In a recent attorney discipline case, the question of the appropriate sanction for an attorney who traded his legal services for construction work on his home and yard came before the Utah Supreme Court. In In the Matter of Discipline of Joseph P. Barrett, an attorney was suspended from the practice of for law for 150 days for misappropriating firm funds arising from two situations where the attorney traded legal services for construction on his home and yard. On appeal, among other things, the supreme court was asked to determine whether the intentional or knowing misappropriation of firm funds, like the intentional or knowing misappropriation of client funds, creates a presumption of disbarment. The Supreme Court ultimately found that the attorney’s conduct warranted a 150-day suspension, but not disbarment.
Attorney Trades Legal Services for Railing Work on His Home
The misconduct at issue in the above-referenced case stemmed from three independent situations (two involving legal services the attorney provided to clients in exchange for construction work on his home and yard, and one involving the attorney’s reimbursement request for a phone call with a potential client). As it relates to the first situation, the attorney began providing legal services to a client in 2007 when the client retained the attorney and his law firm to represent the client’s son in a criminal matter. Over the better part of the next three years, the attorney worked on the client’s son’s criminal case, a collection matter for the client’s company, and new criminal matter’s involving the client’s son.
Attorney Asks Firm to Write Off $7,000 in Legal Fees While Pocketing $3,500 From the Client
In June of 2010, the attorney requested that his firm write off more than $7,000 from the client’s account. Around that same time, the client’s brother-in-law began construction of a wrought-iron railing for the attorney’s home; however, the client’s brother-in-law was unable to complete the project. Thereafter, in July 2010, the client wrote the attorney a check for $3,500, which the attorney deposited into his personal bank account. The attorney said that the client proposed that his brother-in-law work on the railing as a “kind gesture,” and that the client insisted on paying the attorney $3,500 so he could find someone else to finish the work on the railing.
The attorney further claimed that he wrote off the client’s bills as a professional courtesy so that the client would continue to refer work to the attorney and because “it was the compassionate thing to do.” However, by 2012, of the approximately $8,600 that the law firm billed to the client’s account, the attorney had written off more than $7,900. Furthermore, by 2012, the client had paid the law firm only $700 while paying the attorney personally $3,500.
Client Said He and Attorney Had Unwritten Agreement to Trade Legal Services for Railing
What is more is that the client’s testimony regarding the payments to the attorney contradicted the attorney’s testimony outlined above in that the client set forth that he had an unwritten agreement with the attorney to exchange work on the railing for the attorney’s legal services. The client further testified that he understood the $3,500 he provided to the attorney to be for the balance of what he owed for the attorney’s legal services.
Attorney Trades Legal Services for a Shed Built in His Yard
The second situation regarding the exchange of the attorney’s legal services involved a shed that a client built for the attorney at the attorney’s home. In November 2010, the attorney and his firm were retained by a client to represent the client in a custody case. A few months thereafter, the client began constructing a shed at the attorney’s home. The attorney subsequently asked the firm to write off about half of the client’s bill. Over the next several months, the attorney requested that his firm write off the remainder of the client’s bill, as well as that the firm return the remainder of the client’s $2,500 retainer.
Second Client Said He and Attorney Had Unwritten Agreement to Trade Legal Services for Shed
The attorney ultimately paid the client approximately $5,000 for the shed, which cost the client more than $15,000 to build. In all, the attorney wrote approximately $8,900 from the client’s account at the law firm. The attorney testified that he wrote off the client’s bills and refunded the client’s retainer because he believed that the client would be unable to pay and needed the money to visit his son. The client’s testimony disagreed with that of the attorney, setting forth that he, like the previously described client, had an agreement to build the attorney a shed in exchange for the attorney’s legal services.
Attorney Sought Reimbursement for Lunch He Did not Attend
The final situation took place in January 2012 when the attorney requested reimbursement for a business development lunch in California that the attorney did not in fact attend. Rather, the attorney’s wife attended the lunch. The attorney testified that he discussed business matters with a potential client over a phone call that took place during the lunch his wife attended.
District Court Finds That Attorney Misappropriated Firm Funds and Improperly Withheld Info From Firm
In early 2012, the law firm’s president approached the attorney about some of his reimbursement requests and subsequently reported the attorney to the OPC. Following an investigation, the OPC filed a complaint in district court in which it requested that the attorney be sanctioned for his conduct involving the trade of his legal services for construction on his home and yard, as well as for his reimbursement requests arising out of the lunch he did not attend in California. The district court concluded that the attorney by accepting payment and construction services in exchange for his legal services had misappropriated firm funds. As it related to the reimbursement request for the lunch, the district court concluded that the attorney had violated Rule 8.4(c) of the Utah Rules of Professional Conduct by withholding “information that would allow [the attorney’s law firm] to properly evaluate whether the expense was legitimate.”
All told, the district court found three violations of Rule 8.4(c), and, as a result, suspended the attorney from the practice of law for 150 days. The district court refused to disbar the attorney on account of the fact that he had misappropriated firm funds and not client funds.
Are All Misappropriation of Funds Cases Created Equally?
As noted above, on appeal, the supreme court was asked to determine, among other things, whether the misappropriation of firm funds, like the misappropriation of client funds, created a presumption in favor of disbarment. On that question, the supreme court determined that suspension, and not disbarment, was the appropriate sanction in the instant case. When determining an appropriate sanction for attorney misconduct, the supreme court performs a two-step analysis using Utah Rules of Professional Practice 14-604 and 14-605. Rule 14-604 sets forth that certain factors should be considered in imposing a sanction after a finding of lawyer misconduct, including: the duty violated, the lawyer’s mental state, the potential or actual injury caused by the lawyer’s misconduct, and the existence of aggravating or mitigating factors. Rule 14-605, on the other hand, details when certain sanctions, including disbarment, suspension, or otherwise, are appropriate.
Utah Supreme Court Declines to Apply Presumption of Disbarment to Misappropriation of Firm Funds Cases
After finding that two of the three provisions of Rule 14-605(a)(1) and (2) did not apply, the court set forth that it was a closer question as to whether Rule 14-605(a)(3) applied, which punishes attorneys for “intentional misconduct involving dishonesty, fraud, deceit, or misrepresentation that seriously adversely reflects on the lawyer’s fitness to practice law.” The supreme court noted that at oral argument the OPC relied on the court’s holding in In re Discipline of Ince for the proposition that misappropriation of firm funds was a presumptively disbarrable offense. However, the supreme court disagreed for two reasons. First, the court set forth that its holding in Ince dealt with the misappropriation of client funds, not firm funds. As a result, the court stated its holding in Ince was inapplicable to the present case.
Second, the court took the opportunity to “clarify … that not all misappropriation is created equal,” and that “[m]isappropriation of firm funds does not ‘undermine the foundations of the profession and the public confidence’ the same way that misusing client funds does.” The court further stated that, while a presumption of disbarment for misappropriation of client funds is necessary to protect the “foundations of the profession and the public confidence that is essential to the functioning of our legal system,” the same policy concerns “do not arise where no client money is at issue.” Thus, the supreme court said it was unwilling to extend its holding in Ince “to mean that where an attorney has misappropriated firm funds but not client funds, the presumption of disbarment must apply.” Accordingly, the court held that Rule 14-605(3) does not apply to situations where attorney misappropriate firm fund and not client funds.
Utah Supreme Court Upholds Suspension Sanction
Turning the appropriate sanction for the attorney’s conduct of trading legal services for construction work, the supreme court noted that the attorney’s conduct did not fit the general parameters of Rule 14-605(b), which governs the circumstances under which suspension is generally appropriate. The court noted there that because Rule 14-605(b) was not applicable, the court turned to the factors set forth in Rule 14-604 to determine the proper sanction for the attorney’s conduct of trading legal services for construction work.
Under Rule 14-604, the supreme court said that the attorney’s intentional and knowing mental state kept the sanction from falling below a suspension, and that the attorney had “not raised compelling mitigating factors that would merit decreasing the severity of the sanction.” According to the court:
Although Mr. Barrett’s misappropriation of firm funds is not deserving of the “professional death-sentence” of disbarment, we hold that suspension is appropriate. Intentional or knowing misappropriation of firm funds is a serious offense, and we conclude that Mr. Barrett’s intentional and knowing mental state, combined with the actual injury caused to his firm from losing the client funds that were due to it, along with the lack of compelling mitigating factors, merits a serious sanction. We therefore agree with the district court that the aggravating and mitigating factors do not justify deviating from suspension, and we uphold the court’s order of a 150-day suspension.
Utah Supreme Court Reverses District Court’s Finding Regarding Reimbursement Request
With that said, the supreme court departed ways with the district court in two respects. First, the supreme court did not find that the attorney’s repayment of the misappropriated funds constituted a mitigating circumstance that there had been a “timely good faith effort to make restitution.” Second, while the supreme court found that suspension was appropriate based upon the legal services trading matters, it reversed the district court’s holding regarding the reimbursement request for the lunch in California that the attorney himself did not attend. The court justified its decision by saying that “in the absence of evidence that Mr. Barrett intentionally deceived the firm as to his presence at the lunch, we do not believe his conduct rises to the level that a sanction is necessary.”
Misappropriating Firm Funds May Get You Suspended, But Likely Not Disbarred in Utah
The above case provides a cautionary tale for attorneys that misappropriate firm funds. However, more importantly, the case serves as notice that the Utah Supreme Court does not view all misappropriation cases the same way, and that misappropriation of firm funds does not create a presumption in favor of disbarment. In fact, the supreme court went so far as to say that the misappropriation of firm funds, if not knowing and intentional, may only warrant a reprimand. However, because it was determined that the attorney’s conduct of misappropriating firm funds in the above case was knowing and intentional, there was no way to reduce the attorney’s discipline below a suspension.
The lesson to be learned here is that, while trading legal services for things other than money is allowed, you may not do without the consent of your firm, and you may not write off legal fees owed to your firm that are being paid to you by other means than money. However, if you are caught doing such things, the Utah Supreme Court has said that suspension, and not disbarment, is the appropriate sanction for such conduct.
Photo Cred.: criminaldefenselawyer.com