Tuesday, April 14, 2015

Sanction Starting-Points

In re PRB Docket No. 2012-1552015 VT 57

By Elizabeth Kruska

And we’re back with another client-trust-accounting issue from the Professional Responsibility Board. The facts here are pretty simple. Attorney has been in practice in one form or another for about 30 years. He set up an interest on lawyers trust account (IOLTA) for client funds, and created a separate subaccount within that account for some personal funds. He had a bookkeeper helping him with his books.

Attorney received a random audit request, which attorneys get from time to time. It’s like drawing a Chance card in Monopoly, except instead of passing Go and collecting $200, you have to audit your IOLTA account and make sure everything is accounted for, and if it’s not you can get into some trouble. It’s less fun than you’d think.

In any case, Attorney realized that he had been violating a rule of IOLTA accounting by putting personal funds into a subaccount. He hired a CPA and a lawyer, and he ordered all his banking records going back about 15 years in an effort to correct any errors. He overhauled his entire bookkeeping practice. He presented all this information to the PRB’s hearing panel. He went well beyond what was required of him in fixing the problem. He worked with Disciplinary Counsel and they agreed that he was negligent in his actions. The hearing panel took all this into account, along with Attorney’s remorse and the fact that no client was ever harmed by any of the accounting issues, and issued a sanction. The sanction started as a public reprimand, but due to the mitigating factors, was reduced to a private admonition.

SCOV reviewed this. On appeal, Disciplinary Counsel argued that the hearing panel got it wrong; the presumptive sanction should have been a suspension, and then the hearing panel should have weighed in the mitigating factors to reduce it to a public reprimand.

This is going to get confusing very quickly, so I’ll explain. Vermont has adopted the American Bar Association (ABA) standards for attorney discipline. When dealing with handling client property (which money is), there are different levels of possible sanctions: suspension, public reprimand, and private admonition are some possible sanctions. The hearing panel has to figure out where the sanction starting point is (the presumptive sanction) based on the violation alleged. From there, the panel is allowed to consider aggravating or mitigating factors to determine if the presumptive sanction stays the same or if it is increased or decreased.

Here, because Attorney and Disciplinary Counsel agreed that Attorney was negligent in his accounting practices, the presumptive sanction was a public reprimand. But due to his clean disciplinary record, and the other mitigating factors mentioned above, the panel decided to lower the sanction to a private admonition.

SCOV says this was okay. Disciplinary Counsel argued on appeal that the presumptive sanction should have been a suspension, and then the panel should have added in the mitigating factors to reduce it to a public reprimand. Disciplinary Counsel argued that suspension is the starting point where a lawyer knows or should know that what he or she is doing is wrong, when it comes to IOLTA issues.

SCOV was unmoved. Sure, the lawyers all should know the rules. Lawyers’ whole lives are rules. We have books full of them all over our offices (and in our cars, on our bedside tables, and sometimes in our handbags). But by making the standard “should know” for everything completely reads out of the rules any possibility of negligence. If that was the standard, every sanction would start with the presumptive sanction of suspension. SCOV isn’t so sure that’s the right way to go. SCOV considers the fact that the parties agreed Attorney was negligent. SCOV was willing to review that, and does so only for clear error, because that kind of finding is fairly fact-dependent. SCOV finds that the facts support negligence as the attorney’s mental state, and find that accordingly, the correct place for the hearing panel to start, sanction-wise, was with a public reprimand and to mitigate the sanction from there.

Justice Robinson concurred, and was joined by Judge Durkin, who was specially-assigned for this opinion. She agrees with the outcome, but is a little troubled by how they got there.

Commingling funds is almost never allowed. What happened here was an honest mistake and no clients were ever harmed by how Attorney handled his funds.

Justice Robinson is concerned, though, that the majority’s opinion could end up being confusing when trying to figure out what the presumptive sanction for an attorney should be. The ABA suggests different disciplinary measures for different circumstances. If an attorney knows or should know that his or her accounting behavior is improper, the presumptive sanction is a suspension. If an attorney is negligent, then the presumptive sanction is a reprimand. She’s concerned because the majority seems to read the “should know” piece out of the equation.

She feels like a reprimand is appropriate where there are procedures but they weren’t followed. So, here, Attorney had a bookkeeper and some bookkeeping procedures. There were errors, and although ultimately it’s up to Attorney to make sure the errors are fixed, this is the kind of thing that should be classified as negligent. That’s where a reprimand is the right starting point.

But what if a lawyer does something wrong not knowing what he or she is doing is wrong? Justice Robinson looks at a prior case where a lawyer did some accounting wrong and no client was hurt, and in that case the court felt a private admonition was insufficient. In that case, the court agreed that a suspension was the correct starting point and added in mitigating factors to reduce to a public reprimand.

The unintended consequence from this opinion seems to be to reduce the presumptive sanction of suspension to public reprimand, and seems to sort of give credence to the idea that ignorance of the rules could be a defense (you know, everybody just acting like this guy). The concern is that this could end up undermining public confidence in the practice of law and how it is governed.

Nevertheless, Justice Robinson looked at the facts of the case and agreed that the end point was the right decision. She called it a rare “two-step” departure (cue all the children of the 1990s yelling “Two Step!” like we all did at Dave Matthews concerts in college). Since Attorney really went above and beyond here in not only cooperating with the board, but also with changing his practices, the private admonition was the right response.

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