Iowa Supreme Court Attorney Disciplinary Board Vs. David John Isaacson

IN THE SUPREME COURT OF IOWA
No. 57 /08–0070
Filed June 6, 2008
IOWA SUPREME COURT ATTORNEY
DISCIPLINARY BOARD,
Complainant,
vs.
DAVID JOHN ISAACSON,
Respondent.
On review of the report of the Grievance Commission.
Grievance Commission report in disciplinary proceeding
recommends imposition of a public reprimand. LICENSE SUSPENDED.
Charles L. Harrington and David J. Grace, Des Moines, for
complainant.
David L. Brown and Alexander Wonio of Hansen, McClintock &
Riley, Des Moines, for respondent.
2
HECHT, Justice.
This matter comes before the court on the report of a division of
the Grievance Commission of the Supreme Court of Iowa. See Iowa Ct.
R. 35.10. The Iowa Supreme Court Attorney Disciplinary Board alleged
the respondent, David J. Isaacson, violated ethical rules by failing to
deposit a client’s funds in a trust account, converting the client’s funds,
failing to keep records of transactions with the client, and making
misrepresentations to the Iowa Supreme Court Disciplinary Board, the
Iowa Supreme Court Client Security Commission, and the law firm
partnership of which he was a member. The grievance commission
found Isaacson violated the Iowa Code of Professional Responsibility by
failing to deposit a client’s funds in a trust account, and failing to keep
proper records of transactions pertaining to those funds, but concluded
the board failed to meet its burden of proof as to the other allegations.
The majority of the commission recommends the imposition of a public
reprimand.1 Upon our respectful consideration of the commission’s
findings of fact, conclusions of law, and recommendation of the
commission, we find the respondent committed several of the charged
ethical violations and suspend his license to practice law for six months.
I. Standard of Review.
We review de novo the commission’s findings. Iowa Supreme Ct.
Att’y Disciplinary Bd. v. Gottschalk, 729 N.W.2d 812, 815 (Iowa 2007).
We give the commission’s findings and recommendations respectful
consideration, but we are not bound by them. Id. It is the board’s
burden to prove attorney misconduct by a convincing preponderance of
the evidence. Iowa Supreme Ct. Bd. of Prof’l Ethics & Conduct v. Lett, 674
1One member of the commission found the board met its burden on other
charges and recommended Isaacson’s license be suspended for at least eighteen
months.
3
N.W.2d 139, 142 (Iowa 2004). If we find the board has proved its
allegations of attorney misconduct, we “may impose a lesser or greater
sanction than the discipline recommended by the grievance commission.”
Iowa Ct. R. 35.10(1).
II. Factual Findings.
Isaacson, a partner in a Des Moines law firm, represented Kelly
Belz in an action to collect rent owed by Belz’s tenant, Robert Young. An
agreement was reached on September 30, 2003, in which Young agreed
to make a series of payments to settle the case: $1500 on or before
October 15, 2003; $1500 on or before November 15, 2003; and the
balance of $5100 on or before December 31, 2003.
Young paid the first settlement installment by delivering to
Isaacson a check in the amount of $1500. Isaacson deposited the check
in his personal bank account, withdrew $1300 in cash, and delivered
$684 in cash to Belz.2
Young delivered to Isaacson a check in the amount of $3000 on or
about November 18, 2003. When Isaacson deposited this check in his
personal account on that date, the account had a negative balance of
$155.52. It is undisputed that Isaacson subsequently delivered to Belz
the sum of $3000 in cash, but neither Isaacson nor Belz maintained
records that could establish when this occurred.
The third and final installment of the settlement was paid on or
about December 26, 2003, when Young delivered to Isaacson a check in
the amount of $2600. Isaacson deposited the instrument in his personal
account on December 30, 2003, and failed to promptly deliver the funds
2Isaacson explained in his testimony before the commission that Belz, a used
car dealer, preferred to receive the settlement proceeds in cash. Isaacson withheld from
the first installment the sum of $816 for services rendered to Belz in achieving the
settlement.
4
to Belz. Several months passed. After being informed by a third party in
late June of 2004 that Belz believed Isaacson had failed to account for
the third settlement installment, Isaacson’s law partner reviewed the law
firm’s trust account. Finding no evidence of Belz’s settlement proceeds,
the partner confronted Isaacson who denied he was in possession of the
proceeds and claimed Belz was mistaken.3
In his initial written response on June 13, 2005, to the board’s
inquiry, Isaacson represented that although Young was to have made all
payments under the settlement with Belz by December 31, 2003, “the
monies were received at a considerably later time period.” Isaacson also
assured the board that he could provide “a proper accounting for the
settlement [funds].” Both of these representations made by Isaacson to
the board were false. Young made all payments required under the
settlement agreement before the end of 2003, and Isaacson could not
properly account for the settlement funds because he commingled them
with his personal funds and failed to maintain records from which an
accurate accounting could be demonstrated.
Isaacson subsequently prepared, and Belz signed, an affidavit in
response to the board’s inquiry. In the affidavit, Belz asserted that
Isaacson cashed the settlement checks at Belz’s direction and delivered
to Belz all funds to which Belz was entitled.4 The affidavit also alleged
3Isaacson suggests his denial was truthful because by the time the partner
expressed his concern about the matter, the funds had been delivered to Belz. Neither
Isaacson nor Belz maintained records that could confirm or refute Isaacson’s version of
the facts.
4The affidavit also avers Belz “approved extensions of the times provided for
payment.” We are unable to discern from the record any extensions of time granted to
Young. As neither Isaacson nor Belz kept records documenting when the payments
were made by Young, we are unable to determine when the first settlement installment
due October 15, 2003, was received by Isaacson. The check representing the second
installment, due on November 15, 2003, was deposited by Isaacson on November 18,
2003. The third installment due December 31, 2003, was paid on December 26, 2003.
5
Belz was satisfied with Isaacson’s representation in connection with the
Young matter, and asserted Belz subsequently consulted Isaacson on
other matters and referred relatives to Isaacson for legal services.
The board filed a complaint on April 30, 2007, alleging Isaacson
committed numerous ethical violations. The board asserted Isaacson’s
failure to deposit the settlement funds in a trust account, and his failure
to respond truthfully to the board violated DR 9–102 (preserving identity
of client’s funds), DR 9–103(A) (maintaining books and records sufficient
to demonstrate compliance with DR 9–102), and DR 1–102(A)(1) (violating
a disciplinary rule), (4) (dishonesty, fraud, deceit, or misrepresentation),
(5) (conduct prejudicial to the administration of justice) and (6) (conduct
adversely reflecting on fitness to practice law). In an amendment to its
complaint, the board subsequently alleged Isaacson also violated DR 1–
102(A)(4) and (6) by failing to deposit in the firm’s office account fees paid
by several other clients, and by drawing a check on the law firm’s
partnership account to compensate his daughter for labor and
reimbursing the firm with a check on his personal account that was
returned for insufficient funds.
III. Ethical Violations.
A convincing preponderance of the evidence establishes that
Isaacson violated DR 9–102(A) by failing to deposit Belz’s funds in a trust
account. Isaacson contends this violation should be viewed as a mere
technical violation of the rule because he fully complied with his client’s
instructions and delivered the settlement proceeds in cash. We disagree.
Belz’s preference to receive his funds in cash did not vitiate Isaacson’s
duty under the rule to deposit the settlement checks in a trust account
and properly account for them. We find implausible Isaacson’s claim
that he believed Belz’s preference to receive the settlement funds in cash
6
rendered DR 9–102(A) inapplicable. A lawyer’s duty under the rule to
deposit a client’s funds in a trust account is not constrained by a client’s
instruction or preference. Iowa Supreme Ct. Bd. of Prof’l Ethics &
Conduct v. Sullins, 648 N.W.2d 127, 134 (Iowa 2002) (“Even if a client
tells her attorney to withhold funds from a trust account, the attorney’s
failure to deposit the funds into a trust account would result in an ethics
violation.”).
Although Belz confirmed by his affidavit and deposition testimony
that he eventually received all of the settlement proceeds to which he was
entitled, the record in this case aptly illustrates the types of perils DR 9–
102 seeks to avoid. Isaacson’s personal bank account balance was from
time to time insufficient to cover checks drawn on the account during the
relevant time periods.
The record also overwhelmingly establishes that Isaacson violated
DR 9–103 by failing to maintain books and records sufficient to
demonstrate compliance with DR 9–102. As he failed to deposit Belz’s
funds in a trust account, Isaacson necessarily violated DR 9–103.
The record establishes that on several occasions Isaacson collected
fees from other clients, and deposited them in his personal account
rather than the partnership’s account. As a consequence of this, the
firm billed some clients who had already paid Isaacson for legal services.
Isaacson contends his conduct was not dishonest, deceitful, or
fraudulent because the partnership agreement did not require him to
share his legal fees with his partner. Although Isaacson had no
contractual obligation to share his fees with his partner, we conclude
this fact is not dispositive as to the board’s claim he violated DR 1–
102(A)(4). We find persuasive the testimony of Isaacson’s partner who
explained the partnership agreement required the partners to deposit all
7
fees collected in the partnership account to assure each partner’s share
of the firm’s overhead would be paid before the partners’ “draws” were
distributed. Isaacson violated this agreement by depositing several fees
in his personal account, and, as a consequence, soon fell behind in the
payment of his share of the overhead. His partner repeatedly requested
payment of the arrearage after the partnership was dissolved in 2004.
Notably, Isaacson failed to respond to his partner’s requests with reasons
why he did not owe approximately $15,000 as his share of the firm’s
overhead. Although Isaacson claimed in his testimony before the
commission that he disputed whether he owed the arrearage claimed by
his partner, we find his testimony wholly unpersuasive. We conclude
Isaacson violated DR 1–102(A)(4) when he deceitfully failed to deposit
fees in the partnership account to avoid paying his share of the firm’s
overhead.
Isaacson also violated DR 1–102(1) and DR 1–102(4) when he filed
his 2004 Combined Statement and Questionnaire with the Iowa Supreme
Court Client Security Commission. In that questionnaire, Isaacson
represented that he kept “all funds of clients for matters involving the
practice of law in Iowa in separate interest bearing trust accounts.” As
we have noted, Isaacson did not deposit Belz’s settlement funds in such
an account. Isaacson violated the same rules when he misrepresented to
the board that he could provide an accounting of the Belz transactions
when in fact he had no records that would document when the cash
transactions occurred. An attorney is prohibited from engaging in
conduct involving dishonesty, fraud, misrepresentation, and deceit. In
connection with this fundamental principle, we have stated that a
“casual, reckless disregard for the truth” warrants discipline. Iowa
8
Supreme Ct. Bd. of Prof’l Ethics & Conduct v. Daggett, 653 N.W.2d 377,
380 (Iowa 2002).
Finally, we find the board has failed to prove by a convincing
preponderance of evidence that Isaacson violated DR 1–102(A)(4) and (6)
by drawing a check on the partnership account payable to his daughter
for services rendered to the firm, and by reimbursing the firm with a
check drawn on his personal account. We find Isaacson’s daughter did
provide services to the firm for which she was compensated, and the
evidence in this record does not sustain the board’s claim that Isaacson’s
actions in this transaction were characterized by dishonesty, or that they
reflect adversely on his fitness to practice law.
IV. Sanction.
Isaacson contends the commission’s recommendation of a public
reprimand is appropriate in this case. The board urges this court to
suspend Isaacson’s license. “There is no standard sanction for a
particular type of misconduct, and though prior cases can be instructive,
we ultimately determine an appropriate sanction based on the particular
circumstances of each case.” Iowa Supreme Ct. Att’y Disciplinary Bd. v.
Earley, 729 N.W.2d 437, 443 (Iowa 2007). “When deciding on an
appropriate sanction for an attorney’s misconduct, we consider the
nature of the violations, protection of the public, deterrence of similar
misconduct by others, the lawyer’s fitness to practice, and [the court’s]
duty to uphold the integrity of the profession in the eyes of the public.
We also consider aggravating and mitigating circumstances present in
the disciplinary action.” Iowa Supreme Ct. Att’y Disciplinary Bd. v.
Walker, 712 N.W.2d 683, 685 (Iowa 2006) (internal quotations and
citations omitted).
9
We have imposed sanctions for violations of DR 9–102 ranging
from a suspension of one year to a revocation. Compare Iowa Supreme
Ct. Bd. of Prof’l Ethics & Conduct v. Gottschalk, 553 N.W.2d 322, 325
(Iowa 1996) (lawyer’s license suspended for one year for misappropriation
of fees from trust account where no client funds were lost), with Comm.
on Prof’l Ethics & Conduct v. Rowe, 225 N.W.2d 103, 104 (Iowa 1975)
(revocation ordered where constellation of lawyer’s violations included
failure to deposit client’s funds in a trust account, misappropriation, and
eventual restitution). We conclude a sanction less than revocation is
appropriate in this case because the board failed to prove Isaacson
intended to convert the third installment of the Young settlement.
Although Isaacson’s failure to deposit those funds in a trust account was
a clear violation of DR 9–102, and the long delay of approximately six
months in the delivery of the third settlement installment evidences
deplorable inattention to Belz’s interests, we find the delay was
substantially attributable to Belz’s casual attitude about receiving the
funds. The board did not controvert Isaacson’s testimony suggesting
that Belz exhibited a somewhat cavalier attitude about the delivery of the
third installment, urged Isaacson not to make a “special trip” to effect its
delivery, and represented that the delivery could be accomplished at a
future date when Belz would consult Isaacson on other matters.
Isaacson’s violation of DR 9–102 does not stand alone, however.
Dishonesty, deceit, and misrepresentation are “abhorrent concepts to the
legal profession, and can give rise to the full spectrum of sanctions,
including revocation.” Iowa Supreme Ct. Att’y Disciplinary Bd. v. Hall,
728 N.W.2d 383, 387 (Iowa 2007). Isaacson’s lack of candor in his
responses to the board and the client security commission, and the
10
deceit he practiced in the relationship with his law partner also demand
a significant suspension in this case.
This court has indicated “prior disciplinary action is properly
considered as an aggravating circumstance . . . .” Iowa Supreme Ct. Bd.
of Prof’l Ethics & Conduct v. Gallner, 621 N.W.2d 183, 188 (Iowa 2001);
accord Iowa Supreme Ct. Bd. of Prof’l Ethics & Conduct v. McKittrick, 683
N.W.2d 554, 563 (Iowa 2004). Isaacson’s license to practice was
suspended for six months in 1997 for violations of DR 1–102(A)(4)
(engaging in conduct involving dishonesty, fraud, deceit or
misrepresentation); DR 5–104(A) (entering a business transaction with
client without full disclosure of differing interests); DR 5–105(B)
(accepting employment where exercise of independent judgment likely to
be affected); and DR 5–105(C) (continuing multiple employment where
exercise of independent judgment likely to be adversely affected). Iowa
Supreme Ct. Bd. of Prof’l Ethics & Conduct v. Isaacson, 565 N.W.2d 315,
318 (Iowa 1997).
As we determine the appropriate sanction, “[i]t is also proper to
consider . . . that [the Respondent] is an experienced lawyer. . . .”
Gallner, 621 N.W.2d at 188. As a practicing lawyer with more than thirty
years of experience as a practitioner, Isaacson clearly knew of his
obligation to deposit his client’s funds in a trust account, his duty to
keep records of such transactions, and his responsibility to be truthful in
his responses to the board, the client security commission, and his law
partner.
We suspend Isaacson’s license to practice law in Iowa indefinitely,
with no possibility of reinstatement for a period of six months from the
date of filing of this opinion. The suspension imposed applies to all
11
facets of the practice of law as provided by Iowa Court Rule 35.12(3), and
requires notification to clients as provided in Iowa Court Rule 35.21.
Upon any application for reinstatement, Isaacson 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
35.13. Costs are taxed to Isaacson pursuant to Iowa Court Rule
35.25(1).
LICENSE SUSPENDED.
All justices concur except Wiggins and Baker, JJ., who take no
part.