Court Opinion

ID: 2951026
Source: CourtListenerOpinion
Date Created: 2015-09-16 17:07:19.23149+00
Date Added: 2024-06-11T15:25:10.483661
License: Public Domain

STATE OF MINNESOTA

                                 IN SUPREME COURT

                                       A14-1311

Original Jurisdiction                                                         Per Curiam

In re Petition for Disciplinary Action
against Frank Arend Schulte, a Minnesota                      Filed: September 16, 2015
Attorney, Registration No. 244934                             Office of Appellate Courts

                              ________________________

Martin A. Cole, Director, Siama Y. Chaudhary, Senior Assistant Director, Office of
Lawyers Professional Responsibility, Saint Paul, Minnesota, for petitioner.

Frank Arend Schulte, Saint Paul, Minnesota, pro se.
                             ________________________

                                    SYLLABUS

       An indefinite suspension from the practice of law with no right to petition for

reinstatement for a minimum of 4 months is the appropriate discipline for an attorney

who failed to keep required trust account books and records, paid for non-client-related

expenses from his trust account, failed to cooperate with the disciplinary investigation,

and when several aggravating factors are present.

                                     OPINION

PER CURIAM.

       The Director of the Office of Lawyers Professional Responsibility filed a petition

for disciplinary action against respondent Frank Arend Schulte, alleging that Schulte paid

for non-client-related expenses from his trust account, failed to properly maintain trust

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account books and records, and failed to cooperate with the Director’s investigation. We

deemed the allegations in the petition admitted after Schulte did not respond to the

petition. See Rule 13(b), Rules on Lawyers Professional Responsibility (RLPR). The

only issue before us, therefore, is the appropriate discipline to impose. We conclude that

Schulte’s misconduct warrants an indefinite suspension from the practice of law with no

right to petition for reinstatement for a minimum of 4 months.

                                             I.

        Schulte was admitted to the practice of law in Minnesota in 1994. In 2005 he was

placed on private probation for yelling at a client in a courthouse building, disclosing

confidential client information, failing to return client property, and failing to cooperate

with a disciplinary investigation. In 2010 he received an admonition for failing to

diligently pursue a client’s case, properly serve an opposing party, communicate with a

client, and timely provide a client’s file to new counsel. One month later, he received a

separate admonition for failing to communicate with a client, safely hold client property,

and attend court.

        The instant disciplinary petition alleged that Schulte failed to properly maintain

his trust account books and records, paid personal expenses out of his trust account, and

subsequently did not cooperate with the Director’s inquiry into his misconduct, in

violation of Minn. R. Prof. Conduct 1.15(a), 1.15(b), 1.15(c)(3), and 1.15(h), as

interpreted by Appendix 1 thereto, and Minn. R. Prof. Conduct 8.1(b) and Rule 25,

RLPR.     Because Schulte did not answer the disciplinary petition, we deemed the

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allegations admitted. In re De Rycke, 707 N.W.2d 370, 372 (Minn. 2006); Rule 13(b),

RLPR. We summarize the admitted allegations below.

       Trust Account

       Schulte overdrew his trust account in September 2013, and the bank reported the

overdraft to the Director. After an investigation, the Director determined that between

September 2012 and March 2014, Schulte failed to keep the required trust account books

and records, including a check register, client subsidiary ledgers, monthly trial balances,

and monthly trust account reconciliations. Additionally, the Director determined that

between at least August 2013 and January 2014, Schulte improperly paid a monthly

Internet bill that was a personal or business expense out of his trust account. Because

Schulte never provided copies of his complete trust account books and records during the

investigation, the Director was unable to ascertain either the ownership of the funds that

Schulte withdrew from his trust account to pay this Internet bill, or whether Schulte paid

other non-client-related expenses out of his trust account. Thus, the Director was unable

to determine whether Schulte misappropriated client funds by paying his personal

Internet bill with client funds in his trust account.1 At the very least, however, Schulte

failed to withdraw attorney fees from his trust account if he had already earned them.

       Schulte’s conduct with respect to his trust account violated Minn. R. Prof.

Conduct 1.15(a) (generally prohibiting a lawyer from keeping funds belonging to the

1
       See In re Fairbairn, 802 N.W.2d 734, 742 (Minn. 2011) (stating that
misappropriation of client funds occurs when client “funds are not kept in trust and are
used for a purpose other than one specified by the client”).

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lawyer in a trust account), 1.15(b) (requiring a lawyer to withdraw earned fees from the

trust account within a reasonable time after the fees have been earned), 1.15(c)(3)

(requiring a lawyer to “maintain complete records of all funds . . . coming into the

possession of the lawyer”), and 1.15(h), as interpreted by Appendix 1 thereto (requiring a

lawyer to maintain trust account books and records).

       Failure to Cooperate

       When the bank reported the overdraft in Schulte’s trust account, the Director

initiated an overdraft inquiry and requested that Schulte provide a written explanation for

the overdraft with supporting documentation.        Schulte did not respond within the

requested timeframe, and the Director sent a second letter requesting a written response.

Schulte then provided a copy of the check that caused the overdraft and some bank

statements. Because the information that Schulte provided was incomplete, the Director

twice more requested additional information, but Schulte did not respond to these

requests.

       The Director subsequently converted the overdraft inquiry into a formal

disciplinary investigation and sent Schulte a notice of investigation regarding the trust

account overdraft. Schulte did not respond to the notice of investigation or, again, to

multiple follow-up requests. He also did not attend a meeting at the Director’s office.

       Schulte eventually called the Director and admitted that he had not kept the

required trust account books and records, but he agreed to provide the documentation he

did have. Schulte submitted a reconstructed and unannotated checkbook register and

bank statements for the period from August 1, 2013, through January 31, 2014. Shortly

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thereafter, Schulte met with the Director and again stated that he had not been keeping all

of the required trust account books and records. Although Schulte agreed to reconstruct

his trust account books and records within 30 days, he never did so, even after receiving

several follow-up letters from the Director. Lastly, Schulte failed to provide a written

response to the disciplinary charges presented to the panel of the Lawyers Professional

Responsibility Board.

       Schulte’s noncooperation in the investigation violated Minn. R. Prof. Conduct

8.1(b) (prohibiting a lawyer from knowingly failing to respond to a lawful demand for

information in a disciplinary matter) and Rule 25, RLPR (requiring lawyers to cooperate

with disciplinary investigations).

                                            II.

       Because we have deemed the allegations in the petition admitted, see Rule 13(b),

RLPR, the sole question before us is the appropriate discipline for Schulte’s professional

misconduct. See In re Swensen, 743 N.W.2d 243, 247 (Minn. 2007). The Director

contends that Schulte should receive an indefinite suspension from the practice of law for

a minimum of 6 months; Schulte contends a 3-month suspension is appropriate.

       The purpose of disciplinary sanctions is “not to punish the attorney but rather to

protect the public, to protect the judicial system, and to deter future misconduct by the

disciplined attorney as well as by other attorneys.” In re Rebeau, 787 N.W.2d 168, 173

(Minn. 2010). The four factors that guide our imposition of discipline are: “(1) the

nature of the misconduct; (2) the cumulative weight of the disciplinary violations; (3) the

harm to the public; and (4) the harm to the legal profession.” In re Nelson, 733 N.W.2d

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458, 463 (Minn. 2007). Aggravating and mitigating circumstances are also considered.

In re Harrigan, 841 N.W.2d 624, 629 (Minn. 2014). While we look to similar cases for

guidance on the appropriate discipline, we tailor the discipline to the specific facts of

each case. In re Lundeen, 811 N.W.2d 602, 608 (Minn. 2012).

       The nature of Schulte’s misconduct is serious.        Schulte mishandled his trust

account by failing to properly maintain trust account books and records, keeping funds he

earned in his trust account, and using his trust account to pay a monthly Internet bill.

“The maintenance of proper trust account records is vital to the practice of the legal

profession, since it serves to protect the client and avoid even the appearance of

professional impropriety.” In re Beal, 374 N.W.2d 715, 716 (Minn. 1985). We have

suspended attorneys for trust account violations even when there was no evidence they

intended to deceive their clients or that their trust account violations harmed any clients.

See, e.g., In re Tigue, 843 N.W.2d 583, 587 (Minn. 2014) (suspending attorney for trust

account violations and stating that attorney’s unintentional misappropriation of client

funds and failure to maintain trust account books and records was “serious” misconduct);

In re Hoedeman, 620 N.W.2d 714, 717 (Minn. 2001) (indefinitely suspending attorney, in

part, for failing to maintain trust account books and records and stating that “[w]e take

trust account violations seriously and will not hesitate to impose a disciplinary suspension

to protect the public from attorneys who either intentionally or unintentionally fail to

exercise care in handling client funds” (citation omitted)); In re Ganley, 549 N.W.2d 368,

370-71 (Minn. 1996) (suspending an attorney, in part, for trust account violations and

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stating that “every lawyer is . . . charged with the knowledge that he must maintain a

separate [trust] account and adequate records” (citation omitted)).

       Schulte’s failure to cooperate with the disciplinary investigation is also serious

misconduct.    We have “long recognized that it is incumbent upon an attorney to

cooperate with disciplinary authorities in their investigation and resolution of complaints

against him.” In re Cartwright, 282 N.W.2d 548, 551 (Minn. 1979). “[N]oncooperation

with the disciplinary process, by itself, may warrant indefinite suspension and, when it

exists in connection with other misconduct, noncooperation increases the severity of the

disciplinary sanction.” Nelson, 733 N.W.2d at 464. Here, Schulte’s failure to cooperate

was substantial. He failed to respond to the Director’s original inquiry, the notice of

investigation, and many subsequent requests for information.          He did not attend a

meeting during the investigation and did not answer the disciplinary charges.          The

cooperation that Schulte did provide was minimal, as he only attended one meeting with

the Director and eventually provided some documents related to his trust account.

       We next consider the cumulative weight of Schulte’s disciplinary violations.

“[T]he cumulative weight and severity of multiple disciplinary rule violations may

compel severe discipline even when a single act standing alone would not have warranted

such discipline.” In re Oberhauser, 679 N.W.2d 153, 160 (Minn. 2004). We have

distinguished “a brief lapse in judgment or a single, isolated incident” of misconduct

from “multiple instances of mis[conduct] occurring over a substantial amount of time.”

In re Fairbairn, 802 NW.2d 734, 743 (Minn. 2011) (citation omitted). Schulte’s failure

to maintain proper trust account books and records spanned from at least September 2012

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to March 2014. In addition, his failure to cooperate with the investigation constituted

repeated misconduct over the course of many months. The record therefore establishes

that Schulte’s conduct did not constitute a single, isolated incident of misconduct.

       We also consider the harm to the public and the legal profession. As far as we

know, Schulte’s actions did not appear to harm clients. The lack of evidence of client

harm, however, is partly due to Schulte’s failure to cooperate, which prevented the

Director from determining if Schulte used client funds held in his trust account to pay

personal expenses. As a result, Schulte’s failure to cooperate is particularly harmful

because it prevented the Director from determining whether client funds were at risk

from Schulte’s misuse of his trust account. In addition, Schulte’s “failure to cooperate

with the disciplinary investigation . . . harmed the legal profession by undermining the

integrity of the attorney discipline system.” In re Ulanowski, 834 N.W.2d 697, 703

(Minn. 2013). Likewise, his misuse of his trust account harmed the legal profession

because it called into question the ability of attorneys to safeguard their clients’ money.

See In re Hartke, 529 N.W.2d 678, 680 (Minn. 1995) (“The maintenance of proper trust

account records is one of the fundamental responsibilities of a practicing attorney because

it is the only method for maintaining the identity of the client’s money.”).

       We also consider aggravating and mitigating circumstances when determining the

appropriate discipline for attorney misconduct. In re Haugen, 543 N.W.2d 372, 375

(Minn. 1996). Schulte’s disciplinary history, which consists of three prior admonitions,

is an aggravating factor. In re Coleman, 793 N.W.2d 296, 308 (Minn. 2011) (explaining

that an attorney’s prior disciplinary history is an aggravating factor “because, after being

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disciplined, an attorney is expected to show a renewed commitment to ethical behavior”

(citation omitted)). Moreover, the fact that Schulte has been previously disciplined for

failing to cooperate with the Director is another aggravating factor. In re Brooks, 696

N.W.2d 84, 88 (Minn. 2005) (“We generally impose more severe sanctions when the

current misconduct is similar to misconduct for which the attorney has already been

disciplined.”). Schulte has been licensed to practice law for more than 20 years, and his

substantial experience practicing law is also an aggravating factor. Rebeau, 787 N.W.2d

at 176.

          Schulte urges us to consider his remorse and depression as mitigating factors.

Because he failed to answer the disciplinary petition, there are no factual findings in the

record regarding any potential mitigation. In re Ladd, 463 N.W.2d 281, 283 (Minn.

1990) (stating that we are “not an original factfinding body in attorney discipline matters”

and an attorney’s “failure to answer the petition with any mitigating circumstances bars

our consideration of such issues”). Thus, we will not consider any mitigating factors in

imposing discipline.

          Finally, we look to similar cases for guidance. We have suspended attorneys and

required them to petition for reinstatement when they committed trust account violations

and failed to cooperate with the Director. In re Hansen, ___ N.W.2d ___, 2015 WL

4637375, at *1 (Minn. Aug. 5, 2015) (indefinitely suspending attorney for a minimum of

90 days and requiring him to petition for reinstatement for improperly communicating

with an unrepresented person, failing to maintain trust account books and records and

overdrawing his trust account, and failing to cooperate with a disciplinary investigation);

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In re Schutz, 846 N.W.2d 82, 82 (Minn. 2014) (order) (indefinitely suspending attorney

for a minimum of 90 days and requiring him to petition for reinstatement for failing to

maintain trust account books and records, failing to cooperate with a disciplinary

investigation, and failing to comply with the referee’s orders during the disciplinary

proceeding); In re Edinger, 700 N.W.2d 462, 464 (Minn. 2005) (indefinitely suspending

attorney with no right to petition for reinstatement for 3 months for failing to cooperate

with a disciplinary investigation, making false statements during a disciplinary

investigation, paying personal expenses out of a trust account, and failing to maintain

trust account books and records); see also In re Flatten, 611 N.W.2d 340, 341, 343

(Minn. 2000) (indefinitely suspending attorney and requiring him to petition for

reinstatement for failing to cooperate with disciplinary investigation of a trust account

overdraft when the attorney had been previously disciplined for failure to cooperate).

       In Hansen, Schutz, and Edinger, we allowed the attorneys to petition for

reinstatement after 90 days. Those cases, however, are distinguishable from the instant

case because the attorneys had less substantial disciplinary histories than Schulte, and

two of those attorneys had no prior discipline for failing to cooperate with the Director.

See Hansen, ___ N.W.2d at ___, 2015 WL 4637375, at *1 (stating attorney had a prior

private probation based, in part, on failing to cooperate with the Director’s investigation);

Edinger, 700 N.W.2d at 467 (stating the attorney had no prior discipline). 2 Additionally,

2
       Our decision in Schutz does not identify Schutz’s disciplinary history. See 846
N.W.2d at 82. A review of the petition for disciplinary action in that case, however,
reveals Schutz had one prior admonition for lack of competence and diligence.

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Schulte’s failure to cooperate was particularly serious as it prevented the Director from

determining if client funds were at risk. As a result, suspension for more than 90 days

before Schulte may file a petition for reinstatement is warranted.3

       Based upon the specific facts and circumstances of this case, we conclude that the

appropriate sanction for Schulte’s misconduct is an indefinite suspension with no right to

petition for reinstatement for a minimum of 4 months.

       Accordingly, we order that:

       1.     Respondent Frank Arend Schulte is indefinitely suspended from the

practice of law, effective 14 days from the date of the filing of this opinion, with no right

to petition for reinstatement for 4 months from the effective date of the suspension.

       2.     Respondent shall comply with the requirements of Rule 26, RLPR

(requiring notice of suspension to clients, opposing counsel, and tribunals), and shall pay

$900 in costs pursuant to Rule 24, RLPR.

       3.     Respondent may petition for reinstatement pursuant to Rule 18(a)-(d),

RLPR. Reinstatement is conditioned on successful completion of the professional

3
        In support of his position that the appropriate discipline is an indefinite suspension
with no right to petition for reinstatement for 6 months, the Director cites In re Grzybek,
552 N.W.2d 215, 217 (Minn. 1996), in which we indefinitely suspended an attorney with
no right to petition for reinstatement for 6 months. The attorney’s misconduct in Grzybek
is different from Schulte’s misconduct. See id. at 215 (disciplining Grzybek for failing to
establish the basis for his fee, to communicate with clients, to promptly return clients’
property, and to cooperate with three disciplinary investigations). The Director also cites
In re Anderson, 712 N.W.2d 180, 180 (Minn. 2006) (order), in which we indefinitely
suspended an attorney with no right to petition for reinstatement for 6 months for failing
to communicate with clients and cooperate with the Director. Anderson, however,
admitted to failing to cooperate with the Director’s investigation of six separate
complaints.

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responsibility portion of the state bar examination and satisfaction of continuing legal

education requirements, pursuant to Rule 18(e), RLPR.

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