This entry is part 12 of 12 in the series ELEVEN COMMANDMENTS
Michael Sean Quinn, Ph.D, J.D., Etc., Author

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This Preface is attached to each of the parts, oppressive though that may appear.This blog  is part (1/11th) of a collection called the ELEVEN COMMANDMENTS OF LEGAL ETHICS.  There are 11 separate mini-blogs; they need not be read in any particular order.  I have tried to keep them “together,” but cyber-success is not an inevitability when I am around. An early version* of it was published a decade or so ago.  Before that very short speech versions  were used as part of a day long CLE course ordered by the Supreme Court of Texas for new lawyers.  Later for several years it was used in other CE or CLE contexts.  All of this can be found on my Resume which is linked to (attached to) my website. www.michaelseanquinn.com. There are video versions somewhere in the cyber-sphere, and if not there in the cyber-world or in cyber-space and/or in the so-called “real world,” for sale.  As old as it is, the collection–whether in print, in the “blogus-sky,” on a something like a motion picture–is not really out of date, except there are not explicit references it to legal ethics and the cyber world.  At the same the obligations of the lawyers have not changed much, except now there is a new dimension to our confidentiality obligations and and out obligations to keep up to date. The “code numbers” are sometimes to the ABA Model Rules and sometimes to the Texas Rules of Professional Conduct. (*The term “version” means what it says: wordings change and ideas shift, tough the latter very little.)

Some of the Blogs will contain supplementary additions. Those added after January 1, 2015 will probably be dated, barring oversight. Readers may note that many of the cites are Texas cases.  This resulted from the history of the contents of these blogs.

Given the purposes and context in which the early versions of the essays were written, many of the legal rules explicitly numbered are from The Texas Rules that were built upon the ABA Model Rules. 

This blog, like some of the others, will contain supplementary additions.  Like the others, it will also use some abbreviations from time to time: L for lawyer, LF for law firm, C for client.


These disquisitions are revisions something I wrote at least several years ago. First editions of these essays were  begun some time ago.  Somehow their print got locked in, to some degree, so some parts of the essays were thrown out of kilter and can’t be made right today. This is particularly true along the left margins of some of the essays.



COMMANDMENT ONE: DON’T STEAL THE CLIENT’S
MONEY

Here is a paradigm case. One of the most scandalous law firms of all times was the Rothstein firm in South Florida. It ran a Ponzi scheme and cheated a great many people out of all the money they had. The lawyer Rothstein himself got sentenced to 50 years in prison. In January of 2015 his General Counsel got sentenced to a mere 18 months.  Why would such an outrage happen? You’ve already guessed the reason, probably. He had the good sense to turn on all the other people in the firm who are now lines up to finish litigating their criminal charges.  His defense lawyer argued that he had gotten punished enough since he lost his New York law license and had to go through bankruptcy.  That may not have played any role.  That’s no big deal for a man who hurt so many people, some of them quite old. No.  The reason, he had the good sense to squeal on the “also evil.” Maybe there’s redemption in there.  Even if there isn’t, it’s a good thing to convict and sentence the rest of the thugs. 

A.        Legal Rules:

1.         Under no circumstances should a lawyer ever borrow from a client’s
trust fund without express, clear, advised, reasonable written consent.  Even then, such borrowing should probably not
ever occur.



2.                   A lawyer should not ever commingle trust funds
with her funds, even by accident. (The contents of a client trust fund are the
property of the client.)  S.D.C. v.
Princeton Eco Into Ltd.
, 84 F.2d 443 (S.D.N.Y. 2000).

  Key Rule   1.04:  Fees may be neither illegal nor
unconscionable.  (An unconscionable fee
is one that provokes the following response from a reasonable lawyer:  “That’s highway robbery!”  The fact that this metaphor makes sense
suggests that people see exorbitant fees as a form of stealing.)

B.        Commentary

            1.         Stealing
Client Property
.  If a lawyer forges
endorsements on a medical payment check to his client and makes off with the
money, he has stolen the client’s money. 
In re Dyer, 750 So.2d 942 (La. 1999).  Breard v. 
Sachnoff & Weaver, Ltd.
, 941 F.2d 142, 145 (2nd Cir.  1991) (pleading sufficient).  See Crow v.  Henry, 115 F.3d 294 (5th Cir.  1997) for a particularly enraging case of
what appears to be lawyer crookedness and client betrayal.

            2.         Client
Trust Funds
.  Stealing a client’s
money, especially when you hold it in trust, is nearly the worst sin a lawyer
can commit.  If an attorney knowingly
misappropriates clients’ funds,disbarment is virtually mandatory.  Any conversion of client funds can lead to disbarment.
5  Large scale thefts and embezzlements are
certain to lead to disbarment. 
Obviously, this can be a problem in the estates and trust area.  Even lawyers who do not actually do the
stealing can find themselves in trouble. 
They should have been watching their partners more carefully.  In re Kennon, 491 S.E.2d 252 (S.C.
1997). In 2014 former mayor of St. Louis, Mo. (1993-97), Freeman Bosley, Jr., got his license suspended indefinitely by the Supreme Court of Missouri, when checks on his trust account for client funds bounded.  The amount of money was small, but the court seems to have acted appropriately. 

There is no specific DR regarding commingling
and stealing.  Guess why not?

Sometimes, lawyers are put in jail for
stealing their client’s money.  One
Connecticut lawyer got six years.  Mass.
Mut. Life Ins. Co. v. Millstein
, 129 F.3d 688, 690 (2nd Cir. 1997). There is a well-known case in Texas in which David Bonilla got 10 year probation in 2011 after he paid restitution of over $500T for his thefts from 37 clients. He then violated his probation, e.g., by UPL, in the very law firm where he committed the big crime, was sent to prison in the fall of 2014, and then a few months later–in 1/15–tried to get out on a “shock probation,” whatever that is, since he found prison life so surprising and unpleasant.  Was David really arguing that lawyers in general or his family of not-widely-respected-lawyers were too good for being required to dlve in something like a dormatory a few hours west of Ft. Worth?

Because lawyers are fiduciaries of their
clients, courts take a broad view as to what constitutes stealing.  For example, a lawyer’s failure to account
for and refund unearned fees may constitute a form of stealing, precisely
because the lawyer’s fiduciary.  If a
lawyer postpones remitting funds to a client for an absurdly long period of
time, a lawyer may be disciplined.

            3.         Commingling.  Deliberately commingling trust funds with
business accounts is nearly as bad, because–well–it just looks terrible and
suggests sloppiness or a cavalier attitude about handling the client’s money.  Besides, it is temporary stealing.  In one case, a lawyer failed to create a
trust account, and some of the checks he wrote for expenses bounced.  He was disciplined, even though he eventually
made the checks good.  In re Tracy,
676 N.E.2d 738 (Ind. 1997).  The Tracy
case contains an interesting twist.  Tracy
was licensed in Indiana, took an inactive status, but pursued immigration
practice in California.  Naturally, the
court took a dim view of such actions.  Id.
at 738.  When a lawyer lies to a client
about which lawyer is working on a case and thereby increases the amount of the
billing, he is subject to a disciplinary action, including suspension.  In re Dann, 960 P.2d 416, 419
(Wash.  1998).  (Notice that this case also involved
violating C2.)  Negligent
misappropriation is not nearly so bad as deliberate misappropriation, but they
are still both unlawful, and they are both sanctionable under the law governing
lawyers.  Attorney Grievance
Commission of Maryland v. Sheridan
, 741 A.2d 1143 (Md. 1999).

4.         Mismanagement.  It is improper for a lawyer to mismanage
client funds.  That is not the same,
however, as intentionally diverting them or even commingling them.  In re Lively, 658 N.E.2d 903, 907
(Ind.  1995).  But see Inquiry Commission v. Lococs,
18 S.W.3d 341, 345-46 (Ky. 2000) (holding that an attorney’s inadequate
management of client funds was probable cause for attorney disciplinary
commission to conclude that misappropriation occurred).

            5.         Time
Bills
.  Deliberately exaggerating
bills is a form of stealing.
6  Unexplained and unconsented
to surcharges included in bills are a form of stealing and constitute a
grievable offense.  People v.  Wotan, 944 P.2d 1257, 1263 (Colo.  1997). 
A “surcharge” looks to us like nothing more than an unannounced increase
in fees.

6.         Expense Bills.  Phony expenses are also a form of stealing
from the client.  Id.   Padded expenses (for example, those including
phony or inflated tips, phony tips for baggage transfers, credit card bills
with tips included and then added on as well) are all forms of stealing.  So is having dinner with a friend and billing
the client for the entire evening fare. 
So is staying an extra night or arriving a night early in a particularly
attractive place to take a particularly routine deposition.

            7.         Client
Property
.  Lawyers are required to
return client property promptly.  This
includes money and files.  Attorneys are
required to return labor certification and supporting documents to
immigrant-clients upon request.  In re
Ryan
, 670 A.2d 375, 380 (D.C. App. 
1996).  In this case, the court
affirmed a four-month suspension, which also involved a pattern of
neglect.  Client retainers are often like
property.  In re Burton, 542
S.E.2d 504 (Ga. 2001).  This rule
obviously applies to funds held in trust. 
Thus, if a lawyer takes a retainer with an agreement to charge hourly
fees against it and fails to return a portion of the retainer, the lawyer may
be stealing from the client.  In re
Smith
, 775 So.2d 1 (La. 2000).  A
more interesting question arises when the retainer is not money held in trust
but a kind of up-front fee for retention. 
The solution to this problem may depend upon whether the lawyer has done
any work for the client or foregone work for others.

C.        Problems:

1.         Judging Attorneys’ Fees.  Obviously, lawyers should not lie about their
fees. See C2.  When they get caught doing this, the fee
request is in deep trouble.  They don’t
even have to be caught.  Even judicial
skepticism can substantially reduce the fee. 
Numerous courts tend to be skeptical of attorneys’ fees.

2.         An Auditing Technique.  If all of a lawyer’s time entries end in “.0”
or “.5” is it fair to infer that the time has been rounded off?  Moreover, if an attorney then concedes to
rounding off his time, and claims that he always rounds down, is it fair
to doubt the veracity of what he says? 
Does it make a difference if his firm imposes an onerous billing budget?

D.        Lawyer Conduct in Class Actions:  Selling out is a form of stealing.  Courts have manifested concern that lawyers
may sell out their class clients if the target-defendant is willing to pay
enough money.  Therefore, in recommending
settlements to a class, the attorneys must disclose their fee, and the source
of the fee is irrelevant.  In addition,
trial courts in reviewing settlement proposals for fairness, adequacy, and
reasonableness must consider the size and nature of the attorneys’ fees, along
with other factors.  General Motors
Corp. v. Bloyed,
916 S.W.2d 949, 957 (Tex. 1996).  This is a continuing source of concern.  The courts are worried that if the offer of
attorneys’ fees from the defendant is large enough, the plaintiff’s lawyers
will not have sufficient incentive to push the litigation.  Ortiz v. Fiberbord Corp., 527 U.S. 815
(1999).

Is the following a form of selling out?  Suppose a company agrees to settle a case by
offering a series of coupons for which people may apply.  As part of the settlement, the lawyers for
the plaintiff class are paid what appears to be a handsome cash sum.  Many commentators believe that plaintiffs’
lawyers representing classes tend to exaggerate the value of the settlement in
order to justify their fees.  See
Geraldine Fabrikant, Blockbuster Settles Suit on Late Fees, New York Times C1 (June 6, 2001) (“Blockbuster
said the potential value of the redemption coupons was $450 million.   [¶] But Susan Koniak, a law professor at
Boston University, was skeptical.  ‘If
Blockbuster ends up paying all the money that they wrongly got, then the
lawyers’ fees are worth it,’ she said. 
‘But it is not at all clear that they will.  Often in these cases, the lawyers and the
company inflate the amount that will be paid back.  It makes the lawyers look as if they are
getting less of the total and makes the company look like they are not keeping
any ill-gotten gains.’” Id. at C15).

E.         Stealing From One’s Firm:  When a lawyer embezzles or steals money from
his own law firm, it is nearly as bad as stealing it from clients and can lead
to serious discipline.  Rogers v.  Mississippi Bar, 731 So.2d 1158
(Miss.  1999) (180 day suspension); In
re
Thompson, 991 P.2d 820 (Colo. 2000) (attorney disbarred for
misappropriation); Oklahoma Bar Ass’n v. Statsman, 990 P.2d 854, 860
(Okla. 1999) (stating, in course of holding that one year suspension was
appropriate for lawyer who billed client on own letterhead for work performed
at his prior firm, that “a lawyer’s mishandling of funds belonging to a law
firm. . .is not to be treated differently from misappropriation or
conversion of funds belonging to the lawyer’s client.”).  Sometimes, it might even be worse,
particularly if it involves a pattern. 
See In re Greenberg, 714 A.2d 243 (N.J. 1988).  In this case, a lawyer who was clearly
mentally ill was disbarred, 5-2, upon the grounds that motive is
unimportant.  The court held that the
only thing that mattered was whether the lawyer understood what he was doing,
even if he could not resist doing it.  Id.
at 251.  The major public policy reason
cited by courts is that the legal profession is an institution built upon
trust, and that must be preserved at all costs, in order to assure the
continued confidence of the public and the integrity of the bar.  Id. at 253-54.  After all, “[l]aw firms are the vehicles
through which clients retain individual attorneys and the cultures in which
those individual attorneys function once retained.  It is the firm’s reputation–the sum of the
reputations of the lawyers practicing together–that attracts clients and
suggests that lawyers in the firm can be trusted with the clients’ most
difficult problems and with the clients’ assets.  Lawyers who betray their partners betray that
trust.”  Id. at 250.)  This can be a problem when a lawyer withdraws
from a law firm, and, for example, secrets client files and takes them, when–as
it turns out–neither the client nor the law firm desires this.  In re Cupples, 952 S.W.2d 226 (Mo.
1997) (interesting discussion of withdrawal problems and a helpful
bibliography).  (See C5.)  Lawyers who take kickbacks in the form of
referral fees without telling their law firms are stealing from the law
firms.  Brewer & Pritchard, P.C.
v. Johnson
, 7 S.W.3d 862 (Tex. App.–Houston [1st Dist.] 1999, pet.
granted).

F.         Stealing from One’s Employees:
An attorney who keeps an employee’s withholding tax and uses it for his own
purposes may well be subject to serious discipline.  Attorney Grievance Comm’n of Maryland v.
Clark
, 767 A.2d 865 (Md. 2001) (convincing evidence standard employed).

G.        Breaking Up:  Easy To Do?:  As firms break up, lawyers have a temptation
to use money and client position as a kind of leverage against each other as
they try to maximize their take and minimize their exposure.  Obviously, breaches of fiduciary duty may be
involved.  Conversion also may be a
problem.  In one case, L1
arranged for C to withhold money in an escrow account from L2, and
ended up liable not only for the sums withheld, but for an equal amount of
punitive damages.  The theory was
tortious interference.  Sufrin v.
Hosier
, 128 F.3d 594 (7th Cir. 1997).

K.        Lawyer Conduct in Non-Lawyer Capacity:  Courts are almost gleeful in advertising the
fact that a person who is in criminal difficulties is also a lawyer.  Things seem to go harder for these
attorneys.  Hence, lawyers who shake and
move in the business world need to avoid deals that involve stealing, or deals
that look like they involve stealing.  United
States v. Stewart
, 185 F.3d 112 (3rd Cir. 1998) (attorney convicted of mail
fraud, money laundering, and racketeering relating to the ownership of an
insurance company).  See In re Manns,
685 N.E.2d 1071 (Ind.  1997).  See C6.

Perhaps the Rule should be “Don’t
steal from anybody–especially not clients.”  
And perhaps it has a corollary “Do not steal from clients, but especially not the really poor ones and/or the very elderly.”


Consider the following case from 2015 on pondering the corollary: Barbara Lieberman, L, a New Jersey lawyer, lead a group stealing money from elderly people she represented. The amount stolen was $3.8M, or so, from 16 people. Of course she made various misrepresentations to her clients, as well as forging documents. She got 10 years and is to provide $3M in restitution plus testifying against here cohorts. (Her subordinates in the conspiracy will pay the rest, I guess.) One would expect her to be disbarred. 








                5 Williams
v. Virginia State Bar
, 542 S.W.2d 385 (Va. 2001) (suspension for
mishandling client funds and failing to abide by agreed disposition of case), In
re Banks
, 542 S.W.2d 721 (S.C. 2001) (disbarment for check kiting and
financial fraud including taking money from indigent defense fund and placing
it in the firm’s account without documentation), Attorney Grievance
Commission of Maryland v. Tomaino
, 765 A.2d 653 (Md. 2001) (the lawyer
violated a medley of rules involving some $24 million and was disbarred), In
re Lewis
, 542 S.E.2d 713 (S.C. 2001) (misappropriation of client funds,
false statements, signing client name without permission), In re DiPippoI, 765
A.2d 1219 (R.I. 2001), Attorney Grievance Commission of Maryland v.
Bernstein
, 768 A.2d 607 (Md. 2001), In re Asher, 622 N.W.2d 746
(Wis. 2001), In re Swift, 544 S.E.2d 114 (Ga. 2001), In re Lewis,
542 S.E.2d 713 (S.C. 2001), In re Bell, 539 S.E.2d 806 (Ga. 2000), In
re Sumner,
762 A.2d 528 (D.C. App. 2000) (reciprocal disbarment), In re
Glasser,
739 N.E.2d 660 (Ind. 2000) (disbarment for converting client
funds, letting a limitations period run, and failing to keep clients informed),
Nebraska State Bar Assn v. Jensen, 619 N.W.2d 840 (Neb. 2000)
(suspension for failing to deposit funds into a trust account and failing to
give the client her money back promptly), 
and In re Boone, 766 So.2d 533 (La. 2000), Florida Bar v.
Tauler
, 775 So.2d 944 (Fla. 2000).  In
re Gregory
, 2000 WL 694093 
(S.C. 2000) (misappropriation of money from a mortgage closing), In
re Hanvik
, 609 N.W.2d 235 (Minn. 2000) (misappropriating client funds
warranted in indefinite suspension), In re Chavez, 1 P.3d 417 (N.M.
2000) (misappropriating client funds while already under indefinite suspension
warranted disbarment), and In re Graham, 609 N.W.2d 894 (Minn. 2000)
(disbarment warranted for misappropriation of client funds when the lawyer had
a lengthy disciplinary history and was already on probation).  This string of cases goes on and on and on.  See In re Herbert, 747 A.2d 783 (N.J.
2000) (knowing misappropriation of client funds 
disbarment), In re Bouton,763 So.2d 573 (La. 2000) (2000
WL 303158), In re Carlson, 745 A.2d 257 (D.C. App. 2000), In re
Letellier
, 742 So.2d 544, 547 (La. 1999). (Mishandling client funds warranted
disbarment.  Of course, the lawyer also
refused to cooperate with the disciplinary committee and lied to them.)  But Cf. In re DiPippo, 745 A.2d 736
(R.I. 2000) (conversion of funds belonging to client’s health insurer which was
a subrogee led to three year suspension), Columbus Bar Ass’n v. Hamilton,
725 N.E.2d 1116 (Ohio 2000) (conversion of state funds resulted in indefinite
suspension), Cincinnati Bar Ass’n v. Stidham, 721 N.E.2d 977 (Ohio 2000)
(lawyer’s misapplication of escrow funds warranted only a two-year suspension
in light of numerous mitigating circumstances). 
Misappropriation is also a crime, of course.  United States v. Hoglund, 178 F.3d
410, 414 (6th Cir. 1999).  The court held
that in determining the amount of money stolen, the defendant-attorney is not
permitted to deduct his one-third contingency fee from the total amount of
restitution ordered.  This appears to be
an implication of the doctrine that attorneys are fiduciaries of their clients
and forfeit fees for flagrant abuses of their fiduciary duties. 
                6 Lisa G.
Lerman, Blue-Chip Bilking:  Regulation
of Billing and Expense Fraud by Lawyers
, 12 Geo.
J. L. Ethics
205 (Winter 1999) (exhaustive and exhausting case study of
sixteen high dollar ripoffs of clients by their lawyers).  

























Originally posted on 12/31/2014 @ 9:56 pm

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Michael Sean Quinn, PhD, JD, CPCU, Etc

Michael Sean Quinn, PhD, JD, CPCU, Etc. (530)

One of Texas's leading insurance scholars, Michael Sean Quinn is a past chair of the Insurance Section of the State Bar of Texas and has a broad legal practice.

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