Washington Lawyer

Bar Counsel: What’s in Your Trust Account?

From Washington Lawyer, February 2006

By Gene Shipp and Asma Naeem

barcounsel Bank accounts, like diaries and medicine cabinets, are usually considered to be part of one’s personal life, something that strangers, acquaintances, and even friends and family cannot see. Not so if you are an attorney and have a trust account.

The Office of Bar Counsel routinely examines lawyers’ trust accounts after receiving an overdraft notice from a financial institution or a complaint from a member of the public awaiting a share of settlement proceeds. Unethical misconduct related to trust account practices, discussed in the various sections of Rule 1.15 of the District of Columbia Rules of Professional Conduct, can range from failing to maintain complete bank records (for the requisite five years following the termination of the representation) to the more serious charges of commingling and misappropriation.[1] Out of the three, commingling, prohibited by Rule 1.15(a), shows itself in the most interesting forms.

Per se violations of Rule 1.15(a) occur when attorneys place operating funds in trust accounts holding client funds, or vice versa—instances that can be called “garden variety” commingling. [2] The more complicated types of commingling, however, can arise from attorneys leaving earned funds in their trust accounts, writing checks drawn on trust accounts for personal expenses, or even hiding their personal funds in trust accounts to avoid creditors and collection actions.

To prevent the possibility of such indiscretions, the Rules of Professional Conduct dictate the various aspects of an attorney’s trust account, from the initial phase of setting up a trust account to what is considered D.C. Bar–approved depositories. Regarding the former, Rule 1.17(a) states, in pertinent part,

Funds coming into possession of a lawyer that are required by these Rules to be segregated from the lawyer’s own funds . . . shall be deposited in one or more specially designated accounts at a financial institution. The title of each such account shall contain the words “Trust Account” or “Escrow Account,” as well as the lawyer’s or the lawyer’s law firm’s identity.[3]

When the client funds are minimal in amount and will only stay in the trust account for a short amount of time, an attorney must deposit such funds into a designated IOLTA (Interest on Lawyers’ Trust Accounts) account, as created by the District of Columbia Bar Foundation and set forth in appendix B of the District of Columbia Bar Rules.[4]

Regardless of whether client funds are in an IOLTA or other kind of trust account, attorneys should avoid leaving earned fees in such accounts. Exactly this type of behavior was addressed in a concurring opinion in In re Choroszej,[5] in which the attorney deposited insurance proceeds into his client trust account and, without paying the medical provider, began writing checks out of the account, erroneously believing that the remaining funds were only his legal fees. The District of Columbia Court of Appeals suspended Choroszej for six months based, in part, on a single instance of negligent misappropriation.[6]

Although the court did not reach the issue of whether Choroszej’s payment of personal bills from the trust account constituted commingling, then associate judge Annice Wagner explored the topic more fully in her concurring opinion. Cautioning that the prohibition against commingling in our jurisdiction did not include language of when to remove earned fees, Judge Wagner wrote:

Use of the trust account for payment of personal expenses, even if covered by attorney fees of the lawyer properly deposited may, under certain circumstances, result in the loss of identity between the funds due lawyer and client. . . . Therefore, in my view, members of the bar should remove promptly any fees undisputedly due them which are held in a trust account. . . .[7]

In other words, even though there is no specific stricture against leaving earned fees in a trust account in our jurisdiction, an unintended consequence of such behavior may be commingling.

Indeed, in arriving at a sanction, disciplinary tribunals regularly examine the ways in which an attorney routinely handles monies in his or her trust account to determine whether a commingling resulted from dishonesty, recklessness, or mere negligence. In In re Huber[8] the Board on Professional Responsibility agreed with the hearing committee that Huber engaged in commingling and dishonesty because he used his trust account as an office operating account and repeatedly bounced checks for rent, office services, and meals drawn on the trust account. The hearing committee, having had the benefit of listening to Huber’s explanation of his practices firsthand, concluded that his actions violated Rule 8.4(c) “because [the commingling] shielded Respondent’s operating funds from creditors.”[9] This matter was not reached by the Court of Appeals in light of Huber’s affidavit consenting to entry of order of disbarment.

Another variation of commingling, along with the more serious act of reckless misappropriation, occurred in In re Rivlin.[10] The Court of Appeals found that Rivlin engaged in commingling when he deposited into his escrow account (titled “Lewis A. Rivlin, Lawyer’s Trust Account”) entrusted funds from several clients as well as checks from his firm, and funds from his own and his wife’s personal accounts. Moreover, the respondent wrote checks from that account for such personal expenses as Giant Food, PEPCO, and Washington Gas. In its report annexed to the court’s order of disbarment, the Board on Professional Responsibility explained that Rivlin’s defense that the account was his “triage account” in which “all incoming funds were deposited for a short period of time before being redeposited into a more appropriate account . . . fails as a defense to commingling.”[11] Thus commingling occurs when personal and entrusted funds are in the same account even for a negligible amount of time.

As these cases illustrate, commingling can occur in many ways. It is the first and primary responsibility of the attorney and/or all the attorneys in a firm who have entrusted funds, unearned fees, or advance of costs to open a proper trust account, inspect the signature card to see that it is properly designated, and monitor the account’s activity to ensure that it has the correct funds. None of the attorneys’ personal funds, except those permitted by Rule 1.15(f), should be in a trust account holding entrusted funds.[12] Remember, don’t put anything in your trust account that you don’t want Bar Counsel to see.

Notes
[1] This article does not explore the ethical violation of misappropriation, prohibited by Rule 1.15(c) and discussed by the Court of Appeals in In re Addams, 579 A.2d 190 (D.C. 1990).
[2] The disciplinary sanction for commingling varies on a case-by-case basis, depending on whether the Court of Appeals finds other misconduct, but generally the sanction is a public censure. However, in terms of deterring members of the Bar from engaging in commingling, the Court of Appeals has noted, “We emphasize the ban against commingling to alert the bar that in future cases of even ‘simple commingling,’ a sanction greater than public censure may well be imposed.” In re Hessler, 549 A.2d 700, 703 (D.C. 1988). In In re Goldberg the Court of Appeals censured the respondent for commingling the law firm’s operating funds in the escrow account for a small amount of time in light of such mitigating factors as voluntarily enrolling himself in an ethics course for lawyers’ trust accounting. 721 A.2d 627 (D.C. 1998) (per curiam); cf. In re Millstein, 667 A.2d 1355 (D.C. 1995) (per curiam) (requiring respondent to attend ethics course as part of sanction for commingling).
[3] Probate and guardianship estate (trust) accounts are an entirely different subject and must be handled in the manner prescribed by the D.C. Code and the rules of the probate court.
[4] Approved financial institutions for attorney trust accounts are governed by the Board on Professional Responsibility and can be found at www.dcbar.org/ inside_the_bar/departments/board_on_professional_
responsibility/banks.cfm. See also D.C. Rules of Prof’l Conduct R. 1.17, cmt. 3.
[5] 624 A.2d 434 (D.C. 1992).
[6] The misappropriation occurred when the balance dropped below the amount owed to the medical provider. On the basis of the Choroszej’s testimony that the error was inadvertent and the fact that he paid the medical provider as soon as he became aware of the oversight, the hearing committee found the respondent’s conduct negligent but not dishonest. The board characterized Choroszej as “insensitive to his fiduciary responsibilities” and his bookkeeping as “sloppy.” Id. at 437.
[7] Id. at 439 (emphasis added).
[8] Bar Docket No. 44-92, et al. (Apr. 24, 1997), aff’d, 708 A.2d 259 (D.C. 1998).
[9] Bar Docket No. 44-92, at 4.
[10] 856 A.2d 1086 (D.C. 2004) (per curiam).
[11] Id. at 1095.
[12] The rule states, “Nothing in this Rule shall prohibit a lawyer from placing a small amount of the lawyer’s own funds into a trust account for the sole purpose of defraying bank charges that may be made against that account.”

Gene Shipp is bar counsel to the District of Columbia Court of Appeals. Asma Naeem is assistant bar counsel for intake.

Disciplinary Actions Taken by the Board on Professional Responsibility
Original Matters
In re Reginald J. Rogers. Bar No. 440390. October 7, 2005. In a supplemental report and recommendation, as directed by the D.C. Court of Appeals, the Board on Professional Responsibility recommends that the court order restitution of $261,656.99 with interest to run from October 6, 2003, the date on which the client demanded a return and full accounting of the assets she had entrusted to Rogers.

In re Steven R. Sager. Bar No. 449132. November 21, 2005. The Board on Professional Responsibility recommends that the D.C. Court of Appeals disbar Sager by consent.

Reciprocal Matters
In re Stanley Kirkland Foshee. Bar No. 420761. November 30, 2005. In a reciprocal matter from Virginia, the Board on Professional Responsibility recommends that the D.C. Court of Appeals impose identical reciprocal discipline and suspend Foshee for three years, with reinstatement subject to the same conditions applicable to the Virginia suspension. The Virginia State Bar Disciplinary Board suspended Foshee, as a result of an agreed-upon disposition, for engaging in misconduct that included dishonesty, unauthorized practice of law, failure to provide competent representation, intentional failure to seek a client’s objectives, and neglect, while retained to represent a client in a personal injury matter.

In re Leslie Wayne Lickstein. Bar No. 272062. November 30, 2005. In a reciprocal matter from the United States Bankruptcy Court for the Eastern District of Virginia, the Board on Professional Responsibility recommends that the D.C. Court of Appeals impose identical reciprocal discipline and suspend Lickstein for five years, to be effective immediately, with reinstatement conditioned upon fitness and compliance with the bankruptcy court’s order of disgorgement of $39,297.06 in legal fees to the bankruptcy trustee. The bankruptcy court suspended Lickstein based on an order approving settlement and compromise. The board found that Lickstein engaged in a pattern of dishonest and deceitful conduct in connection with material transactions and in court filings related to a major asset, subject to sale as part of a debtors’ bankruptcy estate, while serving as the debtors’ counsel in a bankruptcy proceeding. The board chair, writing separately, concurred with the result reached by the majority, but would consider the discipline imposed by the Virginia State Bar Disciplinary Board and the record developed in that proceeding, in addition to the bankruptcy record relied on by the majority of the board.

In re Robert Elliot Miller. Bar No. 465792. November 16, 2005. In a reciprocal matter from Florida, the Board on Professional Responsibility recommends that the D.C. Court of Appeals impose identical reciprocal discipline and suspend Miller for six months with fitness. The Supreme Court of Florida suspended Miller for six months, with his reinstatement conditioned upon a showing of rehabilitation and payment of costs, for failing to provide competent, prompt, and diligent representation; to abide by his client’s objectives; to keep his client reasonably informed about the status of the matter; to safe-keep property; and to deliver entrusted property promptly.

In re Gary S. Mininsohn. Bar No. 222760. November 28, 2005. In two consolidated reciprocal matters from Maryland, the Board on Professional Responsibility recommends that the D.C. Court of Appeals dismiss one matter and, in the other, impose reciprocal discipline in the form of disbarment. In the first reciprocal matter the Maryland Attorney Grievance Commission publicly reprimanded Mininsohn for failing to deposit his client’s advance retainer in an attorney trust account until earned as fees, to give his client a full accounting promptly as requested, and to refund the unearned portion of his client’s retainer promptly after the client terminated the representation. In addition, Mininsohn twice failed to respond to Maryland Bar Counsel’s lawful demands for information during its investigation. In the second reciprocal matter, which arose out of four separate complaints that were handled as one consolidated matter in Maryland, the Court of Appeals of Maryland disbarred Mininsohn for (1) repeatedly failing to appear in court and to produce documents as directed by the court, and knowingly disobeying numerous obligations and court orders, thereby engaging in conduct that was prejudicial to the administration of justice, while litigating a personal collection; (2) failing to prepare and submit a final order with the family court, thereby not providing diligent representation, while retained to represent a client in a child custody matter; (3) failing to keep complete records of his client’s trust funds and to deliver promptly to the client funds that were held on her behalf, while retained to represent a client in a personal injury matter; and (4) failing to withhold state income tax from the wages of his employees, to hold such funds in trust until submitting them to the state, to submit to the state the funds withheld, and to provide returns supporting his withholding.

In re Michael D. Rostoker. Bar No. 389339. November 30, 2005. In a reciprocal matter from Massachusetts, the Board on Professional Responsibility recommends that the D.C. Court of Appeals impose reciprocal discipline and disbar Rostoker. The Supreme Judicial Court for Suffolk County, Massachusetts, disbarred Rostoker by consent.

Disciplinary Actions Taken by the District of Columbia Court of Appeals
Original Matters
In re Rozan E. Cater. Bar No. 420942. November 23, 2005. In four consolidated disciplinary matters, the D.C. Court of Appeals suspended Cater for 180 days, with reinstatement conditioned upon (1) Cater’s full compliance with Bar Counsel’s requests for information regarding the underlying complaints of misconduct in three disciplinary matters; (2) a satisfactory showing by Cater that she has been rehabilitated and is fit to practice law in the District of Columbia; and (3) proof that full restitution has been made to two estates. In the first matter, in which Cater’s former secretary embezzled $47,000 from the estates of two incapacitated adults for whom Cater was the court-appointed guardian and conservator, the court found that Cater failed to make “reasonable efforts” to ensure that the conduct of her nonlawyer employee was compatible with her own professional obligations as a lawyer and that Cater failed to provide competent representation to her wards and their estates. In the three other matters, the court found that Cater failed to respond to a lawful demand for information from a disciplinary authority, seriously interfered with the administration of justice, and failed to comply with an order of the Board on Professional Responsibility. Rules 1.1(a), 5.3(b), 8.1(b), and 8.4(d) and D.C. Bar R. XI, § 2(b)(3).

In re Maria C. Mendoza. Bar No. 430906. October 27, 2005. The D.C. Court of Appeals suspended Mendoza for 90 days. Mendoza engaged in dishonesty, deceit, and misrepresentation with respect to a factoring agreement for Criminal Justice Act (CJA) vouchers that she entered into with another party. Mendoza submitted at least 27 false CJA vouchers, with the intent to mislead the other party into believing that the vouchers had been submitted to the court, in order to obtain advance funds on cases that had not been completed. Rule 8.4(c).

In re John H. Midlen Jr. Bar No. 36384. November 10, 2005. The D.C. Court of Appeals suspended Midlen for 18 months. While retained to represent a client in the recovery of cable royalty fees, Midlen committed negligent misappropriation by deducting attorney’s fees from disputed funds entrusted to him, repeatedly failed to provide timely accountings, and signed, without disclosure, a document without the client’s authorization. Rules 1.4(a), 1.4(b), 1.15(b), 1.15(c), 1.16(d), and 8.4(c).

In re Randy M. Mott. Bar No. 211037. October 27, 2005. The D.C. Court of Appeals publicly censured Mott. Mott failed to deposit client funds in a designated escrow account, to safeguard the funds adequately, and to keep appropriate records. Rules 1.15(a) and 1.17(a) and D.C. Bar R. XI, § 19(f).

In re Dennis M. O’Keefe. Bar No. 210310. November 3, 2005. The D.C. Court of Appeals disbarred O’Keefe by consent effective December 31, 2005.

In re Jacob Q. Owusu. Bar No. 442164. November 10, 2005. The D.C. Court of Appeals suspended Owusu for 60 days with fitness and ordered him to make restitution to his client in the amount of $3,500 plus interest at the legal rate of 6 percent. Owusu, while retained to represent a client in an immigration matter, failed to provide competent representation, failed to serve his client with skill and care, failed to provide zealous and diligent representation, intentionally failed to pursue his client’s lawful objectives, intentionally prejudiced or damaged his client, and failed to keep the client reasonably informed about the status of the matter and promptly comply with reasonable requests for information. Rules 1.1(a), 1.1(b), 1.3(a), 1.3(b)(1), 1.3(b)(2), and 1.4(a).

In re Ronald A. Wright. Bar No. 411438. October 20, 2005. The D.C. Court of Appeals suspended Wright for one year with fitness and proof that he made restitution as follows: (1) $300 to a former client with 6 percent interest from October 21, 1999; (2) $2,705 to a medical center with 6 percent interest from June 14, 1999; and (3) $320 to a physician with 6 percent interest from March 3, 1998. In four consolidated cases involving five separate clients, Wright neglected a client’s matter; settled clients’ personal injury claims without their knowledge or consent and otherwise failed to keep clients properly informed or abide by their decisions; failed to keep adequate records of the source and disposition of funds in his client trust account; intentionally harmed a client; failed to notify clients’ medical providers of insurance settlements and promptly pay them from the settlement proceeds as he had agreed to; and avoided paying certain medical providers what they were owed by falsely and dishonestly representing to them that the settlements had not yet been reached and that he had reduced his own fees. Rules 1.2(a), 1.3, 1.4, 1.5(c), 1.15(a), 1.15(b), and 8.4(c).

Reciprocal Matters
In re Mary D. Brennan. Bar No. 460962. October 13, 2005. In a reciprocal matter from Maryland, the D.C. Court of Appeals imposed identical reciprocal discipline and suspended Brennan for 90 days, nunc pro tunc, to March 9, 2004. The Maryland Court of Appeals suspended Brennan for 90 days by consent following findings by a circuit court of Maryland that she failed to file 1999–2001 federal and state income tax returns, in violation of 26 U.S.C. § 7203 (1990) and Md. Code Ann., Tax–Gen. § 13-1001(d) (2001). The Maryland court
further found that Brennan violated Maryland Rules of Professional Conduct pertaining to criminal acts that reflect adversely on the lawyer’s honesty, trustworthiness, or fitness as a lawyer; conduct prejudicial to the administration of justice; and unauthorized practice of law. In addition, Brennan violated Maryland rules pertaining to proper use of an attorney’s trust account.

In re Joel Chasnoff. Bar No. 22673. October 6, 2005. In a reciprocal matter from Maryland, the D.C. Court of Appeals imposed reciprocal discipline and disbarred Chasnoff. The Maryland Court of Appeals disbarred Chasnoff by consent. The Maryland disciplinary case involved two separate matters. In the first Chasnoff was charged with failure to represent a client with competence and diligence, failure to keep the client reasonably informed about the status of representation, and conduct prejudicial to the administration of justice. In the second matter, which involved alleged omissions and/or misstatements of material facts in an application for malpractice insurance, Chasnoff was charged with committing a criminal act reflecting on his honesty, trustworthiness, or fitness; engaging in conduct involving dishonesty, fraud, deceit, or misrepresentation; and engaging in conduct prejudicial to the administration of justice.

In re Timothy A. DeWitt. Bar No. 432651. October 13, 2005. In a reciprocal matter from California, the D.C. Court of Appeals imposed identical reciprocal discipline and suspended DeWitt for 60 days, with a stay of execution of the suspension in favor of 18 months of probation, subject to the probation imposed by the original jurisdiction. The Supreme Court of California suspended DeWitt following the California State Bar Court’s approval of stipulated facts establishing that DeWitt violated Cal. Bus. & Prof. Code § 6068(c) (failure of attorney to counsel or maintain only those actions, proceedings, or defenses as appear to him or her legal or just).

In re Edward P. Gallagher. Bar No. 441751. October 27, 2005. In a reciprocal matter from Maryland, the D.C. Court of Appeals imposed identical reciprocal discipline and disbarred Gallagher. The Court of Appeals of Maryland disbarred Gallagher for intentional misappropriation of client funds; commingling client funds with his own; failure to properly maintain a client trust account or provide a client with an accounting of his funds; failure to keep his client informed; willfully engaging in conduct involving dishonesty, fraud, deceit, or misrepresentation; and engaging in conduct prejudicial to the administration of justice, all of which occurred in connection with representing a client in an immigration matter.

In re James E. Joyner. Bar No. 114199. October 6, 2005. In a reciprocal matter from Maryland, the D.C. Court of Appeals imposed identical reciprocal discipline and suspended Joyner for nine months, with reinstatement conditioned on his submitting proof that he has been readmitted in Maryland or otherwise making an affirmative showing that he has complied with the four conditions imposed by the Maryland court. The Maryland suspension was based upon two separate complaints involving representation of clients in a personal injury matter and an adoption proceeding. The joint consent petition alleged that in both of these cases Joyner violated Maryland Rules of Professional Conduct pertaining to competence, diligence, communication, expediting litigation, and conduct prejudicial to the administration of justice. Furthermore, Joyner admitted to a violation of the rules pertaining to declining or terminating representation in the aforementioned adoption case.

In re Scott G. Smith. Bar No. 957118. October 27, 2005. In a reciprocal matter from Maryland, the D.C. Court of Appeals imposed identical reciprocal discipline and disbarred Smith. In a case based on four separate complaints involving Smith’s conduct as an escrow agent, the Court of Appeals of Maryland disbarred Smith for intentional misappropriation of client funds; engaging in conduct involving dishonesty, fraud, deceit, or misrepresentation; failure to turn over pertinent financial records to Maryland Bar Counsel when requested during the disciplinary investigation; and misleading Maryland Bar Counsel with regard to the status of the trust funds.

In re Robert B. Wilkins. Bar No. 350777. November 23, 2005. In a reciprocal matter from Alabama, the D.C. Court of Appeals imposed identical reciprocal discipline and disbarred Wilkins. The Supreme Court of Alabama disbarred Wilkins for his conviction of “serious criminal conduct.” Wilkins unlawfully possessed mail addressed to an individual other than himself from several credit card companies and subsequently pled guilty to 18 U.S.C. § 1708 (1994), for theft or receipt of stolen mail, before the United States District Court for the Southern District of Alabama.

Contempt Proceedings
In re Nnamdi O. Anya. Bar No. 464648. November 2, 2005. The D.C. Court of Appeals sentenced Anya for two counts of criminal contempt. The contempt conviction was based on Anya’s failure to notify clients and adverse parties of his January 12, 2004, suspension and consequent inability to practice law, and for engaging in the practice of law after being suspended. Anya was sentenced to six months’ incarceration on each count, with execution of sentence suspended on each count with credit for time served, plus five years of supervised probation.

Informal Admonitions Issued by the Office of Bar Counsel
In re Gloria Johnson. Bar No. 310128. October 19, 2005. Bar Counsel issued Johnson an informal admonition for failing to maintain records of entrusted funds, to provide competent representation, to represent a client with diligence and zeal within the bounds of the law and act with reasonable promptness, and to submit complete and timely filings with the court and comply with requests for records, while serving as a personal representative in an estate matter. Rules 1.1(a), 1.1(b), 1.3(a), 1.3(c), 1.15(a), and 8.4(d).

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/internet/opinionlocator.jsf. 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.