Iowa Supreme Court Attorney Disciplinary Board v. Luke D. Guthrie ( 2017 )

IN THE SUPREME COURT OF IOWA
No. 17–0879
Filed September 15, 2017
Amended November 8, 2017
IOWA SUPREME COURT ATTORNEY DISCIPLINARY BOARD,
Complainant,
vs.
LUKE D. GUTHRIE,
Respondent.
On review of the report of the Iowa Supreme Court Grievance
Commission.
The grievance commission found the respondent committed
multiple ethical violations and recommends a three-month license
suspension. LICENSE REVOKED.
Tara M. van Brederode, Des Moines, and Andrew J. Boettger of
Hastings, Gartin & Boettger, Ames, for complainant.
David L. Brown and Tyler R. Smith of Hansen, McClintock & Riley,
Des Moines, for respondent.
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ZAGER, Justice.
The Iowa Supreme Court Attorney Disciplinary Board (Board) filed
a complaint against an attorney alleging multiple violations of our ethical
rules including the misappropriation of funds in his representation of
three clients. The Board also alleged the attorney violated ethical rules
arising from his conviction for domestic abuse assault. The Iowa
Supreme Court Grievance Commission (commission) found eight
violations of our ethical rules and recommended a three-month
suspension. For the reasons outlined below, we revoke the attorney’s
license to practice law in the state of Iowa.
I. Background Facts and Proceedings.
Attorney Luke Guthrie has been licensed to practice law in the
state of Iowa since 2006. At the time of the conduct giving rise to this
disciplinary action, Guthrie was practicing law at Roberts, Stevens,
Prendergast, and Guthrie, PLLC, in Waterloo, Iowa. On November 11,
2015, Guthrie was arrested for domestic abuse assault, first offense, in
Grundy County, Iowa. On November 12, Guthrie informed his law
partners that he was self-admitting himself into a substance-abuse
treatment program and took a leave of absence from the firm. After
becoming aware of other potential ethical violations, the firm terminated
Guthrie’s partnership on November 24. As part of the termination, the
firm informed Guthrie he would need to self-report his potential ethical
violations or the firm would do so. Guthrie self-reported the potential
ethical misconduct to the Board on December 7. The ethical misconduct
arose out of his handling of billings and trust account issues in three
separate client matters, in addition to Guthrie’s arrest for domestic
abuse assault.
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A. Vogel Matter. Guthrie represented Brian Vogel in a
modification action which was finalized by decree on July 22, 2015. A
notice of appeal was filed by the opposing party on August 21. On
September 25, Guthrie and Vogel signed a fee contract and Vogel paid a
retainer of $4965.50, which was deposited into the firm’s trust account.
On October 16, the appellant voluntarily dismissed the appeal. This
voluntary dismissal of appeal was electronically received by Guthrie and
his office at 10:35 a.m. that same date. Guthrie was notified by staff of
the dismissal, but directed staff not to notify Vogel of the dismissal.
On the same day as the voluntary dismissal, Guthrie billed Vogel
for 4.1 hours of work amounting to $717.50. Guthrie claimed that this
time was for work on the proof brief and designation. On October 22,
Guthrie billed Vogel for two hours of time for work on the final
brief/reply brief in the amount of $350. On October 23, Guthrie billed
Vogel for two hours of work on the final proof brief in the amount of
$350. On October 26, Guthrie billed Vogel for two hours of time for
receipt and review of appellant’s brief in the amount of $350. Finally, on
October 28, Guthrie billed Vogel for 1.8 hours of work on his brief in the
amount of $315. There was also an additional charge for fees of $190
after the voluntary dismissal. Therefore, following the voluntary
dismissal, Guthrie billed Vogel an additional 8.6 hours in the amount of
$1505 for work that was never performed.
A staff member prepared a preliminary bill for review by Guthrie.
At that time, she questioned what would happen if the client requested
copies of Guthrie’s work product he had billed for. Guthrie told the staff
person that he doubted Vogel would ever ask for copies of the work
product he billed him for, but if he did, he would have to figure
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something out. Guthrie had performed no work on the proof brief,
designation of appendix, or reply brief for which he billed Vogel.
On November 6, Guthrie directed staff at the firm to transfer
$3797.50 from Vogel’s trust subaccount to the firm’s general account.
That same day, Guthrie withdrew $600 as a check for fees in the Vogel
case. Vogel was not advised of the dismissal of the appeal until
November 15, nine days after the unearned fees were taken and three
days after Guthrie took his leave of absence from the firm. The firm
refunded Vogel all funds for the unearned fees.
B. Dizdarevic Matter. Guthrie also represented Muhamed
Dizdarevic in a child custody case. On November 6, 2015, Guthrie billed
Dizdarevic $262.50 for a 1.5 hour telephone conference with opposing
counsel. Guthrie admitted no telephone conference occurred, which was
also confirmed by opposing counsel. On the same day, Guthrie directed
staff at the firm to transfer $332.50 from Dizdarevic’s trust subaccount
to the firm’s general account. He thereafter withdrew $600 as a check
for fees in the Dizdarevic case. The firm reimbursed Dizdarevic for the
unearned fees.
C. Petrick Matter. Guthrie represented Christina Petrick in a
family law case in 2015. On November 3, 2015, Guthrie billed Petrick for
1.5 hours for discovery review and a telephone conference totaling
$262.50. On November 4, Guthrie billed Petrick for two hours of work in
the amount of $350 for the receipt and review of a client file allegedly
received from her previous attorney. On November 6, Guthrie directed
staff at the firm to transfer $743.75 from Petrick’s trust subaccount to
the firm’s general account. Guthrie then withdrew $600 as a check for
fees. In reviewing this billing, another partner determined that Guthrie
could not have received and reviewed the other attorney’s file as she
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herself received the file on November 12 after Guthrie had left the firm.
As the file could not yet have been received by Guthrie, he did not receive
or review Petrick’s client file on November 4 as billed. Later on, another
attorney at the law firm reviewed the file and determined the firm would
be unable to represent Petrick due to a conflict of interest. The firm
refunded Petrick the entire retainer she had paid in trust in the amount
of $2500. This included the fees that Guthrie had billed.
D. Domestic Assault. On November 11, 2015, Guthrie was
arrested for domestic abuse assault for assaulting his girlfriend. On May
9, 2016, Guthrie pled guilty to domestic abuse assault in violation of
Iowa Code section 708.2A(2)(a)(2015). The court entered an order for
deferred judgment and probation.
E. Proceedings. On November 10, 2016, the Board filed its
complaint against Guthrie. It charged him with two counts: Count I
alleged Guthrie violated six ethical rules in his representation of Vogel,
Dizdarevic, and Petrick. 1 It alleged he misappropriated client funds in an
amount exceeding $500 but not $1000 in value. This was in conjunction
with the alleged theft of funds. Count II alleged Guthrie violated one
ethical rule due to his guilty plea to domestic abuse assault. 2 On
December 6, Guthrie filed his answer, admitting all of the allegations. In
the original complaint, the Board recommended that Guthrie’s license be
revoked.
1These were Iowa Rules of Professional Conduct 32:1.5(a) (charging or collecting
an unreasonable fee), 32:1.15(c) (depositing client funds into trust account), 32:1.15(d)
(promptly delivering client funds or property), 32:1.15(f) (handling of client trust
accounts), 32:1.16(d) (refunding of advance fees or payments), 32:8.4(b) (committing a
criminal act reflecting adversely upon the lawyer’s fitness to practice law—theft, and
32:8.4(c) (engaging in conduct involving dishonesty, fraud, deceit, or
misrepresentation).
2This rule was 32:8.4(b) (committing a criminal act reflecting adversely upon the
lawyer’s fitness to practice law—domestic abuse assault).
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The commission conducted an evidentiary hearing on April 12,
2017. Guthrie submitted a stipulation of facts and rule violations at the
time of the hearing. The stipulation was not timely submitted pursuant
to Iowa Court Rule 36.16. However, the commission elected to receive it
as an exhibit constituting an admission to the facts and rule violations
alleged in the complaint.
The commission found Guthrie committed eight violations of the
Iowa Rules of Professional Conduct: 32:1.5(a) (charging or collecting an
unreasonable fee), 32:1.15(c) (depositing client funds into a trust
account), 32:1.15(d) (promptly delivering client funds or property),
32:1.15(f) (handling of client trust accounts), 32:1.16(d) (refunding of
advance fees or payments), 32:8.4(b) (committing a criminal act reflecting
adversely upon the lawyer’s fitness to practice law—theft), 32:8.4(b)
(criminal act reflecting adversely upon the lawyer’s ability to practice
law—domestic abuse assault), and 32:8.4(c) (engaging in conduct
involving dishonesty, fraud, deceit, or misrepresentation). Based upon
Guthrie’s admission to the rule violations, the hearing primarily focused
on the consideration of pertinent mitigating and aggravating factors. In
its findings of fact, conclusions of law, and recommendations, the
commission considered the rule violations, the mitigating and
aggravating circumstances, and recommended a three-month
suspension. Upon our review, Guthrie requests either a public
reprimand or a thirty-day suspension. The Board continues to
recommend revocation.
II. Standard of Review.
We review attorney disciplinary cases de novo. Iowa Supreme Ct.
Att’y Disciplinary Bd. v. Willey, 889 N.W.2d 647, 653 (Iowa 2017). “The
Board must prove attorney misconduct by a convincing preponderance of
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the evidence, a burden greater than a preponderance of the evidence but
less than proof beyond a reasonable doubt.” Iowa Supreme Ct. Att’y
Disciplinary Bd. v. Stoller, 879 N.W.2d 199, 207 (Iowa 2016) (quoting
Iowa Supreme Ct. Att’y Disciplinary Bd. v. Cross, 861 N.W.2d 211, 217
(Iowa 2015)). We give the commission’s findings and recommendations
respectful consideration, but we are not bound by them. Id. If we find
the Board proved attorney misconduct, it is within our discretion to
impose a sanction that is lesser or greater than that recommended by the
commission. Willey, 889 N.W.2d at 653.
While stipulations of fact are binding on the parties in a
disciplinary proceeding, Iowa Supreme Ct. Att’y Disciplinary Bd. v.
Pederson, 887 N.W.2d 387, 391 (Iowa 2016), “[a]n attorney’s stipulation
as to a violation is not binding on us.” Willey, 889 N.W.2d at 653
(alteration in original) (quoting Iowa Supreme Ct. Att’y Disciplinary Bd. v.
Kingery, 871 N.W.2d 109, 117 (Iowa 2015)). “Even if an attorney’s
stipulation concedes a rule violation, we will only find that a violation
occurred if the facts are sufficient to support the stipulated violation.”
Id.
III. Analysis.
A. Rule Violations. Count I of the complaint alleges Guthrie
violated a number of ethical rules with regard to client trust accounts.
However, at the core, the Board alleged, and the commission found, that
Guthrie misappropriated client funds. Because of the severity of the
allegation, we first consider the violations alleging Guthrie
misappropriated client funds.
Rule 32:8.4(c) provides that it is a violation of our ethical rules for
an attorney to “engage in conduct involving dishonesty, fraud, deceit, or
misrepresentation.” Iowa R. Prof’l Conduct 32:8.4(c). An attorney
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violates this rule when he or she commits theft by misappropriating
client funds. Iowa Supreme Ct. Att’y Disciplinary Bd. v. Green, 888
N.W.2d 398, 404 (Iowa 2016). A person commits the criminal act of theft
by misappropriation when the person
[m]isappropriates property which the person has in trust, or
property of another which the person has in the person’s
possession or control, whether such possession or control is
lawful or unlawful, by using or disposing of it in a manner
which is inconsistent with or a denial of the trust or of the
owner’s rights in such property, or conceals found property,
or appropriates such property to the person’s own use, when
the owner of such property is known to the person.
Iowa Supreme Ct. Att’y Disciplinary Bd. v. Thomas, 844 N.W.2d 111, 116
(Iowa 2014) (quoting Iowa Code § 714.1(2) (2011)). While we utilize the
same definition, we do not require a criminal conviction for theft in order
to find a violation of our rules. Id.; see also Comm. on Prof’l Ethics &
Conduct v. Hall, 463 N.W.2d 30, 35 (Iowa 1990) (“It is also immaterial
that respondent was not charged or convicted of a crime. A criminal
conviction is not a condition precedent to a discipline proceeding when
the facts themselves warrant discipline.”). This is due in part to the fact
that we only require allegations of theft in the context of attorney
disciplinary cases to be proved by a convincing preponderance of the
evidence. Green, 888 N.W.2d at 404. “[A] criminal law defense is not a
defense in a disciplinary proceeding since the purpose of a disciplinary
hearing is not primarily intended to punish the lawyer but rather to
protect the public.” Id. (quoting Iowa Supreme Ct. Att’y Disciplinary Bd.
v. Khowassah, 837 N.W.2d 649, 655 (Iowa 2013)).
Additionally, we must also find that the attorney acted with “some
level of scienter” when there has been an alleged misappropriation of
client funds. Id. at 403 (quoting Iowa Supreme Ct. Att’y Disciplinary Bd.
v. Haskovec, 869 N.W.2d 554, 560 (Iowa 2015)). Scienter requires that
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the attorney acted knowingly, intentionally, or with the aim to mislead.
See, e.g., Iowa Supreme Ct. Att’y Disciplinary Bd. v. Ricklefs, 844 N.W.2d
689, 698–99 (Iowa 2014).
While it may be debatable whether Guthrie misappropriated client
funds involving Dizdarevic and Petrick, it is clear that Guthrie
misappropriated client funds in the Vogel case. In Vogel’s case, Guthrie
was advised on October 16, 2015, that the appeal had been dismissed.
At that time, Guthrie knew there was no remaining work to be performed
on the appeal. However, Guthrie continued to bill Vogel for unperformed
work for weeks thereafter. Even when questioned by staff about his
billing practices, Guthrie simply stated that he doubted Vogel would
notice or ask for copies of the work for which he was billed.
But Guthrie not only continued to bill Vogel for unperformed work
for weeks following the voluntary dismissal of the appeal, he also directed
the transfer of client funds from Vogel’s trust subaccount to the firm’s
general account. Guthrie later personally withdrew client funds for
unearned fees. Additionally, Guthrie acted knowingly when withdrawing
the client fees. Guthrie admits that he authorized the transfer of the
client funds to “maintain the illusion that [he] was competent and that
[his] numbers looked normal to [his] partners for that month.” And
clearly, Guthrie knew that he had not performed the work or earned the
fees.
There is also a clear acknowledgement by Guthrie of the
misappropriation and conversion of client funds contained in the
stipulation of facts and rule violations he signed. The stipulation
contains the following paragraphs:
21. In all three instances described above,
Respondent converted funds from Mr. Vogel, Mr. Dizdarevic,
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and Ms. Petrick’s retainers being held in the law firm’s trust
accounts.
22. Respondent, by authorizing and directing the
transfer of the above three clients’ funds from the trust
account into the firm’s general account, and upon taking a
draw check in the wake of that directive, did, in fact, receive
client funds.
23. Respondent misappropriated or converted for
personal use the funds referenced . . . above without a
colorable future claim thereto.
We find by clear and convincing evidence that Guthrie knowingly
misappropriated and converted client funds in the Vogel case in violation
of rule 32:8.4(c).
B. Sanctions. We apply a range of sanctions for a violation of rule
32:8.4(c), spanning from a public reprimand all the way to license
revocation. Iowa Supreme Ct. Att’y Disciplinary Bd. v. Cepican, 861
N.W.2d 841, 844 (Iowa 2015). The severity of the sanction depends upon
whether the attorney had a colorable future claim to the funds or
whether the attorney engaged in the theft of client funds. Id. (laying out
the test for determining whether suspension or revocation is the
appropriate sanction for a rule 32:8.4(c) violation). An attorney’s failure
to follow the rules governing fees normally results in a less severe
sanction; however, theft of client funds is grounds for revocation. Id.
Although the Board carries the burden to show that misappropriation of
funds has occurred, the attorney carries the burden of producing
evidence that he or she had a colorable future claim to those funds. Id.
Our professional standards regarding the protection of client funds
“are well known and . . . long-standing.” Iowa Supreme Ct. Att’y
Disciplinary Bd. v. Carter, 847 N.W.2d 228, 232 (Iowa 2014) (quoting
Iowa Supreme Ct. Bd. of Prof’l Ethics & Conduct v. Anderson, 687 N.W.2d
587, 590 (Iowa 2004)). Our sanctions in cases involving client funds
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hinges upon whether the attorney had a colorable future claim to the
funds. E.g., id.
If the attorney does have a colorable future claim to the funds
converted, we will not revoke the attorney’s license. E.g., Thomas, 844
N.W.2d at 117. In those cases, the attorney’s violation rests not upon
the misappropriation of client funds, but upon the failure to follow our
rules with regard to the safekeeping of a client’s funds. Carter, 847
N.W.2d at 232.
However, in nearly every case where an attorney converts client
funds without a colorable future claim, we revoke the attorney’s license
to practice law. See, e.g., Iowa Supreme Ct. Att’y Disciplinary Bd. v.
Stowe, 830 N.W.2d 737, 742 (Iowa 2013) (quoting numerous cases
wherein we held revocation was the appropriate sanction when attorneys
converted client funds); Iowa Supreme Ct. Att’y Disciplinary Bd. v. Nelsen,
807 N.W.2d 259, 266 (Iowa 2011) (“It is almost axiomatic that we will
revoke the license of an attorney who converts a client’s funds to his or
her own use.”); Iowa Supreme Ct. Bd. of Prof’l Ethics & Conduct v.
Williams, 675 N.W.2d 530, 533 (Iowa 2004) (revoking attorney’s license
for fictitious billing); Iowa Supreme Ct. Bd. of Prof’l Ethics & Conduct v.
Lett, 674 N.W.2d 139, 145 (Iowa 2004) (revoking attorney’s license for
stealing client funds); Iowa Supreme Ct. Bd. of Prof’l Ethics & Conduct v.
Bell, 650 N.W.2d 648, 655 (Iowa 2002) (revoking attorney’s license for
misappropriating funds); Iowa Supreme Ct. Bd. of Prof’l Ethics & Conduct
v. Leon, 602 N.W.2d 336, 339 (Iowa 1999) (revoking the license of an
attorney who misappropriated client funds); Comm. on Prof’l Ethics &
Conduct v. Ottesen, 525 N.W.2d 865, 866 (Iowa 1994) (revoking
attorney’s license for converting client funds to his own use); Comm. on
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Prof’l Ethics & Conduct v. Tullar, 466 N.W.2d 912, 913 (Iowa 1991)
(stating revocation is appropriate when attorneys convert client funds).
“There is no place in our profession for attorneys who convert
funds entrusted to them.” Thomas, 844 N.W.2d at 117 (quoting Ottesen,
525 N.W.2d at 866). Additionally, the amount of money converted does
not lessen the sanction imposed. Thomas, 844 N.W.2d at 117; Anderson,
687 N.W.2d at 590. Although in this case the firm later returned all the
unearned fees, and therefore the clients did not suffer a financial harm,
“restitution of client funds does not preclude us from revoking an
attorney’s license as a sanction.” Thomas, 844 N.W.2d at 118; see also
Anderson, 687 N.W.2d at 590 (revoking attorney’s license for
withdrawing funds from an escrow account for his personal use, even
though the attorney later replaced the funds).
Based upon our de novo review of the record, and the stipulated
facts, we find Guthrie did not have a colorable future claim to the funds
he withdrew in the Vogel matter, thus leading us to hold that he
misappropriated client funds. In the stipulated facts, Guthrie admits
that he did not have a colorable future claim to the funds and that this
resulted in the misappropriation of client funds. Guthrie presented no
evidence to the contrary. This finding is critical to the outcome of this
proceeding and makes it unnecessary for us to discuss the other rule
violations in detail. Likewise, we need not consider mitigating and
aggravating factors that may be present here.
However, we do find it necessary to make note of several facts.
First, the conduct giving rise to the ethical violations occurred over a
period of approximately one month during a time when Guthrie’s
substance abuse reached its peak. Second, since the violations, Guthrie
took immediate steps to address his substance-abuse issues. Guthrie
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sought treatment and has successfully maintained his sobriety. Finally,
there have been no further violations of our ethical rules since that time.
Guthrie should be commended for addressing his substance-abuse
issues and remaining sober. However, due to Guthrie’s misappropriation
of client funds, we find that revocation is the appropriate sanction.
IV. Conclusion.
The license of Luke D. Guthrie to practice law in the state of Iowa
is hereby revoked. Pursuant to our rules, Guthrie may apply for
reinstatement after a period of at least five years. See Iowa Ct. R.
34.25(7). In the event of application for reinstatement, Guthrie must
demonstrate that he is of good moral character and worthy of
readmission to the bar. See id. r. 34.25(9). Guthrie must also pay all
fees. See id. r. 34.25(9)(d).
LICENSE REVOKED.