Friday, September 11, 2020

Excessive Fee For Finance Charges

The Iowa Supreme Court has imposed a 30-day suspension of a previously-disciplined attorney.

The prior case

He was previously disciplined in 2010 after he had a sexual relationship with a client and disclosed confidential information about the client during his campaign for county attorney, which resulted in a six-month suspension of his license.

The Grievance Commission had proposed a reprimand. 

The court sustained an excessive fee violation for finance charges

On our review, we agree Marzen violated rule 32:1.5(a). Generally, “[a]n attorney cannot assess finance charges when the attorney collects a fee, unless the client agrees in writing in advance to the finance charges imposed.” Iowa Supreme Ct. Att’y Disciplinary Bd. v. Powell, 726 N.W.2d 397, 404 (Iowa 2007). Even without an agreement, an attorney may apply finance charges on the unpaid balance of an accounts receivable if he complies with the notice requirements contained in Iowa Code section 535.11. See Iowa Supreme Ct. Bd. of Prof’l Ethics & Conduct v. McKittrick, 683 N.W.2d 554, 560 (Iowa 2004). While the parties do not address whether Marzen’s invoices complied with the finance charge provisions of chapter 535, on our de novo review, we conclude they did not.

The court agreed that an alleged false statement that he had mailed a client's tax returns was not proven

Marzen maintained throughout this proceeding that the returns were mailed despite neither taxing authority receiving them. [Spouse] Kari Marzen testified she specifically recalled mailing the tax returns because it was a milestone in a big project, and her testimony is supported by the contemporaneous mailing affidavit. Marzen’s inability to produce a copy of the signed returns may be poor practice, but it does not in itself undermine the evidence showing the returns were mailed.

We are mindful of the standard for imposing attorney discipline. We agree with the commission that the Board failed to prove by a convincing preponderance of the evidence that Marzen knowingly made a false statement of material fact to the Board in violation of rule 8.1(a).

But there was a false statement

It is one thing to file tax returns with as much information as available to avoid late filing penalties; it is another altogether to do so in order to provide clients with “filed returns” to give the bank in support of a loan application. Rule 32:8.4(c) imposes an ethical obligation on an attorney to say no to his clients when complying with the request involves a known and material misrepresentation. Marzen violated rule 32:8.4(c).

Transfering an estate file to another attorney without client consent

We also agree with the commission this conduct violated rule 32:1.4(a)(1)–(3). The comments advise that ordinarily an attorney should obtain client consent before “retain[ing] or contract[ing] with other lawyers outside the lawyer’s own firm” to provide or assist in providing legal services on a client’s matter. Iowa R. Prof’l Conduct 32:1.1 cmt. [6]. Even more so, transferring a file to another attorney in a separate law firm requires informed consent, and doing so without informed consent violates rule 32:1.4(a)(1).

The file transfer also violated the duty of confidentiality and involved a false statement

Whether Lloyd consented to Marzen transferring the estate mattern to Sutton was material to whether Sutton would accept the representation, particularly given Sutton’s prior experience with the Piersons. Having a client’s consent is not a fact that is easily overlooked. Testimony from Sutton and Lloyd supports the commission’s finding that Marzen told Sutton that Lloyd had already consented to the transfer when in fact he had not; Lloyd was unaware of the transfer until informed by Sutton. Whether or not Lloyd objected to the transfer, or even consented after-the-fact, Marzen’s statement to Sutton was false when he made it. Marzen knowingly made a false statement of material fact in violation of rule 32:1.4(a).

Defending the bar complaint is not an aggravating factor

With respect to whether Marzen accepted responsibility, we recognize that an attorney is entitled to defend his actions in a disciplinary proceeding without fear that doing so will be considered an aggravating factor if he is found to have violated our ethics rules. While we are troubled by Marzen’s misrepresentation to Sutton that Lloyd had provided written consent to transfer the estate file and by Marzen’s willingness to mail known inaccurate tax returns to the IRS, Marzen provided plausible, albeit misguided, explanations for his actions. 

And the complainant's motivation is no mitigator

the commission found the Piersons brought this complaint because they did not want to pay Marzen, which it considered a mitigating factor. Even if the Piersons did bring this complaint to avoid paying their legal fees, a client’s motivation for bringing a complaint is not a mitigating factor.


Based on Marzen’s violations and the aggravating factors in this case, we agree with the Board that Marzen’s
license should be suspended, contrary to the commission’s recommendation of a public reprimand. We are most troubled by Marzen’s willingness to provide knowingly inaccurate tax returns for his clients to give to their bank in support of a loan application. This, coupled with Marzen’s prior disciplinary record, warrants a thirty-day suspension.

(Mike Frisch)

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