Iowa Supreme Court Attorney Disciplinary Board v. Rodney Howard Powell

IN THE SUPREME COURT OF IOWA
No. 17–0254
Filed September 15, 2017
Amended November 17, 2017
IOWA SUPREME COURT ATTORNEY DISCIPLINARY BOARD,
Appellee,
vs.
RODNEY HOWARD POWELL,
Appellant.
On appeal from the report of the Iowa Supreme Court Grievance
Commission.
Grievance commission recommends a suspension of an attorney’s
license to practice law for violations of ethical rules. LICENSE
SUSPENDED.
Rodney H. Powell, West Des Moines, pro se.
Tara van Brederode and Amanda K. Robinson, Des Moines, for
appellee.
2
CADY, Chief Justice.
The Iowa Supreme Court Attorney Disciplinary Board charged
attorney Rodney Powell with violating the rules of professional conduct
pertaining to conflicts of interest with current clients, using information
obtained in the course of representation against current clients, and
using information obtained in the course of representation against
former clients. The Iowa Supreme Court Grievance Commission found
Powell violated the rules and recommended a six-month suspension.
Upon our de novo review, we find Powell violated the Iowa Rules of
Professional Conduct and impose a two-year suspension.
I. Background Facts and Proceedings.
Rodney Powell is seventy years old. He has been licensed to
practice law in Iowa since 1973. His legal background and disciplinary
history was last documented in an opinion by this court in 2013. See
Iowa Supreme Ct. Att’y Disciplinary Bd. v. Powell (Powell II), 830 N.W.2d
355, 356–57 (Iowa 2013). At that time, we added to his disciplinary
history by finding he engaged in a series of trust fund violations over a
period of years. Id. at 357–58. The violations primarily involved the
premature withdrawal of attorney fees from his trust account. Id. at 357.
We imposed an interim suspension from the practice of law for seven
months followed by an additional suspension of three months. Id. at
356, 359–60. Powell had been previously suspended from the practice of
law in 2007 for six months after he engaged in a series of unethical
actions over a period of time involving the collection of attorney fees.
Iowa Supreme Ct. Att’y Disciplinary Bd. v. Powell (Powell I), 726 N.W.2d
397, 408 (Iowa 2007). Powell was also privately admonished in 2005 for
charging an excessive fee in a case and was privately admonished in
3
2010 “for failing to make an accounting before withdrawing fees from his
trust account.” Powell II, 830 N.W.2d at 356.
In this disciplinary action, Powell is accused of obtaining a
$20,000 loan from the administrator of an estate during the time he
served as the designated attorney for the estate in violation of the rules of
professional conduct. The administrator was the beneficiary of a
$40,000 life insurance policy on the life of the decedent in the estate.
The insurance company paid the insurance proceeds to Powell, and he
deposited them in his law firm trust account. At the request of Powell,
the administrator orally agreed to loan Powell $20,000 of the proceeds.
Powell withdrew the loan proceeds from the trust account before a
written loan agreement was executed. The written agreement
subsequently prepared by Powell provided for the law firm to repay the
loan in monthly installments at ten percent interest. The amount of each
monthly payment was to be based on an unspecified amount of firm
receipts received during the preceding month. Powell claimed he asked
the administrator if he wished to seek independent counsel before
agreeing to make the loan. The administrator denied any request was
made.
Powell subsequently made sporadic and minimal monthly
payments. The administrator eventually filed a breach-of-contract
action. Powell settled the lawsuit by agreeing to pay $25,000 to the
administrator in monthly installments of $1500.
The Board charged Powell with violating Iowa Rules of Professional
Conduct 32:1.8(a) (improperly entering into a business transaction with
a client), 32:1.8(b) (using information relating to representation of a
client to the disadvantage of the client), and 32:1.9(c) (using information
relating to the representation of a former client to the disadvantage of the
4
former client). The commission found Powell violated Iowa Rules of
Professional Conduct 32:1.8(a), 1.8(b), and 1.9(c). It recommended that
Powell’s license to practice law be suspended for six months. It also
recommended Powell reimburse the administrator’s travel costs to testify
at the hearing.
II. Violations.
“A client has a right to expect loyalty and independent judgment
from an attorney.” Iowa Supreme Ct. Att’y Disciplinary Bd. v. Johnston,
732 N.W.2d 448, 455 (Iowa 2007); see also Iowa Supreme Ct. Bd. of Prof’l
Ethics & Conduct v. Fay, 619 N.W.2d 321, 326 (Iowa 2000) (“A person
who seeks legal advice must be able to ‘expect unfettered independence
of professional judgment of a lawyer whose loyalty to that person is
total.’ ” (quoting Comm. on Prof’l Ethics & Conduct v. Oehler, 350 N.W.2d
195, 199 (Iowa 1984))). This concept is crucial to the client–lawyer
relationship, and thus, it rightfully pervades our rules on conflicts of
interest with clients and the duties owed to them. See Iowa Rs. Prof’l
Conduct 32:1.8–.9.
“While rule 32:1.8(a) does not prohibit business dealings between a
lawyer and his or her client, it imposes stringent requirements on such a
transaction.” Iowa Supreme Ct. Att’y Disciplinary Bd. v. Marks, 814
N.W.2d 532, 538 (Iowa 2012). Of particular importance, the rule
“requires that the client . . . be advised, in writing, of the desirability of
seeking the advice of independent legal counsel,” and “that the client be
given a reasonable opportunity to obtain such advice.” Iowa R. Prof’l
Conduct 32:1.8 cmt. 2. These requirements “mitigate[] ‘the possibility of
overreaching’ created by an attorney’s ‘legal skill and training, together
with the relationship of trust and confidence between lawyer and
client.’ ” Iowa Supreme Ct. Att’y Disciplinary Bd. v. Pederson, 887 N.W.2d
5
387, 391–92 (Iowa 2016) (quoting Iowa R. Prof’l Conduct 32:1.8 cmt. 1).
In other words, the rule not only discourages fraudulent activity by
attorneys, see, e.g., Comm. on Prof’l Ethics & Conduct v. Yates, 420
N.W.2d 455, 457–58 (Iowa 1988) (noting attorney failed to advise clients
to seek other legal counsel and then successfully converted client funds),
but also helps to ensure well-meaning attorneys do not inadvertently
cause serious harm to their clients, see, e.g., Iowa Supreme Ct. Att’y
Disciplinary Bd. v. Wright, 840 N.W.2d 295, 301–02 (Iowa 2013)
(concluding attorney violated rule requiring disclosures despite attorney’s
belief he was securing a good investment for his clients). Thus, the rule
serves to protect confidence in the attorney–client relationship. To effect
this purpose, it “must be rigidly followed by our bar, and [it] is strictly
enforced.” Fay, 619 N.W.2d at 325 (applying predecessor to rule 32:1.8).
Powell initially argued he was not subject to the rule because the
administrator was not his client. He claimed he represented the estate,
not the fiduciary. However, as we have recently held, and as Powell
subsequently acknowledged, an attorney representing an estate can owe
ethical duties to the estate’s fiduciary, particularly if the fiduciary sought
out the lawyer’s services. Pederson, 887 N.W.2d at 392 (“Normally, an
attorney–client relationship exists between the executor of an estate and
the attorney designated by the executor to probate the estate.”).
The parties do not dispute that a loan is a business transaction.
Iowa Supreme Ct. Att’y Disciplinary Bd. v. Wintroub, 745 N.W.2d 469,
474–75 (Iowa 2008). The rule prohibits business transactions with
clients, such as a loan, unless
(1) the transaction and terms on which the lawyer
acquires the interest are fair and reasonable to the client and
are fully disclosed and transmitted in writing in a manner
that can be reasonably understood by the client;
6
(2) the client is advised in writing of the desirability of
seeking and is given a reasonable opportunity to seek the
advice of independent legal counsel on the transaction; and
(3) the client gives informed consent, in a writing
signed by the client, to the essential terms of the transaction
and the lawyer’s role in the transaction, including whether
the lawyer is representing the client in the transaction.
Iowa R. Prof’l Conduct 32:1.8(a)(1)–(3). In short, the rule requires (1) fair
terms that are fully disclosed, (2) advice on independent counsel and the
opportunity to obtain it, and (3) informed consent. These requirements
must each be evidenced in writing.
We agree with the findings of the commission that Powell violated
the rule. The terms of the agreement were not fair or fully disclosed and
the critical requirements to enter into the transaction were ignored,
including the duty of documentation. As a result, we find it unnecessary
to consider the companion violations alleged by the Board. Instead, we
turn to sanctions.
III. Sanctions.
“Because ‘we strive to achieve consistency in the discipline of Iowa
lawyers who violate our rules of professional conduct,’ our prior cases are
relevant in our determination of the appropriate sanction.” Iowa
Supreme Ct. Att’y Disciplinary Bd. v. Khowassah, 890 N.W.2d 647, 651
(Iowa 2017) (quoting Powell II, 830 N.W.2d at 358). Powell ignored the
rules governing conflicts of interest with a client. Our sanctions for
similar conduct have ranged from a public reprimand, see Marks, 814
N.W.2d at 542, to revocation, see Comm. on Prof’l Ethics & Conduct v.
Hall, 463 N.W.2d 30, 36 (Iowa 1990). However, we have typically only
used reprimands in this context if the attorney had already served a time
of suspension for the underlying conduct. See Marks, 814 N.W.2d at
542; Wintroub, 745 N.W.2d at 477. On the other end of the spectrum, we
7
typically reserve revocation in this context for only the most serious
violations, such as when the attorney actually converted the client’s
property. See Hall, 463 N.W.2d at 36; Yates, 420 N.W.2d at 458. Thus,
suspensions for violating the conflict-of-interest rules ordinarily range
from one month, see Iowa Supreme Ct. Att’y Disciplinary Bd. v. Kaiser,
736 N.W.2d 544, 546 (Iowa 2007); Fay, 619 N.W.2d at 327, to one year,
see Wright, 840 N.W.2d at 304. We have recently imposed sixty-day
suspensions for violating our conflicts rules. See Iowa Supreme Ct. Att’y
Disciplinary Bd. v. Willey, 889 N.W.2d 647, 658 (Iowa 2017); Pederson,
887 N.W.2d at 395. In one of these cases, like here, the attorney
obtained a loan from the client without complying with the rules
governing business transactions. See Pederson, 887 N.W.2d at 393. In
another case involving a loan from a client, we noted we would have
required a three- to six-month suspension but for the fact the attorney
already served a suspension for the underlying conduct. See Wintroub,
745 N.W.2d at 477.
Notwithstanding, we are confronted with a significant aggravating
factor in this case. In addition to client harm, the pattern of unethical
conduct by Powell over the last decade raises a serious and fundamental
question of his fitness to practice law. See Iowa Supreme Ct. Bd. of Prof’l
Ethics & Conduct v. Beckman, 674 N.W.2d 129, 139 (Iowa 2004). We
begin to lose hope that lawyers will ever understand and meet their
ethical obligations when they repeatedly engage in unethical conduct. Id.
At some point, public protection and the reputation of the profession
justify the revocation of a license to practice law. Powell is approaching
this point. He continues to fail to honor the ethical boundaries of the
profession. However, we have not adopted a three-strikes approach to
revocation. The current discipline will be the third for Powell, but it
8
involves a single incident. Unlike in Beckman, we are not faced with a
new series of unethical conduct that justifies losing hope that he could
practice law in an ethical manner again. Cf. id. His background of
discipline justifies a sanction greater than recommended by the
commission, but not revocation.
Considering all relevant factors, we suspend Powell’s license to
practice law with no possibility of reinstatement for two years from the
date of this opinion.
IV. Conclusion.
We suspend Rodney Powell’s license to practice law in this state
with no possibility of reinstatement for a period of two years from the
date of the filing of this opinion. This suspension shall apply to all facets
of the practice of law. See Iowa Ct. R. 34.23(3). Powell shall comply with
all requirements of the court rules associated with a suspension. See id.
rs. 34.23(1)–(4), .24(1)–(2). Upon any application for reinstatement,
Powell shall have the burden to show he has not practiced law during the
period of suspension and that he meets the requirements of Iowa Court
Rule 34.25. He shall also establish he satisfied or discharged the
settlement of the lawsuit brought by the administrator. See Iowa
Supreme Ct. Att’y Disciplinary Bd. v. Lynch, 901 N.W.2d 501 (Iowa 2017).
The costs of this proceeding, including the administrator’s mileage costs
of $1251 to attend the commission hearing as a witness, are assessed
against Powell. See Iowa Ct. R. 36.24(1); see also Iowa Code § 625.2
(2017).
LICENSE SUSPENDED.
All justices concur except Wiggins, J., who dissents.
9
#17–0254, Iowa Supreme Ct. Att’y Disciplinary Bd. v. Powell
WIGGINS, Justice (dissenting).
I once again dissent to any sanction short of revocation. See Iowa
Supreme Ct. Att’y Disciplinary Bd. v. Powell (Powell II), 830 N.W.2d 355,
360–64 (Iowa 2013) (Wiggins, J., dissenting) (calling for the revocation of
Powell’s license). For the last twelve years, Powell has managed to use
his clients’ funds contrary to our ethical rules. His extensive disciplinary
history is as follows.
In 2005, Powell received a private admonition for charging an
excessive fee to a client. 1 Powell II, 830 N.W.2d at 356 (majority opinion).
In 2007, we suspended Powell’s license to practice law for six months
because of his numerous and persistent unethical actions involving the
collection of fees from clients. Iowa Supreme Ct. Att’y Disciplinary Bd. v.
Powell (Powell I), 726 N.W.2d 397, 408 (Iowa 2007). In 2010, Powell
received another private admonition for failing to make an accounting
before withdrawing fees from his trust account. Powell II, 830 N.W.2d at
356. In 2011, we temporarily suspended Powell from practicing law for
seven months and appointed a trustee to take control of his trust
account in response to his various trust violations. Id. at 356, 359–60.
At the time, the trustee determined his trust account was short
approximately $43,000. Id. at 356. In 2013, we imposed a three-month
suspension for the same trust account violations that led to his interim
suspension in 2011. Id. at 359–60.
Within nine months of his most recent reinstatement, Powell once
again flouted our rules of professional conduct. It is apparent to me that
1“While a prior private admonition is not discipline, we consider it an
aggravating factor” in a subsequent disciplinary case. Iowa Supreme Ct. Att’y
Disciplinary Bd. v. West, 901 N.W.2d 519, 528 (Iowa 2017).
10
Powell’s practice of law does not generate enough income to support his
practice or his lifestyle. This case is similar to Iowa Supreme Court Board
of Professional Ethics & Conduct v. Beckman, 674 N.W.2d 129 (Iowa
2004). There, we said,
Based on the serious and repetitive nature of
Beckman’s ethical violations, we think he is not fit to
practice law. For the same reason, we harbor no hope that
he will understand and meet his ethical responsibilities in
the future. Therefore, the only way in which the public can
be protected is by revocation of his license. This sanction is
necessary, not only to protect the public, but also to protect
the reputation of the bar as a whole.
Id. at 139 (citations omitted).
Here, Powell found a way to use his clients’ assets for personal
gain. Although he did not convert his clients’ funds, his unethical
conduct allowed him to gain access over the funds. This conduct is
similar to the conduct for which we previously disciplined him. Despite
the fact that Powell already received discipline, he has continued in his
unethical behavior. I am convinced that mere suspension is not enough
to deter Powell from committing further questionable conduct.
We revoke an attorney’s license based on the nature and severity of
the attorney’s conduct. See, e.g., Iowa Supreme Ct. Att’y Disciplinary Bd.
v. Green, 888 N.W.2d 398, 405 (Iowa 2016) (revoking the license of an
attorney with no prior violations who misappropriated client funds); Iowa
Supreme Ct. Att’y Disciplinary Bd. v. Crum, 861 N.W.2d 595, 606 (Iowa
2015) (theft of client funds). Revocation is almost axiomatic when an
attorney converts a client’s funds. Iowa Supreme Ct. Att’y Disciplinary
Bd. v. Thomas, 844 N.W.2d 111, 117 (Iowa 2014). I am not advocating a
three-strike-and-you-are-out rule. However, Powell’s conduct, the
similarities to his previous violations, and the repetitive nature of his
11
ethical violations, lead me to conclude he is not fit to practice law. Most
important to me is that all of Powell’s violations demonstrate his
recurrent improper use of client funds to sustain his law practice.
Although he did not outright convert his clients’ funds, he found a way
on three separate occasions to access these funds unethically.
Furthermore, he appears not to have learned anything from his prior
disciplinary proceedings. For the protection of the public, and the
integrity of the bar, I would revoke his license.