In re Sandy v. Lee , 2014 D.C. App. LEXIS 198 ( 2014 )

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DISTRICT OF COLUMBIA COURT OF APPEALS
No. 12-BG-630
IN RE SANDY V. LEE, RESPONDENT.
A Suspended Member of the Bar
of the District of Columbia Court of Appeals
(Bar Registration No. 361460)
On Report and Recommendation
of the Board on Professional Responsibility
(BDN 451-07)
(Argued March 13, 2013 Decided July 17, 2014)
Sandy V. Lee, pro se.
Julia L. Porter, Senior Assistant Bar Counsel, with whom Wallace E. Shipp,
Jr., Bar Counsel, and Jennifer Lyman, Senior Assistant Bar Counsel, were on the
brief for petitioner.
Elizabeth J. Branda, Executive Attorney, Board on Professional
Responsibility, for petitioner.
Before WASHINGTON, Chief Judge, BLACKBURNE-RIGSBY and MCLEESE,
Associate Judges.
2
PER CURIAM: This matter comes before us upon the report and
recommendation of the Board on Professional Responsibility (“Board”). The
Board found that respondent Sandy V. Lee committed intentional misappropriation
by negotiating a check without the authorization or endorsement of one of the
named payees and taking his fee from the proceeds. The Board has unanimously
recommended to this court that respondent be disbarred based upon this intentional
misappropriation as well as other misconduct, particularly respondent‟s flagrant
dishonesty and false testimony before the Hearing Committee. Respondent takes
exception to the Board‟s findings of fact and its legal conclusion that he
intentionally misappropriated funds. Respondent also contends that the proposed
sanction recommended by the Board is unwarranted. Bar Counsel agrees with the
Board‟s conclusion that respondent intentionally misappropriated funds and that
disbarment is the proper sanction for respondent‟s actions, but disagrees with the
Board‟s legal analysis. For the reasons stated herein, we hold that respondent
intentionally misappropriated funds to which a third party had a just claim in
violation of Rule of Professional Conduct 1.15 (c), and thus order that respondent
Sandy V. Lee be disbarred.
3
FACTUAL SUMMARY
In November of 2005, Agnes Tataw (“Ms. Tataw”) purchased property
located at 1423 Montello Avenue, N.E., Washington. D.C. (“the Property”) for a
purchase price of $375,000. She took out two loans from WMC Mortgage
Corporation (“WMC”) to finance the purchase: a $300,000 first-position loan and
a $75,000 second-position loan. As security for the mortgages, Ms. Tataw also
executed first and second deeds of trust on the Property. The Deed of Trust
securing the $300,000 loan was a standard Fannie Mae/Freddie Mac form, which
required her to maintain insurance on the Property, among other things. The
insurance policy was required to include a “standard mortgage clause and [] name
Lender as mortgagee and/or as an additional loss payee.” The Deed of Trust
additionally stated that:
In the event of loss, Borrower shall give prompt notice to
the insurance carrier and Lender. Lender may make
proof of loss if not made promptly by Borrower. Unless
Lender and Borrower otherwise agree in writing, any
insurance proceeds . . . shall be applied to restoration or
repair of the Property . . . . During such repair and
restoration period, Lender shall have the right to hold
such insurance proceeds until Lender has had an
opportunity to inspect such Property to ensure the work
has been completed to Lender‟s satisfaction, provided
that such inspection shall be undertaken promptly.
Lender may disburse proceeds for the repairs and
restoration in a single payment or in a series of progress
payments as the work is completed. . . . Fees for public
4
adjusters, or other third parties retained by Borrower
shall not be paid out of the insurance proceeds and shall
be the sole obligation of Borrower.1
Ms. Tataw later obtained insurance on the property with Encompass
Insurance (“Encompass”) in accordance with this requirement. In January of 2006,
Wilshire Credit Corporation (“Wilshire”) began to service the loan and was
substituted as the mortgagee and interested party on the Encompass policy. In
March of 2006, the Property was vandalized, and in April of 2006 Ms. Tataw filed
a claim with the insurer. Encompass investigated the claim and obtained a repair
estimate of $15,369.32.
In October of 2006, Ms. Tataw retained respondent Sandy V. Lee of Blair &
Lee, P.C., to represent her in pursuing the claim against Encompass. The parties
executed a retainer agreement which required Ms. Tataw to pay a fee of “one-third
(33 1/3%) of the gross amount recovered” if she received her money prior to
litigation, and 40% if she did not receive her money until after suit was instituted.
1
The Hearing Committee found that such a provision “is a standard
provision in residential mortgage loans. It protects the lender‟s interest in the
property by giving the lender the right to hold the insurance proceeds to ensure that
they are used for their intended purpose of repairing and restoring the property.”
5
In January of 2007, Encompass agreed to pay the $15,369.32 claim based on
the repair estimate. Encompass sent the check to respondent, payable to “Agnes
Tataw, Wilshire Credit, and Blair and Lee, P.C.” The Hearing Committee
accepted respondent‟s testimony that when he received this check on January 16,
2007, he did not have a copy of the insurance policy. Still, the Hearing Committee
found that respondent knew that Wilshire had an interest in the proceeds of the
check; when he received the check, respondent knew that Wilshire held the
mortgage loans on the Property and was a payee on the check, and he knew that he
needed Wilshire‟s consent before he could negotiate that check. Moreover, the
same day that respondent received the check he called Wilshire and a claims
representative told him to endorse the check and send it—along with the
contractor‟s and insurer‟s estimates—to Wilshire‟s offices on “Millikan” in
Beaverton, Oregon.
Three days after he received the check, respondent faxed a letter to Wilshire
addressed to an unnamed “Hazard Claims Director” at the company‟s “Millikan
Way” office. The letter read:
Included with this letter is a copy of a check received on
behalf of our client from her home owner‟s insurance
company for loss to her house. The policy, as I have
been told, for some reason requires that your name be
placed on the check for compensation for losses, despite
the fact that no funds are going to your company. Our
6
firm is owed and collecting its fee for services rendered
and for future services. Please be advised that unless I
have a letter by facsimile from you opposing my action, I
will sign your company‟s name to the check, deposit it[,]
collect my fee and hold all other funds until you and your
customer are satisfied. The contractors‟ estimates are
being obtained and will be forwarded to you upon
receipt.
Less than five hours after sending this fax and without any further attempt to
contact Wilshire, at 6:43 p.m. on January 19, 2007, respondent deposited the check
into the firm‟s trust account at SunTrust. Respondent caused three endorsements
to be affixed to the back of the check: a handwritten endorsement of “Blair & Lee,
P.C.,” Ms. Tataw‟s name, and the firm‟s restrictive endorsement stamp. No
endorsement representing payee Wilshire appeared on the check. The Hearing
Committee found that Ms. Tataw authorized respondent to sign her name to the
check, although he had failed to indicate that he had signed it on her behalf. The
Hearing Committee also found that respondent had “intentionally” made an “effort
to convey that all three required endorsements had been made, beginning with a
handwritten endorsement for „Blair & Lee, P.C.‟ that was “difficult to read, and []
intentionally so.” Wilshire did not endorse the check nor consent to respondent
negotiating the check or depositing it in his firm‟s trust account.
On either January 19 (the day that he faxed Wilshire the letter) or the next
business day, January 22, 2007, respondent caused three checks totaling $5,123.10
7
(his fee) to be presented and paid by SunTrust.2 The Hearing Committee rejected
as false respondent‟s testimony that he believed he was authorized to sign
Wilshire‟s name to the check and deposit it because respondent “did not, in fact,
sign Wilshire‟s name to the check, even though he told the Wilshire representative
that he would, and said so in the letter that he wrote . . . . Instead, he used an
intentionally illegible „Blair & Lee‟ endorsement.” Thus, the Hearing Committee
found that respondent knew he was not authorized to sign Wilshire‟s name to the
check. Finally, the Hearing Committee found that respondent “caused the check to
appear as if it had three endorsements in order to cause the SunTrust bank teller to
believe that the check was properly endorsed by the three payees identified on the
front of the check.”
Six months later, in July of 2007, the contractor sent respondent an estimate
of $20,226.67 to repair Ms. Tataw‟s property. Respondent faxed a letter to
Wilshire on July 26, 2007, informing them that his firm was holding the balance of
the insurance check—the net claim proceeds minus his fee—and requesting
approval for the repair work to begin on the property. Steven Bonfiglio (“Mr.
Bonfiglio”), Wilshire‟s in-house counsel and Assistant Vice President, responded
2
The three checks were made out as follows: the first for $1,500, payable
to “Blair & Assoc Payroll Acc # 1372”; the next for $1,061.55, payable to “Walter
Blair”; and the third for $2,561.55, payable to respondent.
8
by fax the same day expressing concern that respondent might have negotiated the
insurance check without Wilshire‟s consent, and emphasizing that the insurance
proceeds were to be used to repair the Property that secured Wilshire‟s loan. He
requested that respondent provide more information and that respondent “retain all
of the fees and costs appropriated by your firm from this check.” Respondent did
not replace the legal fees into the firm‟s trust account. That evening, respondent
sent another fax stating “Client‟s money in trust account,” along with a copy of his
January 19, 2007, fax to Wilshire, a copy of the check, and the contractor‟s
estimate of $20,226.27. Mr. Bonfiglio responded the next day by fax, stating that
Wilshire had never authorized respondent to endorse the check, Wilshire‟s records
reflected that Wilshire had instructed him to endorse the check and send it to them,
and that by defying those orders and endorsing the check, respondent had
“interfered with the operation of the contract between Wilshire and Ms. Tataw,
specifically, the policies and procedures for the disbursement of the insurance
proceeds which ensure that [Wilshire‟s] security interest is properly repaired.” Mr.
Bonfiglio also demanded that respondent send the $15,369.32 so that it (Wilshire)
and Ms. Tataw could coordinate the repairs to the property.
9
Respondent did not respond to the July 27, 2007, communication with Mr.
Bonfiglio nor did he forward the balance of the insurance proceeds.3 Instead,
respondent instituted a civil action on behalf of Ms. Tataw against Wilshire in D.C.
Superior Court on August 2, 2007. Tataw v. Wilshire Credit Corp., 2007-CV-
5357. Before the Hearing Committee, respondent testified that the basis for this
suit was that he wanted a declaration that it was proper for him to endorse
Wilshire‟s name to the check and take his fee.4 In an attempt to avoid litigation,
Wilshire agreed that Ms. Tataw could use the remaining funds to repair the
property. Respondent agreed that Ms. Tataw would dismiss the suit on these
terms, as long as the parties also agreed to abandon all other types of complaints
“stemming from this case” as they were “likely to be without merit.” Wilshire did
not agree to that final waiver term because it sought to file a Bar complaint against
respondent.
3
Respondent failed to turn over the balance to Wilshire despite the fact that
its entitlement to those funds was undisputed. As the Hearing Committee
explained, there was evidence that respondent “clearly understood that Wilshire
had an interest in controlling disbursement, at least of the amount that remained
after he took his fee. Indeed, he told Ms. Tataw that she could not have the
proceeds without Wilshire‟s permission.”
4
However, in the Complaint he did not disclose that: 1) Wilshire was a
payee on the check; 2) respondent negotiated the check without Wilshire‟s
endorsement or permission; 3) respondent withdrew for himself a third of the funds
a day after negotiating the check; and 4) respondent refused to return the funds or
place them in trust after Wilshire demanded that he do so.
10
Wilshire repeatedly asked that respondent dismiss the lawsuit, explaining
that its dispute was not with Ms. Tataw but with respondent, and that if it had to
hire a lawyer to defend in the suit its fees and costs would be billed to Ms. Tataw‟s
mortgage loan under the terms of that agreement. Mr. Bonfiglio even wrote to
respondent and “beg[ged] [the firm to] take the funds from [the] client trust
account and repair her home.” On September 4, 2007, Wilshire filed a motion to
dismiss or for summary judgment arguing that there was no dispute between
Wilshire and Ms. Tataw over use of the funds because both agreed they should be
used to repair the property. In response, respondent prepared an affidavit that Ms.
Tataw signed, which stated that Wilshire had agreed to release the funds for repair
of the property but that they would “attempt later to bill me to pay its attorney‟s
fees due to its six (6) months delay in approving the release of funds.” Respondent
knew at the time that this was a false representation of the reason Wilshire would
bill Ms. Tataw for its litigations costs and also misrepresented Wilshire‟s role in
determining how the funds were to be used.
On October 18, 2007, the action was dismissed with prejudice because there
was no dispute about how the funds should be used. As promised, and in
accordance with the terms of the Deed of Trust, Wilshire assessed its attorney‟s
fees against Ms. Tataw‟s mortgage loan. The remaining funds from the account
11
were paid out to Ms. Tataw and the contractor, who received only $9,246.22
although the estimate for repairs was $20,000. While some repairs might have
been done on the Property, Wilshire was never made aware of them, and though
Mr. Bonfiglio had requested that respondent provide him that information,
respondent never did. The legal fees Wilshire assessed against Ms. Tataw‟s
mortgage were never paid because after January of 2008, Ms. Tataw stopped
making payments on her mortgage. Wilshire later foreclosed on the Property,
selling it for $130,000, about one-third of the amount Ms. Tataw had purchased it
for. On November 28, 2007, Mr. Bonfiglio reported respondent to Bar Counsel.
On August 18 and 27, 2009, an Ad Hoc Hearing Committee heard the
testimony of Bar Counsel‟s three witnesses and admitted thirty-eight of Bar
Counsel‟s exhibits. Respondent, who was represented by counsel, testified himself
and called a single witness on his behalf. Respondent‟s exhibits were also
admitted into evidence. The Hearing Committee concluded that respondent
violated Rules 1.15 (b) and 1.15 (c)5 of the Rules of Professional Conduct and
recommended that respondent be disbarred. Bar Counsel did not file an exception
to the Hearing Committee‟s report and recommendation, but respondent did. In its
5
Rule 1.15 has been revised during the pendency of this appeal, so that
Rule 1.15 (b) is now Rule 1.15 (c) and Rule 1.15 (c) is now Rule 1.15 (d). We
refer to the version of Rule 1.15 in effect at the time of the conduct in question.
12
report and recommendation, the Board expressly adopted the Hearing Committee‟s
findings of fact and recommendation that respondent be disbarred for intentional
misappropriation, but found that respondent had only violated 1.15 (c) because
1.15 (b) and (c) were mutually exclusive, such that he could not have violated both.
Bar Counsel agreed with the finding that respondent intentionally misappropriated
funds in violation of Rule 1.15 (c), but differed from the Board in its legal analysis.
Bar Counsel also disagreed that Rules 1.15 (b) and (c) are mutually exclusive, and
thus argues that respondent should be found to have violated both. Respondent
also takes exception to the Board‟s report and recommendation, raising numerous
issues on appeal. We suspended respondent on an interim basis on August 9, 2012,
and now consider the issues raised by both respondent and Bar Counsel,
respectively.
ANALYSIS
We accept the Board‟s findings of fact, “unless they are unsupported by
substantial evidence of record,” and review the Board‟s legal conclusions de novo.
D.C. Bar R. XI, § 9 (h)(1); In re Pierson, 690 A.2d 941, 946-47 (D.C. 1997).6
6
The Board, in turn, is required to accept the factual findings of the Hearing
Committee that are supported by substantial evidence in the record, viewed in its
(continued . . .)
13
“The [Board]‟s proposed sanction comes to this court with a strong presumption in
favor of its imposition.” In re White, 11 A.3d 1226, 1233 (D.C. 2011) (per curiam)
(citations omitted). We adopt the recommended disposition of the Board, “„unless
to do so would foster a tendency toward inconsistent dispositions for comparable
conduct or would otherwise be unwarranted.‟” In re Cleaver-Bascombe, 986 A.2d
1191, 1194 (D.C. 2010) (per curiam) (quoting D.C. Bar R. XI, § 9 (h)(1)).
Respondent’s Exceptions
Respondent challenges the Board‟s Report and Recommendation on a
number of grounds, two of which can be disposed of summarily.7
First, respondent argues that the findings by the Board are not supported by
substantial evidence in the record. In actuality, however, respondent‟s argument is
merely that the Board adopted the Hearing Committee‟s findings, which he
characterizes as arbitrary and capricious because he disagrees with those findings.
entirety. In re Micheel, 610 A.2d 231, 234 (D.C. 1992). “However, the Board
owes no deference to the hearing committee‟s determination of ultimate facts,
which are really conclusions of law.” Id. (internal quotation marks omitted).
7
Respondent raises various issues throughout his brief, but lists only six in
his “Issues Presented” section. This opinion attempts to address all issues raised,
though they are consolidated.
14
For example, respondent argues that “the Board adopted the finding that
[respondent] testified falsely that he did not receive Wilshire‟s instruction to
endorse and forward the insurance check,” which was “without basis in the
record.” There was, of course, substantial evidence to support the Hearing
Committee‟s finding that he testified falsely in this regard. First, respondent
testified that he called Wilshire the day that he received the check and, though he
first denied being told to endorse the check and forward it to Wilshire‟s “Millikan
Way” address, he later testified that he didn‟t know if anyone had told him to
endorse it and send it to Wilshire, indicating that “they could have mumbled it in a
conversation or he might not have understood it.” After learning that Wilshire had
a record of the conversation and after being asked how he knew to send his letter
to Wilshire at its Millikan Way address, respondent answered “[p]robably because
somebody at the company gave me an address, probably that individual I talked to
on the 16th.” In fact, before the Hearing Committee Wilshire presented a
contemporaneous business record documenting that during the call, its customer
service representative, Ms. Kehoe, told respondent that he and Ms. Tataw should
endorse the check and then send it to the Millikan Way address. This was more
than substantial evidence from which the Hearing Committee and the Board could
find that respondent‟s testimony on this issue was false. Respondent‟s similar
arguments that the Board‟s findings of fact are not supported by substantial
15
evidence are also without merit because there is substantial evidence in the record
to support each of the Board‟s factual findings.
Respondent also contends that the Board incorrectly rejected his argument
that litigation of the disciplinary charges against him was barred by the doctrines of
res judicata and/or collateral estoppel. Underlying this argument is his contention
that Wilshire abandoned its claim to the $5,123.10 that respondent took from the
insurance proceeds for legal fees during the declaratory action in Superior Court,
and therefore, relitigation of respondent‟s entitlement to those fees is now barred.
However, as the Board correctly recognized, the Superior Court “did not decide
whether respondent was entitled to take his fee from the insurance proceeds or
whether doing so constituted a disciplinary violation.”8 Because the issues raised
8
In granting Wilshire‟s motion for summary judgment and dismissing the
action with prejudice, the Superior Court explained that:
It is uncontroverted that defendant is not presently
making any demand that all of the funds be turned over
to it and specifically endorses plaintiff‟s request that the
remaining funds be turned over to plaintiff. Between
plaintiff and defendant, there is no matter presently in
controversy and nothing for this court to decide.
Importantly, in that action Ms. Tataw was the plaintiff, not respondent, who was
merely representing her. As such, there was no litigation concerning whether
respondent was in fact within his right to take his fee from the insurance proceeds,
(continued . . .)
16
in this disciplinary proceeding were not raised and decided in any prior litigation,
this disciplinary action is not barred by the doctrine of res judicata. See Caloramis
v. Caloramis, 3 A.3d 1186, 1190 (D.C. 2010) (explaining that in determining
whether res judicata applies, this court considers: “(1) whether the claim was
adjudicated finally in the first action; (2) whether the present claim is the same as
the claim which was raised or which might have been raised in the prior
proceeding; and (3) whether the party against whom the plea is asserted was a
party or in privity with a party in the prior case”); see also In re Stanton, 589 A.2d
425, 426 (D.C. 1991) (per curiam) (emphasis added) (explaining that the doctrine
of res judicata applies to disciplinary proceedings “so as to prevent litigation of
defenses raised . . . in prior disciplinary proceedings”).
Respondent‟s remaining arguments merit a more substantial discussion.
First, respondent challenges the Board‟s legal interpretation that Wilshire had a
“just claim” to the proceeds of the insurance check because respondent‟s conduct
evidenced his tacit agreement to be bound by the mortgage contract between Ms.
Tataw and Wilshire, despite the fact that he was not a party to that contract.
Respondent argues that under a correct interpretation of Rule 1.15 (c), Wilshire did
and there was certainly no litigation with respect to whether doing so violated the
Rules of Professional Conduct.
17
not have a just claim to the proceeds of the insurance check and, therefore, he did
not violate the rule when he failed to safeguard the money in his possession. Bar
Counsel also takes exception to the Board‟s legal interpretation of Rule 1.15 (c),
but argues that even under a correct legal interpretation there was substantial
evidence that respondent violated Rule 1.15 (c). Next, respondent argues that even
if Wilshire had a just claim to the insurance proceeds, the company waived its right
to object to his endorsement and negotiation of the settlement check by failing to
respond to his several communications concerning the funds. Finally, respondent
argues that even if his conduct violated Rule 1.15 (c), disbarment is not the proper
sanction.
We turn first to the question of whether the Board‟s legal interpretation of
Rule 1.15 (c) is correct. Rule 1.15 (c) provides:
When in the course of representation a lawyer is in
possession of property in which interests are claimed by
the lawyer and another person, or by two or more persons
to each of whom the lawyer may have an obligation, the
property shall be kept separate by the lawyer until there
is an accounting and severance of interests in the
property. If a dispute arises concerning the respective
interests among persons claiming an interest in such
property, the undisputed portion shall be distributed and
the portion in dispute shall be kept separate by the lawyer
until the dispute is resolved. Any funds in dispute shall
be deposited in a separate account meeting the
requirements of paragraph (a).
18
Rule of Professional Conduct 1.15 (c). The comments to the rule illustrate the
extent to which a lawyer‟s duty to a third party extends in such situations:
Third parties . . . may have just claims against funds or
other property in a lawyer‟s custody. A lawyer may have
a duty under applicable law to protect such third-party
claims against wrongful interference by the client, and
accordingly may refuse to surrender the property to the
client.
Rule of Professional Conduct 1.15 (c), cmt. 4.9 This court has also considered the
question of what constitutes a just claim for purposes of Rule 1.15. The leading
case on this issue is In re Bailey, 883 A.2d 106 (D.C. 2005). In that case, this court
found that Mr. Bailey misappropriated funds when he “borrowed” the entirety of a
client‟s settlement award and used it for his own purposes, despite having agreed
to use some of the funds to pay the medical provider, who had treated the client
after she suffered a personal injury. Id. at 121-22. The court explained that unlike
the claims of a client, which do not need to be justified in order to bar the lawyer
from making a distribution, claims of a third party require something more—a
“just claim”—“as to which „applicable law‟ imposes a duty on the lawyer to
distribute the funds to a third party or withhold distribution.” Id. at 116-17(citations omitted). A “just claim,” the court explained:
[I]s one that relates to the particular funds in the lawyer‟s
possession, as opposed to merely being (or alleged to be)
9
This is now Rule of Professional Conduct 1.15 (d), cmt. 7.
19
a general unsecured obligation of the client. . . .
Examples of “just claims” include: (1) “an attachment or
garnishment arising out of a money judgment against the
client”; (2) “a statutory lien”; (3) “a court order relating
to the specific funds in the lawyer‟s possession”; and (4)
“a contractual agreement.”
Id. at 117 (quoting D.C. Ethics Op. No. 293, “Disposition of Property of Clients
and Others Where Ownership is in Dispute” (adopted July 20, 1999, revised Nov.
16, 1999) [hereinafter “D.C. Ethics Op. No. 293”]). With respect to the fourth
example, a “contractual agreement,” we explained, “the reference is to a
contractual agreement made by the client and joined in or ratified by the lawyer to
pay certain funds in the possession of the lawyer . . . to a third party.” Id.(emphasis added) (citations and internal quotation marks omitted).
The Board, apparently under the belief that In re Bailey provided the
exclusive circumstances under which a third party could have a “just claim” to
money being held by an attorney, reasoned that respondent tacitly agreed to be
bound by the terms of the Deed of Trust between Wilshire and Ms. Tataw by his
extensive efforts to secure Wilshire‟s permission to negotiate the check and,
therefore, he was bound by the terms of the Deed of Trust that established
Wilshire‟s just claim to the proceeds of the insurance payment.
20
Respondent argues that the Board‟s interpretation is flawed because the
requirement that a lawyer “voluntarily agree to” or “ratify” a contractual agreement
between the client and a third party “usually refers to a written agreement signed
by the attorney.” And, therefore, because he never signed any document
consenting to be bound by the mortgage contract between Ms. Tataw and Wilshire,
“the Board imposed an agreement where none existed.” Respondent also argues
that because there was no evidence that he orally agreed to be bound by the
mortgage contract, Wilshire could not have had a “just claim” to the funds in his
possession under any contractual theory.
While the facts of this case do not fit squarely within any of the four discrete
examples listed in In re Bailey, that case is nevertheless controlling. In In re
Bailey, this court adopted the definition of “just claim” that was earlier articulated
in D.C. Legal Opinion No. 293, which is that a just claim is one as to which
“applicable law imposes a duty on the lawyer to distribute the funds to the third
party or withhold distribution.” 883 A.2d at 116-17 (internal quotation marks
omitted). The four examples of just claims outlined in the opinion are not meant to
be an exhaustive list of circumstances where applicable law imposes such a duty
on lawyers. Here, Wilshire was listed as a payee on the insurance check, and it is
settled law that a check, which is a valid legal instrument, cannot be negotiated
21
without the endorsement of all named payees. D.C. Code § 28:3-110 (d) (2012)
(“If an instrument is payable to 2 or more persons not alternatively, it is payable to
all of them and may be negotiated, discharged, or enforced only by all of them.”).
Thus, because Wilshire was listed as a payee on a valid legal instrument,
“applicable law” gave Wilshire a “just claim” to the proceeds of the check and
created a duty on the part of the respondent in this case to safeguard the check until
the dispute over its negotiation and entitlement to its proceeds could be resolved.
Importantly, the facts show that respondent was well aware that as a payee
on the check, applicable law conferred on Wilshire a just claim to the funds.10 Not
only did respondent make repeated efforts to obtain Wilshire‟s authorization to
take his fee from the insurance proceeds upon receiving the check but he also
testified that he denied Ms. Tataw‟s request for access to the insurance proceeds on
the basis that he could not do so without Wilshire‟s permission. The fact that
respondent later initiated a declaratory judgment action against Wilshire further
demonstrates that he understood that as a payee on the check, Wilshire had a just
claim or entitlement to the funds. Though respondent clearly knew that ownership
10
While both the Board and Bar Counsel seem to recognize that respondent
knew of Wilshire‟s interest prior to receiving the insurance check, at the very least
by the time he received that check respondent had to have known that Wilshire had
a just claim to the insurance proceeds “for the very simple reason that it was a
payee on the check.”
22
of the funds was disputed, he failed to keep the disputed monies separate until an
accounting could be completed, as required by Rule 1.15 (c), and even decided to
withdraw his fee the next business day after depositing the funds into his firm‟s
trust account. Thus, the Hearing Committee and the Board correctly determined
that respondent was aware that Wilshire had a just claim to the funds and that
respondent intentionally misappropriated those funds in violation of Rule 1.15 (c).
In re Anderson, 778 A.2d 330, 339 (D.C. 2001) (emphasis added) (citing In re
Micheel, 610 A.2d at 236) (explaining that whether a misappropriation is reckless
rather than merely negligent turns on “how the attorney handles entrusted funds,
whether in a way that suggests the unauthorized use was inadvertent or the result
of simple negligence, or 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”).
Alternatively, respondent, relying on In re Thomas, 740 A.2d 538 (D.C.
1999), argues that even if Wilshire did have a just claim to the funds, the company
nevertheless waived its objection to his endorsement and negotiation of the
insurance check by failing to respond to his communications or to otherwise take
required actions to indicate its lack of consent. However, unlike in In re Thomas,
where there was some evidence that the insurer had actually waived its entitlement
23
to a lien on the property, 740 A.2d at 546-47, there is no such evidence of a waiver
in this case. Importantly, here the Hearing Committee found that: respondent
falsely testified when he denied that a customer service representative at Wilshire
told him to endorse the check and forward it; there was absolutely no evidence to
suggest that respondent actually attempted to call Wilshire several times over the
next few days to obtain authorization to negotiate the check; the July 19, 2007, fax
was not a good-faith effort to obtain Wilshire‟s consent; and during pendency of
the declaratory judgment litigation, Wilshire repeatedly refused to ratify
respondent‟s conduct. As such, Wilshire did not waive its right to object to
respondent‟s unauthorized endorsement and negotiation of the insurance check,
which constituted intentional misappropriation.
This court will adopt the recommended disposition of the Board, “unless to
do so would foster a tendency toward inconsistent dispositions for comparable
conduct or would otherwise be unwarranted,” In re Cleaver-Bascombe, 986 A.2d
1191, 1194 (D.C. 2010) (per curiam) (quoting D.C. Bar R. XI, § 9 (h)(1)), and in
this case the Board recommended the presumptive sanction for intentional
misappropriation, which is disbarment. Matter of Addams, 579 A.2d 190, 191
(D.C. 1990) (en banc).
24
Respondent argues, however, that disbarment is an improper sanction, citing
In re Romansky, 938 A.2d 733 (D.C. 2007) to support that proposition. In re
Romansky is clearly distinguishable from the instant case. First, In re Romansky is
a billing fraud case in which this court, sitting en banc, concluded that Romansky
did not violate Rule 8.4 (c) when he charged two clients for more hours than his
attorneys worked because there was not “clear and convincing evidence” that he
acted recklessly rather than negligently. Id. at 742. This court concluded that there
was substantial evidence in the record that he had made “a good faith mistake” that
was “inconsistent with dishonest intent,” including the fact that the law firm he
worked for had recently changed its billing practices, the bills at issue were sent
out shortly after the new policy was initiated, two attorneys in the firm testified
that Romansky could have been confused as to which policy applied to the two
clients at issue, and Romansky was “responsible for an unusually large number of
bills totaling millions of dollars.” Id. at 741. Because we concluded that
Romansky‟s violation of Rule 8.4 (c) was negligent, as opposed to reckless or
intentional, we agreed with the Board‟s recommendation that a thirty-day
suspension in that case was the proper sanction for the negligent submission of
false documents. Id. at 743.
25
The instant case, however, falls within the Addams line of cases, Matter of
Addams, 579 A.2d at 190, in which the respondent intentionally misappropriated
client funds from a trust account that were intended to be used to pay the holder of
the client‟s promissory note. Id. at 192. Like in the instant case, in Matter of
Addams it was not the client that was upset with the lawyer‟s conduct, but rather,
the third party note holder. Id. Upon consideration of the presumptive sanctions
for intentional misappropriation in other jurisdictions, this court concluded that “in
virtually all cases of misappropriation, disbarment will be the only appropriate
sanction unless it appears that the misconduct resulted from nothing more than
simple negligence.” Id. at 191. Thus, although the respondent in that case had
been practicing law for twenty-two years without any disciplinary sanctions, and
“while the complainant was the disgruntled third-party note holder and not
Addams‟ client, that circumstance offer[ed] no solace when the purpose of the
severe sanction is to maintain public confidence in the bar,” id. at 199, such that
disbarment was the proper sanction. As in Addams, supra, the findings of the
Board in this case support the conclusion that respondent intentionally
misappropriated funds to which a third party had a just claim. Therefore,
disbarment is the proper sanction unless extraordinary circumstances warrant a
lesser sanction and those extraordinary circumstances are not present in this case.
See, e.g., In re Kersey, 520 A.2d 321, 326 (D.C. 1987) (explaining that the fact that
26
an attorney suffered from alcoholism, which played a role in his misconduct, was a
mitigating factor to be considered in determining how he should be sanctioned).
Under the circumstances here, we are satisfied that imposing the
presumptive sanction of disbarment “would [not] foster a tendency toward
inconsistent dispositions for comparable conduct or otherwise be unwarranted.” In
re Cleaver-Bascombe, 986 A.2d at 1194; see also Matter of Addams, 579 A.2d at
199. As such, respondent is disbarred from the practice of law in the District of
Columbia.
Bar Counsel’s Remaining Exception
Bar Counsel takes exception to the Board‟s legal conclusion that Rules 1.15
(b) and (c) are mutually exclusive, such that respondent could not have violated
both. However, having concluded that respondent committed intentional
misappropriation in violation of Rule 1.15 (c), the presumptive sanction for which
is disbarment, we need not reach this issue in this appeal. See In re Corizzi, 803
A.2d 438, 439 n.1 (D.C. 2002) (citations omitted) (declining to address Bar
Counsel‟s exceptions challenging the Board‟s failure to find additional ethical
27
violations because disbarment was warranted based on the violations about which
there was no dispute).
Accordingly, it is therefore ORDERED that respondent Sandy V. Lee is
disbarred from the practice of law in the District of Columbia, effective thirty days
from the date of this opinion. See D.C. Bar. R. XI, § 14 (f). Respondent shall not
be eligible for reinstatement for five years from the effective date of disbarment,
pursuant to D.C. Bar R. XI, § 16 (a). Respondent‟s attention is called to D.C. Bar
R. XI, § 14, including the affidavit requirement of subsection (g), and to the
consequences of not timely complying with the requirements of section 14 set forth
in D.C. Bar R. XI, § 16 (c). For the purposes of reinstatement to the bar,
respondent‟s disbarment shall commence on the date he files a sufficient affidavit
pursuant to D.C. Bar R. XI, § 14 (g).
So ordered.