IOWA SUPREME COURT ATTORNEY DISCIPLINARY BOARD, Complainant, v. Luke D. GUTHRIE, Respondent.
No. 17-0879
Supreme Court of Iowa.
Filed September 15, 2017
901 N.W.2d 493
David L. Brown and Tyler R. Smith of Hansen, McClintock & Riley, Des Moines, for respondent.
ZAGER, Justice.
The Iowa Supreme Court Attorney Disciplinary Board (Board) filed a complaint against an attorney alleging multiple violations of our ethical rules including the misappropriation of funds in his representation of three clients. The Board also alleged the attorney violated ethical rules arising from his conviction for domestic abuse assault. The Iowa Supreme Court Grievance Commission (commission) found eight violations of our ethical rules and recommended a three-month suspension. For the reasons outlined below, we revoke the attorney‘s license to practice lаw in the state of Iowa.
I. Background Facts and Proceedings.
Attorney Luke Guthrie has been licensed to practice law in the state of Iowa since 2006. At the time of the conduct giving rise to this disciplinary action, Guthrie was practicing law at Roberts, Stevens, Prendergast, and Guthrie, PLLC, in Waterloo, Iowa. On November 11, 2015, Guthrie was arrested for domestic abuse assault, first offense, in Grundy County, Iowa. On November 12, Guthrie informed his law partners that he was self-admitting himself into a substance-abuse treatment program and took a leave of absence from the firm. After becoming aware of other potential ethical violations, the firm terminated Guthrie‘s partnership on November 24. As part of the termination, the firm informed Guthrie he would need to self-report his рotential ethical violations or the firm would do so. Guthrie self-reported the potential ethical misconduct to the Board on December 7. The ethical misconduct arose out of his handling of billings and trust account issues in three separate client matters, in addition to Guthrie‘s arrest for domestic abuse assault.
A. Vogel Matter. Guthrie represented Brian Vogel in a modification action which was finalized by decree on July 22, 2015. A notice of appeal was filed by the opposing party on August 21. On September 25, Guthrie and Vogel signed a fee contract and Vogel paid a retainer of $4965.50, which was deposited into the firm‘s trust account. On October 16, the appellant voluntarily dismissed the appeal. This voluntаry dismissal of appeal was electronically received by Guthrie and his office at 10:35 a.m. that same date. Guthrie was notified by staff of the dismissal, but directed staff not to notify Vogel of the dismissal.
On the same day as the voluntary dismissal, Guthrie billed Vogel for 4.1 hours of work amounting to $717.50. Guthrie claimed that this time was for work on the proof brief and designation. On October 22, Guthrie billed Vogel for two hours of time for work on the final brief/reply brief in the amount of $350. On October 23, Guthrie billed Vogel for two hours of work on the final proof brief in the amount of $350. On October 26, Guthrie billed Vogel for two hours of time for receipt and review of appellant‘s brief in the amount of $350. Finally, on October 28, Guthrie billed Vogel for 1.8 hours of work on his brief in the amount of $315. There was also an additional charge for fees of $190 after the voluntary dismissal. Therefore, following
A staff member prepared a preliminary bill for review by Guthrie. At that time, she questioned what would happen if the client requested copies of Guthrie‘s work product he had billed for. Guthrie told the staff person that he doubted Vogel would ever ask for copies of the work product he billed him for, but if he did, he would have to figure something out. Guthrie had performed no work on the proof brief, designation of appendix, or reply brief for which he billed Vogel.
On November 6, Guthrie directed staff at the firm to transfеr $3797.50 from Vogel‘s trust subaccount to the firm‘s general account. That same day, Guthrie withdrew $600 as a check for fees in the Vogel case. Vogel was not advised of the dismissal of the appeal until November 15, nine days after the unearned fees were taken and three days after Guthrie took his leave of absence from the firm. The firm refunded Vogel аll funds for the unearned fees.
B. Dizdarevic Matter. Guthrie also represented Muhamed Dizdarevic in a child custody case. On November 6, 2015, Guthrie billed Dizdarevic $262.50 for a 1.5 hour telephone conference with opposing counsel. Guthrie admitted no telephone conference occurred, which was also confirmed by opposing counsel. On the same day, Guthrie directed staff at the firm to transfer $332.50 from Dizdarevic‘s trust subaccount to the firm‘s general account. He thereafter withdrew $600 as a check for fees in the Dizdarevic case. The firm reimbursed Dizdarevic for the unearned fees.
C. Petrick Matter. Guthrie represented Christina Petrick in a family law case in 2015. On November 3, 2015, Guthrie billed Petrick for 1.5 hours for discovery review and a telеphone conference totaling $262.50. On November 4, Guthrie billed Petrick for two hours of work in the amount of $350 for the receipt and review of a client file allegedly received from her previous attorney. On November 6, Guthrie directed staff at the firm to transfer $743.75 from Petrick‘s trust subaccount to the firm‘s general account. Guthrie then withdrew $600 as a check fоr fees. In reviewing this billing, another partner determined that Guthrie could not have received and reviewed the other attorney‘s file as she herself received the file on November 12 after Guthrie had left the firm. As the file could not yet have been received by Guthrie, he did not receive or review Petrick‘s client file on November 4 as billed. Later on, аnother attorney at the law firm reviewed the file and determined the firm would be unable to represent Petrick due to a conflict of interest. The firm refunded Petrick the entire retainer she had paid in trust in the amount of $2500. This included the fees that Guthrie had billed.
D. Domestic Assault. On November 11, 2015, Guthrie was arrested for domestic abuse assault for assaulting his girlfriend. On May 9, 2016, Guthrie pled guilty to domestic abuse assault in violation of
E. Proceedings. On November 10, 2016, the Board filed its complaint against Guthrie. It charged him with two counts: Count I alleged Guthrie violated six ethical rules in his representation of Vogel, Dizdarevic, and Petrick.1 It alleged he misappropriat
The commission conducted an evidentiary hearing on April 12, 2017. Guthrie submitted a stipulation оf facts and rule violations at the time of the hearing. The stipulation was not timely submitted pursuant to
The commission found Guthrie committed eight violations of the
II. Standard of Review.
We review attorney disciplinary cases de novo. Iowa Supreme Ct. Att‘y Disciplinary Bd. v. Willey, 889 N.W.2d 647, 653 (Iowa 2017). “The Board must prove attorney misconduct by a convincing preponderance of the evidence, a burden greater than a preponderance of the evidence but less than proof beyond a reasonable doubt.” Iowa Supreme Ct. Att‘y Disciplinary Bd. v. Stoller, 879 N.W.2d 199, 207 (Iowa 2016) (quoting Iowa Supreme Ct. Att‘y Disciplinary Bd. v. Cross, 861 N.W.2d 211, 217 (Iowa 2015)). We give the commission‘s findings and recommendations respectful consideration, but we are not bound by them. Id. If we find the Board proved attorney misconduct, it is within our discretion to impose a sanction that is lesser or greater than that recommended by the commission: Willey, 889 N.W.2d at 653.
While stipulations of fact are binding on the parties in a disciplinary proceeding, Iowa Supreme Ct. Att‘y Disciplinary Bd. v. Pederson, 887 N.W.2d 387, 391 (Iowa 2016), “[a]n attorney‘s stipulation as to a violation is not binding on us.” Willey, 889 N.W.2d at 653 (alteration in original) (quoting Iowa Supreme Ct. Att‘y Disciplinary Bd. v. Kingery, 871 N.W.2d 109, 117 (Iowa 2015)). “Even if an attorney‘s stipulаtion concedes a rule violation, we will only find that a violation occurred if the facts are sufficient to support the stipulated violation.” Id.
III. Analysis.
A. Rule Violations. Count I of the complaint alleges Guthrie violated a number of ethical rules with regard to client trust accounts. However, at the core, the Board alleged, and the commission found, that Guthrie misaрpropriated client funds. Because of the severity of the allegation, we first consider the violations alleging Guthrie misappropriated client funds.
[m]isappropriates property which the person has in trust, or property of another which the person has in the person‘s possession or control, whether such possession or control is lawful or unlawful, by using or disposing of it in a manner which is inconsistent with or a denial of the trust or of the owner‘s rights in such property, or conceals found property, or appropriates such property to the person‘s own use, when the owner of such property is known to the person.
Iowa Supreme Ct. Att‘y Disciplinary Bd. v. Thomas, 844 N.W.2d 111, 116 (Iowa 2014) (quoting
Additionally, we must also find that the attorney acted with “some level of scienter” when there has been an alleged misappropriation of client funds. Id. at 403 (quoting Iowa Supreme Ct. Att‘y Disciplinary Bd. v. Haskovec, 869 N.W.2d 554, 560 (Iowa 2015)). Scienter requires that the attorney acted knowingly, intentionally, or with the aim to mislead. See, e.g., Iowa Supreme Ct. Att‘y Disciplinary Bd. v. Ricklefs, 844 N.W.2d 689, 698-99 (Iowa 2014).
While it may be debatable whether Guthrie misappropriated client funds involving Dizdarevic and Petrick, it is clear that Guthrie misapprоpriated client funds in the Vogel case. In Vogel‘s case, Guthrie was advised on October 16, 2015, that the appeal had been dismissed. At that time, Guthrie knew there was no remaining work to be performed on the appeal. However, Guthrie continued to bill Vogel for unperformed work for weeks thereafter.
But Guthrie not only continued to bill Vogel for unperformed work for weeks following the voluntary dismissal of the appeal, he also directed the transfer of client funds from Vogel‘s trust subaccount to the firm‘s general account. Guthrie later personally withdrew client funds for unearned fees. Additionally, Guthrie acted knowingly when withdrawing the client fees. Guthrie admits that he authorized the transfer of the client funds to “maintain the illusion that [he] was competent and that [his] numbers looked normal to [his] partners for that month.” And clearly, Guthrie knew that he had not performed the work or earned the fees.
There is also а clear acknowledgement by Guthrie of the misappropriation and conversion of client funds contained in the stipulation of facts and rule violations he signed. The stipulation contains the following paragraphs:
21. In all three instances described above, Respondent converted funds from Mr. Vogel, Mr. Dizdarevic, and Ms. Petrick‘s retainers being held in the law firm‘s trust accounts.
22. Respondent, by authorizing and directing the transfer of the above three clients’ funds from the trust account into the firm‘s general account, and upon taking a draw check in the wake of that directive, did, in fact, receive client funds.
23. Respondent misappropriated or converted for personal use the funds referenсed ... above without a colorable future claim thereto.
We find by clear and convincing evidence that Guthrie knowingly misappropriated and converted client funds in the Vogel case in violation of
B. Sanctions. We apply a range of sanctions for a violation of
Our professional standards regarding the protection of client funds “are well known and ... long-standing.” Iowa Supreme Ct. Att‘y Disciplinary Bd. v. Carter, 847 N.W.2d 228, 232 (Iowa 2014) (quoting Iowa Supreme Ct. Bd. of Prof‘l Ethics & Conduct v. Anderson, 687 N.W.2d 587, 590 (Iowa 2004)). Our sanсtions in cases involving client funds hinges upon whether the attorney had a colorable future claim to the funds. E.g., id.
If the attorney does have a colorable future claim to the funds converted, we will not revoke the attorney‘s license. E.g., Thomas, 844 N.W.2d at 117. In those cases, the attorney‘s violation rests not upon the misappropriation of client funds, but upon the fаilure to follow our rules with regard to the safekeeping of a client‘s funds. Carter, 847 N.W.2d at 232.
“There is no place in our profession for attorneys who convert funds entrusted to them.” Thomas, 844 N.W.2d at 117 (quoting Ottesen, 525 N.W.2d at 866). Additionally, the amount of money converted does not lessen the sanction imposed. Thomas, 844 N.W.2d at 117; Anderson, 687 N.W.2d at 590. Although in this case the firm later returned all the unearned fees, and therefore the clients did not suffer a financial harm, “restitution оf client funds does not preclude us from revoking an attorney‘s license as a sanction.” Thomas, 844 N.W.2d at 118; see also Anderson, 687 N.W.2d at 590 (revoking attorney‘s license for withdrawing funds from an escrow account for his personal use, even though the attorney later replaced the funds).
Based upon our de novo review of the record, and the stipulated facts, we find Guthrie did not have a cоlorable future claim to the funds he withdrew in the Vogel matter, thus leading us to hold that he misappropriated client funds. In the stipulated facts, Guthrie admits that he did not have a colorable future claim to the funds and that this resulted in the misappropriation of client funds. Guthrie presented no evidence to the contrary. This finding is critical to the outcome of this proceeding and makes it unnecessary for us to discuss the other rule violations in detail. Likewise, we need not consider mitigating and aggravating factors that may be present here.
However, we do find it necessary to make note of several facts. First, the conduct giving rise to the ethical violations occurred over a period of аpproximately one month during a time when Guthrie‘s substance abuse reached its peak. Second, since the violations, Guthrie took immediate steps to address his substance-abuse issues. Guthrie sought treatment and has successfully maintained his sobriety. Finally, there have been no further violations of our ethical rules since that time. Guthrie should be commended for addressing his substance-abuse issues and remaining sober. However, due to Guthrie‘s misappropriation of client funds, we find that revocation is the appropriate sanction.
IV. Conclusion.
The license of Luke D. Guthrie to practice law in the state of Iowa is hereby
LICENSE REVOKED.