Iowa Supreme Court Attorney Disciplinary Board v. Samuel Zachary Marks

IN THE SUPREME COURT OF IOWA
No. 11–1016
Filed May 25, 2012
IOWA SUPREME COURT ATTORNEY
DISCIPLINARY BOARD,
Complainant,
vs.
SAMUEL ZACHARY MARKS,
Respondent.
On review of the report of the Grievance Commission of the
Supreme Court of Iowa.
An attorney filed a notice of appeal concerning a recommendation
of the Grievance Commission of the Supreme Court of Iowa. ATTORNEY
REPRIMANDED.
Charles L. Harrington and Elizabeth E. Quinlan, Des Moines, for
complainant.
David L. Brown and Jay D. Grimes of Hansen, McClintock & Riley,
Des Moines, for respondent.
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WIGGINS, Justice.
The Iowa Supreme Court Attorney Disciplinary Board brought a
complaint against the respondent, Samuel Zachary Marks, alleging
multiple violations of the Iowa Rules of Professional Conduct. A division
of the Grievance Commission of the Supreme Court of Iowa found the
respondent’s conduct violated the rules and recommended we suspend
his license with no possibility of reinstatement for six months. On our
de novo review, we find Marks violated our rules. However, we disagree
with the commission’s findings and recommended sanction. Instead, we
publicly reprimand him for his conduct.
I. Scope of Review.
We review attorney disciplinary proceedings de novo. Iowa
Supreme Ct. Att’y Disciplinary Bd. v. Axt, 791 N.W.2d 98, 101 (Iowa
2010). The Board must prove disciplinary violations by a convincing
preponderance of the evidence. Id. A convincing preponderance of the
evidence is more than a preponderance of the evidence, but less than
proof beyond a reasonable doubt. Iowa Supreme Ct. Att’y Disciplinary
Bd. v. Adams, 809 N.W.2d 543, 545 (Iowa 2012). We give respectful
consideration to, but are not bound by, the commission’s findings and
recommendations. Iowa Supreme Ct. Att’y Disciplinary Bd. v. Earley, 774
N.W.2d 301, 304 (Iowa 2009). Upon proof of misconduct, we may impose
a greater or lesser sanction than that recommended by the commission.
Axt, 791 N.W.2d at 101.
II. Factual Findings and Prior Proceedings.
Marks has been licensed to practice law in Iowa since 2000. He
practices in the areas of bankruptcy and consumer protection.
During the past five years, Marks has been disciplined multiple
times. We temporarily suspended his license in 2006 and 2008 for
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failure to cooperate with the Board. Further, in 2007, the Board publicly
reprimanded him for lack of diligence, incompetence, and failing to
cooperate timely and fully with the Board. Finally, in 2009, we
suspended his license for thirty days for neglecting client matters and
failing to cooperate with the Board. There, we took into account Marks’
prior disciplinary history and his battle with depression. In this case,
the Board alleges Marks committed ethical violations during his
representation of a client in a foreclosure action, after the termination of
the attorney–client relationship, and during his subsequent interactions
with the Board.
A. Winona Property. In August 2005, Linda Kenney hired Marks
to defend her in a foreclosure action involving her house, located on
Winona Avenue in Des Moines. Marks filed an answer and a demand for
delay of sale on Kenney’s behalf. Despite Marks’ efforts, the court
foreclosed Kenney’s interest in her house on November 29. The court set
a sheriff’s sale for May 29, 2006, which gave Kenney a six-month
redemption period.
After subsequent attempts to find alternative financing failed, but
before the sheriff’s sale, Marks offered to purchase Kenney’s property,
pay off Kenney’s mortgage, and sell the home back to Kenney once she
obtained new financing. Meanwhile, Kenney and her boyfriend would
continue to live in the home and make monthly payments to Marks.
Marks recognized the need to terminate the attorney–client
relationship before he could enter into a transaction with Kenney. To
that end, Marks drafted an agreement, dated April 14, 2006, which
stated the following:
The undersigned parties acknowledge that Samuel Z. Marks
and Marks Law Firm, P.C. provide no further legal
representation to Linda Kenney. The undersigned parties
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acknowledge that any legal representation provided in the
past to Linda Kenney by Samuel Z. Marks and Marks Law
Firm, P.C. is hereby terminated and there is no further
expectation of representation. The undersigned parties
acknowledge that Linda Kenney wishes to enter into a real
estate transaction with Samuel Z. Marks and Jennifer
Marks. The undersigned parties acknowledge that Linda
Kenney has the right and should seek independent counsel
with respect to any real estate transaction entered into with
Samuel Z. Marks and Jennifer Marks.
Marks and Kenney signed the agreement. Marks testified that he
believed the agreement severed the attorney–client relationship and that
he entered into the transaction for the sole purpose of helping Kenney
remain in her house. He also testified he never intended to profit from
the transaction.
On April 26, Marks’ wife took out a purchase money mortgage on
the property. Although the mortgage was in his wife’s name, Marks also
signed the mortgage as a borrower. On April 28, Kenney executed a
warranty deed transferring the property to Marks’ wife. Marks admitted
he was involved in the preparation of the deed. Marks and his wife then
purchased the property from the bank, satisfying the amount Kenney
owed on her mortgage. Kenney testified she did not realize she actually
transferred the property to Marks’ wife until after she had done so.
Kenney and her boyfriend continued to live in the house and made
sporadic payments to Marks. On February 25, 2009, Kenney and Marks’
wife executed a written real estate contract, naming Kenney and her
boyfriend as the buyers and Marks’ wife as the seller. Marks prepared
this contract. The contract set up a payment plan by which Kenney and
her boyfriend would buy the property back from Marks’ wife by making
monthly payments.
As of December 13, 2010, the date of Marks’ hearing before the
commission, Kenney and her boyfriend continued to live in the home.
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Marks estimated at the hearing that he was between $30,000 and
$40,000 behind on his mortgage payments. He also testified he would
immediately sign the deed over to Kenney if she obtained financing for
the amount of his mortgage.
B. Disciplinary Proceedings. Kenney filed a complaint against
Marks with the Board on July 16, 2008. Marks received notice of the
complaint against him on July 23. The notice informed Marks that Iowa
Rule of Professional Conduct 32:8.1(b) required him to provide the Board
with a response. It also directed him to Iowa Court Rule 34.7, which
governs a respondent’s failure to respond to a complaint. A copy of the
complaint was enclosed with the notice.
On August 26, Marks received a second notice of complaint from
the Board stating that his failure to respond within ten days could result
in a temporary suspension of his license to practice law. On
September 23, the Board requested that the supreme court issue a
notice of possible temporary suspension to Marks. On September 30,
the clerk of the supreme court filed a notice of possible temporary
suspension for failure to respond. The notice informed Marks that his
license would be suspended unless he responded within twenty days of
the issuance of the notice. Marks responded on October 21. At no time
prior to his response did Marks seek an enlargement of his time to
respond to the complaint.
The Board filed a complaint alleging Marks violated the Iowa Rules
of Professional Conduct by entering into a business transaction with a
current client, representing a current client in a transaction materially
adverse to the interests of a former client, failing to cooperate with the
Board, and engaging in conduct prejudicial to the administration of
justice. The commission found Marks violated rule 32:1.8(a), which
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prohibits a lawyer from entering into a business transaction with a client
absent certain safeguards. It also found Marks violated rule 32:8.1(b) by
failing to cooperate with the Board and rule 32:8.4(d) by engaging in
conduct prejudicial to the administration of justice. Finally, the
commission noted it did not need to determine whether Marks violated
rule 32:1.9(a), which prohibits a lawyer from representing a current
client in a transaction materially adverse to the interests of a former
client absent the informed written consent of the former client, because it
found Marks had not severed the attorney–client relationship. The
commission then stated it would have found that Marks violated rule
32:1.9(a) if it had determined Marks terminated the attorney–client
relationship because Marks represented his wife throughout the real
estate deal.
III. Ethical Violations.
A. Conflicts of Interest. Because the Board frames its
allegations against Marks in the alternative, we will consider each
alternative separately.
1. Business transaction with a current client. While rule 32:1.8(a)
does not prohibit business dealings between a lawyer and his or her
client, it imposes stringent requirements on such a transaction. Iowa
Supreme Ct. Att’y Disciplinary Bd. v. Wintroub, 745 N.W.2d 469, 474
(Iowa 2008). The rule provides as follows:
(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;
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(2) the client is advised in writing of the desirability of
seeking and is given a reasonable opportunity to seek the
advice of independent legal counsel on the transaction; and
(3) the client gives informed consent, in a writing
signed by the client, to the essential terms of the transaction
and the lawyer’s role in the transaction, including whether
the lawyer is representing the client in the transaction.
Iowa R. Prof’l Conduct 32:1.8(a). By its terms, rule 32:1.8(a) only applies
if Marks and Kenney did not terminate the attorney–client relationship
prior to entering into a business transaction. We have stated that the
term “business transaction” has a broad meaning. Iowa Supreme Ct. Bd.
of Prof’l Ethics & Conduct v. Fay, 619 N.W.2d 321, 325 (Iowa 2000).
Kenney executed a warranty deed transferring the property to
Marks’ wife on April 28. Although the deed indicates Kenney transferred
the property to Marks’ wife, Marks does not dispute that he was a party
to the transaction. Indeed, Marks proposed the transaction and testified
he was successful in his goal to keep Kenney in her house. He further
testified the transaction was in his wife’s name only because she could
get a better interest rate on a loan from the bank. Therefore, we must
determine whether Marks and Kenney terminated the attorney–client
relationship prior to the execution of the deed on April 28. The parties
contend the issue of whether Marks violated rule 32:1.8(a) turns on
whether the agreement of April 14, 2006, was sufficient to terminate the
attorney–client relationship. However, we need not decide whether this
agreement, by itself, was sufficient to terminate the relationship.
A judgment is the final adjudication of the rights of the parties.
Iowa R. Civ. P. 1.951 (2005). In 2005, once a court entered judgment in
a civil case, a party had ten days to file a motion or bill of exceptions. Id.
r. 1.1007. Similarly, a party had thirty days to file a notice of appeal.
Iowa R. App. P. 6.5. Generally, in a civil action, once the period for
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motions and appeals expires, the lawyer’s representation of his or her
client ends. In foreclosure actions, a mortgagor may satisfy its judgment
by paying the mortgagee the amount of the judgment prior to the sheriff’s
sale, but this action does not require the mortgagee to make any filings
with the court. See Iowa Code § 654.21 (2005).
The court entered judgment against Kenney on November 29,
2005. Although Kenney filed a demand for delay of sale, which delayed
the sheriff’s sale until May 29, 2006, Kenney could not file any motions
or an appeal following December 29, 2005. Therefore, Marks was not
necessarily representing Kenney in the foreclosure action following
December 29. The agreement of April 14, 2006, makes it clear that
Marks terminated the attorney–client relationship and that Marks was no
longer representing Kenney when the transaction with Marks’ wife
occurred. Therefore, rule 32:1.8(a) is not applicable.
2. Continuing duty to former clients in the same or substantially
related matter. Rule 32:1.9(a) imposes a continuing duty on a lawyer
with respect to conflicts of interest with former clients. It provides:
A lawyer who has formerly represented a client in a matter
shall not thereafter represent another person in the same or
a substantially related matter in which that person’s
interests are materially adverse to the interests of the former
client unless the former client gives informed consent,
confirmed in writing.
Iowa R. Prof’l Conduct 32:1.9(a). At the latest, Marks’ representation of
Kenney in the foreclosure action terminated on April 14, 2006. Nearly
three years later, Kenney and Marks’ wife executed a written real estate
contract naming Kenney and her boyfriend as the buyers and Marks’ wife
as the seller. The contract memorialized the deal Kenney believed she
was getting when she transferred the property to Marks’ wife in 2006.
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Marks prepared this contract. A lawyer who prepares a contract is
engaged in the practice of law. Iowa Supreme Ct. Att’y Disciplinary Bd. v.
Netti, 797 N.W.2d 591, 604 (Iowa 2011); Comm. on Prof’l Ethics &
Conduct v. Toomey, 236 N.W.2d 39, 40 (Iowa 1975). Therefore, we
conclude Marks was representing his wife in the sale of the property to
Kenney. Thus, we must determine whether Marks should have obtained
Kenney’s informed consent, confirmed in writing, prior to representing his
wife in the matter.
Matters are substantially related when they “involve the same
transaction or legal dispute or if there otherwise is a substantial risk that
confidential factual information as would normally have been obtained in
the prior representation would materially advance the client’s position in
the subsequent matter.” Iowa R. Prof’l Conduct 32:1.9 cmt. [3]. The real
estate contract dictating the terms of the sale of the property from Marks’
wife to Kenney involved a matter substantially related to the foreclosure
action as defined by rule 32:1.9(a) because the contract and foreclosure
action concerned Kenney’s property and her ability to remain in her
home. Further, Marks’ representation of his wife was adverse to Kenney
because Marks’ wife took ownership of the property while Kenney still
had a right of redemption. She also became the financier of Kenney’s
repurchase of the property. Therefore, in this situation, Marks was
required to obtain informed consent from Kenney.
Our 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 material risks of and
reasonably available alternatives to the proposed course of conduct.” Id.
r. 32:1.0(e). Consequently, before a lawyer can represent an adverse
client, the lawyer must communicate adequate information to the former
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client and explain to the former client the material risks of the
representation and the reasonable alternatives available. The informed
consent must be confirmed in writing.
While representing Kenney in the foreclosure action, Marks gained
an intricate knowledge of Kenney’s financial condition. He knew that
Kenney was unable to save her house from foreclosure because she did
not have the financial ability to do so. We believe Marks should have
known that because of Kenney’s financial situation there was a
reasonable possibility that she would still be unable to retain her home
even if she entered into an agreement with Marks’ wife. Marks should
have informed Kenney that if she entered into a contract with his wife
and was unable to make the payments, then she would be subject to
further litigation and a potential personal judgment against her. If
Kenney did not enter into the real estate contract, she would have only
lost her house and not have potentially been subject to further litigation
or a personal judgment. Additionally, Marks should have disclosed to
her that if she did not enter into the transaction with Marks, she would
lose her home, but the litigation over the home would cease and there
would be no deficiency judgment against her.
In defense of his failure to obtain Kenney’s informed consent in
writing prior to representing his wife, Marks essentially argues the
subsequent representation was not materially adverse to Kenney because
he did a good deed by assuming Kenney’s mortgage, which allowed her to
remain in her home. Marks’ altruistic intentions may be noble, but they
do not excuse his failure to comply with his ethical obligations. Because
there is no indication in the record that Marks received Kenney’s
informed consent confirmed in writing to Marks’ representation of his
wife in the real estate transaction, Marks violated rule 32:1.9(a).
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B. Failure to Cooperate with the Board. Attorneys must
cooperate with disciplinary investigations. Iowa Supreme Ct. Bd. of Prof’l
Ethics & Conduct v. Honken, 688 N.W.2d 812, 821 (Iowa 2004). The
commission found Marks violated rules 32:8.1(b) and 32:8.4(d) because
he did not cooperate with the Board’s investigation. We agree.
Rule 32:8.1(b) requires that “a lawyer in connection with . . . a
disciplinary matter, shall not . . . knowingly fail to respond to a lawful
demand for information from [a] . . . disciplinary authority.” Iowa R.
Prof’l Conduct 32:8.1(b). Under our rules, a respondent in an attorney
disciplinary proceeding must provide a written response within twenty
days of receiving the complaint. Iowa Ct. R. 34.6(4). Failure to respond
to the complaint is a violation of our rules. Iowa Supreme Ct. Att’y
Disciplinary Bd. v. Johnson, 792 N.W.2d 674, 680 (Iowa 2010); Iowa
Supreme Ct. Att’y Disciplinary Bd. v. Marks, 759 N.W.2d 328, 331 (Iowa
2009). If the respondent fails to respond, we may infer from the
circumstances that the respondent knowingly failed to respond. Iowa R.
Prof’l Conduct 32:1.0(f). Marks first received notice of the complaint on
July 23, 2008. He did not respond until October 21, almost three
months later and only after repeated notices from the Board and a notice
of possible temporary suspension from the supreme court clerk. These
circumstances show Marks knowingly did not respond to the Board’s
inquiries. Therefore, Marks violated rule 32:8.1(b).
Rule 32:8.4(d) prohibits a lawyer from engaging “in conduct that is
prejudicial to the administration of justice.” Id. r. 32:8.4(d). It is well
established that a lawyer’s failure to respond to inquiries from the Board
constitutes conduct prejudicial to the administration of justice. See Iowa
Supreme Ct. Att’y Disciplinary Bd. v. Plumb, 766 N.W.2d 626, 631, 632
(Iowa 2009); Iowa Supreme Ct. Att’y Disciplinary Bd. v. Ireland, 748
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N.W.2d 498, 502 (Iowa 2008); Iowa Supreme Ct. Att’y Disciplinary Bd. v.
McCarthy, 722 N.W.2d 199, 205 (Iowa 2006); Comm. on Prof’l Ethics &
Conduct v. Bromwell, 389 N.W.2d 854, 857 (Iowa 1986). Marks did not
respond to the Board for nearly three months in this case. Therefore,
Marks violated rule 32:8.4(d).
IV. Determination of Appropriate Sanction.
To determine the appropriate sanction, we consider
the nature of the violations, the attorney’s fitness to continue
in the practice of law, the protection of society from those
unfit to practice law, the need to uphold public confidence in
the justice system, deterrence, maintenance of the
reputation of the bar as a whole, and any aggravating or
mitigating circumstances.
Ireland, 748 N.W.2d at 502. Moreover, the sanction “must be tailored to
the specific facts and circumstances of each individual case.” Comm. on
Prof’l Ethics & Conduct v. Rogers, 313 N.W.2d 535, 537 (Iowa 1981).
One of Marks’ violations relates to his failure to obtain Kenney’s
informed consent confirmed in writing prior to the time that he
represented his wife. While we do not have any cases directly on point,
this situation is sufficiently analogous to one in which an attorney enters
into a business transaction with a current client without following the
rules in place to safeguard the interests of the client. In those cases, the
sanction can range from a public reprimand to revocation of the lawyer’s
license to practice law. See, e.g., Comm. on Prof’l Ethics & Conduct v.
Hall, 463 N.W.2d 30, 36 (Iowa 1990) (revoking the license of a lawyer
who entered into a series of transactions with a client, resulting in the
client’s loss of several hundred thousand dollars); Comm. on Prof’l Ethics
& Conduct v. Mershon, 316 N.W.2d 895, 900 (Iowa 1982) (publicly
reprimanding an attorney who formed a corporation with a client).
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In this case, there is no evidence indicating Marks’ actions harmed
his client. Marks stated he did not intend any outcome from engaging in
the transaction other than to allow Kenney to continue to live in the
house. He also testified he would immediately transfer the property back
to Kenney if she could obtain financing to pay off the mortgage.
Although Marks and his wife still own the property, Kenney and her
boyfriend continue to live in the house.
The commission recommended a six-month suspension in large
part due to Marks’ disciplinary history. In 2009, we suspended Marks’
license to practice law for thirty days following his neglect of two matters
and his failure to cooperate with the disciplinary process. In doing so,
we took note of Marks’ previous disciplinary record, which included
sanctions for lack of diligence, incompetence, and multiple instances of
failing to cooperate with the Board. We also considered his depression a
mitigating factor. Finally, we warned Marks that future misconduct
would result in harsher sanctions. We wrote:
We also issue Marks a stern warning. He is teetering
on the brink of disaster. Although he is fit to practice law,
he has fallen into a pattern of neglect and non-cooperation
these past few years. If he does not remedy this behavior, he
will receive a harsher sanction next time he appears before
us. Although we are sympathetic to the struggles Marks has
endured with depression, his past conduct and record as a
whole indicates he lacks diligence and professionalism.
Marks, 759 N.W.2d at 333 (citation omitted).
However, all of Marks’ conduct that is the subject of the present
disciplinary action occurred prior to the date in 2009 when we
suspended his license for thirty days. Had we been aware in 2009 of the
conduct that is the subject of the present disciplinary proceeding, it is
unlikely that we would have suspended Marks’ license for more than
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thirty days. See Iowa Supreme Ct. Att’y Disciplinary Bd. v. Moorman, 729
N.W.2d 801, 805–06 (Iowa 2007). Therefore, we see no reason to elevate
Marks’ sanction here. A public reprimand will do. We also remind
Marks of our prior warning that future misconduct will result in harsher
sanctions.
V. Disposition.
For the above reasons, we publicly reprimand Marks rather than
impose the suspension recommended by the commission. We tax the
costs of this proceeding to Marks in accordance with Iowa Court Rule
35.26(1). 1
ATTORNEY REPRIMANDED.
1On February 20, 2012, we renumbered this rule to 35.27(1). Because Marks’
hearing before the grievance commission commenced prior to the renumbering, we
must refer to rule 35.26(1). See Iowa Ct. R. 35.26 (2012) (renumbered from rule 35.25
in February 2012).