Iowa Supreme Court Attorney Disciplinary Board v. George Qualley IV and Thomas Karl Bleyhl

IN THE SUPREME COURT OF IOWA
No. 12–0694
Filed February 8, 2013
IOWA SUPREME COURT
ATTORNEY DISCIPLINARY BOARD,
Appellee,
vs.
GEORGE QUALLEY IV and
THOMAS KARL BLEYHL,
Appellants.
On review of the report of the Grievance Commission of the
Supreme Court of Iowa.
Attorneys appeal from the grievance commission recommendation
that we suspend their licenses to practice law in Iowa for thirty days.
LICENSES SUSPENDED.
Charles L. Harrington and Patrick W. O’Bryan, Des Moines, for
complainant.
George Qualley IV and Thomas K. Bleyhl of Qualley & Bleyhl,
P.L.C., pro se, for respondents.
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ZAGER, Justice.
The complainant, the Iowa Supreme Court Attorney Disciplinary
Board (Board), alleges the respondents, George Qualley IV and Thomas
Bleyhl, violated numerous rules of the Iowa Rules of Professional
Conduct. The alleged violations arose out of a sequence of events
occurring from 2008–2010. The Grievance Commission of the Supreme
Court of Iowa (commission) found Qualley and Bleyhl violated rules
32:1.4, 32:1.7, and 32:1.8. The commission recommended we suspend
both Qualley and Bleyhl from the practice of law for thirty days. Upon
our de novo review, we find both Qualley and Bleyhl violated our rules of
professional conduct and suspend each of them from the practice of law
for sixty days.
I. Background Facts and Proceedings.
Qualley and Bleyhl were each admitted to the Iowa bar in 2006.
They are the only partners in the law firm of Qualley & Bleyhl, P.L.C.
The Board filed a detailed complaint against both Qualley and
Bleyhl on November 8, 2011, alleging that each of them, acting in concert
with the other, had violated multiple ethical rules.
The commission held a hearing on February 27, 2012. On April
16, 2012, the commission issued its findings of fact and conclusions of
law and recommended we suspend each of them from the practice of law
for thirty days. The commission further recommended that the
suspensions be staggered so as to minimize the disruption in the
operation of their law firm. Qualley and Bleyhl appeal.
II. Standard and Scope of Review.
We have adhered to the following standard of review for attorney
disciplinary cases:
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“Attorney disciplinary proceedings are reviewed de novo. The
Board bears the burden of proving misconduct by a
convincing preponderance of the evidence, which is a lesser
burden than proof beyond a reasonable doubt but a greater
burden than is imposed in the usual civil case. If we
determine the Board has met its burden and proven
misconduct, ‘we may impose a greater or lesser sanction
than the sanction recommended by the commission.’ ”
Iowa Supreme Ct. Att’y Disciplinary Bd. v. Cannon, 821 N.W.2d 873, 876
(Iowa 2012) (quoting Iowa Supreme Ct. Att’y Disciplinary Bd. v. Weaver,
812 N.W.2d 4, 9 (Iowa 2012) (citations omitted)).
III. Findings of Fact.
In September 2008, Broadmoor Place Homeowners Association
(Broadmoor) retained Qualley and Bleyhl to assist it in collecting
delinquent dues from a homeowner in Broadmoor. The homeowner had
failed to pay monthly association dues and was in default in the amount
of $4090. The parties entered into a contingency fee agreement for this
debt collection. Qualley and Bleyhl performed a number of services in
pursuing payment from the homeowner to Broadmoor. They began by
sending a thirty-day notice to cure default as a prerequisite to initiating a
foreclosure action. When the homeowner did not cure the default by
paying the delinquent dues, Qualley and Bleyhl proceeded to file a
foreclosure petition on behalf of Broadmoor.
While the foreclosure action was pending, the homeowner filed for
bankruptcy. Qualley and Bleyhl represented Broadmoor in the
bankruptcy action, filing a motion for relief from automatic stay in the
bankruptcy court. 1 This motion was unresisted and subsequently
1While no formal agreement was ever executed between Qualley and Bleyhl and
Broadmoor as to their representation in this bankruptcy action, or the subsequent
CitiMortgage, Inc. foreclosure, it is not disputed that the parties assumed that their
representation for these services would be on an hourly basis. Qualley and Bleyhl
submitted periodic statements to Broadmoor for these services during this time that
were timely paid.
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granted. Broadmoor obtained a decree of foreclosure on October 23,
2009. In the decree, Broadmoor acknowledged a first mortgage existed
on the subject property that was superior to their lien. During this time,
and into 2010, Qualley and Bleyhl continued to take action to execute on
Broadmoor’s lien.
On September 11, 2009, the first mortgage holder, CitiMortgage,
Inc., commenced an action to foreclose on its mortgage. Qualley and
Bleyhl also represented Broadmoor’s interest in this foreclosure action,
ultimately consenting to a decree recognizing the secondary position of
Broadmoor. A sheriff’s sale was scheduled for August 12, 2010. While
the record is unclear as to the reason for its action, CitiMortgage
dismissed its foreclosure action without prejudice on August 5, 2010,
one week before the sheriff’s sale of the property
In the spring of 2010, Qualley and Bleyhl prepared the necessary
documentation for the sheriff’s sale. However, the decree they had
obtained did not have an award of attorney fees. Similarly, none of the
preliminary sale documents included accruing association dues.
Broadmoor had expended $2696.59 in attorney fees to Qualley and
Bleyhl in their handling of the two foreclosure actions and the
bankruptcy. At least a portion of these attorney fees should have been
included in the judgment against the homeowner and recouped in the
sheriff’s sale. Qualley and Bleyhl concede that the foreclosure decree
“did not include the total amount [Broadmoor] was apparently entitled
to.” In testimony before the commission, Qualley was ambivalent as to
whether he and Bleyhl had erred, stating it was “possible” Broadmoor
would have gotten a higher judgment if he and Bleyhl had included
attorney fees in the judgment amount, though he agreed Broadmoor was
entitled to attorney fees. Qualley also offered no reasonable explanation
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as to why accruing association dues were not included in the final
judgment amount provided to the sheriff as part of the execution.
On July 27, 2010, in advance of the sheriff’s sale, Bleyhl sent an
email to Broadmoor’s property manager. This email informed her that
Broadmoor had the right to purchase the property at the sheriff’s sale,
but specifically recommended against exercising that right. This email
also informed the property manager that Qualley and Bleyhl had found a
“potential buyer,” and further noted a “potential conflict of interest” since
they would be representing both the buyer and the seller (Broadmoor).
Neither Qualley nor Bleyhl advised Broadmoor who the potential buyer
was or of the need to seek independent legal counsel. They also offered,
“[W]e do not believe this poses a problem since we are trying to get the
association completely paid off.” Broadmoor’s board elected to proceed
despite the dual representation.
The weeks and months leading up to the sheriff’s sale offer
significant insight into the complaint filed against Qualley and Bleyhl.
Qualley and Bleyhl have a longtime friend by the name of Izaah Knox.
During the years prior to the events giving rise to this disciplinary action,
the three of them had discussed investing in real estate with the idea of
making money by “flipping” real estate in a short period of time.
Because of the assessed value of the subject property, Qualley and
Bleyhl believed that they could buy the property cheaply, pay everyone
off, and resell it quickly at a profit of $10,000 to $20,000. Qualley and
Bleyhl approached Knox about buying the real estate at the sheriff’s sale,
and he agreed. To accomplish this, Qualley and Bleyhl organized Elite
Real Estate, L.L.C. (Elite). Elite was recorded with the secretary of state
on August 3, 2010. The initial capital of Elite was provided by Knox in
the amount of $7000. Neither Qualley nor Bleyhl made any capital
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contribution to Elite. Then, CitiMortgage dismissed its foreclosure action
on August 5, 2010, one week before the sheriff’s sale, which allowed
Broadmoor to become the first bidder on the real estate subject only to
the first lien holder. This fact was not communicated to Broadmoor, nor
were the possible legal ramifications of the dismissal discussed with
Broadmoor. However, in an email to Qualley and Bleyhl dated August 9,
2010, several days prior to the sale, Broadmoor did request confirmation
that all association dues to date and legal fees would be included in the
price listed in the sheriff’s sale. The record does not show any response
to this email prior to the sale.
A serious factual dispute in this matter concerns whether Qualley
and Bleyhl advised Broadmoor’s property manager of their relationship
with Elite, the potential buyer who became the eventual buyer. Qualley
and Bleyhl claim to have informed Broadmoor’s property manager of
their interest in Elite. However, the property manager testified she had
not heard of Elite prior to the sheriff’s sale. The president of
Broadmoor’s board also stated she knew nothing about Elite prior to the
sheriff’s sale. The record is also devoid of any record or document which
would show this disclosure. Further, Broadmoor was not advised of the
need to seek independent legal advice on the potential conflict.
On August 12, 2010, the sheriff’s sale proceeded as scheduled. On
behalf of Broadmoor, Qualley provided a written bid of $6500.
Thereafter, either Qualley or Bleyhl made an oral bid of $6900 on behalf
of Elite. As the high bidder, a sheriff’s deed was issued to Elite that day.
On September 2, 2010, Qualley and Bleyhl provided a check to
Broadmoor in the amount of $6859.08 as its proceeds from the sale of
the real estate in satisfaction of Broadmoor’s judgment in the foreclosure
action against the homeowner. Broadmoor was dissatisfied with the
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proceeds received because the judgment did not include association dues
that had accrued during the pendency of the action or the attorney fees
expended in collecting these dues. After fruitless attempts to resolve the
matter with Qualley and Bleyhl, Broadmoor’s board president filed a
complaint with the Board on behalf of Broadmoor.
IV. Ethical Violations.
The Board alleged that Qualley and Bleyhl committed multiple
violations of the Iowa Rules of Professional Conduct in their
representation of Broadmoor and Elite.
A. Conflict of Interest. The Board alleged that Qualley and
Bleyhl violated Iowa Rules of Professional Conduct 32:1.7 and 32:1.8.
Rule 32:1.7 provides:
(a) Except as provided in paragraph (b), a lawyer shall
not represent a client if the representation involves a
concurrent conflict of interest. A concurrent conflict of
interest exists if:
(1) the representation of one client will be directly
adverse to another client; or
(2) there is a significant risk that the representation of
one or more clients will be materially limited by the lawyer’s
responsibilities to another client, a former client, or a third
person or by a personal interest of the lawyer.
(b) Notwithstanding the existence of a concurrent
conflict of interest under paragraph (a), a lawyer may
represent a client if:
(1) the lawyer reasonably believes that the lawyer will
be able to provide competent and diligent representation to
each affected client;
(2) the representation is not prohibited by law;
(3) the representation does not involve the assertion of
a claim by one client against another client represented by
the lawyer in the same litigation or other proceeding before a
tribunal; and
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(4) each affected client gives informed consent,
confirmed in writing.
(c) In no event shall a lawyer represent both parties in
dissolution of marriage proceedings
Iowa R. Prof’l Conduct 32:1.7. In pertinent part, rule 32:1.8 provides:
(a) A lawyer shall not enter into a business transaction
with a client or knowingly acquire an ownership, possessory,
security, or other pecuniary interest adverse to a client
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;
(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.
....
(i) A lawyer shall not acquire a proprietary interest in
the cause of action or subject matter of litigation the lawyer
is conducting for a client, except that the lawyer may:
(1) acquire a lien authorized by law to secure the
lawyer’s fee or expenses; and
(2) contract with a client for a reasonable contingent
fee in a civil case.
....
(k) While lawyers are associated in a firm, a prohibition
in the foregoing paragraphs (a) through (i) that applies to any
one of them shall apply to all of them.
Id. r. 32:1.8.
Qualley and Bleyhl represented both Broadmoor and Elite in a sale
of real estate. In doing so, they owed a duty of loyalty not only to
Broadmoor, but also to Knox, the third partner in Elite.
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Qualley and Bleyhl do not dispute that they advised Broadmoor
that it should not purchase the foreclosed property at the sheriff’s sale.
Nor do they dispute that they had a profit motive for creating Elite
specifically to purchase the property. The commission found that
the entire reason for [Qualley and Bleyhl] wanting to
purchase the property was that they saw the possibility to
make a profit by quickly reselling it. They would not have
engaged Mr. Knox to form Elite if this was not true.
Upon our de novo review, we concur with the commission’s factual
findings.
We have held that it is axiomatic that representing both a buyer
and a seller in the same transaction is a conflict of interest.
[A] lawyer’s simultaneous representation of a buyer and a
seller in the same transaction is a paradigm of a conflict of
interest. Beginning with such basic elements as determining
the price and describing the property to be sold, what one
party gets the other must concede.
Iowa Supreme Ct. Bd. of Prof’l Ethics & Conduct v. Wagner, 599 N.W.2d
721, 726–27 (Iowa 1999) (citation and internal quotation marks omitted).
Qualley and Bleyhl disclosed to Broadmoor that they were representing
both the buyer and the seller in this transaction. However, they failed to
disclose the degree of conflict posed by this situation by not ensuring
that Broadmoor’s representative understood their personal interest in
Elite. Additionally, they failed to advise Broadmoor to seek independent
legal counsel. As summarized by the commission, Qualley and Bleyhl
“acquired ownership of the property without providing written
disclosures to either Elite or [Broadmoor], without telling them to seek
advice of independent counsel and without getting informed consent in
writing,” violating Iowa Rules of Professional Conduct 32:1.8(a)(1),
32:1.8(a)(2), and 32:1.8(a)(3). Further, Qualley and Bleyhl “obtained a
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proprietary interest in the subject matter of an in rem proceeding where
they represented [Broadmoor],” which is prohibited under rule 32:1.8(i).
See Iowa R. Prof’l Conduct 32:1.8(i).
Qualley and Bleyhl do not dispute that this was a conflict of
interest or that they violated our ethical rules. Upon our de novo review,
we concur with the commission’s findings, undisputed by Qualley and
Bleyhl. We find that Qualley and Bleyhl violated provisions of Iowa Rules
of Professional Conduct 32:1.7 and 32:1.8 involving conflicts of interest.
B. Communications to Client. The commission found that
Qualley and Bleyhl violated three distinct provisions of Iowa Rule of
Professional Conduct 32:1.4 governing communication with clients.
“[W]hen [an attorney] represents a client whose interests differ
from those of another client, or from the [attorney’s] own interests, the
burden shifts to the [attorney] to prove that all the transactions were fair
and equitable.” Wagner, 599 N.W.2d at 723. An essential part of this
heightened standard is the requirement that the attorney must
proactively ensure and be able to demonstrate that the “client was fully
informed of the nature and effect of the transaction proposed and of [the
client’s] own rights and interests in the subject matter involved.” Id.
(citation and internal quotation marks omitted). The commission found
neither Qualley nor Bleyhl fulfilled their responsibilities to communicate
adequately with Broadmoor.
Rule 32:1.4(a)(1) requires a lawyer to “promptly inform the client of
any decision or circumstance with respect to which the client’s informed
consent, as defined in rule 32.1.0(e), is required by these rules.” Iowa R.
Prof’l Conduct 32:1.4(a)(1). The rules define “informed consent” as “the
agreement by a person to a proposed course of conduct after the lawyer
has communicated adequate information and explanation about the
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material risks of and reasonably available alternatives to the proposed
course of conduct.” Id. r. 32:1.0(e).
The commission found, and we concur, that neither Qualley nor
Bleyhl fulfilled their responsibilities to provide informed consent to
Broadmoor about the conflict they faced, as required by rules 32:1.7 and
32:1.8. As previously noted, Qualley and Bleyhl failed to communicate
adequate information and explanation to either Elite or Broadmoor
regarding the conflict of interest, constituting a violation of rule
32:1.4(a)(1) in addition to the violation of conflicts rules.
Iowa Rule of Professional Conduct 32:1.4(a)(2) requires that a
lawyer shall “reasonably consult with the client about the means by
which the client’s objectives are accomplished.” Rule 32:1.4(b) provides
that “[a] lawyer shall explain a matter to the extent reasonably necessary
to permit the client to make informed decisions regarding the
representation.” The commission found, and we concur, that Qualley
and Bleyhl violated these two interrelated provisions.
Qualley and Bleyhl did not properly inform anyone at Broadmoor,
including the property manager, of CitiMortgage’s dismissal of its
foreclosure action. Qualley and Bleyhl also failed to discuss or
communicate how the dismissal of this foreclosure action may have
opened up additional legal avenues for Broadmoor, including a
discussion as to whether it might now be beneficial for Broadmoor to bid
on the property at the sheriff’s sale. Broadmoor could not make an
informed decision as to how to proceed without the benefit of all this
information. Additionally, Qualley and Bleyhl failed to respond to a
specific inquiry, prior to the sale, as to the full value of their bid at the
sheriff’s sale, which would have included the accruing homeowner dues
and attorney fees. Per rule 32:1.4(b), Qualley and Bleyhl were required
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to disclose this information. Per rule 32.1.4(a)(2), they were required to
consult with Broadmoor as to how Broadmoor wanted to proceed. They
did not do either of these things.
Further, as the potential buyer, Qualley and Bleyhl knew, but
failed to inform Broadmoor, that Elite was only sufficiently capitalized to
make the initial purchase at the sheriff’s sale and had no provision for
additional capital contributions to pay for the ongoing association dues
to Broadmoor. Knowledge of these facts would have allowed Broadmoor
the ability to make more informed decisions regarding its judgment.
Now, Broadmoor is again dealing with a homeowner (Elite) that is
delinquent in its dues. Finally, the commission found that Qualley and
Bleyhl did not inform Broadmoor that the foreclosure judgment did not
include ongoing association dues from the original homeowner to
Broadmoor, nor did it include attorney fees. Qualley and Bleyhl did not
disclose this material information to Broadmoor, nor did they consult
with Broadmoor about how to use this information to fulfill Broadmoor’s
goals, again in violation of both rules 32:1.4(a)(2) and 32:1.4(b).
Broadmoor attempted to ensure it would be made whole in the
sheriff’s sale. In an email dated August 9, 2010—three days before the
sheriff’s sale took place on August 12, 2010—the property manager
asked, “Does the sale price listed on the sheriff sale include all dues to
date and legal fees?” Neither Qualley nor Bleyhl responded to this
inquiry. Again, this communication issue constituted violations of both
rule 32.1.4(a)(2) and 32:1.4(b). Qualley and Bleyhl did not provide this
information, and without it, Broadmoor did not have the opportunity to
make an informed decision about whether to move forward with the
sheriff’s sale or whether to make a bona fide attempt to purchase the
property itself.
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Even after repeated attempts to obtain a full disclosure and
accounting of the judgment, accruing homeowner fees and attorney fees,
Qualley and Bleyhl were not forthcoming. Instead, they refused to
provide the accountings, responded in derogatory terms to the legitimate
requests, and told Broadmoor that if it wanted a response, it would
charge them for it on an hourly basis.
Qualley and Bleyhl repeatedly assert, both in their testimony in
front of the commission and in their briefs, that they properly informed
the property manager of all relevant matters and that it was the property
manager who failed to provide this information to Broadmoor’s board.
Communication problems between the property manager and
Broadmoor’s board are irrelevant to our analysis. We agree with the
commission’s findings that Qualley and Bleyhl did not adequately convey
important information to the property manager, or anyone else
representing Broadmoor, in a timely manner.
Additionally, as the commission noted, Qualley and Bleyhl did not
disclose other significant, relevant facts. They did not disclose the
financial position of Elite, even though they were privy to that
information. They did ultimately provide Broadmoor with all the
pleadings and filings associated with the matter, including the
foreclosure decree and the satisfaction of judgment, but this was not
sufficiently timely to assist Broadmoor in achieving its goals. Qualley
and Bleyhl argue that they had no incentive for violating our ethics rules
with regard to appropriate communication, as Elite had not “made a
dime,” and they do not anticipate Elite will ever realize a profit from its
investment here. Yet, both Qualley and the third partner in Elite, Izaah
Knox, testified it was their intention to profit from flipping the unit.
Knox, in fact, testified they anticipated making up to $20,000 on this
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venture from their roughly $7000 investment. As Qualley testified, they
recognized the purchase was a risk. The fact that they made a decision
which ultimately turned out to be unprofitable does not mask the profit
motive. Qualley and Bleyhl were nonetheless required to provide
adequate information to Broadmoor.
We do not discipline for mere negligence or error in judgment.
Iowa Supreme Ct. Att’y Disciplinary Bd. v. Sobel, 779 N.W.2d 782, 788–89
(Iowa 2010). In Sobel, we declined to find a violation when an attorney
did not communicate with his clients through an interpreter, concluding
that while the attorney’s judgment of his clients’ ability to understand
English may have been incorrect, it did not reflect adversely on his
fitness to practice law, especially as it reflected the understanding of
multiple parties who had interacted with the attorney’s clients. Id.
The actions of Qualley and Bleyhl represented more than mere
negligence. They did not exercise sufficient diligence to ensure
Broadmoor could make informed decisions regarding whether to bid at
the sheriff’s sale, the appropriate bid at the sheriff’s sale, and whether
Broadmoor would have wanted Elite as a buyer at the sheriff’s sale. See
Iowa R. Prof’l Conduct 32:1.4(b). Upon our de novo review, we agree with
the findings of the commission that Qualley and Bleyhl violated rules
32:1.4(a)(1), (a)(2), and (b) governing client communication.
C. Fee Agreement. The Board alleged that Qualley and Bleyhl
violated Iowa Rule of Professional Conduct 32:1.5(b), which governs fee
agreements and requires that “the basis or rate of the fee and expenses
for which the client will be responsible shall be communicated to the
client, preferably in writing, before or within a reasonable time after
commencing the representation.”
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In evaluating possible violations of rule 32:1.5(b), we first
determine whether there was a written agreement. See Iowa Supreme Ct.
Att’y Disciplinary Bd. v. Dunahoo, 799 N.W.2d 524, 533 (Iowa 2011). In
the event no written agreement exists, we proceed to evaluate whether
the attorney effectively communicated the fee agreement to the client. Id.
The fee agreement Qualley and Bleyhl entered into with Broadmoor,
while in writing, contemplated a standard contingency fee agreement for
debt collection of unpaid association dues. When the representation
evolved into legal services involving two foreclosure actions and a
bankruptcy, the better practice would clearly have been to execute a new
agreement on the basis of an hourly rate. Nevertheless, the property
manager testified she understood the fee structure prior to the beginning
of representation. Likewise, the invoices sent to Broadmoor reflected an
hourly fee structure, and Broadmoor paid the invoices without
expressing concerns regarding the fee structure. The commission found
the Board did not prove a violation of rule 32:1.5(b), and we concur.
D. Conduct of Dishonesty, Fraud, Deceit or Misrepresentation.
The commission characterized this as the “closest question presented,”
ultimately deciding that the Board did not prove by a convincing
preponderance of the evidence that Qualley and Bleyhl violated rule
32:8.4(c) governing dishonesty, fraud, deceit or misrepresentation. We
agree that this is an extremely close question, and Qualley and Bleyhl
are aided by the heightened standard of proof the Board must meet. See
Weaver, 812 N.W.2d at 9 (Iowa 2012) (“A convincing preponderance of
the evidence . . . is a lesser burden than proof beyond a reasonable doubt
but a greater burden than is imposed in the usual civil case.”). Upon our
de novo review, we agree that the Board failed to meet its burden in
establishing a violation of rule 32:8.4(c).
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In the past, we have found violations of rule 32:8.4(c) in situations
in which attorneys have made false statements to the security
commission, Iowa Supreme Ct. Att’y Disciplinary Bd. v. Kersenbrock, 821
N.W.2d 415, 421 (Iowa 2012), forged documents, Iowa Supreme Ct. Att’y
Disciplinary Bd. v. Newman, 748 N.W.2d 786, 787–88 (Iowa 2008), and
altered documents, Iowa Supreme Ct. Att’y Disciplinary Bd. v. Schall, 814
N.W.2d 210, 213–14 (Iowa 2012). However, we require a reasonable level
of scienter to find an attorney violated rule 32:8.4(c). Iowa Supreme Ct.
Att’y Disciplinary Bd. v. Parrish, 801 N.W.2d 580, 587 (Iowa 2011) (“In
the legal sense, a misrepresentation usually requires something more
than negligence.” (Citation and internal quotation marks omitted.)).
The commission found that Qualley and Bleyhl advised Broadmoor
not to purchase the property, even though their own actions
demonstrated they thought it would be profitable to do so. Qualley and
Bleyhl also failed to respond in a timely manner to Broadmoor’s inquiry,
prior to the sheriff’s sale, as to whether the foreclosure judgment
included the entire amount to which Broadmoor was entitled. Instead,
Qualley and Bleyhl referred to a phantom “second sale” as a possibility
for curing any issues with the first sale, which never materialized.
Many of the problems in this area originated after the sale was
complete. Though we do not hold Qualley and Bleyhl accountable for the
property manager’s failure to notify Broadmoor’s board of the ownership
interest Qualley and Bleyhl disclosed immediately subsequent to the
sheriff’s sale, their interactions with Broadmoor’s board and the new
property manager after the sale are problematic. Rather than respond in
a timely manner to requests for information in a way that assisted
Broadmoor in understanding the law and the proceedings, both Qualley
and Bleyhl stonewalled. Qualley informed the new property manager
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that he was “poorly informed with respect to how a foreclosure for
homeowner’s association dues actually works.” When the new property
manager continued to press for an accounting of invoices and an
explanation regarding the conflict of interest issues, Bleyhl told him that
Broadmoor was lucky to have gotten anything and “[h]ad we [Qualley and
Bleyhl] not pursued this action, the dues owed would have been
discharged in bankruptcy and the association would be totally out of
luck.”
Even more disturbing, Qualley and Bleyhl failed to provide billing
records and the accounting for funds that the new property manager
requested. Representing that they had provided all of the requested
information to the previous manager, they informed the new manager
that they would charge their standard hourly rate for providing the
requested information.
However, the commission also recognized that some of the
inaccurate statements Qualley made to his clients might have been due
to inexperience. In support of this conclusion, it cited Qualley’s
testimony at the disciplinary hearing. “[I]t was clear that Mr. Qualley did
not understand the concept of amending the judgment.” As the
commission noted, negligence does not violate this rule. Iowa Supreme
Ct. Att’y Disciplinary Bd. v. Netti, 797 N.W.2d 591, 605 (Iowa 2011)
(finding a level of scienter greater than negligence is required to find a
violation of rule 32:8.4(c)).
Ultimately, the commission found credible the contention of
Qualley and Bleyhl that they intended to help Broadmoor, while
simultaneously helping themselves. Though Broadmoor’s board
president indicated that Broadmoor had no interest in purchasing the
unit, and Broadmoor’s financial ability to do so was questionable, that
18
does not relieve Qualley and Bleyhl of the responsibility of representing
Broadmoor’s interest and informing them of the possible advantages of
purchasing the unit. To their credit, as owners in Elite, Qualley and
Bleyhl did bid a sufficient amount to cover Broadmoor’s initial judgment
and court costs. We do not believe they intended to cheat Broadmoor.
They simply did an incompetent job of fully protecting Broadmoor’s
interests. We do not believe this rises to the level of dishonesty, fraud,
deceit, or misrepresentation required to prove a violation of rule
32:8.4(c).
V. Sanctions.
There is no standard sanction warranted by any particular type of
misconduct. Weaver, 812 N.W.2d at 13. Though prior cases can be
instructive, the sanction warranted in a particular case must be based
on the circumstances of that case. Id.
In determining the appropriate discipline, we consider the
nature of the alleged violations, the need for deterrence,
protection of the public, maintenance of the reputation of the
bar as a whole, and the respondent’s fitness to continue in
the practice of law, as well as any aggravating and mitigating
circumstances. The form and extent of the sanctions must
be tailored to the specific facts and circumstances of each
individual case. Significant distinguishing factors in the
imposition of punishment center on the existence of multiple
instances of neglect, past disciplinary problems, and other
companion violations.
Id. (citation and internal quotation marks omitted).
Qualley and Bleyhl repeatedly emphasize their belief that they have
“learned their lesson” and will not reoffend. While individual deterrence
is one factor we consider, we must also consider all of the other factors
enumerated above. We have responsibilities to both the public and the
bar to discourage violations of our rules of professional conduct.
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Qualley and Bleyhl clearly did not effectively communicate the
status of their representation to Broadmoor, in violation of our rules.
Additionally, Qualley and Bleyhl were involved in a direct conflict of
interest, failed to fully disclose the conflict of interest, and never
obtained, in writing, informed consent to the conflict as required by our
rules. They did not adequately inform either of their clients, Broadmoor
or Elite, of the facts the clients needed in order to give informed consent
to Qualley and Bleyhl’s representation.
We have imposed a public reprimand and suspensions of varying
duration for similar conduct. Iowa Supreme Ct. Att’y Disciplinary Bd. v.
Ta-Yu Yang, 821 N.W.2d 425, 427 (Iowa 2012) (holding public reprimand
was warranted for attorney who violated rule of professional conduct
prohibiting attorney from engaging in conduct involving
misrepresentation, rule requiring attorney to explain matter to extent
reasonably necessary to permit client to make informed decisions, and
rule governing conflict of interest); Netti, 797 N.W.2d at 600, 607
(imposing a two-year suspension where attorney engaged in a conflict of
interest with his client, among other violations); Iowa Supreme Ct. Att’y
Disciplinary Bd. v. Zenor, 707 N.W.2d 176, 182, 187 (Iowa 2005)
(imposing a four-month suspension where attorney represented opposing
entities, among other violations); Iowa Supreme Ct. Att’y Disciplinary Bd.
v. Howe, 706 N.W.2d 360, 378, 381–82 (Iowa 2005) (imposing a four-
month suspension where attorney represented opposing entities, among
other violations); Wagner, 599 N.W.2d at 723 (imposing a three-month
suspension where attorney failed to inform the client of the attorney’s
financial interest in a transaction); Iowa Supreme Ct. Bd. of Prof’l Ethics
& Conduct v. Sikma, 533 N.W.2d 532, 537–38 (Iowa 1995) (imposing a
three-month suspension on attorney who engaged in undisclosed
20
business transactions with a client). We have also imposed public
reprimands for similar behavior. Comm. on Prof’l Ethics & Conduct v.
Qualley, 487 N.W.2d 327, 328, 330–31 (Iowa 1992) (imposing a public
reprimand where attorney and his client engaged in a transaction
together intended to profit both attorney and client, but attorney did not
provide complete disclosure of his interests).
We also consider any aggravating and mitigating factors. We
consider cooperation with the Board’s investigation to be a mitigating
factor. Iowa Supreme Ct. Att’y Disciplinary Bd. v. Axt, 791 N.W.2d 98,
103 (Iowa 2010). Qualley and Bleyhl cooperated with the Board’s
investigation. Additionally, the record does not disclose any prior
disciplinary action involving either of the respondents, which is also a
mitigating factor. Iowa Supreme Ct. Att’y Disciplinary Bd. v. Moonen, 706
N.W.2d 391, 402 (Iowa 2005).
Multiple violations of our ethical rules warrant increased
disciplinary sanctions. Iowa Supreme Ct. Bd. of Prof’l Ethics & Conduct v.
Lesyshen, 585 N.W.2d 281, 288 (Iowa 1998). We have found Qualley
and Bleyhl violated multiple provisions of the rules.
Qualley and Bleyhl engaged in a course of conduct that violated
multiple rules of professional conduct in an attempt to gain personal
profit. Their testimony that they did not actually accrue personal profit
does not erase their intention of profiting. Additionally, the fact that they
have lost money on the transaction has resulted in financial harm to
both Elite and Broadmoor, the two entities they represented. Elite was
not properly capitalized to hold the property for an extended period of
time. As a result, it now stands to lose its investment to either the first
mortgage holder or to Broadmoor, as Elite is in arrears on its association
dues and the status of the first mortgage is unknown. Unfortunately,
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Broadmoor again has a homeowner who is neglecting to pay the dues
owed to Broadmoor.
Considering the aggravating and mitigating factors, and the need
to protect both the public and the bar against the type of self-dealing
that occurred here, we find suspension is warranted. We conclude that
the appropriate sanctions in this case are suspensions of both Qualley’s
and Bleyhl’s licenses to practice law for sixty days.
VI. Disposition.
For the above reasons, we suspend the licenses of George Qualley
IV and Thomas Bleyhl to practice law in this state for sixty days. The
suspension of George Qualley IV shall commence on the filing date of this
opinion. The suspension of Thomas Bleyhl shall commence on April 12,
2013. The suspension applies to all facets of the practice of law. Iowa
Ct. R. 35.13(3). Qualley and Bleyhl must comply with the notification
requirements of rule 35.23, and costs are taxed against them pursuant
to rule 35.27(1). Unless the Board objects, Qualley’s and Bleyhl’s
licenses will be automatically reinstated on the day after the sixty-day
suspension period expires if all costs have been paid. Iowa Ct. R.
35.13(2).
LICENSES SUSPENDED.