Misappropriation Or Simple Conversion?

A suspension of 30 days has been imposed by the Oklahoma Supreme Court.

The representation involved a wrongful death claim

Prior to Mother's death, she underwent ankle surgery wherein she received wound care by home health care provider Amedisys, Oklahoma LLC ("Amedisys") and her daughter, Teresa. There was speculation that Amedisys negligently performed Mother's home health care which resulted in her death. Teresa sought attorneys to file medical negligence and wrongful death claims to no avail. Ultimately, Mother's other daughter, Pamela, was referred by attorney, Lynn Williams ("Williams"), to Respondent to pursue the wrongful death claim.

The claim was settled in mediation.

Respondent did not deposit the settlement proceeds with the Estate until May 2020--nearly one year later. Through June 2022, Hilton and Respondent litigated the issue of Respondent's attorney fees. The probate court ultimately awarded Respondent $52,968.50 for fees and costs in the wrongful death case and subsequent litigation. The probate court ordered the remaining balance of the settlement proceeds be paid to Hilton as his allowable attorney fees for his representation of the Estate. In the end, the heirs received none of the settlement proceeds from the wrongful death case.

Rejected charges

Rule 1.1 requires that a lawyer provide competent representation to a client Rule 1.3 requires that each lawyer act with reasonable diligence and promptness in representing a client. Complainant alleges Respondent failed to render competent representation of Pamela because Respondent admitted to never having handled a wrongful death case. The fact that Respondent had never handled a case of this type is insufficient to support a claim of lack of competence. Our standard for practicing law does not require expertise, in fact "[a] lawyer need not necessarily have . . . prior experience to handle legal problems of a type with which the lawyer is unfamiliar." Rule 1.1, ORPC, cmt. [2]. If Complainant's argument carried the day, all newly admitted attorneys would effectively lack competence to handle their first case. Further, testimony demonstrates that Respondent had handled several personal injury cases which encompass many similarities to wrongful death cases. The record fails to establish that Respondent lacked competence to handle the wrongful death case. Moreover, it is hard to reconcile a claim for lack of competence when Respondent obtained a presumably successful settlement for his client without objection from the heirs.

Complainant further alleges that Respondent lacked competence because he did not review the probate file. The record shows Pamela had the probate court's permission to hire counsel to pursue the wrongful death claim and Respondent properly initiated the wrongful death case on behalf of his client. Nothing in the record demonstrates Respondent would have been required to review the probate file, or that such a review would have affected Respondent's ability to pursue and settle the wrongful death case. Moreover, Complainant alleges Respondent violated Rule 1.3 because he delayed payment of the settlement proceeds. But based upon testimony, Respondent delayed payment of the settlement proceeds by the instruction of his client and Teresa's objection to Respondent's employment contract. Thus, we find Complainant has failed to establish by clear and convincing evidence that Respondent violated Rules 1.1 and 1.3, ORPC.

Rule 3.3., ORPC, concerns candor to the tribunal. Complainant asserts that several of Respondent's filings with the court included false statements. For example, in Respondent's Response to Motion to Reconsider and/or Clarify Order filed in Osage County on February 25, 2022, Respondent stated that but for Teresa's objection to Respondent's employment in April of 2017, the heirs would have received their money in May or June 2017 instead of 2020. Complainant contends that this statement is false because Respondent did not have sufficient funds in his trust account to pay the heirs during May or June 2017. However, the record shows that there were several days in which Respondent's trust account contained sufficient funds to pay the heirs in May or June 2017. Thus, we do not find Complainant's allegation is sufficient to support a violation of Rule 3.3, ORPC.

Rule 3.4(c) requires that a lawyer shall not knowingly disobey an obligation given by the court. Complainant contends that Respondent knowingly disobeyed the probate court's October 23, 2017, order when he failed to deposit the settlement proceeds with the Osage County Clerk. Instead of depositing the settlement proceeds, Respondent filed a Motion to Vacate, arguing he did not receive notice of the October 23, 2017, hearing. Respondent's decision to file the Motion to Vacate was not unreasonable when Respondent believed his clients' settlement was in jeopardy. Based upon the record, Respondent did not disobey the court's order, he objected to it and ultimately appealed it. As such we find Complainant failed to establish by clear and convincing evidence a violation of Rule 3.4(c), ORPC.

Established violations

Rule 1.5(e) prohibits a lawyer from dividing a fee between lawyers who are not in the same firm unless (1) the division is in proportion to the services performed by each lawyer or each lawyer assumes joint responsibility for the representation; (2) the client agrees to the arrangement and the arrangement is confirmed in writing; and (3) the total fee is reasonable. Based upon testimony, Respondent's client was unaware that Respondent paid Lynn Williams a $10,000.00 referral fee. The evidence demonstrates Pamela did not agree in writing to the referral fee arrangement. Respondent admitted to violating Rule 1.5(e)(2). Thus, we find Respondent violated Rule 1.5(e)(2), ORPC.

Rule 1.15 relates to a lawyer's duties in safekeeping client property. Violations of Rule 1.15 can be sorted into three categories: (1) commingling, (2) simple conversion, and (3) misappropriation. State ex rel. Oklahoma Bar Ass'n v. Combs, 2007 OK 65, ¶ 13, 175 P.3d 340, 346. The categories carry increasing levels of culpability, with misappropriation being the most serious. Id. Commingling occurs when client funds are combined with the lawyer's personal funds. Id. at ¶ 14, 175 P.3d at 346. Simple conversion occurs when an attorney applies a client's money to a purpose other than that for which it came to be entrusted to the lawyer. Id. at ¶ 15, 175 P.3d at 346. Misappropriation occurs when an attorney purposely deprives a client of money through deceit and fraud. Id. at ¶ 16, 175 P.3d at 346.

Respondent admits to a violation of Rule 1.15, ORPC. We accept Respondent's admission and find from clear and convincing evidence that his conduct violated Rule 1.15, ORPC. Various times after Respondent deposited the settlement proceeds into his trust account, and before he paid the settlement proceeds to the heirs, the balance of the settlement proceeds fell below the amount owed to the heirs. Moreover, Respondent admitted he spent trust account funds on other matters at his law practice, such as payroll and business expenses during a challenging period of time. Respondent's admission of wrongdoing and his use of the settlement proceeds for his own business expenses amount to commingling and simple conversion.

Sanction

When imposing discipline, we are mindful of its deterrent effect, as discipline is imposed to set an example for other lawyers and not to serve as punishment. The facts of this case are unique. First, over four years have lapsed between the filing of the grievance and today's opinion, with no explanation reflected in the record for this unreasonable delay. Due to the lapse of time, Respondent has undoubtedly endured hardship and additional expenses during Complainant's investigation into events that occurred almost seven years ago. Moreover, Respondent has made it clear that he has since learned from his mistake and has taken the necessary steps to prevent this conduct from happening again. Second, the record demonstrates Respondent's conduct was due to sloppy negligence, not greedy intent. We are mindful of the severity of mismanagement of client's funds; however, a suspension of six months--as applied to the facts of this case--would serve a punitive result as opposed to a necessary deterrent. Accordingly, we find that our goals are best met by the imposition of a 30-day suspension from the practice of law to begin the date of this opinion.

Justice Combs dissented in part and would find misappropriation

 I concur in the majority's decision to discipline the Respondent, but I dissent from imposition of discipline that amounts to a mere slap on the wrist and from the denial of Complainant's application to assess costs in toto. My dissent concerning the degree of discipline arises from my disagreement with the majority's characterization of Respondent's "use of the settlement proceeds for his own business expenses" as something that "amount[s] to commingling and simple conversion" and that "was the result of a confluence of errors and oversight as opposed to an intent to defraud." Majority Op. ¶¶ 17, 33. This error in weighing Respondent's actions leads to a virtual cascade of errors, such as the majority's reliance upon State ex rel. OBA v. Combs, 2007 OK 65, 175 P.3d 340, as an analogous case involving "commingled and converted funds," see Majority Op. ¶ 31, and their denial of all costs associated with this Rule 6 disciplinary proceeding...

 Complainant proffers State ex rel. OBA v. Mortensen, 2023 OK 32, 527 P.724--one of this Court's more recent cases involving misappropriation--for our consideration. In that case, the attorney was disbarred for misappropriating client funds, failing to diligently represent clients, and failing to keep clients informed. But Complainant is not seeking disbarment of the Respondent; Complainant is only asking for a 6-month suspension. That is a reasonable adjustment that accounts for the differences between this case and Mortensen. I would impose the requested 6-month suspension upon Respondent as discipline.

(Mike Frisch)