Iowa Supreme Court Attorney Disciplinary Board v. Tina Hassane Muhammad

IN THE SUPREME COURT OF IOWA
No. 19–1032
Filed October 25, 2019
IOWA SUPREME COURT ATTORNEY DISCIPLINARY BOARD,
Complainant,
vs.
TINA HASSANE MUHAMMAD,
Respondent.
On review of the report of the Iowa Supreme Court Grievance
Commission.
The grievance commission recommends a one-year suspension of an
attorney’s license to practice law for multiple violations of ethics rules,
including theft from a client without colorable claim. LICENSE
REVOKED.
Tara van Brederode, Des Moines, for complainant.
Tina Hassane Muhammad, Chicago, Illinois, pro se.
2
APPEL, Justice.
In this disciplinary matter, we consider whether a lawyer’s
depositing of $7500 advanced by a client into a personal account amounts
to theft as alleged and, if so, whether the lawyer can avoid revocation by
showing that she had a colorable claim to the funds.
The Iowa Supreme Court Attorney Disciplinary Board (Board)
sought revocation of the lawyer’s license to practice law. After a hearing,
the Iowa Supreme Court Grievance Commission (commission) concluded
that the lawyer received the funds for expense purposes in connection with
a potential legal claim but that the funds were deposited into the lawyer’s
personal account. The commission also found that the lawyer did not have
a colorable present or future claim to the funds. After balancing
aggravating and mitigating factors, the commission recommended the
lawyer’s license be suspended for one year. The commission further
recommended that we require reimbursement of the $7500, that we
require the lawyer to obtain a mentor, that the lawyer undergo at least six
hours of continuing legal education related to trust account and fee
retainer agreements, and that the lawyer continue to comply with our
minimum continuing legal education requirements during the period of
suspension.
Based upon our de novo review, we revoke the lawyer’s license to
practice law.
I. Factual and Procedural Background.
A. Introduction. Tina Muhammad is a licensed Iowa lawyer. Prior
to becoming a lawyer, Muhammad was a stay-at-home mother and worked
for a period of time outside the legal profession. She graduated from law
school in 2015 and was admitted to the Iowa bar in 2016. During her law
school years, Muhammad worked with Black Lawyers for Justice in
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support of their nationwide efforts against police brutality and served as
an assistant on cases.
At the time she obtained her Iowa law license, Muhammad was
employed as a compliance officer with a Des Moines-based company. She
left her employment there in the summer of 2016, and in August 2016,
she entered solo practice focusing on family and criminal law. At the time
of the disciplinary hearing in this case, Muhammad was employed by
Upright Law, a Chicago law firm specializing in bankruptcy matters. She
also on occasion performed contract work reviewing documents.
Muhammad has no prior disciplinary history.
Rachel Peebles is a resident of the State of Washington. She
currently resides in Tacoma. Peebles’ son was a mental health patient at
Harborview Medical Center in Seattle, Washington. On August 12, 2014,
an incident allegedly occurred at Harborview which formed the basis for
Peebles’ personal injury/civil rights matter against Harborview and other
related parties. In August of 2016, Peebles contacted Muhammad in Iowa
regarding potential legal representation in this matter.
B. Nature of Complaint. On July 26, 2018, the Board filed a
complaint against Muhammad. The Board alleged that in the summer of
2016, Peebles conducted an internet search to find an attorney to evaluate
whether she had sufficient grounds to bring a personal injury and civil
rights lawsuit against Harborview Medical Center, the State of
Washington, the University of Washington, and the Seattle Police
Department. According to the Board, Peebles located Muhammad through
an online advertisement and paid her a $250 retainer to evaluate her case.
Peebles allegedly told Muhammad that she did not want an attorney
licensed in Washington to represent her. The Board asserted Muhammad
advised Peebles that there were grounds to bring a personal injury and
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civil rights lawsuit in Washington arising from the alleged incident. The
Board claimed that Peebles and Muhammad executed a contingency fee
agreement (Agreement) regarding the personal injury/civil rights claim.
Pursuant to the Agreement, the Board alleged that Peebles paid
Muhammad $7500 in advance for expenses in connection with the
personal injury/civil rights representation. According to the Board,
Muhammad deposited the funds in a nontrust account. The Board
claimed that when Peebles severed the attorney–client relationship with
Muhammad, she requested an accounting of the $7500 advanced for
expenses. The Board stated that no accounting was forthcoming and that
none of the $7500 was returned to Peebles.
The Board alleged that Muhammad violated Iowa Rules of
Professional Conduct 32:8.4(b) (criminal acts) and 32:8.4(c) (honesty,
fraud, deceit, and misrepresentation). Specifically, the Board alleged,
17. Muhammad used the $7,500 expense retainer for
purposes other than for the specific purpose for which it was
paid as set forth in the Agreement.
18. Muhammad did not have a colorable future claim to
the $7,500, as it was for the specific purpose of paying
expenses, and instead knowingly converted the funds in
violation of Iowa Code §§ 714.1(2) and 714.2(2).
The conversion and lack-of-colorable-future-claim allegations are
sufficient to comply with Iowa Court Rule 36.8(1). 1
The Board also alleged a series of trust account violations.
Specifically, the Board alleged violations of Iowa Rules of Professional
1Iowa Court Rule 36.8(1) provides, in relevant part,
Allegation of misappropriation or conversion. If the complainant intends to
assert that a respondent misappropriated or converted client or third-
party funds in violation of rule 32:1.15 or chapter 45 of the Iowa Court
Rules, the complainant must specifically allege in the complaint the
respondent’s misappropriation or conversion for personal use was without
a colorable future claim to the funds.
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Conduct 32:1.15(a) (holding funds in separate accounts), 32:1.15(c)
(depositing advance legal and expense fees in trust account), 32:1.15(d)
(safekeeping and prompt delivery of property), and 32:1.15(f) (complying
with chapter 45 of the Iowa Court Rules).
Muhammad answered the Board’s complaint. She asserted that
Peebles agreed to pay her a $15,000 flat fee to assist in the settlement of
a separate action related to public disclosure of video footage but not for
expenses associated with her potential personal injury/civil rights claim.
Thus, according to Muhammad, the payment of the $7500 was “already
earned.” 2 Muhammed asserted that she pulled the Agreement off the
Internet and that it was “all wrong for this case.” She asserted that the
Agreement “is very confusing and seems to allude that [she] charged
[Peebles] $7500.00 for expenses, but that is incorrect.”
On the trust account issue, Muhammed claimed she put the $7500
she received from Peebles in what she thought was a client trust account.
Muhammad claimed the account was improperly set up by bankers, a fact
she claimed she did not know until she prepared her yearly client security
questionnaire.
2Iowa Court Rule 36.8(2) states, in relevant part,
Colorable future claim. A respondent who intends to rely on the defense of
a colorable future claim to funds taken from a trust account to avoid a
finding of misappropriation must, within the time set for making of pretrial
motions or at such later time as the division president directs, file written
notice of such intention. . . . The respondent bears the burden of coming
forward with evidence in support of a colorable future claim, but the
burden to prove conversion remains with the complainant.
Notice in the answer is sufficient to comply with the rule. See Iowa Supreme Ct. Att’y
Disciplinary Bd. v. Moran, 919 N.W.2d 754, 757 (Iowa 2018). Although the answer does
not specifically use the term “colorable claim,” it is sufficient to give the Board notice of
the respondent’s claim that the fees were, in fact, earned. Thus the respondent has
complied with the court rule.
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Muhammad admitted that she did not provide Peebles with an
accounting in connection with the $7500 payment. Regarding her ability
to provide an accounting to Peebles, Muhammad asserted that she failed
to keep track of her time. Muhammad affirmatively pled that she helped
get Peebles a settlement in the public disclosure case, contacted attorneys
regarding a trust account for Peebles, helped Peebles get visitation rights
to the facility where her son was confined, and negotiated a release for her
son. According to Muhammad’s pleading, Peebles called her and her
paralegal “every day, and sent tons of emails and various documents.” In
her answer, Muhammad maintained that not only did she earn the $7500
but that Peebles owed her an additional $7500.
Muhammad denied the Board’s allegation that she had no colorable
claim to the $7500. She repeated her insistence that the funds were not
for expenses related to her potential personal injury/civil rights claim.
According to Muhammad, “I never converted funds knowingly, that is not
true. . . . [M]y intentions were good and remained good, it was my
paperwork that was lousy. I admit that.” In effect, Muhammad admitted
that she violated rule 32:1.15(f) (complying with Iowa Code chapter 45) but
denied the remainder of the Board’s alleged violations.
II. Proceedings Before the Commission.
A. Sanction for Pretrial Noncompliance and Motion to
Continue. In its scheduling order, the commission established
November 6, 2018, as the deadline for the filing of exhibits, exhibit lists,
and witness lists. The scheduling order provided that a hearing on the
matter would be held on November 29–30, 2018.
Muhammad did not timely file the required documents on
November 6. Further, on November 9, Muhammad did not participate in
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a hearing on the question of whether the testimony of Peebles could be
taken by telephone.
On November 13, counsel for the Board sent an email to Muhammed
asking when the documents might be available but received no answer. In
light of the lack of response, the Board on November 15 filed a motion to
intervene with the panel president seeking any of the following: (1) an order
prohibiting Muhammad from introducing witnesses and exhibits, (2) an
order extending the deadline for witness and exhibit lists, or (3) setting the
matter for hearing.
On November 16, the panel president granted the motion to
intervene and extended the deadline for providing submissions to the
following Monday, November 19, but warned Muhammad that if she failed
to provide the documents she would be precluded from calling witnesses
or offering exhibits at the hearing. Muhammad failed to file any
documents under the extended deadline. On November 20, the Board filed
a motion to preclude her from offering exhibits or witnesses at the hearing.
That same day, the panel president granted the motion and entered an
order precluding Muhammad from offering exhibits or witnesses at the
hearing. Cf. Iowa Supreme Ct. Att’y Disciplinary Bd. v. Cepican, 861
N.W.2d 841, 843 (Iowa 2015) (holding respondent was precluded from
introducing witnesses and evidence as a sanction for failing to answer the
complaint or to provide discovery responses).
On November 26, Muhammad filed a motion to continue the hearing
asserting hardship and the need to consult with an attorney. The Board
resisted the continuance. The Board recounted Muhammad’s history of
noncompliance with the various orders and deadlines. The panel
president denied the motion to continue.
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B. Hearing Before the Commission. The hearing occurred on
November 29 and 30, 2018. The Board called two witnesses to testify,
Peebles (telephonically) and Muhammad.
Muhammad was not allowed to present a case-in-chief but only to
cross-examine Peebles and herself. The commission members engaged in
extensive examination of the two witnesses.
C. Commission’s Findings of Fact, Conclusions of Law, and
Recommendation.
1. Findings of fact. In a nineteen-page order, the commission found
facts largely adverse to Muhammad. Among other things, the commission
concluded that the $7500 in funds advanced by Peebles were for the
purpose of paying expenses in connection with the personal injury/civil
rights matter. The commission found that the funds were not placed in a
client trust account; that no expenses were incurred in the personal
injury/civil rights case prior to termination of representation; and that
when Peebles asked for an accounting and refund of the balance,
Muhammad did not respond. The commission further found that
Muhammad had no colorable present or future claim to the funds.
2. Commission’s conclusions of law (violations). Based on its review
of its findings, the commission concluded that Muhammad violated Iowa
Rules of Professional Conduct 32:8.4(b) and (c) when she converted
Peebles $7500 expense retainer for her personal use and failed to use
those funds for expenses related to the personal injury and civil rights
matter. Further, citing Iowa Supreme Court Attorney Disciplinary Board v.
Parrish, 925 N.W.2d 163, 170–71 (Iowa 2019), the commission found that
Muhammad did not have a colorable future claim to the $7500 because
the funds were specifically provided for expenses. In the alternative, the
commission concluded that Muhammad did not have a colorable present
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claim to the funds because there was no evidence—other than
Muhammad’s testimony—that the funds were intended to pay Muhammad
for work related to the public disclosure settlement.
The commission recognized that a violation of Iowa Rule of
Professional Conduct 32:8.4(c) requires some element of scienter in order
to prove a violation. See Iowa Supreme Ct. Att’y Disciplinary Bd. v.
Haskovec, 869 N.W.2d 554, 560 (Iowa 2015). The commission did not
expressly conclude that scienter was present; however, the commission’s
determination that Muhammad violated the rule necessarily implies a
finding of scienter.
The commission also found violations of various rules related to
trust accounts and maintenance of client funds. The commission noted
Muhammad did not deposit the retainer in a trust account but put it in a
personal account, thereby comingling personal assets with client funds.
She further admitted that she did not keep an accounting of her work and
did not have records that would warrant withdrawal of funds from the
$7500 retainer. Muhammad did not refund the amount to Peebles and
failed to provide an accounting of the retainer. As a result, the commission
found that Muhammad violated rules 32:1.15(a), (c), (d), and (f).
3. Commission’s analysis of mitigating and aggravating factors and
recommended sanction. With respect to mitigating factors, the commission
noted that Muhammad is an inexperienced attorney who opened a solo
practice without a mentor. In support of finding inexperience a mitigating
factor, the commission cited Iowa Supreme Court Attorney Disciplinary
Board v. Turner, 918 N.W.2d 130, 152 (Iowa 2018). The commission noted
that Muhammad’s case, unlike Turner, involves only one mistake, not
repeated mistakes, by an inexperienced practitioner.
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The commission, however, also found aggravating factors. The
commission noted that the case involved multiple violations of disciplinary
rules which generally warrants a more severe sanction. See Iowa Supreme
Ct. Att’y Disciplinary Bd. v. Baldwin, 857 N.W.2d 195, 213 (Iowa 2014).
The commission further found that Muhammad’s conduct in the
proceeding did not reflect a true understanding of the gravity of her
actions. Specifically, the commission noted that Muhammad failed to
comply with scheduling orders, failed to appear at a telephonic hearing,
and sought a continuance of the hearing less than three full days before
the scheduled hearing. See Iowa Supreme Ct. Att’y Disciplinary Bd. v. Netti,
797 N.W.2d 591, 606 (Iowa 2011) (citing caselaw finding that other
aggravating factors, such as failure to cooperate with the board, warrant
more severe sanctions in trust account violations).
Based on the evidence and the aggravating and mitigating factors,
the commission recommended that Muhammad’s license be suspended for
a period of one year. Before being reinstated, the commission
recommended that Muhammad reimburse the $7500 to Peebles, obtain a
mentor, complete a minimum of six hours in-person continuing legal
education with a specific focus on trust accounts and fee/retainer
agreements, and maintain the mandatory continuing legal education
requirements during the period of suspension.
D. Statement on Sanctions. After the entry of the commission’s
findings of fact, conclusions of law, and recommendation, Muhammad did
not file an appeal. The Board did not file a brief with this court regarding
the proper sanction that should be imposed on Muhammad.
Muhammad filed a statement with this court regarding sanctions,
asking for leniency. She stated that her errors were due to a lack of
experience and knowledge, insisting, “I earned those funds. We agreed to
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$15,000.00 when we settled her [public disclosure] case.” According to
Muhammad, the commission did not give “any weight to my prior legal
work for [Peebles] or the settlement I got her.” She admitted the Agreement
was “a mishmash of contradictory statements,” but averred that she had
earned the funds and denied that she intentionally took client funds.
III. Discussion.
A. Findings of Fact. Based on our de novo review of the record,
we find the following facts.
1. Initial attorney–client relationship. Muhammad in the summer of
2016 opened a solo practice in Des Moines, eventually named Justice Law,
PLLC. Muhammad’s law practice focused on family law and criminal law.
During the summer of 2016, Peebles sought an attorney to evaluate
whether she had sufficient grounds to bring a personal injury/civil rights
lawsuit against the State of Washington, the University of Washington, the
Seattle Police Department, and Harborview Medical Center related to an
incident in which Peebles and her son were allegedly “tased” at
Harborview. Peebles wanted an out-of-state attorney for her personal
injury and civil rights lawsuit.
In August of 2016, Peebles found an online article about
Muhammad and reached out to her online. Peebles completed and
submitted an electronic form and paid Muhammad a $250 fee for an initial
one-time consultation to evaluate the merits of a personal injury and civil
rights lawsuit and review documents related to the lawsuit. Muhammad
advised Peebles the same day that Peebles had grounds to bring the
personal injury and civil rights case. During the initial phone
consultation, Muhammad and Peebles discussed a $2000 retainer for the
personal injury and civil rights litigation. Muhammad subsequently
requested a retainer of $15,000.
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At the time Peebles was consulting Muhammad about the potential
personal injury and civil rights claim, Peebles encountered legal issues
surrounding the settlement of what the record characterizes as “a public
disclosure case.” This matter was handled by a Washington state attorney,
Katherine George.
With respect to the public disclosure claim, Harborview had agreed
to pay Peebles $55,000 and to provide video footage regarding an incident
involving Peebles and her son at the facility. Settlement documents
included multiple signature dates from August 31 to September 2, 2016.
Muhammad reviewed the settlement agreement to ensure that the release
language would not preclude the contemplated personal injury/civil rights
claim. Muhammad also advised Peebles to execute the final agreement
notwithstanding Peebles’ concerns about the impact of the settlement on
Peebles’ eligibility for Medicaid and housing assistance. Because of the
potential implications of the release, and the ultimate acquiring of video
relating to the tasing incident, the public disclosure claim was directly
related to the proposed representation of Muhammad in the personal
injury/civil rights claim.
2. October 26 invoices. On October 26, 2016, Muhammad sent
Peebles two invoices: one for $250 and another for $1000. One invoice
was for a letter that Muhammad sent on behalf of Peebles to a Washington
state hospital administrator relating to Peebles’ ability to visit her son and
to questions relating to alleged assaultive behavior. The second invoice
did not provide an itemization of services but equaled four hours of work
at Muhammad’s hourly rate. According to Muhammad, the work related
to the invoice included working with Peebles to lift a ban on Peebles from
visiting her son, the terms and conditions of her son’s discharge from the
hospital, and review of her son’s medical records. Muhammed reasonably
13
believed these services were part and parcel of the personal injury/civil
rights claim. At that point in time, Peebles and Muhammad had not yet
signed a contingency fee agreement related to the personal injury/civil
rights case.
Muhammad observed that she sent the invoices “to kind of see
whether or not [Peebles] was going to pay me for the legal services that I
had been performing for her.” Muhammad further testified that at the
time she sent the invoices, she “had to pay her paralegal as well.”
Following receipt of the invoices, Peebles and Muhammad, however,
agreed that payment of these services would occur through a contingency
fee for the personal injury/civil rights case once an agreement was
executed. Muhammed sent Peebles no other invoices after the execution
of the Agreement at the end of November.
3. Drafting and execution of the Agreement in personal injury/civil
rights matter. With respect to the personal injury/civil rights case,
Muhammad first drafted the Agreement in August 2016. Muhammad
found an agreement exemplar online and revised it for use in connection
with Peebles’ representation. Muhammad revised paragraphs related to
the purpose of the agreement and retainer provisions to fit her work for
Peebles.
Muhammad sent the Agreement to Peebles in November. The
Agreement was signed by Peebles and dated November 22, 2016. Peebles
returned the signed Agreement to Muhammad with a $7500 check in the
same envelope. The check bore the notation “legal expenses.” Muhammad
signed the Agreement on November 28, 2016, and she deposited the $7500
in her personal bank account.
4. Terms of the Agreement. The Agreement signed by the parties
stated that the “client(s) believe(s) that (s)he may have a claim or cause of
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action for civil rights and personal injury violations against the University
of Washington, Harborview Hospital, the State of Washington, Seattle
Police Department or any other person, firm, or corporation that may be
liable . . . .” The parties agreed that the law firm “will proceed as it shall
deem appropriate to effect a recovery for any and all civil rights and
personal injury claims that has been sustained by client(s).”
The Agreement further provided that upon the signing of the
agreement, the client shall pay to the law firm
the sum of $7,500.00 that shall be applied upon account for
expenses as needed, to obtain photographs or recordings,
police reports, to secure records and documents, fees for
expert witnesses, and the cost of service of notice of suit and
filing of the Petition.
The Agreement further provided,
Law Firm may demand from time to time, and client(s)
shall pay such, additional sums as shall be necessary to pay
said expenses. Any expense fund balance shall apply on law
firm’s fees; however, such balances so applied, unless
hereinafter otherwise set forth, shall be considered in
determining the percentages hereinafter referred to.
The Agreement provided for a contingency fee as follows: thirty
percent if effected by settlement after service of notice of suit and up to the
selection of the jury in said trial; thirty-three percent of the recovery if
made at any point beginning with the selection of the jury and ending with
the final decision of the jury; and finally, an amount equal to fifty percent
thereafter, including appeal to the Washington Supreme Court if an appeal
is taken.
The Agreement provided that the law firm “may at its own expense
employ another attorney, or attorneys, in such place or places as may
appear desirable to assist in the above matter.” However, “[i]f client(s)
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employ(s) another attorney, or attorneys, in this matter, such employment
shall be at the client’s expense.”
Finally, the Agreement provided that attorneys (Muhammad) shall
receive “no compensation for services rendered under this Agreement if
there is no recovery of money and/or other property.”
5. Deposit of funds into personal account. Muhammad has offered
various explanations for her treatment of the $7500 check received from
Peebles. At the hearing, she suggested that the fees were earned and that
she did not need to put them in trust. She further stated that the check
was written to her personally and that, as a result, she put it in her
personal account. At another point in the hearing, and in her posttrial
brief, she criticized bankers at Veridian Credit Union for improperly setting
up her trust account, but the check was deposited in Muhammad’s
personal account at Bank of America where Muhammad had no client
trust accounts. The deposit of the funds into her personal account was
an intentional act: she stated at the hearing that she did so as the check
was made out to her personally.
At the time the check was deposited in her personal account, there
were indications that Muhammad was experiencing financial distress. In
her testimony before the commission, Muhammad emphasized that she
needed funds to pay her paralegal and was also overdue on at least one
credit card.
6. Events after the execution of the Agreement. In December, after
entering into the Agreement, Muhammad intended to look into yet another
legal matter for Peebles, helping to collect an unpaid $78,000 backpay
award related to a 2005 jury trial against the City of Seattle. Muhammad
also assisted Peebles with reinstating her visitation rights with her
hospitalized son and with obtaining appropriate discharge instructions for
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Peebles’ son. Muhammad told Peebles she would commence work on the
personal injury and civil rights matter in January.
Muhammad obtained a referral for Lee Rousso to serve as local
counsel in Washington state for the personal injury and civil rights
lawsuit. Muhammad notified Peebles that Peebles needed to meet with
Rousso in January of 2017. Peebles became very upset that it was
necessary to have a Washington attorney involved.
Muhammad and Peebles disputed whether their attorney–client
relationship was terminated by Muhammad or Peebles, but in any event,
the relationship was terminated in February of 2017. The commission
found that Muhammad did not file a personal injury or a civil rights matter
on behalf of Peebles and, further, that Muhammad did not incur any
expenses for the personal injury and civil rights matter.
Soon after the termination of representation, Peebles requested an
accounting of the $7500 paid to Muhammad. Muhammad did not provide
an accounting and (by Muhammad’s own admission) did not maintain
records on the work completed and time accrued regarding her work for
Peebles.
7. The $7500 was for anticipated expenses related to the personal
injury/civil rights litigation. Muhammad asserted that she and Peebles
agreed Muhammad would receive $15,000 for Muhammad’s work
regarding the $55,000 public disclosure settlement. Muhammad claimed
that the Peebles payment of $7500 was for one-half of these public
disclosure settlement fees and that the $7500 included in the Agreement
was “memorializing” the other half. In other words, Muhammad claimed
that the $7500 was for fees already earned in the public disclosure
litigation and not for future expenses in the personal injury/civil rights
litigation. The facts do not support this assertion.
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First, the public disclosure case was largely settled when
Muhammad was engaged by Peebles. Obviously, Muhammad desired to
ensure that the terms of the settlement agreement did not foreclose the
proposed personal injury claim. And, Muhammad no doubt recognized
that the video footage to be obtained as part of the public disclosure case
could be important evidence in the personal injury/civil rights claim.
Muhammad’s work on the public disclosure file is consistent with
furthering the civil rights/personal injury matter and does not appear to
have been a separate engagement.
Second, the record simply does not support substantial work on the
file that would be needed to justify a $15,000 flat fee. This would represent
twenty-seven percent of the entire recovery, a very large amount for last
minute document and strategy review with the attorney primarily
responsible for the file. Instead, Muhammad’s marginal work on the
settlement of the public disclosure case was an important step in ensuring
the future success of the proposed personal injury/civil rights claim and
in obtaining important video evidence related to it.
Third, in late October, Muhammad presented Peebles with two
invoices for $250 and $1000. At that time, Muhammad had no agreement
in place with Peebles related to the personal injury/civil rights claim.
Though not itemized, these billings likely reflect the work to date that
Muhammad believed Peebles owed her for work she performed in the
absence of a contingency fee agreement on the personal injury/civil rights
matter. The record is clear, however, that these invoices were not “due”
but were to be rolled into the Agreement once it was executed by
Muhammad and Peebles.
Fourth, the terms of the Agreement establish that the funds were
advanced for litigation expenses in the personal injury/civil rights matter.
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The Agreement was signed in late November after Peebles obtained the
funds from the public disclosure settlement. The terms of the Agreement
clearly identify the funds as being advanced to pay for expenses in the
litigation. Peebles contemporaneously put the $7500 check and a signed
copy of the Agreement in the same envelope and mailed it to Muhammad.
Muhammad’s attempt to divorce the $7500 from the terms of the
Agreement are not persuasive.
Muhammed blames her inexperience for the mismatch between the
terms in the Agreement and Muhammad’s stated purpose of the
Agreement. The evidence shows, however, there was no rush to complete
the Agreement. Muhammad had ample time to review and edit the
Agreement, first finding the exemplar agreement in August of 2016.
Peebles’ payment of $7500 was for the specific purpose to advance money
for expenses related to the personal injury and civil rights matter,
pursuant to the Agreement.
Fifth, the record shows that on October 27, 2016, Peebles sent a text
message to Muhammad. The text message stated, in relevant part,
I understand that there will be expenses, as you are out of
state. Will you be willing to accept $7,500 retainer for
personal injury and no billing to look into the matter of the
$75,000 [for the 2005 worker’s compensation case] I’ve never
received. Both cases on separate contingency.
To this, Muhammad replied, “[T]hat’s fair. Let’s get this show on the road.”
Clearly, the $7500 retainer was for expenses in the personal injury/civil
rights matter and was separate from, for instance, any potential
representation on the workers’ compensation matter.
8. No cumulative earned fee offset. Aside from her theory that the
$7500 was paid for fees earned as a flat fee in the public disclosure
litigation, Muhammad offers an alternate theory, namely, that she
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cumulatively earned $7500 in unbilled work for a number of undertakings
for Peebles and that, therefore, she had a colorable earned fee offset to the
$7500 she wrongfully deposited in her personal account.
But the record does not support the cumulative earned fee theory.
Much of the unbilled work claimed by Muhammad in fact relates rather
closely to the personal injury/civil rights claim and cannot be used as an
offset as the parties agreed that fees would be paid on a contingent basis.
As indicated above, the work on the public disclosure case, which likely
totaled about $1000 or $1250 at most, was inextricably related to the
personal injury/civil rights claim. From the record, it is clear that this
work was rolled into the larger representation. Even so, the $1250 does
not approach the $7500 taken by Muhammad.
Muhammad also claims she did work for Peebles on a potential
workers’ compensation claim. According to Muhammad, Peebles was
owed $78,000 from a past workers’ compensation claim. The record
shows, however, that the parties contemplated that the matter, if handled
at all, would be done on a contingent fee basis. No formally executed
contingent fee agreement was reached by the parties in this matter.
Therefore, any work performed by Muhammed did not reflect earned fees
but was exploratory work related to a potential future engagement.
Muhammad points out that she did write a letter on behalf of Peebles
and/or her son to medical providers. Yet, this relatively minor
undertaking was related to the same personal injury/civil rights case and
covered by the contingency fee representation. Even if part of the funds
were earned, one must wonder why Muhammad was unable to return any
portion of the $7500 fee. See Iowa Supreme Ct. Att’y Disciplinary Bd. v.
Kelsen, 855 N.W.2d 175, 184 (Iowa 2014).
20
We do not doubt that Peebles was a difficult client. There were no
doubt an abundance of phone calls between Peebles and Muhammad’s
office. This fact does not provide a defense to misappropriation of client
funds.
B. Violations. As is often the case, the central issue here is
whether Muhammad converted money from her client or whether she is
simply guilty of trust account violations. See Cepican, 861 N.W.2d at 844
(“The difference [between theft or conversion and mere trust account
violations] is critical because of the difference in the sanctions imposed.”).
A long line of our cases over the past twenty-five years stand for the
proposition that conversion of client funds almost always results in
revocation of the attorney’s license to practice law. See, e.g., Iowa Supreme
Ct. Att’y Disciplinary Bd. v. Guthrie, 901 N.W.2d 493, 500 (Iowa 2017) (“[I]n
nearly every case where an attorney converts client funds without a
colorable future claim, we revoke the attorney’s license to practice law.”);
Iowa Supreme Ct. Att’y Disciplinary Bd. v. Stowe, 830 N.W.2d 737, 742
(Iowa 2013) (“It is almost axiomatic that we revoke the licenses of attorneys
who convert funds when the attorney did not have a colorable future claim
to the funds.” (Emphasis added.)); Iowa Supreme Ct. Att’y Disciplinary Bd.
v. Nelsen, 807 N.W.2d 259, 266 (Iowa 2011) (“It is almost axiomatic that
we will revoke the license of an attorney who converts a client’s funds to
his or her own use.” (Emphasis added.)); Iowa Supreme Ct. Bd. of Prof’l
Ethics & Conduct v. Williams, 675 N.W.2d 530, 533 (Iowa 2004) (“Normally,
this court will revoke an attorney’s license for converting client funds.”);
Iowa Supreme Ct. Bd. of Prof’l Ethics & Conduct v. Lett, 674 N.W.2d 139,
144 (Iowa 2004) (“[The attorney’s] actions clearly warrant revocation . . . .
[Attorney] stole client funds.”); Iowa Supreme Ct. Bd. of Prof’l Ethics &
Conduct v. Bell, 650 N.W.2d 648, 655 (Iowa 2002) (“[W]e conclude
21
revocation is appropriate. We are fully aware this proceeding involves [the
attorney’s] first ethical violation. Nevertheless, in view of [the attorney’s]
willful and knowing misappropriation of funds to his personal use and the
aggravating circumstances previously noted, disbarment is warranted.”);
Iowa Supreme Ct. Bd. of Prof’l Ethics & Conduct v. Leon, 602 N.W.2d 336,
339 (Iowa 1999) (finding that even in client funds misappropriation cases
meriting leniency, that if sufficient aggravating factors exist, the court has
“a duty to protect the public and the courts from such conduct” through
revocation); Comm. on Prof’l Ethics & Conduct v. Ottesen, 525 N.W.2d 865,
866 (Iowa 1994) (“There is no place in our profession for lawyers who
convert funds entrusted to them.”); Comm. on Prof’l Ethics & Conduct v.
Fugate, 394 N.W.2d 408, 410 (Iowa 1986) (“We will not countenance
conversion of client funds by persons we license to practice law. Our
decisions consistently hold that revocation, rather than suspension, is the
appropriate discipline for the commingling and conversion of client
funds.”). On the other hand, violation of trust account violations ordinarily
lead to lesser sanctions. See Guthrie, 901 N.W.2d at 498 (finding
misappropriation of client funds more severe than violations of ethical
rules regarding client trust accounts); Cepican, 861 N.W.2d at 844 (“Theft
of client funds is grounds for revocation, while the failure to follow the
rules governing retainer fees normally results in a less severe sanction.”);
Iowa Supreme Ct. Att’y Disciplinary Bd. v. Powell, 830 N.W.2d 355, 359
(Iowa 2013) (“While the conduct in both categories is serious, . . . we make
a distinction for purposes of sanctions between conduct involving trust
fund violations and conduct in the nature of stealing.”).
In this case, we are somewhat hampered by the state of the record
and the lack of advocacy by the parties. Muhammad was prohibited from
offering witnesses or evidence, and only two witnesses, Peebles and
22
Muhammad, were called by the Board. Under the circumstances, the
documentary evidence in this case is limited.
We first consider whether Muhammad has violated Iowa Rules of
Professional Conduct 32:8.4(b) and 32:8.4(c). Based on our de novo
review, we agree with the commission that Peebles paid the $7500 as a
retainer for legal expenses in connection with the personal injury/civil
rights engagement. Muhammad deposited the fees in her personal
account. Further, the personal injury/civil rights engagement never got
off the ground due to a dispute over the hiring of local counsel.
At the hearing, Muhammad testified that the payment of $7500 was
not for expenses related to the personal injury/civil rights litigation but
instead for services performed by Muhammad in connection with the
settlement of the public disclosure claim. As pointed out by the
commission, the agreement drawn by Muhammad and sent by her to
Peebles explicitly referenced representation in the personal injury/civil
rights matter. In response, Peebles executed the agreement and made the
payment of $7500 to Muhammed. The documentary record, as well as the
testimony of Peebles, directly links the $7500 payment to the execution of
the personal injury/civil rights contingency agreement (Agreement).
We note this case has similarities with the situation presented in
Kelsen, 855 N.W.2d 175. In Kelsen, the board charged that the respondent
received $7500 from a client. Id. at 178. Kelsen claimed that the client
understood that the funds could be used, in part, to pay for Kelsen’s office
expenses. Id. at 179. The relevant contingency agreement prepared by
Kelsen provided that the funds would be used for litigation expenses and
had no language relating to using the funds for Kelsen’s overhead. Id. at
179–80. Kelsen claimed that he prepared the contingency agreement from
a form that he found on the internet when working at home late at night.
23
Id. at 180. Kelsen claimed that the document did not reflect the parties
understanding. Id. at 179–80. We ultimately rejected Kelsen’s contentions
and revoked his license. Id. at 185–86.
The Kelsen case is instructive here. Muhammad makes a similar
claim regarding lack of care in preparing a contingency fee agreement and
claims there was an understanding outside the four corners of the
Agreement that authorized her to claim the funds. As in Kelsen,
Muhammad offered no evidence other than her conclusory testimony.
Unlike in Kelsen, however, Muhammad’s client (Peebles) adamantly denied
Muhammad’s claim that she was entitled to fees for services provided in
the public disclosure action.
Muhammed claims that she could not offer documentation proving
her work on the public disclosure claim because the commission, after
repeated defaults, barred her from offering exhibits at the hearing. Yet,
she made no offer of proof at the hearing. Further, the public disclosure
claim was largely resolved when Peebles first contacted Muhammad. And,
the record shows that Peebles had separate counsel (Katherine George) in
connection with the public disclosure claim. It seems implausible that
Muhammad earned or was otherwise entitled to a large fee of $15,000 on
a matter that was largely settled when Peebles first contacted Muhammad.
The commission did not credit Muhammad’s explanation that the $7500
fees were earned through representation in the public disclosure matter.
We share the commission’s view of the evidence.
It is perhaps true that Muhammad performed some unbilled tasks
for Peebles that are not directly related to the personal injury/civil rights
claim. Such services are reflected in the October invoices of $250 and
$1000. Based on our review of the record, however, we conclude, as did
the commission, that these fees were folded into the Agreement. In any
24
event, even if there were some marginal fees unrelated to the personal
injury/civil rights representation, they did not approach the $7500
Muhammad received from Peebles and deposited directly into
Muhammad’s personal bank account. See id. at 184–86 (holding
revocation is appropriate where Kelsen similarly places $7500 directly in
his personal bank account without mitigating circumstances). The bottom
line is that Muhammad did not have a present claim of right that would
serve as an offset for her misuse of the $7500 expense retainer.
There is, perhaps, the possibility that Muhammad could claim a
future colorable claim under the Agreement. Such an understanding was
not explicitly advanced by Muhammad. In her answer to the Board’s
complaint, Muhammad asserted only that the money was not for expenses
but was earned through services Muhammad provided to Peebles in
settling the public disclosure case.
The question of whether an attorney could assert a colorable future
claim of work to be performed in the future was addressed in Kelsen. In
Kelsen, we noted that “[w]e generally do not revoke the licenses of hourly
rate attorneys who take funds for personal use before they have done the
work but in anticipation of doing so.” Id. at 185. We explored whether the
same approach could be applied when the lawyer was working in a
contingency fee context.
In Kelsen, we declined to find a colorable future claim based on work
to be done on a contingent fee claim. We noted that the attorney’s
testimony that he expected a prompt settlement was vague and lacked
corroborating detail. Id. There is certainly no claim in this case that
settlement of the yet-to-be-filed personal injury/civil rights claim was
imminent. Second, we noted in Kelsen that the retainer advanced was for
costs and not fees. Id. The same is true here. Finally, we noted in Kelsen
25
the lawyer did not have a signed contingency fee agreement. Id. In
contrast, we do have a contingency fee agreement in Muhammad’s case.
We do not think the last Kelsen factor is determinative here.
Muhammad provided no evidence that she had performed any significant
work on the case prior to termination of representation or that there were
near term prospects for success on the file. Under these facts, we do not
find a colorable future claim based on the contingency fee contract.
The commission sought supplemental briefing from the parties on
the application of this court’s ruling in Parrish, 925 N.W.2d at 170–71. In
Parrish, an attorney received client funds intended for expenses, but kept
the money for himself. Id. at 167. Parrish claimed, however, that he had
earned fees in excess of the amounts advanced for stenographic expenses
and thus had a colorable present claim, even though the payment was
expressly restricted to satisfying outstanding court reporter fees. Id. at
167–68. In Parrish, we rejected the argument that a present claim of
earned fees could give rise to a colorable claim for funds advanced for
expenses, but we declined to impose the severe sanction of revocation on
the ground that our prior caselaw did not provide clear notice to attorneys
that a present claim could not be used as a defense to misappropriation of
specifically designated funds. Id. at 180.
If Muhammad had convinced us that she had a colorable present
fee offset to the $7500 expense retainer, we might conclude, as in Parrish,
that she was entitled to fair notice that such a theory was not a defense to
a conversion claim where the funds are designated for a particular
purpose. As a general matter, we think it advisable that lawyers have clear
notice of the type of conduct that may lead to revocation. Like the
commission, however, we have found that Muhammad simply did not have
a present claim to the $7500 under any scenario.
26
Finally, there is the question of scienter for violation of Iowa Rule of
Professional Conduct 32:8.4(c). See Guthrie, 901 N.W.2d at 498 (noting
the necessity of finding some level of scienter in cases of misappropriation
of client funds). Scienter is satisfied where an attorney acted knowingly,
intentionally, or with the aim to mislead. See Iowa Supreme Ct. Att’y
Disciplinary Bd. v. Ricklefs, 844 N.W.2d 689, 698–99 (Iowa 2014). An
attorney’s “casual, reckless disregard for the truth” also establishes
sufficient scienter to support a violation of the rule. Iowa Supreme Ct. Att’y
Disciplinary Bd. v. Clarity, 838 N.W.2d 648, 656 (Iowa 2013) (quoting Iowa
Supreme Ct. Att’y Disciplinary Bd. v. Isaacson, 750 N.W.2d 104, 109 (Iowa
2008)). Based on our review of the record, we conclude that the Board
showed by a convincing preponderance of the evidence that the deposit of
Peebles’ $7500 into Muhammad’s personal account was not a mere
mistake but was an intentional act. It could well be, of course, that
Muhammad did not realize the ethical implications of her conduct. Theft
by misappropriation, however, is a general intent crime. Eggman v. Scurr,
311 N.W.2d 77, 79–81 (Iowa 1981).
We therefore conclude, as did the commission, that the Board has
proved by a convincing preponderance of the evidence that Muhammad
violated Iowa Rules of Professional Conduct 32:8.4(b) and 32:8.4(c) and
that she had no colorable present or future claim offsetting her
misappropriation.
C. Sanction. Under the caselaw cited above, revocation of license
is virtually automatic when a lawyer converts client funds. We see no
basis for an exception in this case. As a result, we conclude that the
appropriate sanction in this case is revocation.
27
IV. Disposition.
We revoke Muhammad’s license to practice law in the State of Iowa.
As a result, Muhammad must follow the notification provisions of Iowa
Court Rule 34.24. Muhammad may apply for readmission after a period
of at least five years. See Iowa Ct. R. 34.25(7). In the event of application
for readmission, Muhammad must demonstrate she is of good moral
character and worthy of readmission to the bar. See id. r. 34.25(9). Costs
of this action are assessed to Muhammad pursuant to Iowa Court Rule
36.24(1).
LICENSE REVOKED.