Iowa Supreme Court Attorney Disciplinary Board v. Donald N. Laing and D. Scott Railsback ( 2013 )

IN THE SUPREME COURT OF IOWA
No. 13–0152
Filed June 14, 2013
IOWA SUPREME COURT ATTORNEY DISCIPLINARY BOARD,
Complainant,
vs.
DONALD N. LAING and D. SCOTT RAILSBACK,
Respondent.
On review of the report of the Grievance Commission of the
Supreme Court of Iowa.
In attorney disciplinary action, grievance commission recommends
suspension for multiple violations of ethical rules, including charging
and receiving excessive fees for services. LICENSES SUSPENDED.
Charles L. Harrington and Elizabeth E. Quinlan, Des Moines, for
complainant.
Donald N. Laing and D. Scott Railsback of Keota, pro se.
2
HECHT, Justice.
Attorneys Donald N. Laing and D. Scott Railsback provided
conservator services to a ward over a period of more than three decades.
The attorneys were later sued by the ward who alleged, and the district
court found, the attorneys had charged and received excessive fees for
their services. The Iowa Supreme Court Attorney Disciplinary Board
(Board) charged the attorneys with multiple violations of the ethical rules
governing the conduct of Iowa lawyers. A division of the Grievance
Commission of the Supreme Court of Iowa found the attorneys violated
the rules and recommended their licenses to practice law be suspended
for at least three years. We suspend their licenses for a period of
eighteen months.
I. Scope of Review.
This court reviews attorney disciplinary proceedings de novo. Iowa
Supreme Ct. Att’y Disciplinary Bd. v. McCarthy, 814 N.W.2d 596, 601
(Iowa 2012). The commission’s recommendations receive our respectful
consideration, but they do not bind us. Id. If we find a violation of an
ethical rule has occurred, our determination of the appropriate sanction
“is guided by the nature of the alleged violations, the need for deterrence,
protection of the public, maintenance of the reputation of the bar as a
whole, and [the attorney’s] fitness to continue in the practice of law.”
Comm. on Prof’l Ethics & Conduct v. Kaufman, 515 N.W.2d 28, 30 (Iowa
1994). The Board must prove its allegations of misconduct by a
convincing preponderance of the evidence. Iowa Supreme Ct. Att’y
Disciplinary Bd. v. Howe, 706 N.W.2d 360, 366 (Iowa 2005).
II. Factual Findings and Prior Proceedings.
Laing was appointed conservator for John T. Klein on May 21,
1974. Klein, a Vietnam War veteran, had a history of paranoid
3
schizophrenia, depression, and substance abuse. He needed the
assistance of a conservator, having recently inherited 160 acres of
farmland and other property from his mother’s estate. Klein inherited
from an aunt an undivided one-half interest in additional farm real estate
in the early 1980s.1 In 1993, he inherited from another aunt a certificate
of deposit and other personal property valued at $56,947.58, and he
became the life beneficiary of a trust corpus valued at $321,282.2 Klein
also owns a single lot in the state of Texas and a parcel of two acres the
respondents acquired for him in an Iowa tax sale.
The respondents performed legal services in connection with a
series of farm leases between the conservatorship and members of a farm
family who had also long been the respondents’ clients.
During the thirty-four years following his appointment in 1974,
Laing served as Klein’s conservator. Laing prepared annual reports of
the conservatorship’s status—with some assistance from Railsback, who
joined Laing as a partner in the practice of law in 1975—and submitted
them to the court for each of these years. The reports detailed the
conservatorship’s receipts and disbursements for the reporting period
and summarized the status of the ward’s assets, including an investment
account managed by an investment firm. Each year Laing sought, and a
district court judge entered, an order approving fees for the services
provided by the respondents to the ward.
Among the services for which Laing and Railsback requested
compensation were legal, accounting, and property management
1This land was partitioned in 1990 and Klein became the owner of a tract of
eighty acres.
2Income from the trust is available for Klein’s maintenance and support.
4
services, and, as we will detail below, other services typically performed
by guardians rather than conservators.
At the time of Laing’s appointment as conservator, Klein was
undergoing outpatient mental health treatment in Boulder, Colorado.
His illness presented significant challenges for his caretakers and the
respondents. During Laing’s years of service as conservator, residential
care facilities in California, Colorado, and Connecticut provided Klein’s
care for varying periods of time. When Klein’s behavior—including
occasional acts of violence directed at care providers and others—was
incompatible with the policies of residential treatment facilities housing
him, when his health insurer refused to pay for care and treatment, and
when he became dissatisfied with his accommodations and walked away,
the respondents were involved in locating Klein and relocating him from
one institutional setting to another or arranging independent residential
quarters for him.3
During periods when Klein was living “independently” in
Connecticut and Iowa, he encountered significant challenges, including
allegations of criminal law violations, substantial difficulties managing
his relationships with others, problems controlling the behavior of other
persons present in his living environment, and persistent struggles with
routine money management for his daily necessities.4 These challenges,
difficulties, problems, and struggles encountered by Klein—sometimes
when he was situated at great distance from the respondents’ law office
3When Klein ran away from a Connecticut treatment facility, he was found living
in that state on a park bench. As no relative was available to retrieve Klein and secure
proper living arrangements for him, the district court authorized Laing to do so.
4The respondents believed Klein was vulnerable to acquaintances who
manipulated him to gain access to his motor vehicle and his money.
5
in Keota—also presented challenges for the respondents as they provided
assistance.
In the seventh year of the conservatorship, the respondents
submitted a claim for two hundred twenty-seven hours of services. The
claim did not separate the hours spent performing legal services from the
hours spent performing duties ordinarily performed by a conservator or
guardian. In that reporting year, the respondents paid themselves for
services from Klein’s assets and reimbursed themselves for travel
expenses they had advanced before such payments were approved by the
court. The annual report disclosed these payments.
Klein had no legal guardian, and no relative stepped forward to
undertake the responsibility. Klein’s need for a guardian was clearly
apparent by May 1983. In that month Laing filed the ninth annual
conservatorship report and an application for compensation. These
documents presented the respondents’ claim that together they had
spent more than three hundred hours serving Klein during the previous
year, including one hundred twenty hours traveling to and from
Connecticut to visit him at a treatment facility. Although the court
initially entered an order approving the ninth annual report and the
respondents’ fees in the amount of $12,000 without notice to the ward or
a guardian ad litem representing the ward, the court later reconsidered
its decision and withdrew the order. The court appointed an interim
conservator for Klein and scheduled a hearing with notice to the
respondents, the interim conservator, and Klein’s aunt. After
considering the evidence presented at a hearing, the court again
approved the annual report, but found the respondents had failed to
show their trip to Connecticut was necessary. Accordingly, the court
6
reduced the respondents’ compensation for conservators’ and attorneys’
fees to $8500.
Laing filed the tenth annual report and request for compensation
in July 1984. The respondents’ affidavits of compensation filed with this
annual report revealed the total hours spent serving the respondent
during the reporting period and requested payment at the rate of sixty
dollars per hour, but did not separate the hours spent performing legal
services from hours spent performing conservator services. The district
court scheduled a hearing on the report and the respondents’ request for
compensation, and appointed a guardian ad litem to represent Klein at
the hearing. Following the hearing, the court again found the
respondents’ claims for compensation were unreasonable. The court’s
ruling made the following observations:
It is obvious from the outset that the conservator in this case
is acting in a dual capacity, and this has caused some of the
misunderstandings and problems which have arisen in
regard to the allowance of fees. . . . As part of the tenth
report, the conservator states that he believes the Court
should appoint a guardian for the ward and that the
conservator would decline to further serve in that capacity.
Since the conservator has never been officially appointed as
guardian, it would not be necessary for him to resign. A
petition should be presented to the Court pursuant to
Sections 633.552 of the Iowa Probate Code so a guardian
may be properly appointed. The conservator testifies that
there is no one else present and able to undertake these
duties. . . . If the conservator determines that no one else is
available and continues to serve in that capacity, he should
at least segregate his accounts and time records so that
separate applications could be presented to the Court.5
5Klein consistently opposed the appointment of a guardian during the
respondents’ years of service, apparently believing he did not need such assistance. He
changed his position during his testimony before the grievance commission, however,
and acknowledged his need for a guardian. Laing claims he tried without success over
the years to find an appropriate person to serve as Klein’s guardian, consulting the
Veteran’s Administration and representatives of a residential care facility for
7
The court disallowed the respondents’ request for compensation for
certain services provided and approved fees in an amount less than the
respondents had already paid themselves from Klein’s assets. The
court’s 1984 order therefore directed the respondents to repay Klein the
sum of $2552.01 to rectify the overpayment.
Laing filed the eleventh annual report covering the period from
May 21, 1984, to May 20, 1985, and requested fees for the respondents’
services during that period. The respondents’ itemized statement of
services claimed a total of 50.35 hours for “legal work” and a total of
17.25 hours of “conservator type work.” The district court again directed
Laing to provide notice to Klein’s guardian ad litem and scheduled a
hearing on the report and the respondents’ request for compensation.
Following the hearing, the court approved payment of fees in the amount
of $6686 and reimbursement in the amount of $69.48 for expenses
advanced by the respondents.
Laing filed annual reports and requests for compensation for the
twelfth through the thirty-third years of the conservatorship. Among the
services for which the respondents sought and obtained compensation
were those clearly of the type commonly performed by conservators:
payment of expenses, banking transactions, preparation of annual
reports, and the like. Many of the reports filed during this period,
however, revealed the respondents had performed services that did not
require legal training or asset management expertise. For example, the
respondents sought and received payment for: transporting Klein to
numerous medical appointments, taking him shopping for clothes and
stereo equipment, assisting him in purchasing and delivering gifts for
_____________________
nominations for appointment. Laing declined appointment as guardian, and he never
filed an application invoking the court’s authority to appoint someone else.
8
others, attending Klein’s birthday parties, and accompanying him to a
play and other outings for pleasure.
The annual reports were approved and fees were awarded to the
respondents each year after 1985 in the amount they requested without
notice to the ward or a guardian ad litem for the ward6 and without a
hearing. In each instance, one or both of the respondents discussed with
a district court judge the status of the conservatorship and Klein’s
health. The respondents made themselves available to the court on
these occasions to answer the court’s questions regarding the services
they had rendered for Klein since the previous reporting period.
The rates charged by the respondents for services they
characterized as “conservator services” in the twelfth through the thirty-
third reporting years steadily increased from $42 per hour in the earlier
years to $125 per hour in the later years. The number of hours claimed
during those years ranged from a low of 31.75 hours to a high of 236
hours in the thirty-third reporting year. As noted, many of the services
did not require professional knowledge or skill and were of a type
routinely performed by guardians at a much lower hourly rate. For
example, in the thirty-first annual report, the respondents claimed 215
hours of conservator services at a rate of $100 per hour. That report
claimed eighty hours for numerous round trips to Oskaloosa for the
purpose of arranging a rental residence for Klein and moving his
possessions into the house, shopping trips to Des Moines to purchase
house furnishing items, measuring windows in the rental house for
drapes, and selecting building materials for house cabinets. In Klein’s
action to remove Laing as conservator and recoup excessive fees, the
6The guardian ad litem appointed on August 8, 1984, apparently served until
May 24, 1994, when he was discharged by an order of the district court.
9
district court found the reasonable hourly rate for such services was $15
per hour. We agree with the district court’s finding and adopt it as our
own.
The respondents also claimed unreasonable time and fees for the
preparation of several of the annual reports. They claimed an average of
between ten and fifteen hours for the preparation of the first eleven
annual reports. But like their hourly rates, the number of hours the
respondents claimed for preparation of the annual reports rose steadily
over the years. When Laing filed the twenty-sixth annual report, he
represented the respondents had spent seventy-six hours in its
preparation.7 The evidence established through expert testimony that
preparation of the annual reports should not have required more than
eight hours.8
The district court judge who signed most of the orders approving
the annual reports and authorizing payment of the fees requested by the
respondents from 1986 through 2007 testified that the procedure
followed in the Klein conservatorship was consistent with his approach
in other such matters. The judge routinely relied on the integrity of
lawyers—practicing in that judicial district as officers of the court—to
make claims for fees that were reasonable and proper under the
circumstances.
Laing filed on July 21, 2008, the thirty-fourth annual report and
request for fees covering the period from May 21, 2007, to May 20, 2008.
7Although Laing signed the annual reports as Klein’s conservator, the
respondents testified they both participated in performing the conservator’s and legal
services for which compensation was claimed from the late 1970s forward.
8The principal assets in the conservatorship were farm real estate leased for
cash rent and securities managed by an investment firm. The investment firm’s reports
summarizing transactions conducted during the reporting period should have facilitated
the conservator’s preparation of the annual reports.
10
Klein appeared through separate counsel, objected to the conservator’s
annual report, and requested Laing’s removal as conservator. Klein’s
new counsel also filed a separate petition alleging the respondents had
engaged in fraud and deceit in requesting excessive fees and praying for
restitution. The proceedings on Klein’s objections to the conservator’s
annual report and the separate petition were consolidated for trial.
After a bench trial, the district court found the respondents had
charged and received excessive fees for their services in the
conservatorship.9 In the first through nineteenth reporting years, the
respondents claimed between ten and fifteen hours for the preparation of
each annual report. Thereafter, their claims for this service ranged from
a low of thirty hours to a high of seventy-six hours. The district court
found the respondents had claimed excessive hours in the preparation of
some of the annual reports and charged excessive hourly rates for other
services that could have been performed by a competent legal secretary
or paralegal.10
Noting that Klein had not been given notice of the annual reports
or the respondents’ applications for fees after 1985, and that no hearings
were held prior to the entry of the related orders in years 1986 (the
twelfth annual report) through 2006 (the thirty-third annual report), the
court reset the respondents’ fees for those years and entered judgment
against the respondents in the amount of $175,511.60.11
9Thedistrict court did not find the respondents had engaged in fraud, deceit, or
misrepresentation.
10In finding excessive the hours of service claimed by the respondents for
conservator services, the court noted, as we have, that the ward’s farmland was cash-
rented and his stock portfolio was managed by an investment firm.
11The district court judge who presided at the trial forwarded a copy of her
findings of fact, conclusions of law, judgment and decree to the Board.
11
The respondents appealed the judgment and Klein cross-appealed.
We transferred the appeal to the court of appeals, which affirmed the
district court judgment as modified, increasing the judgment against the
respondents to $178,497.91. The respondents’ request for further review
was denied by this court.
The Board filed a complaint alleging the respondents (1) engaged in
conduct involving dishonesty, fraud, deceit, or misrepresentation prior to
July 1, 2005, in violation of DR 1–102(A)(4) of the Iowa Code of
Professional Responsibility and in violation of rule 32:8.4(c) of the Iowa
Rules of Professional Conduct after July 1, 2005; (2) engaged in conduct
that was prejudicial to the administration of justice in violation of DR 1–
102(A)(5) of the Iowa Code of Professional Responsibility prior to July 1,
2005, and in violation of rule 32:8.4(d) of the Iowa Rules of Professional
Conduct after July 1, 2005; (3) collected clearly excessive fees in violation
of DR 2–106(A), (B) of the Iowa Code of Professional Responsibility prior
to July 1, 2005, and in violation of rule 32:1.5(a) of the Iowa Rules of
Professional Conduct after July 1, 2005; (4) continued employment as
conservator or attorney for the conservator under circumstances
presenting a conflict of interest prior to July 1, 2005, in violation of DR
5–105(C) of the Iowa Code of Professional Responsibility and after July 1,
2005, in violation of rule 32:1.7 of the Iowa Rules of Professional
Conduct.
Following a hearing on the allegations in the Board’s disciplinary
complaint, the commission found the respondents had claimed excessive
hours and charged excessive fees for legal services and conservator’s
services in violation of DR 2–106(A), (B) and rule 32:1.5(a). The
commission further found the respondents’ course of conduct in claiming
excessive hours for services and charging excessive fees constituted
12
dishonesty, fraud, deceit, or misrepresentation reflecting adversely on
their fitness to practice law in violation of DR 1–102(A)(4), (6) and rule
32:8.4(c), and constituted conduct prejudicial to the administration of
justice, in violation of DR 1–102(A)(5) and rule 32:8.4(d). The
commission also found the respondents had violated DR 5–105(C) and
rule 32:1.7 in performing legal services in connection with consecutive
leases of Klein’s farm real estate to another of the respondents’ clients—
transactions presenting a conflict of interest. The commission
recommended the respondents’ licenses be suspended for at least three
years.
III. Violations.
We find the Board has proved by a convincing preponderance of
the evidence that the respondents charged and submitted claims for
clearly excessive fees in the Klein conservatorship. The excessiveness of
the fees arose from the respondents’ claims of unreasonable time
expended for management of Klein’s assets, drafting annual
conservator’s reports, and preparing tax returns. The Board also proved
by a clear preponderance of the evidence that the respondents charged
excessive hourly rates for performing a wide array of services not
requiring legal training or other professional skills and commonly
performed at a much lower cost by guardians. We therefore find the
respondents violated DR 2–106(A) and (B) for such conduct prior to
July 1, 2005, and violated rule 32:1.5(a) for similar conduct after that
date. As we find incredible the amount of time the respondents
consistently claimed for preparation of annual reports and tax returns in
the twelfth through the thirty-third years of the conservatorship, we
conclude the respondents engaged in misrepresentation in violation of
13
DR 1–102(A)(4) prior to July 1, 2005, and rule 32:8.4(c) after July 1,
2005.
In misrepresenting the time devoted to services for the
conservatorship and charging excessive fees for their work, the
respondents also engaged in conduct that was prejudicial to the
administration of justice in violation of DR 1–102(A)(5) and rule 32:8.4(d).
Their conduct resulted in litigation for the removal of the conservator and
restitution of the excessive fees obtained from the ward’s estate.
We also find the Board met its burden of proof in establishing that
the respondents violated DR 5–105(C) and rule 32:1.7 by representing
the conservatorship in negotiating and drawing a series of farm leases
renting Klein’s land to another client of the respondents’ law firm.
Although the respondents believed they represented only Klein in the
lease transactions, and not the tenant, the circumstances surrounding
the transactions made it likely the respondents’ independent professional
judgment on behalf of Klein was prone to be adversely affected. We find
no evidence that the respondents took the precautions of full disclosure
of the possible effect of such representation on their exercise of
independent judgment as required by DR 1–105(D) and rule 32:1.7(b)(4).
IV. Sanction.
We give respectful consideration to the grievance commission’s
recommendation concerning the appropriate sanction for an attorney’s
ethical violations. Iowa Supreme Ct. Bd. of Prof’l Ethics & Conduct v.
Waples, 677 N.W.2d 740, 743 (Iowa 2004). Nevertheless, we are free to
impose a lesser or greater sanction than the discipline recommended by
the grievance commission. Iowa Supreme Ct. Att’y Disciplinary Bd. v.
Reilly, 708 N.W.2d 82, 84 (Iowa 2006).
14
In selecting the appropriate sanction for ethical infractions, we
consider
the nature and extent of the respondent’s ethical infractions,
his fitness to continue practicing law, our obligation to
protect the public from further harm by the respondent, the
need to deter other attorneys from engaging in similar
misconduct, our desire to maintain the reputation of the bar
as a whole, and any aggravating or mitigating
circumstances.
Iowa Supreme Ct. Bd. of Prof’l Ethics & Conduct v. Kallsen, 670 N.W.2d
161, 164 (Iowa 2003). In determining the appropriate sanction, “we look
to prior similar cases while remaining cognizant of their limited
usefulness due to the variations in their facts.” Iowa Supreme Ct. Att’y
Disciplinary Bd. v. Casey, 761 N.W.2d 53, 62 (Iowa 2009).
We have imposed suspensions ranging from sixty days to two years
for violations of the rule prohibiting excessive fees. See Iowa Supreme Ct.
Att’y Disciplinary Bd. v. Carty, 738 N.W.2d 622, 625 (Iowa 2007)
(suspending for sixty days license of attorney who claimed extraordinary
probate fee for conduct compensated by ordinary fee); Comm. on Prof’l
Ethics & Conduct v. Zimmerman, 465 N.W.2d 288, 291–93 (Iowa 1991)
(suspending for six months the license of attorney who requested fee
bearing no rational relationship to services rendered by the conservator
and sought excessive fees for legal services that duplicated fees sought
for conservator’s services); Comm. on Prof’l Ethics & Conduct v.
Coddington, 360 N.W.2d 823, 826 (Iowa 1985) (suspending for two years
the license of attorney who, while serving as conservator, paid fees to
himself before obtaining court approval and took additional fees that
were never approved by the court). The appropriate sanction in this case
must, in our view, approach the high end of this range because the
15
respondents’ serial violations of multiple ethical rules were committed
over a long period of time.
Aggravating and mitigating circumstances are factors affecting our
determination of the appropriate sanction. Iowa Supreme Ct. Bd. of Prof’l
Ethics & Conduct v. Sherman, 637 N.W.2d 183, 187 (Iowa 2001). The
respondents are experienced lawyers, having focused their practice in the
areas of probate, real estate, and tax law since the 1970s. Laing testified
at the hearing before the commission that he could think of no errors or
mistakes made by the respondents in serving the Klein conservatorship
for more than three decades. Like the commission, we view the
respondents’ profound and persistent lack of awareness of and
responsibility for the excessiveness of their fees as an aggravating factor.
We also find mitigating factors affecting our judgment in this case.
As we have noted, Klein’s illness and resulting volatility posed significant,
complex, and time-consuming challenges for the respondents. We find
plausible the respondents’ contention that there was a limited universe
of people capable of managing Klein’s residential requirements,12 health
care needs,13 and other routine matters of daily living.14 The
respondents are entitled to some credit for “filling the gap” when no
relative did. In his testimony at the hearing before the commission, Klein
candidly admitted the respondents had been extremely helpful to him
12As we have noted, Klein’s behavior occasionally made him unwelcome at some
residential treatment facilities. Dissatisfied from time to time with his living
circumstances in residential care environments, he would walk away and require
relocation assistance.
13Klein needed assistance in comprehending and communicating to residential
care providers the treatment recommendations of his mental health providers. Laing
was appointed Klein’s medical representative in the late 1970s.
14Klein had numerous traffic accidents and required assistance in obtaining
repair and storage services for his car, an asset he apparently valued highly.
16
over the years and consistently responded to his requests for much-
needed assistance of all types.15 We are convinced the respondents
sincerely attempted to make Klein’s life better when no family member
stepped forward to help. They clearly went wrong, however, in repeatedly
over-reaching in their applications for fees for services to a vulnerable
ward who was disabled and kept uninformed of the amounts they were
charging for their services. We do not view as a mitigating factor the
district court’s approval of the respondents’ fee applications under the
circumstances presented here. See Coddington, 360 N.W.2d at 826
(suspending license of lawyer who revealed in his annual conservator’s
reports that he had taken excessive fees in advance of court approval).
Having reviewed the record, considered the factors affecting the
determination of the appropriate sanction, and explored the aggravating
and mitigating features of this case, we conclude the respondents’
licenses should be suspended for eighteen months. The suspension
imposed applies to all facets of the practice of law as provided by Iowa
Court Rule 35.13(3) and requires notification of the respondents’ clients
as provided by Iowa Court Rule 35.23. The respondents shall make
restitution to Klein as required by the judgment against them and no
reinstatement shall be ordered until the judgment is satisfied. The costs
of this proceeding are taxed against the respondents pursuant to Iowa
Court Rule 35.27(1).
LICENSES SUSPENDED.
All justices concur except Mansfield, J., who takes no part.
15The primary source of Klein’s unhappiness with Laing was his unwillingness to
give Klein more than five dollars per day to buy energy drinks and cigarettes.