Washington Lawyer

Bar Counsel: Restitution: Imposing a Monetary Condition as Part of Discipline

From Washington Lawyer, December 2004

By Joyce E. Peters

barcounselTwo disciplinary summaries reported this month refer to a requirement that the respondent pay restitution as part of the disciplinary sanction and as a condition of reinstatement. Restitution is not an uncommon requirement in disciplinary cases, although it is considered a “condition imposed with discipline” rather than a disciplinary sanction.

D.C. Bar Rule XI, section 3(a), lists the types of discipline, stating:

Any of the following sanctions may be imposed on an attorney for a disciplinary violation:
   (1) Disbarment by the Court;
   (2) Suspension by the Court for an appropriate fixed period of time not to exceed three years . . . ;
   (3) Censure by the Court;
   (4) Reprimand by the Board;
   (5) Informal admonition by Bar Counsel;
   (6) Revocation or suspension of a license to practice as a Special Legal Consultant; or
   (7) Probation imposed by the Court, or imposed by the Board with the consent of the attorney and the approval of the Court, for not more than three years. Probation may be imposed in lieu of or in addition to any other disciplinary sanction. Any conditions of probation shall be stated in writing in the order imposing probation. . . . Violation of any condition of probation shall make the attorney subject to revocation of probation and the imposition of any other disciplinary sanction listed in this subsection but only to the extent stated in the order imposing probation.

Several things are interesting about this list of disciplinary sanctions. With the exception of item 6, each item specifies who may impose the sanction. Bar Counsel has limited authority and may impose only an informal admonition. The Board on Professional Responsibility may impose a reprimand or direct Bar Counsel to impose an informal admonition.[1] Although D.C. Bar Rule XI, section 3(a)(7), seems to suggest that the board may impose probation, the board’s authority is conditioned upon the attorney’s consent and approval of the court.[2] Thus a recommendation of probation actually requires action by the court, whereas informal admonitions and board reprimands do not.[3] In addition, although probation is usually imposed in connection with a suspensory sanction or a stayed suspensory sanction, the court has imposed it along with a censure, that is, even without a suspensory sanction.[4]

Probation is considered a type of discipline; restitution is not. Rather, restitution is included in D.C. Bar Rule XI, section 3(b), which describes “conditions imposed with discipline” and states:

When imposing discipline, the Court or the Board may require an attorney to make restitution either to persons financially injured by the attorney’s conduct or to the Clients’ Security Trust Fund (see Rule XII), or both, as a condition of probation or of reinstatement. The Court or the Board may also impose any other reasonable condition, including a requirement that the attorney take and pass a professional responsibility examination as a condition of probation or reinstatement.

This section appears to authorize both the court and the board to impose restitution and any other reasonable condition as part of the disciplinary sanction. The authority to impose “any other reasonable condition” is not further conditioned, and this language has been used by the board and the court to require attendance at continuing legal education courses;[5] supervision by a practice monitor or consultation with the D.C. Bar Lawyer Practice Assistance Program;[6] participation in Alcoholics Anonymous, with random drug testing or other consultation with the D.C. Bar Lawyer Counseling Program;[7] and even monitoring of payment of federal and local income taxes.[8] In one case the court felt that disgorgement of a secret fee was an appropriate and reasonable condition, although disgorgement had never previously been ordered in a disciplinary case.[9]

A close reading of the language concerning restitution, however, reveals that restitution may only be required “as a condition of probation or of reinstatement.” As just noted, the board needs court approval of any recommendation for probation, and only the court has the power to suspend. So, in effect, the language of section 3(b) does not confer authority on the board itself to order restitution. If the board believes that an attorney should be reprimanded and pay restitution as a condition of probation, the board does not have authority to impose that discipline. The board could make this recommendation, and has done so, but the restitution and probation parts of the recommendation would have to go to the court for approval.[10]

What exactly does the court mean when it orders restitution? In general, disciplinary sanctions are not intended as punishment, and the court has stated, “In determining the proper sanction, our foremost concern is the need to protect the public, the courts, and the legal profession.”[11] Rather, as the court has noted, its “purpose in conducting disciplinary proceedings and imposing sanctions is not to punish the attorney; rather, it is to offer the desired protection by assuring the continued or restored fitness of an attorney to practice law.”[12] As a result, most sanctions—reprimands, censures, suspensions, and even disbarments—do not usually benefit the complainant, but are aimed at protecting the community.[13] Restitution is a bit different and may provide some monetary recompense to the complainant or a third party.

In In re Robertson[14] the court had an opportunity to examine the concept of restitution in a disciplinary case involving the failure to prepare or file a client’s Maryland and federal tax returns for six years. As a result of the attorney’s delay, both Maryland and the Internal Revenue Service denied claims for refunds for the returns filed more than three years after they were due. This caused economic damage to the client in the amount of $16,000 to $25,000. The record of the disciplinary proceeding, however, documented claims for refunds and overpayment credits only for one year in the amount of $7,191.61. The attorney repeatedly stated that he intended to compensate his client for his client’s losses, but never suggested a specific sum or prepared a written restitution plan as recommended by the hearing committee. The hearing committee recommended a reprimand with restitution. After reviewing the record, the board recommended a 90-day suspension, but adopted the hearing committee’s recommendation for restitution of $7,191.61 to enforce the attorney’s promise to pay for his client’s financial losses. The court rejected the board’s recommendation and imposed a 120-day suspension without ordering restitution.

In discussing the board’s recommendation, the court stated:

In recommending this amount of restitution, the Board appears to adopt a definition of “restitution” that both the Hearing Committee and Bar Counsel have proposed: restitution should aim at making the client whole. Because we find no support for this expanded concept of restitution in this court’s previous disciplinary decisions, and because the Board’s definition blurs the distinction between restitution and consequential damages, which are more appropriately determined in a civil adjudication, we cannot adopt the Board’s recommendation. . . . Our previous orders demonstrate that this court and the Board have adhered to the following definition of restitution: a payment by the respondent attorney reimbursing a former client for the money, interest, or thing of value that the client has paid or entrusted to the lawyer in the course of the representation.[15]

The court then provided a series of examples in which it had imposed restitution requirements to require the return of a retainer fee,[16] a client’s “out of pocket” expense,[17] a fee plus interest incurred by the client to obtain funds to pay the fee,[18] and a fee and expense money a client had paid the lawyer.[19] The court noted that its definition of disciplinary restitution also comported with the common law definition contained in the Restatement (Second) of Contracts § 370 (1981),[20] and that restitution is “distinct from reliance or expectation damages under contract doctrine or from reasonably foreseeable damages under tort doctrine.”[21]

Refusing to expand the definition of restitution beyond its common law usage, the court concluded that a disciplinary proceeding is not the appropriate forum for assessing a client’s damages resulting from an attorney’s malpractice. The court stated:

The disciplinary process is not designed to handle questions of causation, foreseeability, burdens of proof, mitigation, contributory negligence, and other issues which have to be resolved in a civil suit for damages and inevitably would come into play if we were to expand the definition of restitution for disciplinary purposes, beyond its traditional scope and meaning.[22]

Since the Robertson decision, the court has ordered restitution as a condition of reinstatement in numerous cases, particularly in cases in which the lawyer has seriously neglected or abandoned a client’s case,[23] collected illegal fees,[24] engaged in misappropriation of client funds,[25] or engaged in fraud and dishonesty.[26] In some cases the funds being returned are fees advanced by the client, so the restitution order is merely enforcing the requirement in Rule 1.16(d) of the D.C. Rules of Professional Conduct, which requires, in connection with a termination, “refunding any advance payment of fee that has not been earned.” This is certainly true in the cases involving abandonment of the client. In other cases the restitution has involved settlement funds that the lawyer failed to pay to a third party[27] or personal funds of clients that had been improperly taken by the lawyer.[28]

As these cases show, payment of restitution as a condition of reinstatement has been ordered to clients, third parties, and the Clients’ Security Fund. Restitution has been ordered in original cases and in reciprocal matters.[29] The court has ordered implementation of restitution plans as part of a reinstatement[30] and in connection with a period of probation.[31] Restitution has even been ordered as a condition of reinstatement in a consent-to-disbarment case.[32]

Benjamin Franklin is often remembered for his saying, “A penny saved is a penny earned.” In the case of restitution, however, a penny earned is a penny saved. Restitution prevents both unjust enrichment of the lawyer and financial injury to clients or third parties who have entrusted the lawyer with funds and other interests. Restitution, as a condition imposed with discipline, has an important role in the disciplinary process: to ensure compliance with an attorney’s obligations under the rules, to enhance credibility of lawyers in the eyes of the community, and to ensure that lawyers fully understand and honor their obligations to their clients and others.

The lesson of restitution to every bar member is that entrusted client or third-party funds must be earned or returned. If they are unearned or entrusted for use on behalf of the client, they are subject to restitution. As such, restitution will always be a very important part of disciplinary sanctions.

Notes
[1] Board Rule 13.8 provides: “When the Board determines that the proceeding should be concluded by an informal admonition, or by a reprimand, the Board shall direct Bar Counsel to informally admonish respondent in writing including a brief statement of the reasons therefor or the Board shall issue an order reprimanding respondent.”
[2] The Board Rules are silent concerning imposition of probation as a sanction.
[3] D.C. Bar Rule XI, section 6(a)(8), requires Bar Counsel to report at least twice a year all cases involving informal admonitions or board reprimands.
[4] In In re Dunietz, 687 A.2d 206, 207 (D.C. 1996), the court noted in dicta that a censure, along with a probationary period, is authorized by D.C. Bar Rule XI, section 3(a). In that case, however, the court imposed a 30-day suspension, rather than a censure, with a stay conditioned upon satisfactory completion of probation. In In re Bettis, No. 02-BG-1285 (D.C. Aug. 5, 2004), the court imposed a censure along with a period of probation with conditions and restitution. The sanction, however, had a condition subsequent, as failure to pay the restitution as ordered by the court would result in an immediate 30-day suspension.
[5] In re Bernstein, 774 A.2d 309, 318–19 (D.C. 2001) (completion of a course in professional responsibility and restitution).
[6] In re Bettis, No. 02-BG-1285 (D.C. Aug. 5, 2004) (two years of probation under supervision of practice monitor with particular attention to escrow and trust account operation, along with notice to clients and restitution to medical provider); In re Roxborough, 775 A.2d 1063, 1064–65 (D.C. 2001) (supervision by a practice monitor for one year); In re Banks, 709 A.2d 1181 (D.C. 1998) (court imposed 90-day suspension with 30 days stayed in favor of one year of probation with conditions, including that respondent be evaluated and participate in D.C. Bar Lawyer Practice Assistance Program).
[7] In re McConnell, 667 A.2d 94 (D.C. 1995) (per curiam) (requiring attendance at AA meetings and submission to random drug tests).
[8] In re Shorter, 603 A.2d 462, 463 (D.C. 1992).
[9] In re Hager, 812 A.2d 904, 922–24 (D.C. 2002). An amicus brief filed by Public Citizen had urged the court to add disgorgement of a secret fee as a reasonable condition of reinstatement under D.C. Bar Rule XI, section 3(b). The court agreed, stating: “We think the Board did not take a broad enough view of the full range of possible disciplinary actions under our rules. . . . This court has previously relied upon Section 3(b)’s open-endedness to impose special reinstatement conditions that are well-matched to particular misconduct.” Id. at 922–23. The court then concluded that preventing unjust enrichment, the objective that underlies restitution, also underlies the concept of disgorgement. The court then ordered a one-year suspension with reinstatement conditioned upon the question of appropriate disgorgement.
[10] In re Taylor, 511 A.2d 386 (D.C. 1986) (per curiam) (court orders $250 in restitution in board reprimand case).
[11] In re Steele, 630 A.2d 196, 200 (D.C. 1993).
[12] Id.; see also, e.g., In re Appler, 669 A.2d 731, 738 (D.C. 1995); In re Hutchinson, 534 A.2d 919, 924 (D.C. 1987) (en banc).
[13] A complainant seeking monetary relief from an attorney normally must file a malpractice or other civil action, seek fee arbitration (and then initiate enforcement of the award), or make application to the Clients’ Security Fund. These actions are separate and apart from the disciplinary process.
[14] 612 A.2d 1236 (D.C. 1992).
[15] Id. Omitted from this quotation is a discussion of the unpublished decision in In re Anderson, No. 86-657 (D.C. July 28, 1986), upon which the court relied in reaching its conclusion about the appropriate definition for restitution. Also omitted is the court’s footnote, which points out that D.C. Bar Rule XI, section 3(b), permits restitution to the Clients’ Security Fund, as well as to the client. In fact, however, the language of section 3(b) is not limited to clients, but refers to “persons” financially injured by the conduct of the attorney.
[16] In re O’Donnell, 517 A.2d 1069 (D.C. 1986) (restitution of a $1,000 retainer fee).
[17] In re Roundtree, 467 A.2d 143, 148 (D.C. 1983).
[18] In re Landesberg, 518 A.2d 96 (D.C. 1986).
[19] In re Solomon, 599 A.2d 799 (D.C. 1991); In re Washington, 541 A.2d 1276 (D.C. 1988).
[20] The court quotes from comment a to section 370: “A restitution interest is an interest ‘in having restored to [one party] any benefit that [he or she] has conferred on [another] party.’” In re Robertson, 612 A.2d at 1240.
[21] Id. at 1241.
[22] Id. Judge Schwelb filed a lengthy dissent arguing that this case was the wrong case in which to decide the issue of restitution, as the issue had not been briefed by either side or contested by the attorney. The issue of restitution had been raised by the court and then argued by the parties. In Judge Schwelb’s view, “The concept of restitution to clients is quintessentially remedial, and the provision authorizing such relief merits a generous construction.” Id. In his view it should have been decided only after “full consideration by the court of all the arguments which counsel are in a position to make.” Id.
[23] In re Spitzer, 845 A.2d 1137 (D.C. 2004) (refund of advance fee in reciprocal matter from Maryland); In re Hallmark, 831 A.2d 366 (D.C. 2003); In re Perez, 828 A.2d 206 (D.C. 2003); In re Ryan, 670 A.2d 375 (D.C. 1996); In re Steele, 630 A.2d at 197.
[24] In re Jackson, 801 A.2d 38 (D.C. 2002) (previously disbarred attorney ordered to pay restitution with interest for illegal fee as condition of reinstatement); In re Bernstein, 774 A.2d 309 (D.C. 2001) (taking of fees in excess of fee award); In re Travers, 764 A.2d 242 (D.C. 2000) (fees taken from estate without court approval); In re Ray, 675 A.2d 1381 (D.C. 1996) (failure to obtain probate court approval for fee; restitution of fee with interest at legal rate of 6 percent ordered).
[25] In re Viehe, 762 A.2d 542 (D.C. 2000) (disbarment for misappropriation of client funds; restitution ordered with interest); In re Johnson-Ford, 746 A.2d 308 (D.C. 2000); In re Thomas, 740 A.2d 538 (D.C. 1999) (disbarment with issue of restitution deferred until filing of petition for reinstatement due to state of the record).
[26] In re Austin, No. 02-BG-786 (D.C. Sept. 2, 2004) (court orders full restitution to client and Clients’ Security Fund before respondent is eligible to apply for readmission; case involved dishonesty in obtaining loans from client; restitution to client with 10 percent interest as specified in notes given to client).
[27] In re Bettis, No. 02-BG-1285 (D.C. Aug. 5, 2004) (restitution with interest from the earliest date of distribution of any settlement funds).
[28] In re Austin; In re Viehe.
[29] In In re Zackey, 838 A.2d 313 (D.C. 2003), a reciprocal disbarment case from the state of Washington, the court ordered the lawyer to comply with the restitution requirements imposed by the Washington Supreme Court as a condition of reinstatement. In In re Spitzer, 845 A.2d 1137 (D.C. 2004), a reciprocal case from Maryland, the court ordered the attorney to show documentation of a $1,500 refund to his former Maryland client as a condition of reinstatement here.
[30] In re Roxborough, 775 A.2d 1063 (D.C. 2001) (attorney reinstated with conditions, including compliance with restitution plan).
[31] In re Lopes, 770 A.2d 561 (D.C. 2001) (restitution using a payment schedule ordered as condition of probation with other conditions).
[32] In re Taylor, 731 A.2d 412, 413 (1999) (restitution of $27,000 with interest at legal rate to two individuals or repayment to Clients’ Security Fund ordered as condition of reinstatement).

Disciplinary Actions Taken by the Board on Professional Responsibility
In re Nnamdi O. Anya. Bar No. 464648. September 17, 2004. The board recommends that the court disbar Anya and require him to pay restitution as recommended in another matter already pending before the court. Anya failed to file timely written responses to ethical complaints in 13 separate matters and failed to respond to two orders of the Board on Professional Responsibility compelling his response in eight of the matters, in violation of Rules 8.1(b) and 8.4(d) and D.C. Bar Rule XI, § 2(b)(3).

In re Michael R. Calabrese. Bar No. 366774. September 14, 2004. The board recommends that the court disbar Calabrese by consent.

In re Edward P. Gallagher. Bar No. 441751. September 27, 2004. In a reciprocal matter from Maryland, the board recommends that the court impose identical reciprocal discipline and disbar Gallagher. The Maryland Court of Appeals disbarred Gallagher for misappropriation; commingling; failure to communicate; violation of the disciplinary rules; commission of a criminal act reflecting adversely on the fitness to practice; conduct involving dishonesty, fraud, deceit, or misrepresentation; and conduct prejudicial to the administration of justice, all of which occurred in connection with representing a client in an immigration matter. Gallagher violated Rules 1.4(a), 1.15(a), 1.15(b), 8.4(a), 8.4(b), 8.4(c), and 8.4(d) of the Maryland Rules of Professional Conduct; Maryland Court Rules 16-603, 16-604, 16-606, 16-607, and 16-609; and Md. Code Ann., Bus. Occ. & Prof. §§ 10-302 and 10-306 (1989).

In re Jeffrey C. Hines. Bar No. 233239. September 17, 2004. In a reciprocal matter from Maryland, the board recommends that the court impose functionally equivalent reciprocal discipline and suspend Hines for 19 months and two weeks, with fitness, to run consecutive to his suspension in Hines I, an earlier reciprocal matter now pending before the court on the board’s recommendation of six months with fitness. The Maryland Court of Appeals suspended Hines for ethical violations arising from two complaints. In a tax matter Hines failed to act in a timely manner, keep his client adequately informed about the status of the representation, and exercise reasonable supervision over nonlawyer assistants in connection with a tax matter, in violation of Rules 1.3, 1.4, and 5.3 of the Maryland Rules of Civil Procedure (MRCP). In a second matter, involving a home refinancing, Hines applied a portion of client funds held in trust to alleged outstanding legal fees, without authorization of the client, in violation of MRCP 1.15(a), 1.15(b), and 1.16(d).

In re Adrian P. Ifill. Bar No. 192864. September 29, 2004. In a reciprocal matter from Maryland, the board recommends that the court impose identical reciprocal discipline and disbar Ifill. The Maryland Court of Appeals disbarred Ifill for violating the Maryland Rules of Professional Conduct in two separate client matters. In the one matter involving a client’s insurance claim, Ifill failed to provide competent representation, failed to perform substantive work, failed to communicate, failed to communicate the rate or basis of the fee in writing, charged an excessive fee, and made false statements of material fact to D.C. Bar Counsel, Maryland Bar Counsel, and the Maryland Circuit Court during the course of the disciplinary matter, in violation of Maryland Rules 1.1, 1.3, 1.4(a), 1.4(b), 1.5(a), 1.5(b), 8.1(a), 8.4(c), and 8.4(d). This first matter was fully litigated in the District of Columbia as an original disciplinary matter and is now pending review by the court. In the second matter involving an estate, Ifill took client funds that did not belong to him and commingled them in his general account with his other property, made false statements to Bar Counsel and the Maryland Circuit Court during the course of the disciplinary matter, misappropriated funds, took a fee for work on the estate without prior approval of the Maryland Orphans’ Court, and gave false statements and testimony to cover up the misappropriation, in violation of Maryland Rules 1.15(a), 8.1(a), 8.4(a), 8.4(b), 8.4(c), and 8.4(d) and Maryland Court Rule 16-604, which requires deposit of entrusted funds into an attorney trust account.

In re Mary S. Meade. Bar No. 413992. September 27, 2004. In a reciprocal matter from Virginia, the board recommends that the court impose identical reciprocal discipline and suspend Meade for 13 months. The Virginia proceeding concerned Meade’s refusal to pay a court reporter and her dishonest behavior when the Virginia disciplinary authorities investigated the situation. The Virginia Supreme Court found that Meade’s statements in her written and oral testimony in connection with the matter were false, and that she violated Disciplinary Rules 1-102(A)(3) and (4) and Virginia Rules 8.1(c), 8.1(d), 8.4(b), and 8.4(c). The board found that the rules Meade violated in Virginia are substantially similar to D.C. Rules 8.1(b), 8.4(b), 8.4(c), and 8.4(d).

Disciplinary Actions Taken by the District of Columbia Court of Appeals
In re Eugene T. Austin. Bar No. 141085. September 2, 2004. The court disbarred Austin, with his reinstatement conditioned upon payment of full restitution to his client, with interest at the rate of 10 percent, and to the Clients’ Security Fund of the District of Columbia Bar, with interest at the legal rate. Austin, while retained to represent a client in a probate matter, engaged in a prohibited conflict of interest by entering into 10 loan transactions with his client on terms that were both unfair and unreasonable without making the required disclosures that would have permitted his client to make fully informed decisions concerning her actions. Austin also engaged in dishonest conduct by concealing his financial condition from his client and fabricating a letter to his client’s successor counsel to thwart his client’s wishes. He then failed to reflect his debts to his client on his bankruptcy petition and failed to inform her of his bankruptcy filing. Austin violated Rules 1.8(a) and 8.4(c).

In re Bruce D. Blum. Bar No. 418766. September 16, 2004. In a reciprocal matter from Maryland, the court imposed identical reciprocal discipline and disbarred Blum. The Maryland Court of Appeals disbarred Blum for, inter alia, engaging in a repeated pattern of dishonesty and lying to his client, successor counsel, Bar Counsel, a disciplinary inquiry panel, and a circuit court judge, concealing his failure to refund to his former client approximately $700 in unearned fees, in violation of Rules 1.15(a), 1.16(d), 3.3(a)(1), 3.3(a)(4), 3.4(a), 3.4(b), 8.1(a), 8.1(b), 8.4(c), and 8.4(d) of the Maryland Rules of Professional Conduct; Maryland Court Rules 16-606 and 16-609; and Md. Code Ann., Bus. Occ. & Prof. §§ 10-304 and 10-306 (1989).

In re Stephen S. Millstein. Bar No. 20099. August 19, 2004. The court publicly censured Millstein and imposed the board’s recommended conditions of practice, requiring Millstein to consult with the D.C. Bar Lawyer Practice Assistance Program (LPAP), participate in whatever program LPAP recommends, and submit periodic reports on his compliance. Millstein, who was previously disciplined for mishandling settlement funds, was retained to represent a client in a personal injury matter. He failed to maintain complete records regarding disbursements he made from settlement proceeds and failed to furnish prompt notice of the settlement to a third-party medical provider who had an interest in the funds, in violation of Rules 1.15(a) and 1.15(b) and D.C. Bar Rule XI, § 19(f).

In re David V. Peery. Bar No. 442089. August 13, 2004. The court ordered that the petition against Peery be dismissed.

Informal Admonitions Issued by the Office of Bar Counsel
In re Andrew T. Richardson III. Bar No. 462613. September 7, 2004. Bar Counsel issued Richardson an informal admonition for violating Rules 3.4(c) and 8.4(d) by failing to comply with a court order directing him to make regular child support payments as well as repay a large arrearage, which resulted in two separate contempt orders.

The Office of Bar Counsel compiled the foregoing summaries of disciplinary actions. Reports and recommendations issued by the Board on Professional Responsibility, as well as informal admonitions issued by the Office of Bar Counsel, are posted on the D.C. Bar Web site at www.dcbar.org. Court opinions are printed in the Atlantic Reporter and, for decisions issued since mid-1998, are also available online. To obtain a copy of a recent slip opinion, visit www.dccourts.gov/dccourts/appeals/opinions_mojs.jsp. Please note that in some cases Bar members may have the same name. To confirm the identity of individuals who have been subject to discipline, contact the D.C. Bar Member Service Center at 202-626-3475 or membership@dcbar.org.