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In re Fair

September 13, 2001

IN RE CARRIE L. FAIR, RESPONDENT.


Before Steadman and Schwelb, Associate Judges, and Ferren, Senior Judge.

The opinion of the court was delivered by: Steadman, Associate Judge

A Member of the Bar of the District of Columbia Court of Appeals On Report and Recommendation of the Board on Professional Responsibility

Argued November 1, 2000

This bar disciplinary matter arises out of respondent's appointment as successor personal representative and attorney for the estate of Sara Fraction, who died intestate in 1981. *fn1 There is little question that respondent was dilatory and negligent in carrying out her duties. The key issue before us involves her payments to herself of fees relating to the estate, a matter as to which the Board and the Hearing Committee were in sharp disagreement. Respondent first made such partial payments in 1994 totaling $6600 without prior court approval as was then required. Then, once court approval was obtained of a total for fees and expenses of $12,720, she overpaid herself in 1997 by almost $600. We conclude that, in the circumstances of this rather peculiar case, the record does not contain sufficient proof by "clear and convincing evidence" that these payments constituted the charged "intentional and/or reckless" misappropriation of estate funds so as to fall within the automatic disbarrment rule of In re Addams. We suspend respondent from the practice of law for one year and sixty days.

I.

The Board agreed with and adopted the Hearing Committee's findings of fact. The Board's summary of those factual findings is attached as Appendix A. These findings reflect a serious pattern of neglect by respondent of her duties with respect to the estate. Both the Hearing Committee and the Board were in agreement that respondent had committed five charged disciplinary rule violations relating to that neglect, and we see no basis to conclude the contrary. As the Board report put it, "the evidence of inexcusable inaction on Respondent's part is overwhelming." *fn2

The Hearing Committee and the Board sharply differed, however, on the charges of misappropriation and taking an illegal and/or unreasonable fee. *fn3 With respect to the $6600 fee payments without prior court authorization, the Hearing Committee concluded that no misappropriation had occurred at all. It noted that in prior cases before the Board, an attorney had received payment of legal fees from a personal representative prior to court authorization and the Board had rejected charges of misappropriation because the attorney was not entrusted with estate funds. See In re Ray, 675 A.2d 1381 (D.C. 1996); In re Travers, 764 A.2d 242 (D.C. 2000); In re Mudd, Bd. Dkt. 472-92 (1995). The Committee saw no reason why the result should be different where attorney and personal representative were the same person. *fn4 The Committee also noted that the section requiring prior court approval had been repealed by the legislature and that the legislature "cannot have intended to legalize misappropriation of client funds." Finally, the Committee concluded that even if there was misappropriation, the conduct constituted at most negligence, given the expert testimony as to the actual practice in probate proceedings at the time. The Committee rejected the charge of taking an illegal and/or unreasonable fee on the basis of the eventual award by the court of total fees and expenses almost twice that of the $6600. Finally, the Committee ascribed the $600 overpayment of the total approved fees to "negligent miscalculation and nothing more." The Committee recommended a suspension of sixty days. *fn5

The Board disagreed with the Hearing Committee's disposition of the misappropriation and unreasonable fee charges. With respect to the $6600 fee payments in 1994 without prior court approval, the Board deemed itself bound by In re Utley, 698 A.2d 446 (D.C. 1997), in which a conservator paid herself a fee without court authorization and was deemed to have misappropriated the funds. *fn6 The Board further concluded that since, as in Utley, respondent knew that prior authorization was required by statute, her unauthorized payments could not be characterized as negligence. The Board distinguished this situation from those in which attorneys who were not also personal representatives received fees without prior court approval, since an attorney acting in a dual role is "entrusted" with estate funds. In its discussion, the Board did not address the repeal of the violated statute. With respect to the $600 overpayment in 1997, the Board concluded that since, in its view, respondent did not keep records and simply tried to keep the numbers in her head, her overpayment could only be characterized as "reckless." Finding no extenuating circumstances to take this proceeding outside of the normal rule of In re Addams, 579 A.2d 190 (D.C. 1990) (en banc), the Board recommended disbarrment.

II.

Very recently, in In re Anderson, No. 00-BG-230 (Aug. 2, 2001), and a few months previously in In re Berryman, 764 A.2d 760 (D.C. 2000) we reviewed at length the general concept of misappropriation and the holding of In re Addams, with extensive case analysis. We need not repeat those efforts here. In sum, misappropriation is "any unauthorized use of client's funds entrusted to [an attorney], including not only stealing but also unauthorized temporary use for the lawyer's own purpose, whether or not he derives any personal gain or benefit therefrom." In re Harrison, 461 A.2d 1034 (D.C. 1983). "[I]n virtually all cases of misappropriation, disbarrment will be the only appropriate action unless it appears that the misconduct resulted from nothing more than simple negligence." In re Addams, 579 A.2d at 191. It is thus "the long-standing rule in this jurisdiction that intentional or reckless misappropriation of client funds will result in disbarrment, save perhaps for extraordinary circumstances." In re Viehe, 762 A.2d 542, 543 (D.C. 2000) (per curiam). Such intentional or reckless misappropriation means a showing that the attorney handled entrusted funds "in a way that reveals either an intent to treat the funds as the attorney's own or a conscious indifference to the consequences of his behavior for the security of the funds." Anderson, slip op. at 15. *fn7 Bar Counsel must prove disciplinary violations by "clear and convincing evidence." This standard is applicable to proof of underlying facts to support the "intentional or reckless" component of Addams, which can have such a drastic effect on the penalty to be imposed in contrast to "negligent" misappropriation. In re Anderson, supra, slip op. at 7-13. The burden thus is upon Bar Counsel to show such a level of culpability by clear and convincing evidence to bring it within the rule of Addams.

In the case before us, disagreeing with the Hearing Committee, the Board took the view that respondent had engaged in misappropriation both by taking a fee out of estate assets without the then-requisite prior court approval and, subsequently, once the amount of the fee had been approved by the court, taking from estate assets an amount roughly $600 in excess of that approved fee. The Board further concluded that in both instances, the misappropriation fell within the rule of Addams and recommended disbarrment. We examine each instance in turn.

A.

As summarized in the Board's findings of fact, "between June and September 1994, respondent wrote six checks to herself as fee payments on the estate's bank account, for a total of $6600. *fn8 At the time of these payments, the statute and Probate Court rules *fn9 required prior court approval for payments of fees for services. Respondent was aware of this requirement." Id.

We agree with the Board's conclusion that this conduct constituted misappropriation as we have defined that term. It correctly viewed as controlling in that regard In re Utley. In that case a conservator had taken fees and commissions without prior court approval, as required by law, and we held that this conduct constituted misappropriation. Likewise, in In re Evans, 578 A.2d 1141 (D.C. 1990), we held that an attorney also acting as personal representative had misappropriated estate funds when he paid himself a fee in excess of that approved by the court in the mistaken belief that the heirs had consented to that action. *fn10

The critical question, however, is whether the unauthorized payment which constituted the type of "intentional and/or reckless" misappropriation which would bring the action within Addams, as the Board thought. This is a conclusion of law requiring de novo review, and we have the obligation to make our own determination on the issue. In re Anderson, supra, slip op. at 16 n.5 (citing In re Micheel, 610 A.2d 231, 234 (D.C. 1992) (question is one of "`ultimate fact'-[i.e.,] a conclusion of law"); In re Berryman, 764 A.2d 760, 766 (D.C. 2000).

We think the Board put excessive weight on Utley in coming to this conclusion. As indicated, Utley also involved payment of a fee without required prior court approval. But Utley involved far more. First of all, respondent there for twenty-one months refused to repay the improper fee despite having had the irregularity called to her attention and despite numerous court requests for repayment. We concluded that "respondent's flagrant disregard of the court's inquiries for almost two years is an aggravating factor of sufficient magnitude to compel us to conclude that she was reckless." Furthermore, even after being told of the impropriety, respondent there took yet a third payment without court approval. "Especially in light of this third act of payment despite court requests to return the earlier two unapproved payments, we cannot characterize these deliberate acts as the product of simple negligence." 698 A.2d at 450. No such recalcitrance or open defiance was exhibited by respondent here. *fn11

This case now before us presents two rather perplexing aspects which distinguish it from fitting neatly into our precedents. First of all, as the Hearing Committee emphasized, within less than a year after respondent had paid herself a portion of her fee without the then-requisite prior court authorization, the legislature as part of a general revision of probate practice eliminated the need for any such court approval. See In re Travers, 764 A.2d 242, 245 n.1 (D.C. 2000). In the Committee's words, "the repeal has to be read to reflect a legislative judgment that estates can be properly administered without requiring prior court approval of fee withdrawals by fiduciaries, and that there is nothing morally or ethically offensive about such a practice." The repeal was not made retroactive, to be sure, *fn12 but nonetheless to disbar an attorney on grounds of intentional misappropriation or its equivalent for committing a type of act which within a year was legislatively determined to be utterly licit is a somewhat unsettling concept.

Second, unlike in Utley or any similar misappropriation case, the Hearing Committee heard extensive testimony by attorney Nicholas D. Ward, acknowledged by Bar Counsel as a probate expert, concerning the prevalence in actual probate practice at the time of payment of fees in probate matters without prior court approval. A flavor of that testimony is in this response by the expert to Bar Counsel's questioning:

I think that you're making a distinction with failure to understand the nature of the practice. The rule says you don't do it [i.e., pay fees without prior court approval], but I'm testifying as an expert that the practice is that for most of the people who don't do it, it is not thought to be the end of the world. Their fees get approved, anyway. So what is the significance that we may draw from their not doing it? That, yes, it is ...


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