will not reject respondent’s

negotiated discipline for not stipulating a charge of misappropriation.

      6
        Contrary to the Board’s assertion, In re Krame does not help answer this
question. Krame does not involve a court approving a payment that exceeded the
amount of funds in an account or the amount due to an attorney. 284 A.3d at
765-66. Rather, Mr. Krame paid himself twice for the same work—first when he
submitted his fee petition to the probate court and then again when the court
approved that petition. Id. Thus, the probate court in Krame did not approve the
double payment; it approved one payment that the attorney paid himself twice. Id.
Therefore, in Krame, the probate court did not approve the payment that
constituted misappropriation, whereas here the probate court did approve the
payment that, per the Board, constituted misappropriation.
      7
         A further wrinkle in this case compounds the uncertainty. The probate
court approved respondent’s disbursements based on his mistaken representation
that the account had enough funds to cover the disbursements. Thus, even if court
approval of a payment generally precludes it from being “unauthorized,” another
question remains of whether the court can “authorize” a payment premised on
mistaken information.
                                          17

              B. The Sanction is Justified and Not Unduly Lenient

      Having accepted the negotiated discipline’s decision not to stipulate a

misappropriation charge, we agree that the proposed sanction for respondent’s

record-keeping violation is “justified and not unduly lenient.” Mensah, 262 A.3d

at 1102. Respondent’s sanction—a 30-day suspension with proof of fitness for

reinstatement, stayed in favor of one year of probation with conditions—is

“consistent with the discipline imposed in comparable cases.” In re Robbins, 192

A.3d 558, 567 (D.C. 2018) (per curiam); see, e.g., In re Ukwu, 712 A.2d 502, 503

(D.C. 1998) (per curiam) (30-day suspension, suspended in favor of probation with

conditions); In re Toppelberg, 906 A.2d 881, 882 (D.C. 2006) (per curiam) (60-day

suspension, 30 days stayed in favor of training). Accordingly, it is

      ORDERED that respondent George A. Teitelbaum is hereby suspended from

the practice of law in the District of Columbia for 30 days, stayed in favor of one

year of unsupervised probation, with the following conditions:

      (i)     that Respondent not be the subject of a disciplinary complaint
              that results in a finding that he violated the ethics rules of any
              jurisdiction in which he is licensed to practice during the
              probationary period;
      (ii)    that Respondent will notify ODC promptly of any disciplinary
              complaint filed against him and its disposition;
      (iii)   that Respondent will consult with the D.C. Bar’s Practice
              Management Advisory Service to conduct a review of his
              practices around the handling of entrusted funds, and waive
              confidentiality regarding all aspects of the review and any
              follow-up, including measurement of the success of corrective
              measures taken;
                                 18

(iv)   that Respondent will submit to ODC the results of his
       successful completion of corrective measures at least 90 days
       before his probation expires, including descriptions of steps
       implemented and training materials used; and
(v)    that Respondent need not show fitness, provided that he
       successfully completes probation.

                                                               So ordered.