In re Johnson, Jr. ( 2024 )

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DISTRICT OF COLUMBIA COURT OF APPEALS
No. 23-BG-0587
IN RE BRUCE A. JOHNSON, JR., RESPONDENT.
A Member of the Bar
of the District of Columbia Court of Appeals
(Bar Registration No. 445925)
On Report and Recommendation
of the Board on Professional Responsibility
(BDN: 20-BD-020; DDN: 2017-D158, 2018-D337, & 2018-D357)
(Argued February 22, 2024 Decided August 29, 2024)
Bruce A. Johnson, Jr., pro se.
Julia L. Porter, Deputy Disciplinary Counsel, with whom Hamilton P.
Fox, III, Disciplinary Counsel, was on the brief, for Disciplinary Counsel.
Before BECKWITH, MCLEESE, and HOWARD, Associate Judges.
PER CURIAM: Disciplinary Counsel charged respondent Bruce A. Johnson, Jr.
with numerous violations of the District of Columbia Rules of Professional Conduct,
including reckless misappropriation of entrusted funds. A Hearing Committee
concluded that Mr. Johnson had committed most but not all of the charged
violations. In particular, the Hearing Committee concluded that Mr. Johnson had
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misappropriated entrusted funds negligently rather than recklessly. The Hearing
Committee recommended that Mr. Johnson be suspended for sixteen months.
The Board on Professional Responsibility concluded that Mr. Johnson
committed many of the charged violations, but the Board concluded that
Mr. Johnson’s misappropriation was reckless rather than merely negligent. The
presumptive sanction for reckless misappropriation is disbarment, In re Addams, 579
A.2d 190, 191 (D.C. 1990) (en banc), and the Board recommended that sanction.
We conclude that Mr. Johnson committed reckless misappropriation and we
adopt the Board’s recommended sanction of disbarment.
I. Factual and Procedural Background
The charges against Mr. Johnson arose from three separate matters. In the
first two matters, the Board concluded that Mr. Johnson failed to provide a written
retainer agreement to clients, in violation of D.C. R. Pro. Conduct 1.5(b); failed to
keep and preserve complete records of entrusted client funds, in violation of D.C. R.
Pro. Conduct 1.15(a) and (e); and, upon termination of his representation, failed to
refund unearned advance fee payments and to timely surrender client papers and
property, in violation of D.C. R. Pro. Conduct 1.16(d). Mr. Johnson contests those
conclusions in this court.
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In the third matter, which we will refer to as the misappropriation matter, the
Board concluded that Mr. Johnson failed to keep and preserve complete records of
entrusted funds, in violation of D.C. R. Pro. Conduct 1.15(a); recklessly
misappropriated entrusted client funds, in violation of D.C. R. Pro. Conduct 1.15(a)
and 1.15(e); knowingly failed to respond reasonably to a lawful demand for
information from Disciplinary Counsel, in violation of D.C. R. Pro. Conduct 8.1(d);
and engaged in conduct seriously interfering with the administration of justice, in
violation of D.C. R. Pro. Conduct 8.4(d).
In light of our conclusion that Mr. Johnson committed reckless
misappropriation requiring disbarment, we need not decide whether Mr. Johnson
also committed other violations. See, e.g., In re Doman, 314 A.3d 1219, 1224 (D.C.
2024) (per curiam) (declining to decide whether other violations were proven where
“the answer to that question would not affect the sanction we impose”). Also,
Mr. Johnson does not dispute in this court that he misappropriated entrusted funds,
instead arguing only that his misappropriation was negligent rather than reckless.
We therefore focus our discussion in this opinion solely on the question whether
Mr. Johnson engaged in reckless misappropriation requiring disbarment.
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A. Proceedings before the Hearing Committee
The following evidence was presented to the Hearing Committee with respect
to the misappropriation matter.
Mr. Johnson is the only principal of his law firm and the only signatory on the
firm’s trust account. From January 2015 through February 2019, Mr. Johnson used
a credit-card-payment processing company to facilitate client payments via credit
card into the trust account. The company charged the trust account a percentage of
each credit-card transaction that was processed into the account, and the company
also charged an annual fee. Mr. Johnson also accepted payment of client fees with
American Express credit cards. American Express charged the trust account a
monthly fee as well as a percentage of each transaction that was processed into the
account. These credit-card processing fees totaled hundreds of, and sometimes over
one thousand, dollars a month.
Mr. Johnson was not aware of the extent to which credit-card payments were
being withdrawn from the trust account. Mr. Johnson did not look at the monthly
trust-account bank statements, instead giving them unopened to his accountant.
There was no checkbook for Mr. Johnson’s trust account, and to the extent there may
have been a general ledger for the trust account, Mr. Johnson did not consult it.
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Mr. Johnson was aware that acceptance of credit-card payments into the trust
account and the processing fees deducted from that account created a deficit that
required reimbursement. In 2016, Mr. Johnson became aware that his accountant
was not reconciling the trust account and that there was a deficit. In October 2016,
Mr. Johnson sent the accountant an email stating, “I need to cut a check to replenish
the trust account for bounced check fees and credit card costs. Please let me know
the amount. Thanks.” The accountant did not respond to Mr. Johnson’s email and
“kind of blew it off.” From approximately March 2015 to December 2018, no
checks were deposited to reimburse the trust account for the monthly credit-card fees
and bank charges that were being deducted. In his testimony before the Hearing
Committee, Mr. Johnson acknowledged that he had made a mistake with respect to
his supervision of the accountant.
Over $30,000 in credit-card fees was deducted from the trust account from
January 2015 through February 2019. In November 2018, Mr. Johnson wrote six
checks from the trust account that were returned for insufficient funds. On
November 21, 2018, the balance in the trust account was less than $5. In November
2018, Mr. Johnson was supposed to be holding tens of thousands of dollars in the
trust account.
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In defending himself against the charge of reckless misappropriation,
Mr. Johnson testified that he used accounting software and an accountant to assist in
the firm’s business operations and trust-account reconciliations. When Mr. Johnson
changed accountants in 2015, he had his old accountant train the new accountant.
Mr. Johnson had no indication that his new accountant did not understand the
reconciliation process.
Mr. Johnson testified that the October 2016 email to the accountant was
intended to remind the accountant of the accountant’s responsibility to replenish the
trust account for deducted credit-card fees. Mr. Johnson further testified that he was
not aware in October 2016 that there was a deficit in the trust account. Mr. Johnson
believed that the accountant was performing trust-account reconciliations, because
the accountant told Mr. Johnson, “I got it, it’s taken care of, don’t worry about it.”
After the six checks bounced in 2018, Mr. Johnson used personal funds to
replenish the trust account. Mr. Johnson also rehired his old accountant to
investigate the trust-account reconciliation issues.
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1. The Hearing Committee’s Recommendation
The Hearing Committee concluded that Disciplinary Counsel had proven by
clear and convincing evidence that Mr. Johnson had misappropriated entrusted client
funds.
On the issue of sanction, the Hearing Committee found that Mr. Johnson’s
misappropriation was negligent rather than reckless. The Hearing Committee found
several factors weighing in favor of recklessness: Mr. Johnson failed to ensure that
the trust account was closely reconciled; he ignored years of problems in the account;
and he had ample prior warning of the need to protect the trust account. Mr. Johnson
also failed to look at the monthly trust-account statements and “had been
inadvertently spending his clients’ money for years.” The Hearing Committee noted
that those actions and omissions displayed a “casual indifference” to protecting
entrusted client funds and that Mr. Johnson’s misappropriations “could be deemed
reckless” because Mr. Johnson knew that the balance in the trust account was
insufficient, yet he failed to act.
The Hearing Committee, however, also found several factors weighing in
favor of negligence: Mr. Johnson used a computer system to keep track of trust
balances; Mr. Johnson employed an accountant; and Disciplinary Counsel did not
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charge that Mr. Johnson had a practice of depositing personal funds into the trust
account.
The Hearing Committee found the issue to be “very close,” because
Mr. Johnson’s actions were “sloppy in the extreme,” and Mr. Johnson “ignored
many warning signs that should have caused him to remedy the problems with his
trust account.”
B. The Board’s Report and Recommendation
The Board adopted the Hearing Committee’s pertinent findings of fact with
respect to the misappropriation matter. The Board agreed with the Hearing
Committee that Disciplinary Counsel had proven that Mr. Johnson misappropriated
entrusted funds.
Disagreeing with the Hearing Committee, the Board concluded that
Mr. Johnson’s misappropriation of funds was reckless, not negligent. In support of
that conclusion, the Board explained that Mr. Johnson was on notice by 2016 that
the trust account was not properly being reimbursed but Mr. Johnson nevertheless
continued to be inattentive to the trust account, did not check account balances or
review bank statements, and signed checks without looking at them.
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The Board acknowledged that Mr. Johnson had made some efforts to protect
client funds, including by hiring an accountant, but concluded that Mr. Johnson’s
prolonged inattention to the trust account and prolonged failure to supervise his
accountant, despite warning signs, was an abdication of responsibility that rose to
the level of recklessness.
Having found reckless misappropriation, the Board recommended
disbarment.
II. Analysis
A. Standard of Review
“Disciplinary Counsel bears the burden of proving intentional or reckless
misappropriation—i.e. more than simple negligence—by clear and convincing
evidence.” In re Gray, 224 A.3d 1222, 1228 (D.C. 2020) (per curiam) (internal
quotation marks omitted). In considering a recommendation of the Board, this court
will defer to the Board’s findings of fact if those findings are supported by
substantial evidence. In re Haar, 270 A.3d 286, 294 (D.C. 2022). Similarly, the
Board must accept the Hearing Committee’s findings of fact if those findings are
supported by substantial evidence. Gray, 224 A.3d at 1228. Whether a given set of
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facts establishes negligent misappropriation or instead reckless misappropriation is
a question of law that this court decides de novo. Id.
B. Misappropriation in General
Misappropriation under D.C. R. Pro. Conduct 1.15 is defined as “any
unauthorized use of a client’s funds entrusted to the lawyer, including not only
stealing but also unauthorized temporary use for the lawyer’s own purpose, whether
or not [the lawyer] derives any personal gain or benefit therefrom.” In re Anderson,
778 A.2d 330, 335 (D.C. 2001) (brackets and internal quotation marks omitted).
Misappropriation “occurs whenever the balance in the attorney’s operating account
falls below the amount due to the client.” Id. (brackets and internal quotation marks
omitted).
The hallmarks of reckless misappropriation include:
[T]he indiscriminate commingling of entrusted and
personal funds; a complete failure to track settlement
proceeds; the total disregard of the status of accounts into
which entrusted funds were placed, resulting in a repeated
overdraft condition; the indiscriminate movement of
monies between accounts; and finally the disregard of
inquiries concerning the status of funds.
In re Ahaghotu, 75 A.3d 251, 256 (D.C. 2013) (internal quotation marks omitted).
These hallmarks are not “intended to be an exhaustive list of relevant factors, nor
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must all of them be present before conduct resulting in misappropriation can be
considered reckless.” Gray, 224 A.3d at 1231. Reckless misconduct can be
established if an attorney’s conduct showed “an unacceptable disregard for the safety
and welfare of entrusted funds.” Anderson, 778 A.2d at 338. Negligent
misappropriation, on the other hand, is marked by a “good-faith but inadequate effort
to comply” with Rule 1.15. In re Ponds, 279 A.3d 357, 361 (D.C. 2022) (per
curiam). “In making the distinction between negligent and reckless
misappropriation, our inquiry focuses on whether the lawyer handled the entrusted
funds in a way that suggests the unauthorized use was inadvertent or the result of
simple negligence, or in a way that reveals . . . a conscious indifference to the
consequences of [the lawyer’s] behavior.” In re Cloud, 939 A.2d 653, 660 (D.C.
2007) (internal quotation marks omitted).
C. Misappropriation in This Case
Mr. Johnson concedes that he misappropriated entrusted client funds. He
argues, however, that Disciplinary Counsel has not established by clear and
convincing evidence that he recklessly misappropriated those funds. Essentially for
the reasons stated by the Board, we agree with the Board that Mr. Johnson’s
misappropriation was reckless.
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The conclusion that Mr. Johnson’s conduct was reckless finds substantial
support in our prior decisions. See, e.g., Ahaghotu, 75 A.3d at 253-59 (single
instance of misappropriation lasting only one day was reckless, where attorney did
not reconcile accounts, had ignored problems with trust account for at least one year
before charged misappropriation, and had commingled personal and client funds);
In re Gregory, 790 A.2d 573, 574-79 (D.C. 2002) (per curiam) (misappropriation
was reckless, where attorney “abdicated his responsibility” to non-lawyer assistant
and did not check bank records or account balances after being alerted to problems).
Mr. Johnson does not discuss Gregory, on which the Board heavily relied.
Mr. Johnson does argue that his conduct differs from the conduct at issue in
Ahaghotu, because (1) unlike Mr. Ahaghotu, Mr. Johnson had not previously been
subject to discipline for mismanagement of entrusted funds; (2) Mr. Johnson was not
on notice of the issues with his trust account until after Disciplinary Counsel notified
him of the six bounced checks in 2018; and (3) Mr. Johnson did not commingle
personal and entrusted funds.
We are not persuaded by those points. First, it is true that Mr. Ahaghotu had
twice previously been admonished for mishandling of client funds. Ahaghotu, 75
A.3d at 254-55. This court did not rely on that fact, however, when determining that
Mr. Ahaghotu’s conduct in the charged matter was reckless. Id. at 256-58. Second,
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the Hearing Committee and the Board both found that Mr. Johnson had notice of the
lack of reimbursement in 2016, years before the misappropriation. As we explain
infra, we conclude that the record fully supported those findings. Third, although it
is true that Mr. Johnson did not commingle funds, there are other respects in which
Mr. Johnson’s conduct was more problematic than Mr. Ahaghotu’s. Specifically,
Mr. Johnson’s inattention to the status of the trust account was more protracted and
resulted in a very substantial shortfall in the trust account. On balance, we view
Mr. Johnson’s conduct in this case as showing a degree of recklessness quite
comparable to the degree of recklessness shown by the conduct at issue in Ahaghotu.
Mr. Johnson argues, however, that his conduct was less serious than conduct
that this court found negligent in In re Robinson, 74 A.3d 688, 695-96 (D.C. 2013),
and In re Dailey, 230 A.3d 902 (D.C. 2020) (per curiam). We disagree. In Robinson,
we concluded that the attorney had engaged in negligent misappropriation where the
trust account was overdrawn twice in a period of approximately one month and the
attorney failed to take prompt corrective action. Robinson, 74 A.3d at 695-96. In
Dailey, we found negligent misappropriation based on careless recordkeeping and
one instance of misappropriation regarding a dishonored trust-account check.
Dailey, 230 A.3d at 911-12. This case differs from Robinson and Dailey in a number
of respects. Most significantly, neither of those cases involved protracted neglect of
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a trust account after notice of problems, and neither involved a shortfall amounting
to tens of thousands of dollars.
1. Mr. Johnson’s Factual Challenges
Mr. Johnson disputes seven findings of fact relevant to the misappropriation
issue. First, Mr. Johnson argues that the record does not support the finding that he
failed to look at trust-account statements when they were received, instead giving
them unopened to his staff. In support of this challenge, Mr. Johnson relies on his
own testimony that he gave the statements to his accountant and worked with the
accountant if necessary to reconcile the account. The Hearing Committee and the
Board were not required to credit Mr. Johnson’s testimony on this point. See In re
Wilde, 299 A.3d 592, 605-06 (D.C. 2023) (Hearing Committee and Board “were not
required to accept Ms. Wilde’s version of the story,” and this court is “required to
place great weight on credibility determinations made by the Board and the Hearing
Committee because of the Hearing Committee’s unique opportunity to observe the
witnesses and assess their demeanor.”) (internal quotation marks omitted). In any
event, Mr. Johnson’s testimony that he got involved in reconciling the account “if
necessary” did not squarely contradict the finding at issue.
Second, Mr. Johnson challenges the finding that he became aware in 2016 that
there was a discrepancy between the amount of funds actually in the trust account
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and the amount reflected in his in-house accounting system. Mr. Johnson argues
that such a discrepancy would not be unusual, given that checks might not have
cleared or might have been in transit. That argument does not directly contradict the
finding at issue, but instead relates to the significance of the finding considered in
isolation. As we have explained, however, the findings at issue, taken as a whole,
establish that Mr. Johnson acted recklessly. Mr. Johnson also argues that he had
hired an accountant to handle such discrepancies, and the Hearing Committee found
that Mr. Johnson believed that the accountant in fact was doing so. Those arguments
too do not directly contradict the finding at issue. Moreover, it does not appear to
be accurate that either the Hearing Committee or the Board explicitly credited
Mr. Johnson’s testimony that he believed in 2016 that the accountant was properly
addressing the discrepancy. Rather, the Hearing Committee merely noted that
Mr. Johnson had so testified.
Third, Mr. Johnson challenges the finding that he became aware in 2016 that
the accountant was not reconciling the trust account. In fact, however, Mr. Johnson
admitted to Disciplinary Counsel that he knew that the accountant was not
reconciling the trust account, stating: “Much to my chagrin, in 2016 when I checked
in with [the accountant] on reconciliation he said he had not been doing it . . . . I
verbally told him that reconciliation was required.” Although Mr. Johnson cites his
own testimony denying that he was aware in 2016 that the accountant was not
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reconciling the account, the Hearing Committee and the Board were not required to
credit that testimony. Wilde, 299 A.3d at 605-06. Moreover, the Hearing Committee
and the Board were entitled to give weight to Mr. Johnson’s contrary admission to
Disciplinary Counsel. Cf., e.g., Chaabi v. United States, 544 A.2d 1247, 1248 (D.C.
1988) (admission of party opponent is admissible as substantive evidence).
Fourth, Mr. Johnson challenges the finding that Mr. Johnson specifically
knew in 2016 that credit-card costs and bank fees were not being reimbursed. As
the Hearing Committee explained, that finding was supported by Mr. Johnson’s
email telling the accountant that the accountant “need[ed] to cut a check to replenish
the trust account for bounced check fees and credit card costs.” Mr. Johnson argues
that, considered in isolation, that email could have simply been a reminder rather
than recognition of a problem that needed to be addressed. That email must be
considered, however, in light of the other findings in the case. Taken together, those
findings amply support the conclusions that Mr. Johnson was not himself reconciling
the trust account or examining bank statements; he was aware in 2016 that his
accountant was not reconciling the account; he was aware in 2016 that there was a
potential problem with unreimbursed credit-card expenses and bank fees; although
he on one occasion directed the accountant to prepare one reimbursement check, no
such check was prepared and no reimbursement occurred; he never followed up on
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the issue; and the problem persisted for more than two years thereafter, eventually
causing a very substantial shortfall in the trust account.
Fifth, Mr. Johnson challenges the finding that no reimbursement checks for
credit-card expenses and bank fees were issued from 2015 through 2018.
Mr. Johnson’s argument, however, is not that this finding was inaccurate, but rather
that he was not aware that reimbursement checks were not being issued, because he
reasonably believed that the accountant was causing such checks to issue. Because
Mr. Johnson was required to sign all checks, it would be quite reasonable to conclude
that he at least should have known that no such checks were being issued.
Sixth, Mr. Johnson challenges the finding that he admitted in his testimony
that his supervision of the accountant was deficient. Mr. Johnson does not deny that
made such an admission, instead apparently seeking to retract the admission and
argue that, in fact, his supervision of the accountant was reasonable. The Hearing
Committee and the Board, however, were entitled to give weight to Mr. Johnson’s
admission. Wilde, 299 A.3d at 605-06; Chaabi, 544 A.2d at 1248.
Finally, Mr. Johnson challenges a finding relating to his interaction with his
practice monitor in Maryland. The Board did not rely on that finding, and we do not
either. We therefore need not address that issue.
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In sum, we are not persuaded that Mr. Johnson’s factual challenges provide
any basis for this court to disagree with the Board’s conclusion that Mr. Johnson’s
misappropriation was reckless.
2. Mr. Johnson’s Remaining Arguments
Mr. Johnson more generally challenges the conclusion that his conduct was
reckless. In large part, Mr. Johnson’s argument rests on his view of the facts. For
reasons we have already explained, however, we are not persuaded by Mr. Johnson’s
challenges to the factual findings of the Hearing Committee and the Board.
Mr. Johnson points out a number of additional considerations that he argues
undermine a finding of recklessness: (1) he had hired an accountant; (2) he used a
software program for bookkeeping; (3) he has not been subject to prior discipline for
trust-account issues; and (4) once the overdrafts occurred in 2018, he took prompt
action to address the problem. We agree that the first two considerations provide
some support for an argument that Mr. Johnson’s conduct was negligent rather than
reckless. The third consideration seems neutral rather than affirmatively helpful to
Mr. Johnson, and the fourth appears to be factually disputed. In any event, we agree
with the Board that the considerations Mr. Johnson relies upon were outweighed by
the circumstances that we have previously discussed.
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III. Sanction
“[I]n 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.” Addams, 579 A.2d at 191. A sanction less than
disbarment is appropriate only in “extraordinary circumstances.” Id.; see also In re
Hewett, 11 A.3d 279, 286-90 (D.C. 2011) (highlighting “truly unique”
circumstances where intentional misappropriation benefited client by preserving
client’s Medicaid eligibility). We see no evidence of such extraordinary
circumstances here.
Mr. Johnson did not present evidence to support extraordinary circumstances
in mitigation before the Hearing Committee or the Board. In his brief before this
court, Mr. Johnson argues that he is a sole practitioner with a modest practice and
therefore does not have the resources to employ the accounting departments that
generally prevent large law firms from facing misappropriation charges. He also
argues that no client was ultimately harmed by his misappropriations.
We conclude that Mr. Johnson has not rebutted the presumption of
disbarment. This case is not meaningfully different from cases in which this court
has held that similar, or even more sympathetic, circumstances were insufficient to
rebut the presumption of disbarment applicable to reckless misappropriation. See,
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e.g., Gray, 224 A.3d at 1233-34 (evidence insufficient to rebut presumption of
disbarment where attorney was sole practitioner with modest practice, attorney
charged below-market fees to low- and moderate-income clients, attorney intended
to retire from practice of law, and no client was ultimately harmed).
Finally, Mr. Johnson asks this court to overrule Addams’s presumption of
disbarment for reckless misappropriation. That argument must be addressed to the
en banc court, because a division of the court is bound by our prior holdings. M.A.P.
v. Ryan, 285 A.2d 310, 312 (D.C. 1971).
In passing, Disciplinary Counsel asks us to condition Mr. Johnson’s
reinstatement on making restitution, with interest, for fees he collected but never
earned. That issue was not briefed, however, and Disciplinary Counsel has not
advised the court of the amount of restitution that would be appropriate. We
therefore decline to decide this issue at this time, but we note that the issue can be
addressed in the event that Mr. Johnson seeks reinstatement. See, e.g., In re
Roundtree, 503 A.2d 1215, 1217 (D.C. 1985) (laying out criteria for reinstatement
of disbarred attorney, including “attorney’s conduct since discipline was imposed,
[such as] the steps taken to remedy past wrongs”); In re Morrell, 859 A.2d 644, 649
(D.C. 2004) (evidence of restitution is “material with respect to [disbarred
attorney’s] recognition of the seriousness of [the attorney’s] misconduct, and as a
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reflection of steps [the attorney] has taken to remedy [the attorney’s] wrongdoing”)
(internal quotation marks omitted).
Accordingly, it is ordered that Bruce A. Johnson, Jr. be, and hereby is,
disbarred from the practice of law in the District of Columbia. For purposes of
reinstatement, the period of Mr. Johnson’s disbarment shall not begin to run until
such time as Mr. Johnson files an adequate affidavit of compliance with D.C. Bar
R. XI, § 14(g). See D.C. Bar R. XI, § 16(c).
So ordered.