Lawyer Disciplinary Board v. Edward R. Kohout , 238 W. Va. 668 ( 2016 )

IN THE SUPREME COURT OF APPEALS OF WEST VIRGINIA
September 2016 Term
_______________ FILED
November 15, 2016
No. 15-0926 released at 3:00 p.m.
_______________ RORY L. PERRY II, CLERK
SUPREME COURT OF APPEALS
OF WEST VIRGINIA
LAWYER DISCIPLINARY BOARD,
Petitioner
v.
EDWARD R. KOHOUT,
Respondent
____________________________________________________________
Lawyer Disciplinary Proceeding
Nos. 14-01-015, 14-01-274, 14-01-301, 14-01-382
LAW LICENSE ANNULLED
____________________________________________________________
Submitted: October 25, 2016
Filed: November 15, 2016
Andrea J. Hinerman, Esq. Rachel L. Fetty, Esq.
Office of Disciplinary Counsel Big Tree Law
Charleston, West Virginia Morgantown, West Virginia
Counsel for the Petitioner Counsel for the Respondent
JUSTICE BENJAMIN delivered the Opinion of the Court.
SYLLABUS BY THE COURT
1. “This Court is the final arbiter of legal ethics problems and must
make the ultimate decisions about public reprimands, suspensions or annulments of
attorneys’ licenses to practice law.” Syl. pt. 3, Comm. on Legal Ethics v. Blair, 174 W.
Va. 494, 327 S.E.2d 671 (1984).
2. “A de novo standard applies to a review of the adjudicatory record
made before the [Lawyer Disciplinary Board] as to questions of law, questions of
application of the law to the facts, and questions of appropriate sanctions; this Court
gives respectful consideration to the [Board’s] recommendations while ultimately
exercising its own independent judgment. On the other hand, substantial deference is
given to the [Board’s] findings of fact, unless such findings are not supported by reliable,
probative, and substantial evidence on the whole record.” Syl. pt. 3, Comm. on Legal
Ethics v. McCorkle, 192 W. Va. 286, 452 S.E.2d 377 (1994).
3. “Where an attorney writes a worthless check under circumstances
that demonstrate dishonesty or misrepresentation . . . or conduct that adversely reflects on
fitness to practice law . . . , disciplinary punishment is warranted. It should be shown that
the attorney was either aware that the check was worthless when it was written or failed
to make it good within a reasonable period of time after the attorney was aware the
i
account had insufficient funds.” Syl. pt. 3, Comm. on Legal Ethics v. Taylor, 187 W. Va.
39, 415 S.E.2d 280 (1992).
4. “In deciding on the appropriate disciplinary action for ethical
violations, this Court must consider not only what steps would appropriately punish the
respondent attorney, but also whether the discipline imposed is adequate to serve as an
effective deterrent to other members of the Bar and at the same time restore public
confidence in the ethical standards of the legal profession.” Syl. pt. 3, Comm. on Legal
Ethics v. Walker, 178 W. Va. 150, 358 S.E.2d 234 (1987).
5. “Aggravating factors in a lawyer disciplinary proceeding are any
considerations or factors that may justify an increase in the degree of discipline to be
imposed.” Syl. pt. 4, Lawyer Disciplinary Bd. v. Scott, 213 W. Va. 209, 579 S.E.2d 550
(2003).
6. “Mitigating factors in a lawyer disciplinary proceeding are any
considerations or factors that may justify a reduction in the degree of discipline to be
imposed.” Syl. pt. 2, Lawyer Disciplinary Bd. v. Scott, 213 W. Va. 209, 579 S.E.2d 550
(2003).
7. “Mitigating factors which may be considered in determining the
appropriate sanction to be imposed against a lawyer for violating the Rules of
ii
Professional Conduct include: (1) absence of a prior disciplinary record; (2) absence of a
dishonest or selfish motive; (3) personal or emotional problems; (4) timely good faith
effort to make restitution or to rectify consequences of misconduct; (5) full and free
disclosure to disciplinary board or cooperative attitude toward proceedings; (6)
inexperience in the practice of law; (7) character or reputation; (8) physical or mental
disability or impairment; (9) delay in disciplinary proceedings; (10) interim
rehabilitation; (11) imposition of other penalties or sanctions; (12) remorse; and (13)
remoteness of prior offenses.” Syl. pt. 3, Lawyer Disciplinary Bd. v. Scott, 213 W. Va.
209, 579 S.E.2d 550 (2003).
iii
Benjamin, Justice:
This lawyer disciplinary proceeding arises from four separate complaints
filed with the Lawyer Disciplinary Board (“LDB”) concerning attorney Edward “Ed” R.
Kohout. Following an evidentiary hearing, the Hearing Panel Subcommittee (“HPS”) of
the LDB issued a report in which it determined that Mr. Kohout engaged in unethical
conduct, violating Rules 1.1, 1.2(a), 1.3, 1.4(a) and (b), 1.5(a), 1.15(a) and (b), 3.1,
5.4(a), 8.1(a), and 8.4(c) and (d) of the West Virginia Rules of Professional Conduct.1
The HPS recommended that Mr. Kohout’s law license be annulled, that he make
restitution to client Sonja Richard in the amount of $2,059.66, and that he be ordered to
pay the costs of the disciplinary proceedings. The Office of Disciplinary Counsel
(“ODC”), on behalf of the LDB, urges that the Court adopt the sanctions recommended
by the HPS. Mr. Kohout insists that annulment is too severe a penalty for his misconduct.
After careful consideration, we conclude that Mr. Kohout’s unethical
behavior warrants the annulment of his law license and the additional sanctions
recommended by the HPS.
1
Unless otherwise specified, references to “Rules” in this opinion are to the West
Virginia Rules of Professional Conduct. Additionally, we note that the Court approved
comprehensive amendments to the Rules, which became effective on January 1, 2015.
Because the events giving rise to this disciplinary proceeding all occurred before January
1, 2015, we rely on the version of the Rules in effect at the time of those events.
1
I. FACTUAL AND PROCEDURAL BACKGROUND
Mr. Kohout was admitted to the West Virginia State Bar on November 4,
1987, upon successful completion of the bar exam. At all times pertinent to this
proceeding, he has maintained a law practice in Morgantown, West Virginia. This case
arises from four complaints filed against Mr. Kohout with the LDB. Based on these
complaints, the Investigative Panel of the LDB filed a Statement of Charges with the
Court on September 25, 2015, to which Mr. Kohout filed an answer on October 19, 2015.
The HPS held a hearing on the Statement of Charges on January 25 and 26,
2016. During the hearing the HPS heard testimony from twelve witnesses, including Mr.
Kohout. On June 3, 2016, the HPS filed its report, in which it examined each of the
complaints filed against Mr. Kohout. The HPS determined that Mr. Kohout had violated
the Rules and recommended sanctions.
A. Complaint of the ODC, No. 14-01-015
From 2012 through 2014, Mr. Kohout represented owners of property in
Big Bear Lake Camplands (“Big Bear”), a deeded property development, in a case
against the Big Bear Property Owners Association, Inc. and Nancy Friend, the operator of
Big Bear. The property owners disputed the propriety of increases in their annual
assessments and other fees.
2
By letter dated September 22, 2012, addressed to “the residents of Big Bear
Camplands,” Mr. Kohout wrote:
I have been asked to initiate a lawsuit challenging the manner
in which [Nancy Friend] runs Big Bear . . . . Your names will
need to be added to the Complaint as plaintiffs along with all
the residents of Big Bear who wish to join in this. . . .
Some of you have sent me money for a retainer fee,
which I appreciate. I may need to bill you for additional funds
as the case progresses for expenses, but it will [be] a modest
sum evenly split among you and will be money well spent. . .
.
My fee arrangement will be as follows. In addition to
the retainer, I’ll keep track of my time at an hourly rate of
$200/hr, which is modest by Morgantown standards. If we
recover any money by way of settlement or jury verdict or
judgment I’ll keep the standard one-third contingent fee plus
expenses (court reporter fees, court fees, etc[)], and the rest
will be split evenly among you.
At the time Mr. Kohout sent this letter, his records show that he had received
approximately $1,500.00 from more than twenty Big Bear property owners. Mr. Kohout
did not enter into a written fee agreement with any of the Big Bear property owners.
By letter dated December 11, 2012, Mr. Kohout wrote again to the
residents of Big Bear, telling the property owners that a suit had been filed against Big
Bear Owners Association, Inc. and Nancy Friend under the names of Charles and
Lorraine Galford. In the letter, Mr. Kohout requested that the recipients “please accept
this letter as an invoice for $50 from each of you to keep this case going. . . . You can tell
3
any other residents who have not yet joined this action can join by contacting me and
paying the $50 filing fee.”
On January 16, 2013, Mr. Kohout sent another letter updating the Big Bear
property owners on the status of the case and requesting additional funds. By letter dated
February 7, 2013, Mr. Kohout advised that the case had been transferred to Preston
County and that he required additional funds, asking that each recipient “send in another
$50 payable to Ed Kohout.” Mr. Kohout made a substantially similar request in a
subsequent letter dated February 19, 2013. By letter dated February 25, 2013, Mr. Kohout
clarified that he required that the residents pay “a simple $50 a month to keep this case
going,” and advised that he would withdraw from the case if he did not “receive
everyone’s payments by next week.” With updates on the status of the case, Mr. Kohout
sent more letters to the Big Bear property owners on May 17, 2013, August 5, 2013, and
September 4, 2013, each time requesting a monthly fee of $50.
By letter dated October 21, 2013, Mr. Kohout informed the Big Bear
property owners that their case had been dismissed. In addition, he wrote:
You have the right to file an appeal within 30 days, but
I would need payment of at least $3,000 up front before
starting to work on that and I am not optimistic that our
Supreme Court will even hear the case. I think our chances, at
best, are 50-50. If anyone of you wants to write me a check
then I’ll be happy to file the appeal. But for now, the case is
over. . . . I actually lost money on the case in terms of the
4
value of my time spent verses what little I was paid, by some
of you, and for which I am grateful.
Mr. Kohout’s records show that at the time the case was dismissed, he had collected a
total of $4,850.00 from the Big Bear property owners, $400.00 of which was paid to him
by the Galfords. During the pendency of the litigation, all of the money Mr. Kohout
received from the Big Bear property owners was deposited into his law office’s operating
account with United Bank.
On October 31, 2013, Mr. Kohout filed a notice of appeal with the Court in
the Big Bear case, attaching a check for the $200 filing fee. The check, numbered 3149,
was dated October 29, 2013, and was drawn on Mr. Kohout’s operating account with
United Bank. On December 3, 2013, Mr. Kohout gave the files associated with the case
to Charles Galford, one of the named plaintiffs in the Big Bear action. By letter dated
December 11, 2013, the Clerk’s Office informed Mr. Kohout that on December 4, 2013,
check number 3149 had been returned for non-sufficient funds. The Clerk’s letter
directed Mr. Kohout to provide the Clerk with a cashier’s check or money order for the
$200 filing fee within seven days of receipt of the letter. Mr. Kohout did not respond to
this letter.
On December 13, 2013, Mr. Kohout filed a motion with the Court to
withdraw as counsel in the case. On January 8, 2014, the Court denied the motion to
withdraw for failing to comply with the Rules of Appellate Procedure. Ms. Edythe Nash
5
Gaiser, Deputy Clerk, telephoned Mr. Kohout and advised him that his motion to
withdraw had been denied, that he was expected to comply with the scheduling order and
file a brief in the case, and that he continued to have an outstanding debt with the Court
because of the unpaid $200 filing fee. In response, Mr. Kohout wrote a letter to the Court
Clerk that same day, stating:
Your assistant (I think her name was Edie?) called
today and advised me that the Court had denied my motion to
withdraw from this case. I have already withdrawn from the
underlying case2 and my client[s] picked up their file and
have moved on. I think my reaction to the decision may have
offended her and for that I apologize. My secretary quit on
me suddenly with a note last week for things have been hectic
here. She then advised that the filing fee had not been paid
and said it would be turned over to the ODC for action, which
I did not understand. So I mailed you a check for the filing
fee today and attached is a copy. Thank you for your
understanding.
(footnote added). The check, number 093, was dated January 8, 2014, and was drawn on
Mr. Kohout’s new operating account with BB&T. The Court did not attempt to negotiate
this check, requiring the filing fee be paid by cashier’s check or money order.
Also on January 8, 2014, the Clerk’s Office, at the direction of the Court,
filed a disciplinary complaint against Mr. Kohout, directing that the ODC investigate the
2
Mr. Kohout filed a motion to withdraw from the Big Bear action in the Circuit
Court of Preston County on November 18, 2013. However, because his appeal with this
Court was pending during that time, the circuit court lacked jurisdiction to address the
motion.
6
circumstances surrounding the unpaid filing fee. That same day, by letter, ODC advised
Mr. Kohout of the complaint. On January 10, 2014, Mr. Kohout responded to ODC,
writing:
My petition speaks for itself. . . . The Galfords came
and picked up their file. The Galfords paid me $50 along with
some of the other campers at Big Bear. That’s all. That
money was properly accounted for. . . . [T]he Galfords and
the other campers failed and refused to continue to pay me for
my time in working on this case. I sent them monthly letters
urging them to pay, but we never heard back. . . . There’s no
dishonesty, deceit or misrepresentation. To my knowledge, an
ethics case has never been based on one bounced check. . . .
I have not engaged in any conduct prejudicial to the
administration of justice. This is simply about one bounced
check, unbeknownst to me, which I paid promptly. It has been
paid and this matter is moot. There are no ethical violations
here that can be proven.
On January 15, 2014, Mr. Kohout again wrote to the Court, including with
the letter an “Official Check” dated January 15, 2014, for $200.00, processed through
BB&T, to “pay the $200 filing fee.” Mr. Kohout timely filed a brief in the case. The
Court affirmed the circuit court’s decision in Galford v. Friend, No. 13-1134, 2014 WL
5311389 (W. Va. Oct. 17, 2014) (memorandum decision).
During the investigation of this complaint, Mr. Kohout gave a sworn
statement before the Investigative Panel of the LDB on March 27, 2014. During that
statement, Mr. Kohout explained that none of the Big Bear property owners signed a fee
agreement, and that he believed $50.00 per month from each person over the pendency of
7
the case “would be adequate to cover my time and any expert witnesses we needed, court
reporter fees, things of that nature.” Of the arrangement, he said, “[I]t was very
informal.” Mr. Kohout was questioned by Disciplinary Counsel regarding his contact
with the Galfords prior to filing the appeal as follows:
Q Did you speak to your clients before you filed
[the notice of appeal]?
....
A Well, I’ve had a lot of telephone conversations
with the Galfords. I mean it was very informal. And with
regard to the Galford case, I sent a letter to the campers and
the Galfords every month, and you will see that.
In fact, I attached a lot of those letters to my motion to
withdraw from Galford and I said, “Look” -- I mean I’ve kept
in copious touch with these people. Every month I told them
what was going on with their case.
So, the answer is, yes, I would have sent the Galfords a
letter telling them that I had filed an appeal. Absolutely.3
Q Well, you just said you sent a letter to them
saying that you filed an appeal, but did you talk with them
before you filed the appeal and that’s what they wanted to do?
A Well, I think I did. I don’t recall specifically,
but I would have talked to them and said, you know, “He’s
granted summary judgment. We should appeal this,” you
know. I mean, they left it up to me, basically. Yeah.
Q So I’m assuming then that there is no -- you had
no separate agreement -­
A No.
Q --for a retainer agreement for payment to file an
appeal?
A No, there wasn’t.
Q You were just going to keep it the $50, that’s
what your intention was?
3
The record does not contain a letter from Mr. Kohout to the Galfords notifying
them that an appeal had been filed in their case.
8
A Well, I really wasn’t thinking about it at that
point. I didn’t think that far ahead.
....
I didn’t ask the Galfords -- I did not have a -- I don’t
have a specific recollection of a conversation with the
Galfords about, “Hey, I’m going to file the appeal and it’s
$200.”
(footnote added). Mr. Kohout’s bank records indicate that he did not receive any payment
from the Galfords to file the appeal.
In the Statement of Charges filed with the Court on September 25, 2015,
the Investigative Panel of the LDB charged Mr. Kohout with violating Rules 1.1
(“Competence”),4 1.2(a) (“Scope of representation”)5 and 1.4(b) (“Communication”)6 for
failing to discuss the objectives of the appeal with the Galfords such that the Galfords
could make informed decisions regarding the representation, and for failing to obtain the
4
Rule 1.1, titled “Competence,” provides: “A lawyer shall provide competent
representation to a client. Competent representation requires the legal knowledge, skill,
thoroughness and preparation reasonably necessary for the representation.”
5
Rule 1.2, titled “Scope of representation,” provides in subpart (a), in pertinent
part, “A lawyer shall abide by a client’s decisions concerning the objectives of
representation . . . and shall consult with the client as to the means by which they are to
be pursued. A lawyer shall abide by a client’s decision whether to accept an offer of
settlement of a matter.”
6
Rule 1.4, titled “Communication,” provides, in full, “(a) A lawyer shall keep a
client reasonably informed about the status of a matter and promptly comply with
reasonable requests for information. (b) A lawyer shall explain a matter to the extent
necessary to permit the client to make informed decisions regarding the representation.”
9
Galford’s permission to file the appeal. The Investigative Panel determined that Mr.
Kohout violated Rule 1.15(a) (“Safekeeping property”),7 by failing to hold the legal fees
paid to him by the Galfords and other Big Bear property owners in his client trust
account. Finally, the Investigative Panel concluded that Mr. Kohout had violated Rule
8.4(c) and (d) (“Misconduct”)8 for having insufficient funds in his operating account with
United Bank to cover the filing fee for the appeal, for failing to provide prior notice to the
Galfords that he was filing an appeal, and for attempting to withdraw from representing
the Galfords.
7
Rule 1.15, titled “Safekeeping property,” provides, in subparts (a) and (b):
(a) A lawyer shall hold property of clients or third persons that is in
a lawyer’s possession in connection with a representation separate from the
lawyer’s own property. Funds shall be kept in a separate account designated
as a “client’s trust account” in an institution whose accounts are federally
insured and maintained in the state where the lawyer’s office is situated, or
in a separate account elsewhere with the consent of the client or third
person. Other property shall be identified as such and appropriately
safeguarded. Complete records of such account funds and other property
shall be kept by the lawyer and shall be preserved for a period of five years
after termination of the representation.
(b) Upon receiving funds or other property in which a client or third
person has an interest, a lawyer shall promptly notify the client or third
person. Except as stated in this rule or otherwise permitted by law or by
agreement with the client, a lawyer shall promptly deliver to the client or
third person any funds or other property that the client or third person is
entitled to receive and, upon request by the client or third person, shall
promptly render a full accounting regarding such property.
8
Rule 8.4, titled “Misconduct,” provides, that “[i]t is professional misconduct for
a lawyer to . . . (c) engage in conduct involving dishonesty, fraud, deceit or
misrepresentation[] [or] (d) engage in conduct that is prejudicial to the administration of
justice[.]
10
In his answer to the Statement of Charges, filed October 9, 2015, Mr.
Kohout denied each of these charges. He asserted, “The Galfords knew that I was filing
an appeal and they will so testify at the hearing. . . . [W]e had a verbal agreement that I
would have to be paid for my time. . . . The decision to file the appeal was the
Galfords[’].” With regard to the allegation that Mr. Kohout had mishandled his client’s
funds in violation of Rule 1.15, Mr. Kohout claimed,
I did not fail to hold legal fees in my trust account and
did not violate 1.15. This is ridiculous. I did a tremendous
amount of work on the Big Bear case. Several of the property
owners, and the Galfords, came to the hearings to watch. The
money paid to me was not a retainer but it was fee money
earned immediately for work I did. In fact, the value of my
work far exceeded what little they paid me. If I’m guilty of
anything in regards to the Big Bear case it’s making the
mistake of taking the case in the first place, given that the
property owners group was awkward and difficult to work
with.
Mr. Kohout further asserted, “I DID have sufficient fund[s] in the bank to cover the filing
fee check when it was written. . . . I told [Disciplinary Counsel] that the reason the check
bounced was because the Supreme Court held on to the check for six weeks before
depositing it.” Finally, he contended,
The ODC just casts the facts in a slanted, incomplete and
inaccurate way, and then sting [sic] cites Rule numbers
without any explanation. The check was paid in January of
2014 and I was already punished by the Supreme Court by
11
being forced to file an appeal without pay.9 So this entire
Count is moot and should be dismissed.
(footnote added).
During the hearing before the HPS in January 2016, Mr. Kohout’s former
secretary, Vanessa Lawson, testified that she had opened the Court’s December 11, 2013,
letter regarding the first check sent to cover the Galfords’ $200.00 filing fee. She said that
after opening the letter, she placed the letter on Mr. Kohout’s desk. She further claimed
that at the time, Mr. Kohout said he would send the Court another check as soon as he
had the money.
An investigator for the ODC, Bryan Selbe, testified at the hearing regarding
Mr. Kohout’s bank accounts. He asserted that he had examined Mr. Kohout’s bank
records and determined that at the time Mr. Kohout wrote the first check to pay the
Galford’s filing fee on October 29, 2013, the account on which the check was drawn
carried a negative balance. The bank records included in the record show that on October
29, 2013, the same date marked on the check, Mr. Kohout’s operating account with
9
This Court takes exception to Mr. Kohout’s assertion that this Court “punished”
him by requiring him to file a brief in the Galfords’ case. Mr. Kohout failed to comply
with court rules, and as a direct result of that failure, he was not permitted to withdraw as
counsel in the Galfords’ case, and he remained responsible for adhering to the Court’s
scheduling order. Further, we observe that Mr. Kohout filed the appeal before requiring
payment from the Galfords or any other Big Bear property owners.
12
United Bank was overdrawn in the amount of $2,665.44. As Mr. Selbe observed, the
bank records show that while the operating account carried a positive balance from
October 30, 2013, until November 17, 2013, the account was again overdrawn on
November 18, 2013, and remained overdrawn through the attempts to negotiate the filing
fee check. On or around December 14, 2013, Mr. Kohout abandoned the operating
account with United Bank and opened a new operating account with BB&T.
Charles Galford also testified at the hearing. When asked whether he was
aware that Mr. Kohout had filed an appeal in the case, Mr. Galford answered in the
negative. He said that in the circuit court, following the dismissal of the suit, he was told
that he had 30 days to get another attorney to which he said, “I’m not going to do it. I’m
done with it.”
With regard to the Galfords’ case in circuit court, Mr. Kohout testified at
the hearing that he did not keep an itemized statement of costs, stating, “There weren’t
really any costs other than the original filing fee. . . . [W]e really didn’t have a lot of
expenses. I mean my office expense, obviously, and Vanessa’s time, you know, things of
that nature . . . .” When asked what the $4,850.00 he had collected from the Big Bear
property owners had been spent on, he said, “Well, it was fees. It was spent on general
office expenses and rent and payrolls and everything else. It was paid as earned. I mean I
did a lot of work on the case.” Mr. Kohout testified that he did not keep track of his hours
13
and did not have an invoice for his time or expenses. Mr. Kohout insisted that he filed the
appeal in the case at the direction of the Galfords.
In its report filed with the Court on June 3, 2016, the HPS determined that
Mr. Kohout had committed the rule violations alleged in the Statement of Charges on the
same grounds enunciated in the Statement of Charges.
B. Complaint of Vanessa Lawson, No. 14-01-274
Vanessa Lawson worked as Mr. Kohout’s secretary from November 2010
until December 31, 2013. On December 31, 2013, she returned her keys to the office and
left a note addressed to Mr. Kohout, writing, “So very sorry, but I cannot return to work. I
also have creditors who are wanting money. I need a pay check every week and I am not
sure what & when I will be paid. Thank you for the opportunity to work in this office.”
Upon discovering the note, Mr. Kohout wrote a letter to Ms. Lawson dated January 2,
2014, in which he stated, “You know from the past three years that we’ve always had
occasional money problems, but we’ve always recovered. You could have talked to me
about this.” He also wrote, “As you know, you’ve borrowed money from me over the
past few years. I need to know what your intentions are about paying this back.”
On March 31, 2014, Ms. Lawson’s mother, Judith Beal, filed suit against
Mr. Kohout in the Magistrate Court of Monongalia County, alleging that she loaned him
14
$5000.00 on August 20, 2012, and that he had failed to repay her. On April 3, 2014, Mr.
Kohout wrote to Ms. Lawson, stating, “I see that you’ve got your mother suing me for
that money she gave me in the summer of 2012. How dare you! Please refer back to my
letter to you of January 2. I lent you money and am demanding repayment immediately or
else I’ll sue you too.”
Ms. Lawson submitted a complaint to the ODC dated May 16, 2014. In that
complaint, Ms. Lawson alleged that Mr. Kohout had failed to repay a loan given to him
by Ms. Beal, that he “[b]ounced four paychecks owed to me,” that he “routinely avoids
creditors and has bounced checks to (1) WV Supreme Ct.; (2) Mon Co. Circuit Court; (3)
Malpractice Insurance Company (Wells Fargo),” that he “has also bounced checks to
former employee, Kristen Taylor,” and that he “has also submitted fraudulent Attorney’s
Charging Lien against client.”10 Finally, Ms. Lawson claimed that Mr. Kohout called her
a disparaging term (i.e., “c**t”). It is not disputed that Mr. Kohout’s former law clerk,
Ronald Kramer, drafted Ms. Lawson’s complaint and that she assented to its contents,
adopting it as her own.
The ODC, by letter dated May 19, 2014, advised Mr. Kohout of Ms.
Lawson’s complaint and requested his response. He responded by letter dated May 22,
10
The attorney charging lien referenced here by Ms. Lawson is discussed in
greater detail, infra Part I.D.
15
2014, characterizing Ms. Lawson’s complaint as “a frivolous complaint brought by a
disgruntled and spiteful former employee.” He further claimed that “[n]o rule was
violated,” and that “there is no basis for any disciplinary action.”
On November 10, 2014, Mr. Kohout filed a complaint against Ms. Lawson
in the Magistrate Court of Monongalia County alleging that she had failed to repay loans
he had made to her totaling $4,500.00. Mr. Kohout sought an additional $500.00 from
Ms. Lawson for defamation and false charges of unethical conduct, seeking a total of
$5,000.00 from Ms. Lawson. Ms. Lawson’s answer to the complaint contended that the
“loans” described by Mr. Kohout were in fact bonuses paid in connection with her work
on cases that had settled.
The record in this case reflects that while the suit against Ms. Lawson was
pending, the magistrate court entered a civil judgment order dated May 14, 2015, in Ms.
Beal’s case against Mr. Kohout. That case was decided in favor of Ms. Beal, and the
court ordered Mr. Kohout to pay her $5,000.00. The court also ordered that Mr. Kohout
pay court costs.
In his case against Ms. Lawson, Mr. Kohout submitted to the magistrate
court a document dated September 7, 2011, with the subject line “RE: Bonus program.”
The document provided:
16
Vanessa, you have asked me to lend you money
beyond your regular paycheck. I have therefore established a
bonus program whereby when we settle a case you will get a
percentage of the settlement as I determine based on the size
of the settlement, and other financial needs of the office. This
is entirely discretionary on my part and based upon good
performance. It is understood that all such bonuses are to be
considered loans to the firm and must be paid back i[f] you
quit or are terminated for cause within the first five years of
employment, in keeping with the practices of other
companies. In other words, your bonuses will vest after five
years of continuous employment and are being offered as an
incentive for good loyal performance.
Ms. Lawson’s signature appears on the document, although she denied signing it and
claimed that the first time she ever saw the document was during the proceedings in
magistrate court. Ms. Lawson testified that when she began working for Mr. Kohout, he
told her she would receive bonuses. The record shows that on July 21, 2015, the
magistrate court ruled in favor of Ms. Lawson, entering a civil judgment order dismissing
Mr. Kohout’s claims against her.
In the September 25, 2015, Statement of Charges, the Investigative Panel of
the LDB found that the checks Mr. Kohout described as “loans” were actually bonus
checks given to Ms. Lawson after case settlements. The Investigative Panel observed that
the checks corresponded to checks written to clients whose cases had settled. Based on
these findings, the Investigative Panel determined that Mr. Kohout’s suit to recover the
$4,500.00 in bonus payments lacked merit and was intended only to harass Ms. Lawson.
The Investigative Panel concluded that this conduct violated Rules 3.1 (“Meritorious
17
claims and contentions”)11 and 8.4(c) and (d) (“Misconduct”).12 The Investigative Panel
did not determine that Mr. Kohout violated any other Rules with regard to the allegations
raised in Ms. Lawson’s complaint.
In its June 3, 2016, report, the HPS agreed with the findings and
conclusions of the Investigative Panel as set forth in the Statement of Charges. The HPS
also found that Mr. Kohout violated Rule 5.4(a) (“Professional independence of a
lawyer”),13 which prohibits a lawyer from sharing legal fees with a nonlawyer except
11
Rule 3.1, titled “Meritorious claims and contentions,” provides, in pertinent part,
that “[a] lawyer shall not bring or defend a proceeding, or assert or controvert an issue
therein, unless there is a basis for doing so that is not frivolous.”
12
See supra note 8 and accompanying text.
13
Rule 5.4, titled “Professional independence of a lawyer,” provides, in part:
(a) A lawyer or law firm shall not share legal fees with a nonlawyer,
except that:
(1) an agreement by a lawyer with the lawyer’s firm, partner or
associate may provide for the payment of money, over a reasonable period
of time after the lawyer’s death, to the lawyer’s estate or to one or more
specified persons;
(2) a lawyer who undertakes to complete unfinished legal business
of a deceased lawyer may pay to the estate of the deceased lawyer that
proportion of the total compensation which fairly represents the services
rendered by the deceased lawyer;
(3) a lawyer or law firm purchasing the practice of a deceased,
disabled or disappeared lawyer may, pursuant to the provisions of Rule
1.17, pay to the estate or other representative of that lawyer an agreed-upon
purchase price; and
(continued . . .)
18
under limited circumstances not present in this case, by sharing legal fees with Ms.
Lawson.
C. Complaint of Sonja Richard, No. 14-01-301
On May 15, 2013, Ms. Richard retained Mr. Kohout to represent her in a
personal injury matter, signing a fee agreement, which provided as follows:
The attorney’s fee for representing client shall be one-
third (33.33%) of any funds recovered from the case, plus
reimbursement of expenses associated with same.
. . . .
. . . Client shall pay all costs and expenses incurred in
and about the institution and prosecution of said suit or claim.
....
. . . Client does hereby authorize attorney, at attorney’s
sole option, to withhold and pay from any sums received by
way of settlement or otherwise in the prosecution of the
claim:
a. Attorney’s fee herein provided;
b. Any costs or expenses not yet reimbursed to
attorney;
c. Any amounts owed by client for doctor or
hospital bills;
d. Any other obligations owed by client arising out
of the controversy for which attorney was employed.
On that same date, Mr. Kohout sent a letter to Dynamic Physical Therapy, writing, “I
represent [Sonja Richard] in a personal injury case for which you have seen her. Please
(4) a lawyer or law firm may include nonlawyer employees in a
compensation or retirement plan, even though the plan is based in whole or
in part on a profit-sharing arrangement.
19
accept this letter and a guarantee of payment from any settlement from this case. If you
need further information feel free to contact me.”
Ms. Richard’s case settled on October 30, 2013, for $35,000. The next day,
Mr. Kohout provided Ms. Richard with $20,000 from the settlement, along with a
document titled “Settlement Disbursement.” The Settlement Disbursement document
explained the disbursement of the settlement funds as follows:
1. Check from insurance company $35,000.
2. Given to client per agreement $20,000.
3. Attorney fees and expenses $15,000.
Ms. Richard signed the document.
Ms. Richard filed a complaint with the ODC on June 3, 2014, alleging that
Mr. Kohout had failed to pay her medical bill with Dynamic Physical Therapy, which
totaled $985.00. Although she said that she contacted him multiple times about the
unpaid bill, she claimed, “Mr. Kohout kept the money to pay it out of the settlement and a
couple thousand more th[a]n the agreed amount after I added it up and realized he did get
more th[a]n he should have.” The ODC forwarded the complaint to Mr. Kohout on June
18, 2014.
In his June 23, 2014, response to the complaint, Mr. Kohout stated, “I deny
her scandalous charges in full.” He claimed that pursuant to the fee agreement, he was
20
entitled to one third of the settlement proceeds plus reimbursement of expenses. He
asserted,
My expenses include[] the filing [f]ee and service of
process $275, her bill to Dynamic $985, the cost of obtaining
her hospital records from Fairmont General $14.84, and my
office expense. . . . This case took a great deal of my time so
my fee and expenses were necessary and reasonable under
Rule 1.5.
I did agree to guarantee payment to Dynamic Physical
Therapy so that they would agree to treat her. The bill is
$985. To date I have not been billed by them. I never refused
to pay it and I am holding that money to pay it when they
contact me.
Mr. Kohout also made claims regarding Ms. Richard’s character, including claiming that
Ms. Richard had a criminal history, and that by filing a complaint, Ms. Richard “was just
trying to extort money from” him.
In its September 15, 2015, Statement of Charges, the Investigative Panel of
the ODC asserted:
Upon information and belief, 33.33% of the settlement
in this matter is approximately $11,665.50. The “Settlement
Disbursement,” however, indicates that [Mr. Kohout]’s
“attorney fee and expenses” totaled $15,000.00. While the
“Settlement Disbursement” does not itemize [Mr. Kohout]’s
expenses, in his verified response, he claimed expenses in the
amounts of $275.00, $985.00, and $14.84 leaving a balance
of $3,334.50 in unnamed “office expenses.”
. . . On or about October 30, 2013, [Mr. Kohout]
deposited Complainant Richard’s $35,000.00 settlement
check into his United Bank “Client Trust Account.”
. . . On or about October 30, 2013, [Mr. Kohout] wrote
a check from his “Client Trust Account” in the amount of
$20,000.00 as payment to Complainant Richard. There are no
21
checks reflecting payment of “Attorney fees and expenses”
from [Mr. Kohout]’s United Bank “Attorney at Law”
[operating] account rather on the same date, [Mr. Kohout]
made two “Internet/Phone Trans” from his United “Client
Trust Account to his United Bank “Attorney at Law” account
in the amounts of $3,000.00 and $12,000.00, purportedly
representing his “Attorney’s fees and expenses.” On the day
prior to the “Internet/Phone” transfer, the balance in [Mr.
Kohout]’s United Bank “Attorney at Law” account was
negative $2,665.44.
....
. . . According to the December 12, 2013 bank
statement for [Mr. Kohout]’s United Bank “Attorney at Law”
account . . . [Mr. Kohout]’s ending balance on or about
December 12, 2013, was negative $1,741.11. The balance in
[Mr. Kohout]’s United Bank “Attorney at Law” account had a
negative balance only eighteen (18) days after the October 30,
2013 “Internet/Phone” transfer.
The Investigative Panel determined that Mr. Kohout violated Rule 1.4
(“Communication”) for failing to keep Ms. Richard “reasonably informed about the
status of the payment of the Dynamic Physical Therapy bill” and for failing “to promptly
comply with her reasonable requests for information about the status of the payment of
the medical bill.” Additionally the Investigative Panel concluded that Mr. Kohout
charged an unreasonable fee in violation of Rule 1.5(a) (“Fees”),14 and that he violated
14
Rule 1.5, titled “Fees,” provides, in part:
(a) A lawyer’s fee shall be reasonable. The factors to be considered
in determining the reasonableness of a fee include the following:
(1) the time and labor required, the novelty and difficulty of the
questions involved, and skill requisite to perform the legal service properly;
(2) the likelihood, if apparent to the client, that the acceptance of the
particular employment will preclude other employment by the lawyer;
(continued . . .)
22
Rule 1.15(a) and (b) (“Safekeeping property”)15 by failing to promptly pay the Dynamic
Physical Therapy bill, for failing to hold the money to pay that bill in a client trust
account, and by failing to provide a full accounting of the money withheld from the
settlement. According to the Investigative Panel, Mr. Kohout “wrongfully
misappropriated and converted client funds and/or funds due his client and/or to a third
person to his own personal use” in violation of Rule 8.4(c) and (d) (“Misconduct”).
Finally, the Investigative Panel concluded that Mr. Kohout violated Rule 8.1(b) (“Bar
admission and disciplinary matters”)16 by knowingly making a false statement of material
(3) the fee customarily charged in the locality for similar legal
services;
(4) the amount involved and results obtained;
(5) the time limitations imposed by the client or by the
circumstances;
(6) the nature and length of the professional relationship with the
client;
(7) the experience, reputation, and ability of the lawyer or lawyers
performing the services; and
(8) whether the fee is fixed or contingent.
15
See supra note 7 and accompanying text.
16
Rule 8.1, titled “Bar admission and disciplinary matters,” provides, in relevant
part, that
a lawyer . . . in connection with a disciplinary matter, shall not:
(a) knowingly make a false statement of material fact; or
(b) fail to disclose a fact necessary to correct a misapprehension
known by the person to have arisen in the matter, or knowingly fail to
respond to a lawful demand for information from an admissions or
disciplinary authority, except that this rule does not require disclosure of
information otherwise protected by Rule 1.6.
23
fact in connection with the disciplinary matter by claiming in his response to the
complaint that he was “holding” the money to pay the Dynamic Physical Therapy Bill.
In October 2015, Mr. Kohout contacted Dynamic Physical Therapy about
paying Ms. Richard’s bill. He paid the bill in December 2015.
During the hearing before the HPS held in January 2016, Ms. Richard,
when asked whether she had any discussions with Mr. Kohout about increasing his fee
after she signed the fee agreement, she answered, “No, never.” On that same issue, Mr.
Kohout was questioned by one of the members of the HPS regarding Ms. Richard’s
allegations as follows:
MS. AMBROSE: . . . If the terms are already on paper
that this is what we’re going to do, why would you kind of
bump up your fee a little bit, just because she threw a number
out and thought she was getting only $20,000? Do you see
what I’m saying?
....
It looks a little like you’re taking advantage of that
situation and paying yourself a little bit more knowing that
she might not complain about it. . . .
....
[MR. KOHOUT]: . . . Well, a couple of things, a
couple of factors there for why that was done. One, I was in
serious financial trouble. I mean the bank account was
underwater before that money was put in the account at the
end of October. And, two, I thought that I deserved it because
the case turned out a lot better than I would’ve expected it to.
I never really expected they would go to $35,000. I mean
when we got over 20, I started to get excited. So, you know, I
-- and I discussed it with Sonya [sic]. She said -- she turned to
me and said “Well, how much will I get?” I said “Twenty”.
24
She was happy with that. I thought we had a modification to
our fee agreement. I mean could I have explained it to her
better? Could I have done the math for her? Yes. I mean did I
make mistakes in handling that? Absolutely.
MS. AMBROSE: Because it’s a contract and any
modification should be done in writing?
[MR. KOHOUT]: Yeah. Absolutely. And I mishandled
it and I admit to that and I feel bad about it and I told her that,
you know, yesterday. . . .
Mr. Kohout testified that his office expenses in connection with Ms. Richard’s case
consisted of “secretarial time, copies, phone calls, things of that nature, supplies,”
although he admitted that he did not itemize his expenses.
On the issue of the Dynamic Physical Therapy bill, Ms. Richard testified
that she was physically present in his office when Dynamic Physical Therapy faxed the
bill to his office on July 12, 2013. An employee of Dynamic Physical Therapy, Teresa
Johnson, testified that she called Mr. Kohout’s office about the bill on March 17, 2014;
April 10, 2014; and May 19, 2014. Mr. Kohout admitted that he received the bill on July
12, 2013, and that he did not pay the bill until December 2015.
In its report, the HPS determined that Mr. Kohout violated Rules 1.4 (a)
and (b) (“Communication”), 1.5 (“Fees”), 1.15(a) and (b) (“Safekeeping property”), and
8.4(c) and (d) (“Misconduct”) on the same grounds as those listed in the Statement of
25
Charges. The HPS also concluded that Mr. Kohout violated Rule 1.3 (“Diligence”)17 for
failing to act with reasonable diligence in paying the Dynamic Physical Therapy bill and
Rule 8.1(a) (“Bar admission and disciplinary matters”)18 for making a false claim that he
was “holding” the money to be paid to Dynamic Physical Therapy. The HPS did not find
a violation of Rule 8.1(b) (“Bar admission and disciplinary matters”).
D. Complaint of Ronald G. Kramer, II, No. 14-01-382
Mr. Kohout employed Mr. Kramer as a part-time law clerk from February
2012 to April 2013 while Mr. Kramer attended law school. At Mr. Kramer’s request, Mr.
Kohout represented him in a suit arising from a defect in his vehicle, and a complaint was
filed in the case in April 2013. There is no dispute that the representation was by oral
agreement; they did not enter into a written fee agreement. By letter dated January 6,
2014, Mr. Kramer asked Mr. Kohout to withdraw as counsel, and Mr. Kohout withdrew
from the representation by order entered January 14, 2014. Thereafter, Mr. Kohout filed a
“Notice of Attorney’s Charging Lien” in which he claimed Mr. Kramer owed him
$14,269.00 for work on the case. Mr. Kramer disputed the amount owed.
17
Rule 1.3, titled “Diligence,” provides, “A lawyer shall act with reasonable
diligence and promptness in representing a client.”
18
See supra note 16 and accompanying text.
26
By order entered July 22, 2014, the Circuit Court of Monongalia County
dismissed Mr. Kramer’s suit following the parties’ agreement to settle the case for
$5,000.00. The order also provided that although Mr. Kramer and Mr. Kohout “expressed
alternate views on the contents of the oral contract,” Mr. Kohout was entitled to payment
of one-third of the settlement amount, $1,666.66, as the “fair amount for Mr. Kohout’s
attorney’s fees as one-third is a standard contingency fee arrangement.” The circuit court
concluded that payment of $1,666.66 would satisfy the charging lien.
Mr. Kramer submitted a complaint with the ODC dated July 15, 2014,
wherein he alleged that, in connection with the representation, Mr. Kohout failed to
communicate settlement offers to him, that Mr. Kohout “submitted a fraudulent lien to
court documenting hours and expenses that were knowingly false,” and that Mr. Kohout
sent “vulgar and unprofessional text messages” to him. The ODC forwarded the
complaint to Mr. Kohout on July 18, 2014, and Mr. Kohout responded to the ODC’s
communication in an answer dated July 21, 2014. In his answer, Mr. Kohout contended
that Mr. Kramer’s complaint was “completely frivolous,” and he denied any unethical
conduct.
In the September 25, 2015, Statement of Charges, the Investigative Panel of
the LDB determined that the “Invoice for Legal Services” accompanying the Notice of
27
Attorney’s Charging Lien was fraudulently submitted in Mr. Kramer’s case in violation
of Rule 8.4(c) and (d) (“Misconduct”).
At the hearing before the HPS on January 25 and 26, Mr. Kramer testified
that he had drafted most of the court filings in his case. Mr. Kohout testified he disagreed
with all of Mr. Kramer’s testimony. When asked if there were “instances where Mr.
Kramer prepared the pleadings, and then you filed them,” Mr. Kohout responded, “He
worked on the complaint, the original complaint, and that’s all he did. . . . So that’s not
true that Ron [Kramer] told you yesterday that he did all the work. That is absolutely not
true.” This testimony is supplemented by email correspondence in the record between
Mr. Kramer and Mr. Kohout. In two separate emails, Mr. Kohout acknowledges receipt
of an amended complaint drafted by Mr. Kramer and discovery documents drafted by Mr.
Kramer. One of the two emails indicates that Mr. Kohout received a discovery document
drafted by Mr. Kramer that he filed “exactly as [Mr. Kramer] wrote it.”
The HPS concluded that Mr. Kohout violated Rule 8.4(c) and (d) by
submitting a fraudulent invoice for his services to the circuit court. The HPS supported
this determination with findings that Mr. Kramer “maintained at the hearing that he
drafted the pleadings in his case, including the complaint, discovery responses, and
responses to dispositive motions,” and that Mr. Kramer “testified that he gave at least one
of his pay checks back to [Mr. Kohout] to pay for the filing fee in his case.”
28
E. Recommended Sanctions
The HPS determined that Mr. Kohout’s conduct violated duties to his
clients, to the public, to the legal system, and to the legal profession; that he acted
intentionally and knowingly; and that the amount of real injury is great. The HPS also
observed that presence of several aggravating factors and the absence of any mitigating
factors. The HPS set forth the aggravating factors as follows: “(1) prior disciplinary
offenses; (2) dishonest or selfish motive; (3) a pattern of misconduct; (4) multiple
offenses; (5) refusal to acknowledge wrongful nature of conduct; (6) substantial
experience in the practice of law; and (7) indifference to making restitution.”
With regard to prior discipline, the HPS noted that by the decision of this
Court in Lawyer Disciplinary Board v. Kohout, No. 22629 (W. Va. Apr. 14, 1995) (per
curiam), Mr. Kohout’s law license was suspended for two years for making a materially
false statement in connection with his application for admission to the West Virginia
State Bar; for engaging in conduct involving dishonesty, fraud, deceit, or other
misrepresentation by repeatedly concealing the fact that he had attended and been
suspended from a law school in Alabama; and for deception before the Bankruptcy Court
for the Northern District of West Virginia. The Court concluded that Mr. Kohout
“engaged in serious ethical misconduct and has demonstrated a pattern of conduct
29
involving intentional deception.” Id. at *8.19 Mr. Kohout was also suspended from the
practice of law in the Bankruptcy Court for the Northern District of West Virginia for
three years. After a reinstatement proceeding, Mr. Kohout’s law license was reinstated by
order of this Court entered March 24, 2005. Subsequently, in May 2013, Mr. Kohout was
admonished by the Investigative Panel of the LDB on May 6, 2013, for misleading a
family court as to the status of a personal injury settlement received by his client.
Based on the foregoing, the HPS’s report concludes that Mr. Kohout’s
violations of the Rules
are extremely egregious and touch the very essence of the
public’s perception of the legal profession. The most serious
among the many charges against [Mr. Kohout] are
misappropriation and conversion of funds belonging to his
client and a medical provider and misrepresentation. It is the
recommendation by the Office of Disciplinary Counsel, and a
recommendation supported by factual findings by the Hearing
Panel Subcommittee that [Mr. Kohout]’s law license should
be annulled because it is the only sanction that will
adequately protect the public[.]
The HPS recommends (1) that Mr. Kohout’s law license be annulled, (2) that Mr. Kohout
be required to make full restitution to Ms. Richard in the amount of $2,059.66, and (3)
that Mr. Kohout be ordered to pay the costs of the disciplinary proceedings.
19
Mr. Kohout’s license to practice law in Pennsylvania was suspended following
the suspension of his law license in West Virginia.
30
II. STANDARD OF REVIEW
The LDB is responsible for investigating complaints alleging violations of
the West Virginia Rules of Professional Conduct. W. Va. Rules of Lawyer Disciplinary
Procedure 1. The HPS of the LDB “conduct[s] hearings and make[s] findings of fact,
conclusions of law, and recommendations of lawyer discipline to the Supreme Court of
Appeals on formal charges.” W. Va. Rules of Lawyer Disciplinary Procedure 3. “In order
to recommend the imposition of discipline of any lawyer, the allegations of the formal
charge must be proved by clear and convincing evidence.” W. Va. Rules of Lawyer
Disciplinary Procedure 3.7; see also syl. pt. 1, Lawyer Disciplinary Bd. v. McGraw, 194
W. Va. 788, 461 S.E.2d 850 (1995) (“Rule 3.7 of the Rules of Lawyer Disciplinary
Procedure, effective July 1, 1994, requires the Office of Disciplinary Counsel to prove
the allegations of the formal charge by clear and convincing evidence.” (in part)).
Although the LDB may make recommendations based on its investigations,
“[t]his Court is the final arbiter of legal ethics problems and must make the ultimate
decisions about public reprimands, suspensions or annulments of attorneys’ licenses to
practice law.” Syl. pt. 3, Blair, 174 W. Va. 494, 327 S.E.2d 671. This Court’s standard of
review, as set forth in syllabus point 3 of Committee on Legal Ethics v. McCorkle, 192
W. Va. 286, 452 S.E.2d 377 (1994), provides:
A de novo standard applies to a review of the
adjudicatory record made before the [Lawyer Disciplinary
Board] as to questions of law, questions of application of the
law to the facts, and questions of appropriate sanctions; this
31
Court gives respectful consideration to the [Board’s]
recommendations while ultimately exercising its own
independent judgment. On the other hand, substantial
deference is given to the [Board’s] findings of fact, unless
such findings are not supported by reliable, probative, and
substantial evidence on the whole record.
III. ANALYSIS
The ODC asserts that the evidence in the record supports the HPS’s
findings of fact and conclusions of law, and it urges this Court to adopt the sanctions
recommended by the HPS. Mr. Kohout does not dispute the HPS’s findings with regard
to the complaint of Sonja Richard, No. 14-01-301. However, with regard to the complaint
of the ODC, No. 14-01-015, while he “acknowledges that the return of his check for
insufficient funds . . . did not reflect on the professionalism proscribed [sic] by the
Rules,” he denies having engaged in the misconduct described by the HPS. He further
denies having engaged in misconduct described by the HPS with regard to the complaints
of Ms. Lawson and Mr. Kramer, Nos. 14-01-274 and 14-01-382, respectively. As to the
Rules he concedes he violated, Mr. Kohout claims that they do not warrant the sanctions
recommended by the HPS.
A. Disputed findings and conclusions
Mr. Kohout first argues that the HPS erred in concluding that he violated
Rule 8.4(c) and (d) by submitting a check to the Court Clerk that was denied for
insufficient funds. He asserts that this determination is not sustained by the evidence. In
32
support of his position, he quotes Committee on Legal Ethics v. Taylor, 187 W. Va. 39,
415 S.E.2d 280 (1992), in which we said,
Where an attorney writes a worthless check under
circumstances that demonstrate dishonesty or
misrepresentation . . . or conduct that adversely reflects on
fitness to practice law . . . , disciplinary punishment is
warranted. It should be shown that the attorney was either
aware that the check was worthless when it was written or
failed to make it good within a reasonable period of time after
the attorney was aware the account had insufficient funds.
Syl. pt. 3, id.
Mr. Kohout’s bank records show that his operating account carried a
negative balance on the day check number 3149 was written. Thus, it is clear that the
check was worthless when written. Although money was deposited into that account
exceeding the value of the check the day after the check was written, the account again
carried a negative balance prior to the attempts to negotiate the check, making the check
worthless. We are concerned with Mr. Kohout’s assertions that he did not know about the
denial of the check for insufficient funds until Ms. Gaiser contacted him on January 8,
2014. Even if he had not received the December 11, 2013, letter regarding the denial of
the check, as he asserts, he has at best established a complete failure to stay apprised of
the status of his operating account such that he may timely correct issues connected
therewith. We are particularly concerned with Mr. Kohout’s repeated representations
during these proceedings that his account contained sufficient funds when the check was
written, despite the fact that his bank records clearly reflect otherwise. Although he has
33
now retreated from those representations, his assertions evince a dishonest motive.
Therefore, we determine that the HPS correctly concluded that Mr. Kohout violated Rule
8.4(c) and (d) by submitting check number 3149 to the Court Clerk.
Mr. Kohout also argues that the HPS erred in concluding that he violated
Rule 8.4(c) and (d) by failing to provide notice to the Galfords that he was filing an
appeal with the Supreme Court and for attempting to withdraw from representation of the
Galfords’ in their appeal to the Court. Upon our examination of the record, we determine
that the HPS’s conclusion that Rule 8.4(c) and (d) was violated is supported by clear and
convincing evidence. Mr. Galford testified that he did not authorize Mr. Kohout to file
the appeal, and that after the case was dismissed in the circuit court, he did not have any
interest in appealing the decision. Mr. Kohout did not enter into a written representation
agreement with the Galfords. Mr. Kohout’s own letter to the Galfords and other Big Bear
property owners, dated October 21, 2013, asserted that he would not file an appeal unless
he received “payment of at least $3,000 up front,” yet Mr. Kohout’s bank records indicate
that he did not receive any payments from the Galfords that might be associated with the
appeal. Mr. Kohout testified that he would have sent the Galfords a letter to inform them
that he had filed an appeal as a matter of course, but no such letter exists in the record. In
fact, after filing the appeal, the only documentation in the record showing any
communication between himself and the Galfords involves his withdrawal from the case.
Moreover, Mr. Kohout’s brief to this Court admits, “[D]espite his efforts, he had not
34
received clear word from his clients regarding their intent or desire to appeal.” We also
observe that in his response to the ODC’s complaint, he misrepresented the amount the
Galfords paid him in connection with the representation, stating that he had received
$50.00 instead of the greater sum of $400.00 that he actually collected.
The forgoing evidence, which establishes a violation of Rule 8.4(c) and (d)
(“Misconduct”), is equally probative in establishing that he violated Rules 1.1
(“Competence”), 1.2(a) (“Scope of representation”), and 1.4(b) (“Communication”).
However, while Mr. Kohout’s attempt to withdraw from representation of the Galfords
before this Court did not comply with the Court’s rules for doing so, we agree with Mr.
Kohout’s position that this conduct does not rise to misconduct under the Rules.
Mr. Kohout also attacks the HPS’s conclusion that he violated Rule 1.15(a)
(“Safekeeping of Property”) by failing to hold fees paid in advance by the Galfords and
other Big Bear property owners separate from his own property. He claims in his brief, as
he has throughout these disciplinary proceedings, that he was “paid as the case
progressed and that no one involved in the matter provided a retainer or paid in advance.”
Mr. Kohout’s September 22, 2012, letter to the Big Bear property owners directly
contradicts this assertion. In that letter, he acknowledged, “Some of you have sent me
money for a retainer fee . . . .” Mr. Kohout later testified that all of the money he received
from the Big Bear property owners was placed into his operating account, not a client
35
trust account. In sum, the record establishes that Mr. Kohout did receive fees paid in
advance by the Big Bear property owners and that he failed to hold those fees separate
from his own property, all in violation of Rule 1.15(a).20
With regard to Ms. Lawson’s complaint, Mr. Kohout states that the HPS’s
determination that he violated Rules 3.1 (“Meritorious claims and contentions”) and
8.4(c) and (d) by filing a lawsuit against Ms. Lawson for the return of “loans” is not
supported by the evidence. Mr. Kohout produced a document dated September 7, 2011,
providing that Ms. Lawson would receive bonuses she would be responsible for paying
back to Mr. Kohout if she left or was terminated from her employment within five years.
Ms. Lawson denied having seen the document prior to the lawsuit in magistrate court, she
denied having signed it, and she testified that when she began working for Mr. Kohout,
he told her she would receive bonuses as part of her compensation. The magistrate court
resolved the matter in favor of Ms. Lawson. While the evidence may have been sufficient
for the magistrate court to determine, by a preponderance of the evidence, that Mr.
Kohout was not entitled to that which he claimed, and while we do believe it is an
20
Mr. Kohout’s records, along with his testimony, are troubling. He did not keep
any accounting of the work he performed in the case or his expenses, yet he contends that
he earned the entire $4,850.00 he collected from the Big Bear property owners. In a letter
to the Big Bear property owners, he asserted that he would retain one-third of any
recovery in the case as a contingent fee. He retained the entire sum paid to him despite
there being no recovery in the case. While this raises many questions for the Court, the
facts were not properly developed below for us to determine whether this conduct
constituted a violation of the Rules.
36
interesting coincidence that Mr. Kohout sought from Ms. Lawson the exact sum Ms. Beal
sought from Mr. Kohout, we cannot conclude that the record contains clear and
convincing evidence that Mr. Kohout’s lawsuit against Ms. Lawson lacked merit. Thus,
we agree with Mr. Kohout’s position that evidence was insufficient to support a
determination that he violated Rules 3.1 and 8.4(c) and (d) for filing his suit against Ms.
Lawson.
Mr. Kohout further asserts that the record does not support the HPS’s
determination that he violated Rule 5.4(a) (“Professional independence of a lawyer”). He
argues that the “loans” he provided to Ms. Lawson constituted compensation permitted
under the Rule.21 To the extent that we cannot determine whether the disputed funds
given to Ms. Lawson constitute compensation by clear and convincing evidence, we
cannot find that Mr. Kohout violated this rule.
21
Mr. Kohout’s brief directs the Court to Rule 5.4(a)(3), stating that this rule
“specifically permits compensation of non-lawyer employees.” That rule, however, does
not address the compensation of non-lawyer employees; the rule permits a lawyer to
purchase the law firm of a deceased, disabled, or disappeared lawyer and pay the estate or
other representative of the lawyer. See supra note 13 and accompanying text. We believe
Mr. Kohout may have intended to refer to Rule 5.4(a)(4), the text of which appears
verbatim in the version of Rule 5.4(a)(3) that is currently in force, which permits a lawyer
to include a nonlawyer employee in a compensation plan that is based on a profit-sharing
arrangement. Id.
37
Finally, Mr. Kohout challenges the HPS’s determination that he violated
Rule 8.4(c) and (d) (“Misconduct”) by submitting a fraudulent invoice for legal services
with his Notice of Attorney’s Charging Lien with regard to his representation of Mr.
Kramer. Despite Mr. Kohout’s testimony to the contrary, email correspondence included
in the record shows that he acknowledged receipt of a discovery document drafted by Mr.
Kramer and his assertion that it would be filed exactly as it was written. We find that
based on the evidence in the record, there is clear and convincing evidence that Mr.
Kohout submitted a lien asserting he was owed money for work that he did not perform.
Thus, the HPS’s conclusion that Mr. Kohout violated Rule 8.4(c) and (d) is justified by
the evidence.
B. Sanctions
We now turn to deciding the appropriate sanctions to be imposed. The
ODC asserts that based upon Mr. Kohout’s misconduct, annulment is the appropriate
sanction in this matter. Mr. Kohout disagrees, arguing that annulment is not warranted
and is not proportional to the harm Mr. Kohout caused.
We have held, “This Court is the final arbiter of legal ethics problems and
must make the ultimate decisions about public reprimands, suspensions or annulments of
attorneys’ licenses to practice law.” Syl. pt. 3, Blair, 174 W. Va. 494, 327 S.E.2d 671.
38
Like the HPS, when deciding on an appropriate sanction, the Court must consider the
factors set forth in Rule 3.16 of the Rules of Professional Conduct:
(1) whether the lawyer has violated a duty owed to a client, to
the public, to the legal system, or to the profession; (2)
whether the lawyer acted intentionally, knowingly, or
negligently; (3) the amount of the actual or potential injury
caused by the lawyer’s misconduct; and (4) the existence of
any aggravating or mitigating factors.
Accord syl. pt. 4, Office of Lawyer Disciplinary Counsel v. Jordan, 204 W. Va. 495, 513
S.E.2d 722. In examining these factors, we keep in mind that “attorney disciplinary
proceedings are primarily designed to protect the public, to reassure it as to the reliability
and integrity of attorneys and to safeguard its interest in the administration of justice.”
Comm. on Legal Ethics v. Keenan, 192 W. Va. 90, 94, 450 S.E.2d 787, 791 (1994).
Furthermore,
[i]n deciding on the appropriate disciplinary action for
ethical violations, this Court must consider not only what
steps would appropriately punish the respondent attorney, but
also whether the discipline imposed is adequate to serve as an
effective deterrent to other members of the Bar and at the
same time restore public confidence in the ethical standards
of the legal profession.
Syl. pt. 3, Comm. on Legal Ethics v. Walker, 178 W. Va. 150, 358 S.E.2d 234 (1987).
The behavior we find most disturbing is the behavior in which Mr. Kohout
admits engaging: the conversion of funds from Ms. Richard’s settlement. First, he moved
the funds intended for Dynamic Physical Therapy from his client trust account to his
operating account, comingling the funds of a third person with his own. His bank records,
39
which show that he then overdrew the operating account without paying Dynamic
Physical Therapy, establish that he converted the sum of the bill to his own use. See
Lawyer Disciplinary Bd. v. Kupec, 202 W. Va. 556, 569, 505 S.E.2d 619, 632 (1998)
(“Conversion is the unauthorized use of entrusted funds for the lawyer’s own purpose. It
includes temporary use.”). More than six months later the bill had still not been paid,
prompting Ms. Richard to file a complaint with the LDB. In response to the complaint
Mr. Kohout lied, asserting that he had not received a bill from Dynamic Physical
Therapy. Mr. Kohout finally paid the bill more than two years after the settlement funds
had been disbursed. It is obvious that Mr. Kohout was retaining the money to keep his
law office afloat during a tough financial time.
Second, Mr. Kohout wrongfully retained $2,059.66 of Ms. Richard’s
portion of the settlement of her case, converting those funds to his own use. Before the
HPS, he testified that he and Ms. Richard had orally modified the original fee agreement
to permit him to retain the funds. The record, along with Ms. Richard’s testimony, shows
that no modification took place. We find his assertion in his brief to this Court that he
simply “renegotiat[ed] his share of the settlement agreement without discussing the
matter with Ms. Richard in greater detail,” to be thoroughly disingenuous. To date, Mr.
Kohout still retains the $2,059.66.
40
This Court adheres to “the general rule that absent compelling extenuating
circumstances, misappropriation or conversion by a lawyer of funds entrusted to his/her
care warrants disbarment.” Id. Mr. Kohout has not given us a remotely compelling reason
to deviate from our general rule. His wrongful behavior with regard to Ms. Richard and
Dynamic Physical Therapy, coupled with his dishonest dealings with the Galfords, Mr.
Kramer, the ODC, and this Court, leave us with no doubt that Mr. Kohout’s law license
must be annulled. Through his unethical conduct, he has violated duties owed to a
number of his clients—the Galfords, Ms. Richard, and Mr. Kramer—and to a third party,
Dynamic Physical Therapy. The evidence presented in this case shows that he acted
intentionally, knowingly, and with a dishonest motive. The amount of actual injury in this
case is great; Mr. Kohout still retains thousands of dollars that should have been
disbursed to Ms. Richard over three years ago. By failing to pay the Dynamic Physical
Therapy bill when due, Mr. Kohout also put Ms. Richard’s credit at risk. Additionally,
his conduct reflects poorly on the legal profession.
We further find that this case presents a slew of aggravating factors.
“Aggravating factors in a lawyer disciplinary proceeding are any considerations or
factors that may justify an increase in the degree of discipline to be imposed.” Syl. pt. 4,
Lawyer Disciplinary Bd. v. Scott, 213 W. Va. 209, 579 S.E.2d 550 (2003). We agree with
the findings of the HPS and observe that the following aggravating factors exist in this
case: (1) Mr. Kohout’s list of prior disciplinary offenses, one of which necessitated
41
suspension of Mr. Kohout’s law license for two years; (2) his dishonest and/or selfish
motive; (3) the extensive number of Rule violations; (4) a pattern of misconduct as
established by his prior discipline and the present Rule violations; (5) refusal to
acknowledge the wrongful nature of his conduct or the extent of the harm caused by his
conduct; (6) his substantial experience in the practice of law; and (7) his indifference to
making restitution. We note also that since the HPS submitted its report, Mr. Kohout has
been found, by order of this Court entered on October 7, 2016, to have violated multiple
canons of the Code of Judicial Conduct. The order permanently enjoins him from seeking
judicial office by election or appointment in West Virginia.
We also agree with the HPS’s finding that no mitigating factors are present
in this case. We have held that “[m]itigating factors in a lawyer disciplinary proceeding
are any considerations or factors that may justify a reduction in the degree of discipline to
be imposed.” Syl. pt. 2, id.
Mitigating factors which may be considered in
determining the appropriate sanction to be imposed against a
lawyer for violating the Rules of Professional Conduct
include: (1) absence of a prior disciplinary record; (2) absence
of a dishonest or selfish motive; (3) personal or emotional
problems; (4) timely good faith effort to make restitution or to
rectify consequences of misconduct; (5) full and free
disclosure to disciplinary board or cooperative attitude toward
proceedings; (6) inexperience in the practice of law; (7)
character or reputation; (8) physical or mental disability or
impairment; (9) delay in disciplinary proceedings; (10)
interim rehabilitation; (11) imposition of other penalties or
sanctions; (12) remorse; and (13) remoteness of prior
offenses.
42
Syl. pt. 3, id.
First, Mr. Kohout argues that we should consider his payment of the
Dynamic Physical Therapy bill as a “timely good faith effort to make restitution.” We
decline to do so. The record establishes that he did not timely pay the bill. Additionally,
he has still not made restitution to Ms. Richard for the money he wrongfully retained
from her settlement. We have also recognized that “[r]estitution is not a defense” to
misappropriation or conversion. Kupec, 202 W. Va. at 569, 505 S.E.2d at 632.
Second, Mr. Kohout contends that during the timeframes at issue in the
complaints, he “was experiencing personal and emotional problems that detrimentally
affected his judgment,” and that these problems should be considered a mitigating factor.
Again, we decline to do so. As we recently stated, “While we understand that sometimes
a lawyer’s personal problems require the lawyer’s utmost attention, this focus of a
lawyer’s attention cannot come at the client’s expense.” Lawyer Disciplinary Bd. v.
Sturm, 237 W. Va. 115, ___, 785 S.E.2d 821, 834 (2016). Furthermore, while he claims
to have suffered “emotional problems,” he has not alleged that his problems amount to a
mental disability that could be considered a mitigating factor. See syl. pt. 3, Lawyer
Disciplinary Bd. v. Dues, 218 W. Va. 104, 624 S.E.2d 125 (2005) (“In a lawyer
disciplinary proceeding, a mental disability is considered mitigating when: (1) there is
medical evidence that the attorney is affected by a mental disability; (2) the mental
43
disability caused the misconduct; (3) the attorney’s recovery from the mental disability is
demonstrated by a meaningful and sustained period of successful rehabilitation; and (4)
the recovery arrested the misconduct and recurrence of that misconduct is unlikely.”).
Third, in his brief to this Court, he claims that he has provided “[F]ull and
free disclosure to the disciplinary board,” and that this action should be considered a
mitigating factor. While his responses to the ODC were prompt, the record reflects that
his disclosures were less than “full and free,” making multiple false statements to the
ODC and ultimately this Court.
Fourth, Mr. Kohout asserts that he has shown remorse. While he has
apologized to Ms. Richard for not timely paying the bill to Dynamic Physical Therapy, he
has shown no remorse for wrongfully retaining $2,059.66 from her settlement or for the
numerous other violations of the Rules he has committed.
Fifth and finally, he argues that the remoteness of his prior offenses should
act as a mitigating factor. We disagree. Just like the unethical conduct described in this
disciplinary action, the prior disciplinary offenses demonstrate Mr. Kohout’s general
disregard for personal integrity and the honor of the legal profession. He has established a
pattern of harmful conduct that this Court cannot minimize. We also observe that not all
44
of his prior discipline is remote; he was admonished in 2013 and barred from seeking
judicial office in West Virginia in October of this year.
Under the facts presented in this case, we conclude that Mr. Kohout is unfit
to practice law and that the annulment of his law license is necessary to protect the
public, to reassure the public as to the reliability and integrity of attorneys, and to
safeguard the interest in the administration of justice.
IV. CONCLUSION
Mr. Kohout’s intentional and numerous violations of the Rules, including
the conversion of funds belonging to a client and a third party, warrant the annulment of
his law license. We therefore adopt the sanctions recommended by the HPS and order the
annulment of Mr. Kohout’s license to practice law in the State of West Virginia.22 We
22
Pursuant to Rule 3.33(b) of the West Virginia Rules of Lawyer Disciplinary
Procedure, Mr. Kohout may apply for reinstatement of his law license in five years. The
rule provides that one seeking reinstatement of his or her law license
may file a verified petition in the Supreme Court of Appeals reciting
the cause of such annulment and what the person shall have done in
satisfaction of requirements as to rehabilitation, restitution, conditions or
other acts incident thereto, by reason of which the person should be
reinstated as a member of the state bar and his or her license to practice law
restored. The petitioner shall also file a completed reinstatement
questionnaire provided by the Office of Disciplinary Counsel. At the time
of filing the petition and questionnaire with the Clerk of the Supreme Court
(continued . . .)
45
further order that he make full restitution to Sonja Richard in the amount of $2,059.66,23
and that he reimburse the LDB for the costs it incurred in connection with these
proceedings.
License annulled.
of Appeals, the petitioner shall also file a copy of each with the Office of
Disciplinary Counsel . . . .
We observe if the Court grants a petition for reinstatement, the Court may place
conditions on reinstatement. W. Va. Rules of Lawyer Disciplinary Procedure 3.33(f).
23
Mr. Kohout claims in his brief that it will be “impossible” for him to make
restitution if his license is annulled. We note our order of restitution may be enforced in
two ways: “(1) by the Office of Disciplinary Counsel seeking a contempt order from this
Court, or (2) through the prosecution of a separate lawsuit by the client or a duly
authorized representative of the client.” Syl. pt. 4, in part, Lawyer Disciplinary Bd. v.
Ball, 219 W. Va. 296, 633 S.E.2d 241 (2006).
46