Saturday, May 24, 2008

Dangerous, Not Unconventional

The Kansas Supreme Court imposed a one-year suspension, stayed in favor of three years of probation, in a matter brought to the attention of the Disciplinary Administrator by an insurer when proceeds due from a PIP payment were not forwarded to an insurer as required. The check had been signed without authorization and deposited in the attorney's escrow account. The bar's investigation led to charges and findings of failure to properly operate an escrow account and supervise non-lawyer employees. As to the misconduct, the court held:

  Respondent asserts that her "system of monitoring her trust account . . . has been her practice for years and . . . has worked for her." Yet Respondent admits that her trust account was overdrawn, a result of "checks written based upon an assumption that checks given to Respondent for attorney's fees had been deposited into the account. Although the balance in Respondent's trust account fell below the amount of money that belonged to Farmers, that occurred only because Respondent did not know the check had been deposited."

  The first part of Respondent's statement quoted above is an admission of a breach of her duty to properly hold and safeguard property held for clients and a third party. The second part of Respondent's statement makes no sense. If Respondent did not know a check had been deposited, that should have motivated her to make and/or sanction fewer and/or smaller withdrawals from her trust account rather than enough to overdraw it several times.

As to sanction:

  With the exception of dishonesty or selfishness, we adopt the panel's findings on aggravating factors present in this case. In our view, Respondent knew or should have known that she was handling her trust account improperly, imperiling client funds and harming Farmers through delay. Her casual approach to trust account transactions and recordkeeping is unacceptable. And it is compounded by her disciplinary history, which includes a previous hearing panel's explicit admonition that she "seek counsel in the appropriate maintenance of an attorney's trust account."

  On mitigating factors, we adopt the panel's findings. We note particularly that Respondent immediately and appropriately reacted to the Disciplinary Administrator's notice of the complaint letter from Farmers. Moreover, we observe that Respondent has practiced law for 26 years, often representing underserved clients in very serious matters, and she has never been disciplined for conduct implicating the quality of her representation.

  In this situation, we regard a 1-year suspension from practice as necessary to impress upon Respondent the seriousness of her disregard for proper trust accounting and recordkeeping. Her approach is not harmlessly unconventional. It is dangerous to the interests of those who put their faith in her, as well as to her license to practice. The fact that Respondent's trust account has not caused more serious difficulties to this point has been a matter of grace, not design.

  This being said, Respondent's many years of service to those who can afford to pay little or nothing in attorney fees, the other mitigating factors, and the benefit of the doubt we are willing to extend on the aggravator of dishonesty or selfishness counsel a certain flexibility. Respondent's service, praised in several letters of support from peers and community members, motivates us to suspend imposition of Respondent's 1-year suspension for a period of 3 years from the date of filing of this decision, provided Respondent complies to this Court's satisfaction with the...conditions [set out in the opinion].

There are two categories of people that regularly deal with lawyers in circumstances that involve the operation of the attorney's escrow account. In this case, the complainant is an insurance company. The other are third party medical providers who enter into assignment agreements with lawyers to guarantee payments out of litigation proceeds. Such complaints have a high likelihood of catching Bar Counsel's attention and, as here, may lead to a full dress review of escrow accounting. It is also worth noting that, unlike many clients, insurance companies and medical providers know how to find and use the services of Bar Counsel. (Mike Frisch)

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