Utah State Bar v. Bates, 2017 UT 11

Background

Abraham Bates operated Wasatch Advocates; rapid growth produced disorganized accounting, use of lines of credit, and staffing turnover leading to the firm’s collapse in 2012.
F.A. Apartments paid $28,000 (rents) deposited into Bates’s trust account and a $16,500 retainer (four payments of $16,000 mistakenly deposited into the operating account) for defense of a foreclosure.
Trust account showed shortfalls on three dates (totaling several thousand dollars); operating account temporarily contained $16,000 of client retainer funds that Bates later discovered.
Four weeks after learning the $16,000 was in the operating account, Bates transferred $20,000 from the operating account to payroll (which consumed the $16,000); he later replenished the operating account with line-of-credit draws and paid the $20,000 settlement ten days after the payroll transfer.
OPC charged Bates with multiple Rules violations and sought disbarment based on intentional misappropriation; the district court found violations of rules 1.4(a), 1.15(a), and 1.15(d), but concluded most misconduct was negligent and imposed a six-then-reduced-to-five-month suspension.
On appeal, the Utah Supreme Court affirmed a five-month suspension: it held Bates knowingly commingled client funds (suspension presumptive) but did not knowingly misappropriate funds (so no presumption of disbarment); trust-account shortfalls were negligent (public reprimand presumptive).

Issues

Issue	Plaintiff's Argument (OPC)	Defendant's Argument (Bates)	Held
Whether the operating-account payroll transfer was a knowing misappropriation warranting presumptive disbarment	Bates knowingly used client retainer funds for payroll and thus intentionally misappropriated funds; disbarment presumptive	Bates did not know the $16,000 was used for payroll when he made the transfer; any use was negligent or unwitting	Transfer was not a knowing misappropriation; OPC failed to prove knowledge at time of transfer — negligent use (but Bates knowingly commingled funds)
Whether leaving client funds in operating account after discovery amounted to knowing commingling requiring suspension	OPC argued wrongful failure to safeguard funds supports disbarment or greater sanction	Bates acknowledged leaving funds but denies intent to benefit from them; argued disorganization and inexperience explain conduct	Knowing commingling established; failure to safeguard created potential injury — suspension presumptive and appropriate
Whether trust-account shortfalls (on three dates) were knowing misappropriations	OPC urged the shortfalls were knowing and support disbarment or greater discipline	Bates contended shortfalls resulted from chaotic accounting and were negligent; he lacked contemporaneous awareness	Shortfalls were negligent; OPC did not prove Bates knew at time of withdrawals — presumptive sanction is public reprimand
Proper standard for presumption of disbarment in misappropriation cases	OPC argued broader inference of knowledge/intent from circumstantial evidence suffices	Bates argued knowledge must be contemporaneous with the transfer/withdrawal; absent that, no presumption of disbarment	Court clarified disbarment presumption requires contemporaneous knowledge that client funds are being used in an unauthorized way; knowledge may be inferred from circumstances but must exist at time of misconduct

Key Cases Cited

In re Discipline of Babilis, 951 P.2d 207 (Utah 1997) (intentional misappropriation corrodes public trust and typically warrants disbarment)
In re Discipline of Corey, 274 P.3d 972 (Utah 2012) (knowledge at time of misuse supports inference of intent; extensive use of client funds for firm expenses supports knowing misappropriation)
In re Discipline of Grimes, 297 P.3d 564 (Utah 2012) (balancing public protection with rehabilitation; factual inferences may support findings)
In re Discipline of Lundgren, 355 P.3d 984 (Utah 2015) (disbarment is the harshest sanction; intentional misconduct standard)
In re Discipline of Johnson, 48 P.3d 881 (Utah 2001) (disbarment causes total loss of career; discussion of intent and consequences)
In re Discipline of Ince, 957 P.2d 1233 (Utah 1998) (theft of client funds can satisfy criminal-conduct-based presumption of disbarment)
Utah State Bar v. Jardine, 289 P.3d 516 (Utah 2012) (suspension appropriate for knowing commingling and failures to safeguard client funds)