Sunday, June 28, 2015

Trust Issues

In re PRB Docket No. 2014-133, 2015 VT 63

By Andrew Delaney

When the SCOV likes something the Professional Responsibility Board does, it’ll publish it in the Vermont Reports without messin’ with it. That's what’s going on in this case. I’d imagine it’s a cinch to find a clerk to draft these suckers—but of course I’m assuming they’re lazy like me.

This case stems from a stipulation that respondent and disciplinary counsel filed with the Professional Responsibility Board’s hearing panel—admitting that respondent failed to maintain adequate trust account records. An alleged violation for keeping approximately $150 of his own money in his trust account was dismissed by the hearing panel, and a charge that he kept funds held in a fiduciary capacity in his trust account was dismissed by disciplinary counsel.

Visiting SCOV Law professor Y.T. Sam returns—from a sabbatical “huntin’ varmints”— to give us the play-by-play. “Now see here, when the SCOV sees a good-lookin’ ‘pinion, it’ll brand it like a baby cow. The SCOV got out its brandin’ iron and stamped this sucker.”

Our protagonist had been licensed about seven years when he was selected for disciplinary counsel’s super-fun-totally-fantastic-and-awesome-surprise-audit time. Professor Sam explains: “It’s like being covered in honey and rolling around on a fire-ant hill, figuratively speakin’.” A CPA did an audit for compliance with the Vermont Rules of Professional Conduct—you know, the rules that govern lawyers. Let’s just let that sink in for a moment.

At any rate, the CPA found that respondent: (1) failed to maintain complete records of trust account funds; (2) left a little over $150 in earned fees in his trust account to pay bank service fees; (3) didn’t maintain “a record for each client or person for whom property was held showing all receipts and disbursements and running account balances”; (4) didn’t reconcile his trust account with his monthly bank statement; and (5) “deposited funds related to an estate into his IOLTA account rather than a separate fiduciary account.” There was also a potential problem with notice to clients when he received funds in which clients had an interest, but investigation revealed that he’d been in regular contact and clients were aware of deposits.

Respondent did a number of things to fix the problems, including: installing new accounting software; getting help from an experienced attorney; using digital services with his bank; and working with disciplinary counsel to better understand the rules. Respondent has no prior disciplinary history, had no improper or selfish motive, no client funds were misused or in jeopardy and nobody was injured by respondent’s conduct. Sam explains, “He screwed some stuff up, but not ‘cause he’s a bad fella. And he’s doin’ his best to make it right. They ain’t gonna toss the book at ‘im.”

The rules require, among other things, trust account records for each client “showing all receipts and disbursements and a running account balance.” Our protagonist failed to do that and didn’t reconcile his accounts. The hearing panel finds a violation on that front. “Ain’t no surprise there,” says Sam, “Gotta keep them records straight.”

The rules also require lawyers to keep their own funds separate from clients’ funds. There’s an exception that allows a lawyer to deposit funds in the trust account for the sole purpose of paying service charges or fees on the account, but only in an amount necessary to pay those fees. As previously noted, our protagonist had about a hundred-fifty bucks of his own money in his trust account. This, the hearing panel reasons, is not enough to establish a per se violation because the rule doesn’t really give any indication as to what’s an acceptable amount. While the panel acknowledges a recent decision concluding that $1000 was too much, it’s not ready to say one-fifty is unreasonable per se. Sam says, “That’s kinda a politician’s answer; ‘Might be, but might not be—I did not have “sexual relations” with that woman.’ ” [Editor’s Note: Sam’s been nipping at a flask for a little while now and may be drunk.] 

Another rule requires funds be put in a fiduciary account when they’re held in a fiduciary relationship that arises during the attorney-client relationship. Because the stipulation wasn’t entirely clear as to the relationship between the estate funds and our protagonist, the hearing panel ordered the parties to provide more information. Then disciplinary counsel said, “Oops, guess we don’t have the facts for that one.” The hearing panel would’ve liked to have the facts, however, because one of the purposes of professional responsibility decisions is to educate the bar. “They, hic, wanted to do some professin’ on professionalism,” explains Professor Sam.

The parties recommended admonition by disciplinary counsel and probation for a year. The panel agrees, explaining this is consistent with the ABA standards. Our protagonist was negligent and there was no actual injury (and little potential for injury). In addition, respondent has a number of mitigating factors going for him—no disciplinary history, no dishonest or selfish motive, a timely and good faith effort to fix things, cooperation with the disciplinary proceedings, and a physical disability. There aren’t any aggravating factors.

The panel places our protagonist on probation for a year under terms that include oversight of his trust accounts by an experienced attorney, monthly meetings with his monitor, reports to disciplinary counsel if there are concerns, and appropriate releases.

“Well, shoot,” says Sam. “The only reason I done gone to law school was I couldn’t math-magician mah way out a wet paper bag. Kinda says somethin’ when you need an accountant to tell a lawyer whether the lawyer complied with the lawyer rules, don’t it? Trust accounts sure are squirrelly. Say . . . you ever had squirrel stew?”

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