Lead Opinion
NATURE OF CASE
The Nebraska State Bar Association (NSBA) filed formal charges against Mark D. Frederiksen. In an amended answer, Frederiksen admitted all of the allegations contained in the formal charges. We conclude that Frederiksen should be suspended from the practice of law for 3 years.
SCOPE OF REVIEW
A proceeding to discipline an attorney is a trial de novo on the record, in which the Nebraska Supreme Court reaches a conclusion independent of the findings of the referee; provided, however, that where the credible evidence is in conflict on a material issue of fact, the court considers and may give weight to the fact that the referee heard and observed the witnesses and accepted one version of the facts rather than another. State ex rel. NSBA v. Flores,
Disciplinary charges against an attorney must be established by clear and convincing evidence. Id.
FACTS
Frederiksen was admitted to the practice of law in the State of Nebraska on September 12, 1983. From October 1985 until May 1998, Frederiksen practiced law with the firm of Zarley, McKee, Thomte, Voorhees & Sease, P.L.C. (Zarley, McKee). Zarley, McKee is based in Des Moines, Iowa, but Zarley, McKee maintains an office in Omaha, Nebraska, where Frederiksen worked. From 1991 until May 1998, Frederiksen was a partner at Zarley, McKee.
Frederiksen ultimately justified his actions by referring to them as “moonlighting,” apparently because some of the work for which he retained funds was done at his home rather than at his office. According to Frederiksen, he misappropriated the funds solely out of anger. He claims no mental disorder, no chemical dependency, no marital discord, and no economic distress. The referee found that Frederiksen was “merely angry at his partners and took the money to appease his discontent.”
In May 1998, Frederiksen resigned from Zarley, McKee and joined the Omaha firm of Koley, lessen, Daubman & Rupiper, RC. (Koley, lessen). Frederiksen did not expect to be compensated in any way by Zarley, McKee upon his departure, since he had not “bought into” the firm. However, Zarley, McKee paid Frederiksen “a whole lot of money” after he left. Frederiksen stated that this payment triggered guilty feelings and convinced him that he must discuss his misappropriations with members of Zarley, McKee.
Frederiksen was also admitted to practice law in Iowa. On March 11, 1999, he sent a letter to the Iowa authorities who regulate attorney disciplinary matters, with a copy to Zarley, McKee. The letter stated in part:
The issue of my moonlighting has arisen as we are completing the terms of my buy-out from the Zarley law firm. While I do not believe that there has been any violation of any ethical obligations, I now disclose these past activities to you, in order to satisfy any duty of disclosure by myself or my former partners which may exist. I am discussing resolution of this matter with my former partners, and it is my anticipation, based on these discussions, that it will be*565 resolved amicably between us. Because I am licensed to practice in both Iowa and Nebraska, I am sending this letter to the Disciplinary Committees in both states. Please advise if I can answer any questions you may have.
On June 21, 1999, the Iowa Supreme Court Board of Professional Ethics and Conduct issued the following reprimand:
Following a review of the complaint, your response thereto, the Board’s investigation, and the file, it was the determination of the Board that upon your departure from a Des Moines law firm to associate with an Omaha, Nebraska law firm, you volunteered information to the Des Moines firm that while a partner in that firm you accepted payment for legal services which you rendered at home or otherwise away from the office, and failed to advise your partners of those services or payments which you retained for yourself. That you accepted payments from clients which were not turned over to your firm nor did you report those payments to the firm. That you did, however, volunteer that information to the firm upon your pending departure and that your differences with the firm have been resolved although you and the firm felt compelled to report this matter to the Iowa Supreme Court Board of Professional Ethics and Conduct.
It was the determination of the Board that you be and hereby are publicly reprimanded that your failure to report these fees received to the partnership and in depositing the same to your personal account, that you engaged in conduct involving dishonesty, fraud, deceit, and misrepresentation, contrary to DR 1-102(A)(4) of the Iowa Code of Professional Responsibility for Lawyers.
On March 12, 1999, Dennis L. Thomte, an attorney at Zarley, McKee, filed a complaint against Frederiksen with the NSBA. On September 14, John W. Steele, acting on behalf of the NSBA Counsel for Discipline, filed charges against Frederiksen with the Committee on Inquiry of the Second Disciplinary District (Committee). A hearing to determine whether there were reasonable grounds to believe that Frederiksen was guilty of misconduct which would require the filing of formal charges was requested before the Committee.
The Committee submitted to the Disciplinary Review Board a transcript of its hearing together with a copy of its proposed formal charges. Following a review of the transcript, the chairperson of the Disciplinary Review Board concluded that reasonable grounds existed for discipline of Frederiksen.
On May 1, 2000, formal charges were filed against Frederiksen in this court, alleging that he had violated the following provisions of the Code of Professional Responsibility:
DR 1-102 Misconduct.
(A) A lawyer shall not:
(1) Violate a Disciplinary Rule.
(4) Engage in conduct involving dishonesty, fraud, deceit, or misrepresentation.
DR 9-102 Preserving Identity of Funds and Property of a Client.
(B) A lawyer shall:
(3) Maintain complete records of all funds, securities, and other properties of a client coming into the possession*567 of the lawyer and render appropriate accounts to the client regarding them.
On August 14, Frederiksen filed an amended answer in which he admitted all of the allegations contained in the formal charges.
A hearing was held before a referee on September 20, 2000. The transcript from the proceedings before the Committee was admitted upon stipulation. The referee recommended that Frederiksen “be suspended from the practice of law for a period of not less than 60 days nor more than 6 months” and that upon his return to the practice of law, Frederiksen should be placed on probation for a period of 2 years. Frederiksen appealed to this court.
ASSIGNMENT OF ERROR
In his brief to this court, Frederiksen assigns that the referee erred in recommending a sanction that is excessive under the circumstances of the case.
ANALYSIS
Frederiksen filed his exception to the referee’s report with this court on November 13, 2000, stating that he did not take exception to the findings of fact in the report, but that he took exception to the referee’s recommendation that he be suspended from the practice of law for a period of not less than 60 days nor more than 6 months.
Because neither party has filed exceptions to the referee’s findings of fact, we consider them final and conclusive pursuant to Neb. Ct. R. of Discipline 10(L) (rev. 2001). When no exceptions to the referee’s findings of fact are filed by either party in a disciplinary proceeding, this court may, at its discretion, adopt the findings of the referee as final and conclusive. State ex rel. NSBA v. Mefferd,
We next proceed to determine the appropriate sanction. Under Neb. Ct. R. of Discipline 4 (rev. 2001), the court may consider any of the following as sanctions for attorney misconduct: (1) disbarment; (2) suspension for a fixed period of time;
To determine whether and to what extent discipline should be imposed in a lawyer discipline proceeding, this court considers the following factors: (1) the nature of the offense, (2) the need for deterring others, (3) the maintenance of the reputation of the bar as a whole, (4) the protection of the public, (5) the attitude of the respondent generally, and (6) the respondent’s present or future fitness to continue in the practice of law. State ex rel. NSBA v. Flores,
Frederiksen has admitted his misconduct and acknowledged responsibility for his actions. These actions reflect positively upon his attitude and character and are a factor that we consider in determining the appropriate discipline, bearing in mind that the purpose of a disciplinary proceeding against an attorney is not so much to punish the attorney as it is to determine whether in the public interest an attorney should be permitted to practice. See State ex rel. NSBA v. Jensen,
With respect to the factors for determining whether and to what extent discipline should be imposed, we note that the nature of Frederiksen’s offense was serious. The conduct occurred over a period of 3 to 4 years and involved approximately $15,000. We also note the importance of imposing a disciplinary sanction that will deter other attorneys from such conduct and will maintain the reputation of the bar.
With respect to the protection of the public, we note that no harm came to the public because of Frederiksen’s actions. Although two clients contacted Zarley, McKee to question their bills, thus expending some time to determine whether their
Finally, we take into consideration Frederiksen’s attitude and his fitness to continue in the practice of law. The referee, who observed Frederiksen and heard his testimony, found that Frederiksen is genuinely remorseful and noted that “[h]e is embarrassed by his actions and vows that they will never be repeated.”
Mr. Frederiksen has given his assurance that his dishonesty will be neither repeated nor replicated. He has furthermore presented, through testimony and affidavits, the opinions of many who know him well that he is a man of integrity. He has apparently given tirelessly of himself to the community, his church and the bar association through board memberships, teaching and pro bono work. There is every reason to believe that Mr. Frederiksen is an excellent lawyer.
The referee also found “there is every chance” that Frederiksen will provide excellent legal services and will not repeat his offense. In order to ensure such service, the referee recommended supervision of Frederiksen’s activities after he returns to the practice of law.
The Iowa Supreme Court determined that a public reprimand was the appropriate sanction to be levied against Frederiksen. He argues that a similar sanction, such as “censure with probation or supervision by a qualified attorney,” is the appropriate discipline here as well. See brief for respondent at 24.
We must evaluate each discipline case individually in light of its particular facts and circumstances while also considering sanctions imposed in prior cases presenting similar circumstances. This is a case of first impression in Nebraska. Courts in other states have imposed a variety of sanctions in cases where an attorney misappropriated fees from his own law firm. The discipline imposed has ranged from no sanction to public reprimand to suspension. As the Washington Supreme Court noted in a case which did not involve misappropriation of client funds, “the need for discipline [in such cases] is less clear.” In re Rice, 99 Wash. 2d 275, 277,
Because protection of the public and preservation of the public’s confidence in the legal profession are the primary purposes of attorney discipline, the misappropriation of client funds usually warrants a severe sanction. . . . These interests are not served, however, in the resolution of internal problems of a law firm. Resolution of a dispute between members of a law firm is usually sought in a civil suit. . . . Accounting practices for client funds are strictly regulated by a specific provision in the Code of Professional Responsibility, but no such rule governs accounting procedures for law firm funds.
Id. at 277-78,
The Iowa Supreme Court imposed a public reprimand on an attorney who failed to remit court-appointed attorney fees to his law partnership. See Com. on Pro. Ethics v. McClintock,
An attorney cannot resort to self-help to rectify what may be perceived to be an inequity in the division of law partnership earnings. Most law partnerships are founded upon a total trust and confidence among the partners. A breach of this exceedingly close relationship merits disciplinary action. Although McClintock’s conduct did not involve an attorney-client relationship, his conduct is governed by the Code of Professional Responsibility.
Although severe sanctions may be justified in cases involving attorneys’ conduct with members of their law firms or partnerships, we agree with the commission’s recommendation in this case. McClintock has no prior disciplinary record. He reported the violation and fully cooperated with the committee.
Id. at 608.
In a Minnesota case, an attorney was placed on 2 years’ probation when he, over a 5-year period, retained approximately $6,300 in fees which belonged to his firm’s partnership. See In re Holly,
In Disciplinary Action Against Haugan,
A 30-day suspension was also entered in a case in which the attorney misappropriated law firm funds and opened client files in his own name in order to keep the files secret from the firm. See Disciplinary Action Against Bremseth,
A 60-day suspension was imposed by the Wisconsin Supreme Court in Disciplinary Proceedings Against Casey,
The Florida Supreme Court found a referee’s recommended 12-month suspension excessive and imposed a 90-day suspension in a case in which an attorney accepted client funds and deposited less than the full amount of those funds in the firm’s accounts. See The Florida Bar v. Stalnaker,
An attorney who converted $80,000 of his firm’s funds to his own use was placed on suspension for 3 years in a Louisiana case. See In re Kelly,
Although courts have ordered disbarment for activities somewhat similar to Frederiksen’s, additional factors weighed in favor of the more severe sanction. In State ex rel. Oklahoma Bar Ass’n v. Gray,
The New Jersey Supreme Court disbarred an attorney who retained a portion of a settlement fee for himself and falsified a check request form by indicating it was for reimbursement of expert witness fees, when it was actually a referral payment to another law firm. See Matter of Greenberg,
As noted earlier, no other Nebraska cases have dealt with an attorney’s misappropriation of funds from a law firm. However, we have held that “disbarment is inappropriate in the absence of specifically delineated injuries” to a client as the result of an attorney’s misconduct. See State ex rel. NSBA v. Kelly,
We acknowledge that this court has ordered disbarment in two cases where the attorney was found to have misappropriated nonclient funds. In State ex rel. NSBA v. Rosno,
Before imposing a disciplinary sanction, we must review the mitigating factors present. See State ex rel. NSBA v. Flores,
[Frederiksen] is, I believe, genuinely sorry for his actions. It appears highly unlikely that he will ever again commit such an act. He is admired by others for his professional competence and his concern for the betterment of his community and the bar. From all outward appearances Mr. Frederiksen is an excellent lawyer and is firmly dedicated to his family, his community, his church and his profession.
Frederiksen is currently practicing law with an Omaha law firm and has practiced there for 3 years with no apparent difficulties. Partners of the firm have expressed support for him and a willingness to have him continue practicing with them. Letters of support were submitted by several attorneys who have worked with Frederiksen on NSBA committees and activities, including continuing legal education. Frederiksen has taught law classes at Creighton University School of Law, and he offered letters of support from its faculty. The NSBA Counsel for Discipline did not request disbarment, and the Iowa Supreme Court, presented with the same facts, entered an order of public reprimand.
We conclude that although this case merits a serious sanction which will serve to inform Frederiksen and other attorneys that such behavior is not condoned, disbarment is not required. No client was harmed as a result of Frederiksen’s actions, and there are mitigating circumstances that weigh in his favor. Frederiksen has expressed sincere remorse for his actions and has made full restitution. He is respected by members of the legal profession for his work. The referee found that Frederiksen is dedicated to his family, his community, and his profession. In addition, he has the support of the law firm with which he now practices.
For the reasons set forth herein, Frederiksen is suspended from the practice of law in the State of Nebraska for 3 years, effective immediately.
Judgment of suspension.
Dissenting Opinion
dissenting.
Frederiksen filed no exceptions to the referee’s findings of fact in this case. Thus, it is undisputed that because he was dissatisfied with his compensation, Frederiksen stole approximately $15,000 from his firm over a period of 3 to 4 years. Although he stated that the firm would not have learned of his actions had he not disclosed them, at least two clients had complained about discrepancies in their accounts. Furthermore, one of the firm’s partners testified that he had asked Frederiksen about a discrepancy before his disclosure. Also, at the referee hearing, Frederiksen admitted that he would not have disclosed the misappropriations had the firm not treated him so fairly upon his departure.
The majority opinion acknowledges the serious nature of Frederiksen’s conduct but holds that disbarment in this case is not required. This holding is based on the majority’s determination that no client was harmed as a result of Frederiksen’s actions and that there are mitigating circumstances that weigh in his favor. I dissent.
We have disbarred attorneys for misappropriating nonclient funds. In fact, we specifically rejected an attorney’s argument that his misappropriation of funds from a bar association was distinguishable from cases in which attorneys had been disbarred
Similarly, we accepted an attorney’s voluntary surrender of his license after he misappropriated funds from a nonlegal association for which he served as treasurer. State ex rel. NSBA v. Rosno,
The majority distinguishes this case from McConnell and Rosno, stating that “neither of these cases concerning nonclient funds related to misappropriation of funds from the attorney’s firm.” The implication of the majority’s reasoning is that stealing from an attorney’s own firm is not as serious as the misappropriation of other types of nonclient funds. I disagree.
There is “no ethical distinction between a lawyer who for personal gain willfully defrauds a client and one who for the same untoward purpose defrauds his or her partners.” Matter of Siegel,
Clients often entrust lawyers with large sums of money, and they are entitled to have trustworthy lawyers. A lawyer who steals jeopardizes that trust, regardless of whether the theft is from a client or a firm. Frederiksen was wholly unable to account for the money he misappropriated over 3 to 4 years because he kept no records. While he may have been entitled to a share of the client payments had he remitted them to his firm, he nonetheless repeatedly breached his fiduciary duties to his firm by stealing his partners’ shares of the payments. I would hold that in the absence of compelling mitigating factors, misappropriation of
It is true that we have held disbarment was inappropriate in a case where the client had not been harmed because of the lawyer’s misappropriation of the client’s bond receipt. See State ex rel. NSBA v. Kelly,
But, since Kelly was decided, we have held on numerous occasions that “[t]he fact that no client suffered any financial loss does not excuse the misappropriation of client funds and does not provide a reason for imposing a less severe sanction.” State ex rel. NSBA v. Malcom,
The majority notes that Frederiksen claims no mental disorder, no chemical dependency, no marital discord, and no economic distress. Nonetheless, the majority cites as mitigating factors Frederiksen’s remorsefulness, his participation in bar association committees and activities, his teaching at the
Frederiksen’s achievements and reputation as a lawyer, lecturer, and adjunct law professor are commendable, as is his concern for the betterment of his community and the bar. But they should not serve to mitigate thefts from his own law firm. “The egregiousness of respondent’s dishonesty should have been readily apparent to so distinguished a practitioner. Although good reputation, prior trustworthy professional conduct, and general good character are often considered as mitigating factors . .. their importance is diminished ‘where misappropriation is involved.’ ” (Citation omitted.) Matter of Siegel,
We have held that cumulative acts of attorney misconduct are distinguishable from isolated incidents, therefore justifying more serious sanctions. State ex rel. NSBA v. Freese,
Because I believe that State ex rel. NSBA v. Rosno,