IOWA SUPREME COURT ATTORNEY DISCIPLINARY BOARD v. John Edward NETTI, Jr.
No. 10-1081
Supreme Court of Iowa
May 13, 2011
WIGGINS, Justice.
HECHT, J., joins this concurrence in part and dissent in part.
IOWA SUPREME COURT ATTORNEY DISCIPLINARY BOARD, Complainant,
v.
John Edward NETTI, Jr., Respondent.
No. 10-1081.
Supreme Court of Iowa.
May 13, 2011.
John E. Netti, Jr., Dubuque, pro se.
WIGGINS, Justice.
The Iowa Supreme Court Attorney Disciplinary Board brought a complaint against the respondent, John Edward Netti, Jr., alleging multiple violations of the Iowa Rules of Professional Conduct as well as the Iowa Court Rules, the Iowa Rules of Probate Procedure, and the Iowa Code. A division of the Grievance Commission of the Supreme Court of Iowa found the respondent’s conduct violated the rules and recommended we suspend his license to practice law with no possibility of reinstatement for a period of two years. Neither party appealed. Therefore, we are required to review the report of the grievance commission de novo. Iowa Ct. R. 35.10(1). On our de novo review, we find respondent has violated numerous provisions of our rules and Code, which require us to impose sanctions. Accordingly, we
I. Scope of Review.
We review attorney disciplinary proceedings de novo. Iowa Supreme Ct. Att’y Disciplinary Bd. v. Keele, 795 N.W.2d 507, 509 (Iowa 2011). The board must prove an attorney’s ethical misconduct by a convincing preponderance of the evidence. Id. A convincing preponderance of the evidence is more than the preponderance standard required in a typical civil case, but less than proof beyond a reasonable doubt. Iowa Supreme Ct. Att’y Disciplinary Bd. v. Schmidt, 796 N.W.2d 33, 33 (Iowa 2011). Although the commission’s findings and recommendations are not binding on us, we give them respectful consideration. Id. at 33. “Upon proof of misconduct, we may impose a greater or lesser sanction than the sanction recommended by the commission.” Iowa Supreme Ct. Att’y Disciplinary Bd. v. Templeton, 784 N.W.2d 761, 764 (Iowa 2010).
II. Findings of Fact.
In 1994 respondent, John Edward Netti, Jr., received his license to practice law in the State of Kentucky. Sometime in 2002 or 2003, he received a private reprimand with regard to a client-related matter in Kentucky. In 2001 Netti obtained his license to practice law in Iowa. For some period, his Iowa license to practice law was on inactive status. In 2006 his license was placed on active status. On October 17, 2008, we issued an order suspending his license for failure to pay annual fees and/or file the reports as required by our rules. His license remains under suspension to this day.
The board’s complaint alleges Netti engaged in multiple violations of the Iowa Rules of Professional Conduct, the Iowa Court Rules, the Iowa Rules of Probate Procedure, and the Iowa Code relating to his representation of four separate clients. The alleged misconduct primarily concerns trust account violations, misconduct surrounding fee agreements, the taking of fees, failure to satisfy a hospital lien with settlement proceeds, conflict of interest, the unauthorized practice of law, as well as dishonesty, incompetence, and neglect. Netti filed an answer, denying the board’s allegations.
Netti, however, failed to answer the board’s interrogatories, requests for production of documents, and requests for admission. As a result, the commission deemed the board’s requests for admission admitted. See, e.g., Iowa Ct. R. 35.6; Iowa R. Civ.P. 1.517(2)(6); Iowa Supreme Ct. Att’y Disciplinary Bd. v. Moonen, 706 N.W.2d 391, 396 (Iowa 2005) (recognizing failure to respond to board’s discovery requests requires court to consider all the matters stated in the requests as admitted). In addition, the commission sanctioned Netti for his failure to respond to the board’s discovery requests by treating all the factual allegations in the complaint as admitted for purposes of the disciplinary proceeding. See, e.g., Moonen, 706 N.W.2d at 396 (recognizing this sanction is consistent with the sanctions allowed under Iowa Rule of Civil Procedure 1.517(2)(6)(1)). Based on our de novo review of the record, we make the following findings of fact.
In July 2005, Sharon Matz retained Netti to represent her in a home construction dispute. Between July and October 2005, Matz gave Netti three checks of $250, $1160 or $1150, and $1500 as payment for his anticipated services. At the times he received the checks, Netti had not yet earned these sums. Netti failed to deposit the checks into a separate client trust account. He also failed to
As part of its investigation, the board requested that Netti provide it with copies of his trust account records showing the handling of Matz’s advance fee and expense payments and copies of the statements or correspondence he sent to Matz, notifying her of his withdrawal of funds from the trust account to apply toward the fees and expenses associated with his representation. In response, Netti provided the board with a time and billing statement for his representation of Matz. He also stated, “I am still working on the trust account records and should have them to you within the next 10 days.” However, Netti never provided copies of his trust account records to the board.
B. Estate of Jeremy Zimmerman (Count II).
In 2006 and 2007, Netti represented the Estate of Jeremy Zimmerman. The primary asset of the estate was a wrongful death claim. Netti agreed to pursue this claim and entered into a written contingent-fee agreement with Mary Nauret, the decedent’s mother and administrator of the estate. The contingent-fee agreement failed to state whether Netti’s litigation expenses were to be deducted before or after the contingent fee is calculated.
In November 2006, Netti settled the wrongful death claim for $132,750 and deposited the settlement amount into his “escrow” account, rather than a proper client trust account. A few days later, Netti took $44,245 from the settlement amount as his fee and transferred this amount to a different account. At the time he collected his fee, Netti had not filed the affidavit required by Iowa Code section 633.202 (2005), and the probate court had not issued an order allowing Netti to collect any compensation for his services.
In addition to the wrongful death action, Netti also agreed to assist Nauret in administering the estate and was designated as counsel for the estate. His purpose in opening the estate was solely to pursue the wrongful death claim. After a notice of delinquency, Netti filed an inventory asserting the estate had no assets. This inventory misrepresented the assets of the estate because Netti did not list any of the wrongful death settlement proceeds as an asset. Netti also applied to close the estate. After learning of his incompetence and neglect in probating the estate, Nauret, as administrator of the estate, applied to remove Netti as designated attorney. In seeking Netti’s removal, Nauret cited Netti’s mishandling of the wrongful death settlement proceeds, his improper collection of fees, incorrect inventory, failure to pay claims against the estate, and failure to distribute funds to the decedent’s legal heir, as well as other problems. The court removed Netti as the attorney for the estate. Netti returned $20,000 of the $44,245 in fees he collected, and the court entered judgment against him for the remaining $24,245 he had taken. Netti has not yet fully satisfied this judgment. Finally, after the court terminated his representation, Netti failed to promptly deliver the estate’s file to his successor counsel.
On January 1, 2005, Joshua Walker was injured in an automobile accident. From August 9, 2005 through January 18, 2006, Walker received medical care and treatment from Finley Hospital for the injuries he sustained during the accident. In 2006 and 2007, Netti represented Walker with regard to a personal-injury lawsuit stemming from the automobile accident. Netti agreed to represent Walker on a contingent-fee basis but the two never executed a written agreement. Finley Hospital asserted a $13,000 hospital lien on the proceeds of the personal-injury claim against the tortfeasor’s insurer, Metropolitan Property and Casualty Insurance Company. Netti was aware of the hospital lien.
Netti settled Walker’s personal-injury claim with the tortfeasor and Metropolitan for $45,000. Metropolitan issued a settlement check for $45,000, payable to Netti and Walker. Netti deposited the settlement proceeds into his “escrow” account rather than a proper client trust account. Subsequently, Netti took $23,296.02 as his fee and transferred this amount to a different account. He then gave Walker a check for $20,278.98. The settlement agreement and release obligated Walker to pay from the settlement proceeds “all outstanding liens or claims for reimbursement of medical subrogation claims.” Netti, however, failed to take the appropriate steps to satisfy Finley Hospital’s hospital lien from the settlement proceeds. He also failed to provide Walker with an accounting for the settlement proceeds.
Finley Hospital sued Metropolitan to satisfy its hospital lien. Subsequently, Metropolitan filed a third-party petition against Netti and Walker for indemnity. Without authority, Netti filed an answer for himself and Walker. This prompted a letter from Metropolitan’s lawyer, warning Netti of the conflict of interest and stating, “[I]t’s my belief that you cannot ethically represent both yourself and Joshua Walker in this lawsuit.” In response, while still purporting to represent Walker, Netti moved to withdraw the previously filed answer, filed a new answer for himself, and filed a cross-claim against Walker for indemnity. The cross-claim alleged it was Walker’s obligation to satisfy Finley Hospital’s lien. Netti apparently viewed his attempted withdrawal of the answer as a
The district court granted summary judgment in favor of Finley Hospital as to its hospital-lien claim against Metropolitan. The court also granted summary judgment in favor of Metropolitan as to its thirdparty indemnification claim against Walker. The court rejected Metropolitan’s third-party indemnification claim against Netti because he was not a party to the settlement agreement. After the court’s order, Netti filed a motion for protective order asserting that, in seeking his deposition, Metropolitan was harassing him and fishing for undiscoverable information. The assertions in Netti’s motion were false.
D. Angela Mangeno Representation (Count IV).
In 2008 Netti was suspended from the practice of law in Iowa for failing to submit his annual client security report. Nevertheless, believing Netti was a lawyer in good standing, Angela Mangeno retained him to represent her in a sales tax dispute with the Iowa Department of Revenue. Possibly believing he could represent Mangeno as a non-lawyer, Netti convinced Metropolitan Mangeno to execute a power of attorney in his favor. In addition, Mangeno gave Netti a $750 retainer as payment for his anticipated services. Netti failed to deposit the $750 into a separate client trust account. He also failed to regularly communicate with Mangeno or do the work she hired him to do. As a result, Mangeno terminated Netti’s representation and requested a refund of her retainer and the return of her records. Netti failed to promptly return Mangeno’s records and has not refunded her $750 retainer. Mangeno filed a complaint with the board. Netti refused to send a copy of his file to the board and asserted that the board “has no jurisdiction over this matter.”
A. Rule 32:1.1.
Rule 32:1.1 provides, “A lawyer shall provide competent representation to a client. Competent representation requires the legal knowledge, skill, thoroughness, and preparation reasonably necessary for the representation.” Iowa R. Profl Conduct 32:1.1. “Competent handling of a particular matter includes inquiry into and analysis of the factual and legal elements of the problem, and use of methods and procedures meeting the standards of competent practitioners.” Iowa Supreme Ct. Att’y Disciplinary Bd. v. Tompkins, 733 N.W.2d 661, 668 (Iowa 2007) (quoting Iowa R. Profl Conduct 32:1.1 cmt. 5).
In the Zimmerman matter, Netti’s failure to administer the estate properly constituted incompetent representation. In the Walker matter, his handling of the hospital lien also amounted to incompetent representation. Finally, his failure to perform any services in the Mangeno matter was incompetent representation. Accordingly, the board has proved Netti violated rule 32:1.1.
B. Rule 32:1.3.
Rule 32:1.3 states, “A lawyer shall act with reasonable diligence and promptness in representing a client.” Iowa R. Profl Conduct 32:1.3. This rule requires an attorney to handle a client’s matter in a “reasonably timely manner.” Iowa Supreme Ct. Att’y Disciplinary Bd. v. Johnson, 792 N.W.2d 674, 678 (Iowa 2010). Netti failed to handle the estate proceedings in the Zimmerman matter and the tax issues in the Mangeno matter in a reasonably timely manner. Thus, we find the board proved Netti violated rule 32:1.3.
1. In some of the complaint‘s counts, the board alleged a violation of rule 32:8.4(a) (“It is professional misconduct for a lawyer to . . . violate . . . the Iowa Rules of Professional Conduct....“). We have previously held that
Under our rules of professional conduct:
(a) A lawyer shall:
. . . .
(3) keep the client reasonably informed about the status of the matter;
(4) promptly comply with reasonable requests for information[.]
Iowa R. Profl Conduct 32:1.4(a)(3), (4). This rule requires an attorney to stay in communication with his or her client so that the attorney can inform the client of the status of the matter and promptly respond to reasonable requests of the client. Id. In the Mangeno matter, Netti did not keep his client informed or respond to her reasonable requests. Accordingly, Netti violated rule 32:1.4.
D. Rule 32:1.5(c).
Our rules of professional conduct allow attorneys to enter into contingent-fee agreements under certain circumstances. Id. r. 32:1.5. If an attorney agrees to perform his or her services under a contingent-fee agreement, the fee agreement must be in writing and contain certain provisions to comply with our rules. Id. r. 32:1.5(c). Our rules provide:
(c) A fee may be contingent on the outcome of the matter for which the service is rendered, except in a matter in which a contingent fee is prohibited by paragraph (d) or other law. A contingent fee agreement shall be in a writing signed by the client and shall state the method by which the fee is to be determined, including the percentage or percentages that shall accrue to the lawyer in the event of settlement, trial, or appeal; litigation and other expenses to be deducted from the recovery; and whether such expenses are to be deducted before or after the contingent fee is calculated. The agreement must clearly notify the client of any expenses for which the client will be liable whether or not the client is the prevailing party.
Upon