Hello everyone and welcome to this JACPA Ethics Alert which will discuss the recent Florida Supreme Court disciplinary opinion wherein the court reversed a referee’s findings that a lawyer did not engage in misrepresentation and increased the recommended discipline from a 90 day suspension to a 3 year suspension. The case is The Florida Bar v. Watson, No. SC09-2022, — So.3d —-, 2011 WL 6090078 (Fla. Dec. 8, 2011).
According to the opinion in Watson, the lawyer accepted approximately $800,000.00 in funds from 4 separate individuals to be held in his trust account for an investment related to his client. He wrote letters to the investors which led them to believe that the funds would remain in his trust account. He also acquiesced to and did not advise the investors of a change in the terms of the project into which their funds would be invested. Pursuant to his client’s instructions, the lawyer later disbursed the funds without notifying the investors.
The Bar filed a disciplinary Complaint alleging that the lawyer improperly disbursed the funds, violated the Bar trust account rules (however, his IOTA trust account was surprisingly found to be in compliance with the Bar trust rules related to recordkeeping and procedures), and engaged in dishonesty, fraud, deceit or misrepresentation. The lawyer testified that he did not engage in misrepresentation, fraud, deceit, or dishonesty in disbursing the funds and was complying with his client’s instructions.
After hearings, the referee recommended that the lawyer be found guilty of violating trust account rules by failing to properly hold the funds as a fiduciary under Bar Rule 5-1.1(b) and that the lawyer be found to have been negligent but not guilty of misrepresentation under Bar Rule 4-8.4(c) in 2 of the counts since his conduct was not “deliberate or intentional”. The referee also recommended that the lawyer receive a 90 day suspension nunc pro tunc to the date of an emergency suspension that was previously imposed on October 1, 2009. The opinion rejected the referee’s findings that the lawyer did not violate Bar Rule 4-8.4(c) in 2 of the counts and imposed a 3 year suspension nunc pro tunc to the date of the emergency suspension.
The opinion further stated:
“By (placing funds in trust), the lawyer establishes a new legal relationship with the principal parties either by an expressed agreement or by an agreement implied in law… (t)he relationship that is established is one of principal and agent, where the lawyer/agent owes a fiduciary duty to all of the principals. Absent an express agreement, the law implies that the attorney will know the conditions of the principals’ agreement and will exercise reasonable skill and ordinary diligence in holding and delivering the escrowed funds according to the agreement. Respondent clearly had a duty to the four individuals, and he violated that responsibility.
“Respondent deliberately or knowingly engaged in these improper acts. We find that Respondent is guilty of three violations rule 4-8.4(c), in addition to the referee’s recommendation of four violations of 5-1.1(b). We do not view violations of rule 4-8.4(c) (a lawyer shall not engage in conduct involving dishonesty, fraud, deceit, or misrepresentation) as minor. The Court has clearly stated that “basic, fundamental dishonesty … is a serious flaw, which cannot be tolerated,” (citation omitted), because dishonesty and a lack of candor ‘cannot be tolerated by a profession that relies on the truthfulness of its members’ (citations omitted). Considering this principle, the egregious nature of Respondent’s misconduct clearly outweighs the mitigation.
“The respondent in Florida Bar v. Rigg 944 So. 167 (Fla 2006), engaged in misconduct regarding client funds, committed acts involving dishonesty and misrepresentation, and violated trust account requirements. In part, he failed to properly manage his trust accounts, including real estate funds, and a paralegal allegedly stole some of the account funds. Riggs, like Respondent, asserted that his actions were negligent and not intentional. The Court found Riggs’s actions were deliberate and knowing and met the element of intent, and found him guilty of violating rule 4-8.4(c). Like Respondent, he was also guilty of violating rule 5-1.1(b).
“The (Riggs) Court stated: ‘It is well settled that the misuse of funds held in trust is one of the most serious offenses a lawyer can commit and that disbarment is presumed to be the appropriate sanction (citation omitted). However, there are cases involving attorney misconduct relating to client funds in which the attorneys were disciplined by lengthy suspensions instead of disbarments (citation omitted).’ In light of the facts of this case, a lengthy suspension is the appropriate sanction.” (Riggs argued for a ninety-day suspension and the Court imposed a three-year suspension.)
Bottom line: as many of you already know, the increased discipline in this case is dramatic since a lawyer is automatically reinstated after a 90 day suspension; however, the lawyer must file a petition for reinstatement and show “rehabilitation” by clear and convincing evidence after a 3 year suspension.
As this opinion makes abundantly clear, all lawyers have a strict fiduciary duty to properly handle trust funds and sometimes this requires more than merely complying with the request of a client to disburse. As I have said in the past, the Supreme Court of Florida will not hesitate to dramatically increase a disciplinary sanction if it believes that such an increase is warranted, particularly when it involves the lawyer’s trust IOTA account.
…be careful out there!
As always, if you have any questions about this Ethics Alert or need assistance, analysis, and guidance regarding these or any other ethics, risk management, or other issues, please do not hesitate to contact me.
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