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In re Friedman (05/08/2001) sp-5408
In re Friedman (05/08/2001) sp-5408
Notice: This opinion is subject to correction before publication in
the Pacific Reporter. Readers are requested to bring errors to the attention of
the Clerk of the Appellate Courts, 303 K Street, Anchorage, Alaska 99501, phone
(907) 264-0608, fax (907) 264-0878.
THE SUPREME COURT OF THE STATE OF ALASKA
In the Matter of ) Supreme Court No. S-8542
)
ELLIOTT FRIEDMAN, Attorney ) O P I N I O N
)
______________________________) [No. 5408 - May 8, 2001]
Appeal from the Alaska Bar Association
Disciplinary Board.
Appearances: James D. Gilmore, Gilmore &
Doherty, Anchorage, for Elliott Friedman.
Mark Woelber, Assistant Bar Counsel, Alaska Bar Association,
Anchorage.
Before: Matthews, Chief Justice, Eastaugh,
Fabe, Bryner, and Carpeneti, Justices.
EASTAUGH, Justice.
MATTHEWS, Chief Justice, dissenting as to
sanctions.
BRYNER, Justice, dissenting.
I. INTRODUCTION
Attorney Elliott Friedman, acting for all plaintiffs in
a complex tort suit, deposited an $81,000 settlement contribution
in his client trust account. Without permission from the other
plaintiffs' attorneys, he drew on the trust account to advance
funds to his client and to pay himself attorney's fees not yet due
him. He also drew on the trust account to pay himself fees in the
matters of five other claimants before he had deposited the
settlement funds in those matters. These payments breached
fiduciary duties he owed the other plaintiffs in the tort suit and
put the account out of trust. The Alaska Bar Association's hearing
committee, finding violations of five disciplinary rules,
recommended a six-month suspension from practice and a year of
probation. The bar's disciplinary board adopted most of the
committee's findings. But, finding that Friedman had acted with
selfish motives, it recommended a four-year suspension. Although
we agree substantially with the board's sanction analysis, our
precedents and our independent evaluation of Friedman's mitigating
conduct compel a slightly reduced sanction. We therefore order
Friedman suspended for three years.
II. FACTS AND PROCEEDINGS
A. Facts
The sinking of the F/V UYAK II in 1987 caused the deaths
of most of her crew. The decedents' estates and the survivors sued
the vessel's owner, Cal-Alaska Fisheries, Inc. Elliott Friedman
represented the estate of decedent Rodrigo Jaime. Other attorneys
represented the other plaintiffs.
The case was complex, and the plaintiffs' attorneys
decided to pursue a global settlement. Disputes about Cal-Alaska's
insurance coverage complicated the settlement. Friedman, as de
facto leader of the plaintiffs' attorneys, eventually negotiated a
settlement on behalf of all claimants for a lump sum of about
$670,500, of which Cal-Alaska itself was to contribute $81,000.
Concerned that Cal-Alaska might not pay its share, the
plaintiffs' attorneys attached special importance to collecting
Cal-Alaska's contribution. Cal-Alaska sent its $81,000
contribution to Friedman on May 23, 1990, with a letter from Cal-
Alaska's counsel stating that the "check . . . is to be held in
trust by you for further distribution in accordance with the terms
and conditions of the Settlement Agreement." The check stated:
"Settlement Payment by Cal-Alaska Fisheries, Inc. to be held in
trust per settlement agreement of West of England, et al., v. Cal-
Alaska Fisheries, Inc., et al., Cause No. C88-398C (USDC)." On May
25 Friedman deposited the check in his client trust account pending
receipt of the remaining settlement contributions and agreement
among the plaintiffs on how to divide the settlement proceeds.
Friedman believed that he would receive the remaining settlement
contributions within sixty days. But disagreements among the
plaintiffs on how to allocate the lump-sum settlement proceeds
delayed payment of the remaining contributions for nearly a year.
As of May 19, 1990, the plaintiffs had not agreed on how much each
was to receive; the plaintiffs did not reach agreement until May 1,
1991. The other settlement contributors then paid their shares.
Friedman did not receive the last contribution until late May 1991;
he deposited it in the trust account soon thereafter.
On May 29, 1990, four days after Cal-Alaska's
contribution was deposited in his client trust account and about
one year before the remaining settlement contributions were
deposited in his trust account, Friedman wrote a $15,000 check on
the account for partial payment of fees he had "earned"and costs
he had advanced in the UYAK II case and in an unrelated case. The
bar's hearing committee later found that Friedman had personally
prepared this check. A week later he signed a check on the trust
account to advance his UYAK II client $10,000. On December 13,
1990 he signed a $6,000 trust account check to pay himself an
additional $3,000 in fees in UYAK II.
Friedman had no permission from the other UYAK II
plaintiffs' attorneys to draw on Cal-Alaska's $81,000 contribution
when he paid himself fees and advanced funds to his client in May,
June, and December 1990.
In late 1990 and early 1991 Friedman signed seven client
trust account checks paying himself attorney's fees in five other
claimants' matters unrelated to the UYAK II suit. As to each of
those matters, the funds settling the matter had not yet been
received or deposited in the trust account when he signed the
check. [Fn. 1] In effect, Friedman used trust funds being held for
the UYAK II settlement to pay himself fees in these five non-UYAK
II matters and replaced the UYAK II funds as the settlement checks
in those five matters were received and deposited in the trust
account.
These draws caused the trust account to be "out of
trust." At one point in early 1991, the balance was only
$8,583.29, although the trust account should have contained at
least $81,000 awaiting final distribution to all the UYAK II
claimants.
B. The Disciplinary Proceedings
In May 1992 counsel for another UYAK II claimant filed a
bar grievance, alleging that Friedman had promised to place the
$81,000 in a segregated, interest-bearing account. When bar
counsel asked Friedman to respond to the allegation, Friedman
denied it; he claimed that he had deposited the money in his trust
account as required by law and had not used the money for any
purpose. Bar counsel continued to request and receive information
from Friedman about his bank accounts. Bar counsel eventually
filed a petition for formal hearing. After Friedman answered the
petition, bar counsel moved for summary judgment on all counts.
Friedman opposed the motion and cross-moved for summary judgment.
The hearing committee granted summary judgment. It found
that Friedman did not maintain the Cal-Alaska $81,000 settlement
contribution in trust "as the express terms of his trust required
him to do." It found that the trust account had a minimum balance
of $67,543 to $42,106 between September 29 and December 31, 1990.
At one point some months before Friedman received permission to
draw on the UYAK II trust money, the balance dropped to $8,583.29.
The committee also found that Friedman had failed to account for
and distribute some interest earned on the UYAK II settlement
money. It noted that Friedman correctly believed the Jaime estate
would be entitled to substantially more than the amount he had
advanced to it and that his total fees in UYAK II, based on the
total settlement, exceeded the fees he paid himself in May and
December 1990. It found that Friedman violated: (1) Disciplinary
Rule (DR) 1-102(A)(4) (conduct involving dishonesty, fraud, deceit,
or misrepresentation) through the attorney's fee and client
advances in UYAK II and the other five matters; (2) DR 1-102(A)(5)
(conduct prejudicial to the administration of justice) through his
improprieties within the context of litigation, based on these same
acts; (3) DR 9-102(A) (lawyer's management of money held in trust
for others) based on these same acts; (4) DR 1-102(A)(3) (illegal
conduct involving moral turpitude) because his conduct amounted to
the criminal act of misapplication of funds; and (5) DR 6-101(A)(3)
(neglect of a legal matter) by failing to disburse the excess
settlement funds and by failing to account for one party's interest
on funds (although the committee declined to find this conduct was
intentional). [Fn. 2] The committee granted Friedman summary
judgment on the allegation that he had engaged in conduct adversely
reflecting on his fitness to practice law.
The committee then considered the issue of sanctions.
Following a hearing at which Friedman testified at length, it
recommended a six-month suspension, a one-year probationary period,
and periodic auditing of Friedman's client trust account.
Bar counsel appealed the committee's recommendation to
the bar's disciplinary board and Friedman cross-appealed from the
summary judgment entered against him by the committee. The board
concluded that Friedman's cross-appeal was moot, and adopted the
committee's findings that Friedman had violated DR 1-102(A)(3),
(4), and (5), DR 9-102(A), and DR 6-101(A)(3). The board agreed in
part and disagreed in part with the committee's analysis and
findings concerning aggravating and mitigating circumstances and
recommended that Friedman be suspended from the practice of law for
four years. It also recommended that Friedman be assessed bar
counsel's costs and fees.
Friedman appeals. [Fn. 3]
III. DISCUSSION
A. Standard of Review
"'Bar counsel has the burden of proving the charges of
misconduct in a petition for formal hearing by clear and convincing
evidence. This court reviews the evidence adduced before the
hearing committee independently while giving deference to the
findings of the board.'"[Fn. 4] A respondent attorney who
challenges the board's findings of fact on appeal has the burden of
showing that the findings are erroneous. [Fn. 5] We ordinarily
will not disturb findings of fact made upon conflicting evidence.
[Fn. 6]
As to questions of law and questions concerning the
appropriateness of sanctions, we exercise our independent judgment.
[Fn. 7] We determine sanctions on a case-by-case basis, [Fn. 8]
guided but not constrained by the American Bar Association's
Standards for Imposing Lawyer Sanctions [Fn. 9] and by the
sanctions imposed in comparable disciplinary proceedings. [Fn. 10]
We perform a three-step analysis in imposing attorney
sanctions. [Fn. 11] We first address the first three prongs of the
ABA Standards for imposing sanctions, determining the duty
violated, the lawyer's mental state, and the extent of the actual
or potential injury. [Fn. 12] We next "look to the ABA Standards
to discern what sanction is recommended for the 'type' of
misconduct found in [step 1]."[Fn. 13] Finally, after determining
the recommended sanction, we decide whether aggravating or
mitigating factors should affect that sanction. [Fn. 14]
B. Duty Violations Found by the Committee and the Board
1. DR 1-102(A)(4) (dishonest conduct)
The hearing committee found that Friedman violated DR 1-
102(A)(4) by misapplying funds held in trust. [Fn. 15] The
disciplinary board reviewed the record and adopted the committee's
findings of fact.
The hearing committee found that Friedman stood in a
fiduciary relationship to all the UYAK II claimants when he agreed
to hold the settlement money in trust, pending an apportionment
agreement and disbursement. It concluded that Friedman breached
his fiduciary duty by paying fees to himself in May and December
1990, by advancing $10,000 to his client in the UYAK II matter in
June 1990 before the UYAK II plaintiffs had agreed on an
apportionment, and by advancing fees to himself in the five non-
UYAK II matters before he had received the settlement funds in
those matters. From its finding that Friedman "knowingly"wrote
checks against the settlement proceeds before the express
conditions of his trust allowed him to do so, the committee
inferred that he intended the "natural and probable consequences of
his . . . knowing actions,"i.e., the impairment and misapplication
of the settlement funds and the corresponding breach of his
fiduciary duties.
After Friedman testified at the sanction hearing, the
committee's sanction recommendation stated that
even though Friedman consciously intended to
make advance payments to himself and to his clients from trust
account funds, he did not consciously intend to deprive either his
clients or the UYAK II co-plaintiffs of any funds to which they
ultimately would be entitled. Rather, when Friedman made the
advance payments, he believed these amounts had been "earned"even
though no final apportionment had been agreed to in the UYAK II
litigation and, in the five other cases, the settlement proceeds
had not yet been received.
Friedman argues that there is no evidence of the intent
necessary for a violation of DR 1-102(A)(4). [Fn. 16] He claims
that the intentional misconduct the rule requires cannot be
inferred from a showing of a "knowing"mental state. "Knowing"
includes the "conscious awareness of the nature or attendant
circumstances of the conduct . . . without the conscious objective
or purpose to accomplish a particular result."[Fn. 17] In
contrast, intent in this context requires a "conscious objective or
purpose to accomplish a particular result."[Fn. 18]
We agree with Friedman that finding "knowing"conduct is
insufficient to support a violation of this rule. But "it is
permissible to infer that an accused intends the natural and
probable consequences of his or her knowing actions."[Fn. 19] The
hearing committee drew such an inference, finding intentional
misconduct. We do not think it erred in doing so.
Friedman also asserts that the committee's finding of
intentional misconduct on summary judgment conflicts with its later
conclusion, reached after the sanction hearing, that Friedman "did
not consciously intend to deprive either his clients or the UYAK II
co-plaintiffs of any funds. . . ." We think that the committee's
statement in its sanction recommendation was consistent with its
earlier finding that he had intentionally misapplied the trust
funds. The committee's sanction recommendation simply found that
Friedman did not intend to permanently deprive anyone of their
share of the settlement proceeds. That finding does not preclude
a finding of intentional misconduct in misapplying trust account
funds.
Friedman implies that there was a procedural defect in
finding the intent element upon summary judgment. Although we are
unenthusiastic about a finding of intent on summary judgment, the
procedure followed here probably cured any procedural deficiency:
first, after hearing Friedman's extensive testimony at the sanction
hearing, the hearing committee made additional findings and
conclusions; second, the board independently considered the
committee's proceedings, findings, and conclusions, as well as the
record.
But in any event, we are the ultimate finder of fact in
bar disciplinary matters, [Fn. 20] and we read the record to
establish that Friedman intended to draw on the trust account, that
he knew that settlement funds had not been deposited, and that he
knew that drawing on the account to pay himself fees before the
settlement funds had been deposited would violate the disciplinary
rules. Friedman's testimony demonstrates that he knew, when he
signed the relevant checks, that it was improper to pay himself
attorney's fees in the five non-UYAK II matters before the
settlement moneys in those matters had been placed in the account.
[Fn. 21]The hearing committee found that Friedman engaged in
intentional misconduct and the evidence convinces us that in at
least some of these matters, Friedman knew that the settlement
checks had not yet been received. For example, in the Bear,
Hamilton, and Whitt matters, Friedman paid his clients nothing
until after he had received the settlement funds, even though he
had advanced attorney's fees to himself weeks or months before
receiving the settlement funds. He also testified that as soon as
he settled a case, even if the settlement was only oral, he would
tell his bookkeeper what the contingent fee arrangement was and
that within a week or two he would sign a check drawn on his trust
account for his fees. But receipt of a settlement check within two
weeks of an oral agreement to settle would be unusual in a personal
injury matter, and Friedman himself expressed his belief that
insurance companies tended to delay payment, sometimes by as much
as three months, because "they'll keep them as long as they can
because they get the interest off the money rather than the
client."
We therefore agree with the committee and the board and
find independently that Friedman violated DR 1-102(A)(4).
2. DR 1-102(A)(5) (conduct prejudicial to
administration of justice)
The hearing committee found that Friedman violated DR 1-
102(A)(5) by advancing fees to himself before receiving the
settlement funds in the five non-UYAK II matters and by advancing
$10,000 to the Jaime estate and fees to himself in the UYAK II case
before an apportionment agreement was reached. [Fn. 22] The
committee concluded that conduct occurring outside the courtroom
but within the context of a settlement is encompassed by "the
administration of justice"as that phrase is used in DR 1-
102(A)(5).
Friedman argues that Alaska case law requires active
interference with a civil or criminal proceeding for a violation of
DR 1-102(A)(5). He contends that his alleged misconduct does not
rise to this level. He notes that, unlike the conduct in cases
cited by bar counsel and the committee in which lawyers
fraudulently notarized a client's signature [Fn. 23] or wrote
offensive letters to the state, [Fn. 24] his acts did not prejudice
the administration of justice. He asserts that attorneys routinely
release such funds to their clients. Friedman claims that there is
no evidence that his alleged conduct interfered with or impeded the
administration of any case or proceeding. He alleges that bar
counsel's "bald assertion"that "[t]here is little that is more
reprehensible and prejudicial to the interests of justice than a
lawyer mishandling funds entrusted to him[,]"is insufficient to
support summary judgment.
Bar counsel's unenthusiastic defense of the committee's
finding asks us to conclude that invading funds earmarked for
settlement in a pending case interferes with the administration of
justice. Bar counsel also concedes that a reversal of the
committee's finding on this issue would not undermine the
disciplinary board's ultimate recommendation for discipline because
that recommendation did not rest on this finding.
Most of our cases discussing this rule involved conduct
that actively interfered with civil or criminal proceedings. For
example, in In re West, [Fn. 25] the attorney's conduct induced the
state to enter into a settlement which otherwise would have been
lost or delayed. [Fn. 26] We there cited other examples:
This court has found DR 1-102(A)(5) violations
where an attorney fabricated a deed and attached it to an amended
complaint, [In re] Walton, 676 P.2d [1078,] 1081-88 [(Alaska
1983)]; where an attorney submitted an inaccurate interrogatory
response, [In re] Simpson, 645 P.2d [1223,] 1228 [(Alaska 1982)];
and, where an attorney signed an affidavit, which was filed with
the court, stating that a note was prepared and sent on a certain
date when the note was actually prepared five years later, [In re]
Stump, 621 P.2d [263,] 267 [(Alaska 1980)].[ [Fn. 27]]
These cases involved affirmative acts intended to mislead others in
the course of judicial proceedings for the benefit of the attorney
or the attorney's client. Thus, in In re Vollintine, [Fn. 28] we
found a DR 1-102(A)(5) violation where an attorney wrote a
deliberately harassing letter to federal officials, accusing them
of incompetence, perjury, fraud, cheating, and criminal liability,
to influence coercively a matter impacting the attorney's client.
[Fn. 29]
The cases suggest that DR 1-102(A)(5) contemplates
conduct which impedes or subverts the process of resolving
disputes; it is conduct which frustrates the fair balance of
interests or "justice"essential to litigation or other
proceedings. Cases elsewhere are in accord with this reading of
the rule. [Fn. 30]
Friedman's conduct affected or potentially affected his
clients and the other plaintiffs. But it did not adversely affect
litigation proceedings or a process fundamental to the
administration of justice. It therefore did not prejudice the
"administration of justice,"as that phrase is used in DR 1-
102(A)(5), and consequently did not violate this rule.
3. DR 9-102(A) (handling of client funds)
The hearing committee found that Friedman violated DR 9-
102(A). [Fn. 31] It concluded that Friedman could not collect his
fees for his work in UYAK II and that he could not advance
settlement proceeds to his client until all UYAK II plaintiffs had
agreed to an apportionment of the settlement proceeds. It also
concluded that Friedman could not collect his fees for his work in
the non-UYAK II matters before receiving and depositing the
settlement checks in those matters.
Friedman argues that summary judgment was inappropriate
because his affidavit denied that settlement funds were withdrawn
before he earned them. [Fn. 32] Bar counsel responds that it is
irrelevant whether Friedman had "earned"the funds when he withdrew
them and that the relevant inquiry is whether the funds were "due"
when they were withdrawn. Bar counsel notes that the findings of
the hearing committee and the disciplinary board that Friedman
withdrew the funds before they were "due"established the
violation.
Attorney's fees are not "due"in a matter until the
settlement funds in that matter have been deposited. As a matter
of policy, the lawyer, not the client, should bear the risk of non-
payment in this situation. Friedman presents no evidence to
contradict the bar's evidence that in six matters (including UYAK
II), Friedman paid himself a fee before the settlement funds were
deposited. Friedman's affidavit at most raises a genuine dispute
about whether he had earned the fees he withdrew; but that dispute
is not material, and it is undisputed that the settlement proceeds
from which the fees were to be paid had not been fully received.
We therefore conclude that Friedman violated DR 9-102(A).
4. DR 1-102(A)(3) (illegal conduct involving moral
turpitude)
Finally, the hearing committee found that Friedman
violated DR 1-102(A)(3), [Fn. 33] because it found that his
behavior constituted the crime of misapplication of property under
AS 11.46.620(a). [Fn. 34] Misapplication of property is committed
"if the person knowingly misapplies property that has been
entrusted to that person as a fiduciary."[Fn. 35] Misapplication
of property worth $500 or more is a class C felony. [Fn. 36]
Friedman argues that it was not appropriate to decide on
summary judgment whether he violated DR 1-102(A)(3). The crime of
misapplication of property requires a "knowing"mental state; an
individual's mental state, he argues, cannot be determined on
summary judgment. Friedman also contends that there was
insufficient evidence to sustain a summary judgment; Friedman
affied that he did not know or believe that he was breaching any
fiduciary duties owed to his clients or to the UYAK II co-
plaintiffs. Bar counsel points out that the hearing committee
twice found that Friedman knew he was impairing the trust account
and thus that he had committed the crime of misapplication of
property; bar counsel urges us to make the same finding.
Misapplication of property is an exception to the general
rule that ignorance of the law is no excuse. Alaska Statute
11.46.620 requires that a defendant, to be guilty of misapplying
property, must both act knowingly and know that the act is
unlawful. [Fn. 37] Thus, to find that Friedman violated the
statute requires finding not only that he knowingly engaged in
conduct that violated fiduciary rules but also that he acted with
subjective awareness of the wrongdoing -- that he actually knew
that his acts violated those rules. [Fn. 38]
In In re Mann, we held that an attorney who misapplied
trust funds violated DR 1-102(A)(3). [Fn. 39] Mann acted in
knowing violation of the law when he diverted client funds to make
mortgage payments on his house and was convicted of misapplication
of property; he spent sixty days in jail. [Fn. 40]
Friedman acknowledged that he prematurely withdrew money
from his trust account, but argues on appeal that he did not
understand that the rules governing fiduciary responsibility
prohibited his conduct. He refers us to his testimony at the
sanction hearing and to his affidavit.
But our review of his testimony convinces us that he
understood that it would be wrong to write checks to himself for
fees before depositing the settlement funds. [Fn. 41] And,
because we conclude that he knew that the settlement funds for at
least some matters had not yet been deposited or even received when
he paid himself fees from the trust account, we agree with the
committee and the board that Friedman violated DR 1-102(A)(3). [Fn.
42]
C. Mental State
We next consider the second prong, Friedman's mental
state. The hearing committee found, and the disciplinary board
agreed, that Friedman "consciously intended to make advance
payments"from trust account funds. But the committee also found,
based on evidence presented at the sanction hearing, that "he did
not consciously intend to deprive either his clients or the UYAK II
co-plaintiffs of any funds to which they ultimately would be
entitled." The committee thus distinguished between Friedman's
state of mind concerning the act of withdrawing the money and his
state of mind about how withdrawals might affect clients and others
to whom he owed a fiduciary duty. The disciplinary board did not
expressly address this finding.
We agree that Friedman intentionally disbursed the funds
knowing that he was doing so prematurely. He thus intentionally
violated the trust under which the UYAK II partial payment had been
received as well as the terms under which the funds were entrusted
to him for deposit in his trust account. Evidence supports the
committee's finding that he did not intend to deprive his clients
or others of monies which would be due them. As it turned out, his
misconduct did not actually deprive them of trust funds. But
because the account was out of trust, the UYAK II co-plaintiffs and
his own clients were unwittingly dependent on Friedman's personal
resources. Subsequent audit revealed that those resources would
have been sufficient to satisfy all such claims, suggesting that
his intention was not to permanently deprive clients or the co-
plaintiffs of anything they were to be paid. But this does not
alter our conclusion that he consciously intended to make advance
payments that he knew were premature.
D. Injury
We turn to the third prong, the extent of potential or
actual injury. The parties agree that no client of Friedman's
suffered actual injury. The potential for financial injury, as it
fortuitously turns out, was minimal, because Friedman had
sufficient personal funds to cover any demand for money any client
or UYAK II party might have made.
But bar counsel argued, and the hearing committee agreed,
that Friedman caused actual injury to the public, because "the
public suffers injury whenever a lawyer fails to maintain personal
integrity by improperly handling funds held in trust." We agree
with that analysis.
E. Initial Determination of Appropriate Sanction
We now consider the discipline called for under the ABA
Standards, absent aggravating or mitigating circumstances.
As to the violations of duties Friedman owed clients, the
hearing committee reasoned that suspension was the most applicable
sanction under ABA Standards sec. 4.1, because the committee was
not
persuaded that Friedman knowingly converted client funds. As to
violations of duties he owed the public, including the UYAK II
claimants, the committee noted that Friedman appeared to have
violated AS 11.46.620, and concluded that either suspension under
ABA Standards sec. 5.12 or disbarment under ABA Standards sec.
5.11(a)
was appropriate. The disciplinary board concluded that three of
the applicable standards -- sec.sec. 4.11, 4.42(c), and 5.11(a) --
called
for disbarment, absent aggravating or mitigating circumstances.
Different standards potentially apply to each of
Friedman's violations. Considered together, the standards suggest
that disbarment is appropriate, absent mitigating factors.
Friedman violated DR 1-102(A)(4) by intentionally
engaging in misconduct that involved "dishonesty, fraud, deceit, or
misrepresentation."[Fn. 43] ABA Standards sec. 5.11(b) applies to
such conduct. [Fn. 44] It states that disbarment is generally
appropriate in such cases. [Fn. 45]
Friedman violated DR 9-102(A) when he drew on the trust
account to pay himself fees before they were due. [Fn. 46] Bar
counsel urges us to apply ABA Standards sec. 4.11, which generally
calls for disbarment, to this misconduct. [Fn. 47] ABA Standards
sec. 4.12, which recommends suspension "when a lawyer knows or
should know that he is dealing improperly with client property and
causes
injury or potential injury to a client,"[Fn. 48] also potentially
applies. Given Friedman's conscious intention to use trust funds
to pay himself fees before they were due, we agree with bar
counsel's assertion that Friedman temporarily "'diverted' UYAK II
settlement funds to his own use." We note, as did the hearing
committee, that disbarment should be reserved for cases in which
the lawyer uses the client's funds for the lawyer's own benefit.
[Fn. 49] But that is precisely what Friedman did here. That no
individual harm resulted does not change the nature of his act. On
the other hand, it appears he did not intend to permanently deprive
anyone of trust proceeds. Either sanction therefore could apply to
this violation.
ABA Standards sec. 5.11(a), calling for disbarment, also
applies because Friedman engaged in "serious criminal conduct, a
necessary element of which includes . . . misappropriation."
Friedman's conduct, if committed in Alaska, would have violated AS
11.46.620(a) and would have been a class C felony. [Fn. 50]
F. Aggravating and Mitigating Circumstances
"[A]fter making the initial determination as to the
appropriate sanction, the court [should] then consider any relevant
aggravating or mitigating factors."[Fn. 51] Because disbarment is
the most severe sanction we can impose, aggravating factors are
relevant only to the extent that they neutralize the mitigating
factors. [Fn. 52]
The ABA Standards recognize ten aggravating factors. [Fn.
53] The disciplinary board found four aggravators here: a pattern
of misconduct, submission of false statements, illegal conduct, and
a dishonest or selfish motive. The board thus differed from the
hearing committee, which had found no dishonest or selfish motive.
Friedman disputes the existence of a selfish motive. The
board based its finding on the fact that Friedman "used the
withdrawn mon[ies] for his own purposes." Friedman contends that
this finding is inconsistent with the weight of the evidence. In
support, he points out that the hearing committee found that he did
not intend to deprive clients of any money and withdrew funds only
when he believed he had earned them.
We independently review the evidence while giving great
weight to the board's factual findings. [Fn. 54] Friedman relies
on the testimony of Jeffrey Martin, a Certified Public Accountant
audit specialist. Martin opined that Friedman's handling of the
trust accounts never placed a client at risk and that there was no
evidence of fraud. Friedman also relies on his own testimony that
he did not withdraw settlement monies as fees until he believed he
had earned them.
But our review of the evidence discussed above convinces
us that Friedman knew he was drawing on trust funds to pay himself
fees before they were due. This use of the funds was dishonest and
for his selfish motive. Lack of an intention to deprive clients or
others of monies that were to be paid to them later does not
establish that his intervening use of these monies was honest or
unselfishly motivated. Our conclusion here is consistent with our
holding above regarding Friedman's state of mind. [Fn. 55] We
therefore agree with the board that this aggravator applies here.
The board did not err in applying the "illegal conduct"
aggravator. The committee applied this aggravator based on its
finding that Friedman committed misapplication of property.
Because we concluded in Part III.B.4 that Friedman had the mental
state necessary to be guilty of misapplication of property, this
aggravator applies.
We also find no clear error in the board's finding that
two other aggravators applied. The finding of a "pattern of
misconduct"is supported by evidence that the conduct extended over
the course of a year and involved at least six clients and tens of
thousands of dollars. The finding of "submission of false
statements"is supported by evidence of Friedman's letters to bar
counsel stating that the $81,000 had been deposited in his client
trust account and had not been used for anything. Friedman claims
that he did not know that these statements were false at the time
he made them; but he made no attempt to check his records to verify
his own statement.
ABA Standards sec. 9.32 specifies possible mitigating
factors. [Fn. 56] The board found four mitigators: absence of a
prior disciplinary record; good character or reputation; delay in
disciplinary proceedings (the period between June 1994, when bar
counsel ended the investigation, and December 1995, when bar
counsel filed the petition); and remorse. The board rejected three
additional mitigators recommended by the hearing committee:
personal or emotional problems; a physical disability; and the
absence of a dishonest or selfish motive.
On appeal, neither party challenges the board's
discussion of mitigators. The record supports that discussion.
Friedman argues that a weighing of the aggravating and
mitigating factors, in light of our prior cases, does not support
the board's recommendation of a four-year suspension. As we have
noted previously, there is no "magic formula"for determining how
aggravating and mitigating circumstances affect an otherwise
appropriate sanction. [Fn. 57] "Each case presents different
circumstances which must be weighed against the nature and gravity
of the lawyer's misconduct."[Fn. 58]
Our past cases circumscribe our analysis here. The
disciplinary board paid "particular attention"to In re Mann. Mann
was suspended for three years after confessing to appropriating
client funds in order to make past-due mortgage payments on his
home. [Fn. 59] Mann turned himself in to police and was ultimately
convicted of a class C felony. [Fn. 60] His voluntary disclosure
mitigated the sanction of disbarment. [Fn. 61]
At the other end of the spectrum are In re West [Fn. 62]
and In re Triem. [Fn. 63] West intentionally notarized his
deceased client's signature, knowing that the client's widow had
falsified the signature at West's direction. [Fn. 64] The
attorney's motive was to induce the state to enter into a
negotiated property-loss settlement which would have at least
temporarily foundered if the client's fatal heart attack had been
revealed. [Fn. 65] We found that West clearly intended the
consequences of his actions, and we made the observations quoted
above in Part III.B.2. [Fn. 66] West received a ninety-day
suspension. [Fn. 67]
In Triem, the lawyer was publicly censured. [Fn. 68] He
violated DR 1-102(A)(4) when he told his opponent that discovery
materials had been placed in the mail, but then retrieved them from
the mail without telling opposing counsel. [Fn. 69] He thus
deceived counsel into believing that discovery materials had been
produced. [Fn. 70] The court concluded that a harsher sanction was
unnecessary because Triem did not submit the false documents to the
court and had already been penalized by the court for his
misrepresentation. [Fn. 71]
We think that the nature of Friedman's misconduct was
similar to Mann's and much worse than West's and Triem's. Mann was
suspended for three years. Given this precedent and the mitigating
factors, we believe the appropriate sanction is suspension for
three years. Mann's conduct differs from Friedman's in two main
respects. He took much less money than Friedman. And he self-
reported, whereas Friedman denied withdrawing the money. We find
that the former distinction is not as great as it might seem. Mann
took what he needed, as did Friedman. As to the second
distinction, Friedman's denial is certainly an aggravator.
However, based on our independent evaluation of the record, the
following circumstances convince us that a three-year suspension,
like Mann's, is appropriate and that a four-year suspension would
be too harsh: (1) Friedman's lack of a prior disciplinary record;
(2) the absence of loss or injury to his clients; (3) his
undisputed dedication to his clients and outstanding commitment to
pro bono and public service; and (4) the significant measures that
Friedman took to remedy the problems caused by his conduct.
Friedman relies on a variety of other circumstances to
support his argument that no sanction greater than a six-month
suspension is appropriate. He notes the committee's findings that
his clients and all UYAK II parties received what they were
entitled to without delay attributable to Friedman. He also
correctly notes that the fees he paid himself corresponded to the
fees he would be entitled to charge. His assertion that no client
has ever filed a grievance against him is not disputed by bar
counsel. He also notes the unusual circumstances of his legal
education [Fn. 72] and the undisputed evidence establishing his
public service and the quality of his work for his clients. [Fn.
73] He notes disabling circumstances. [Fn. 74]
We have considered these circumstances. They do not
convince us that the sanction he proposes is sufficient.
IV. CONCLUSION
For these reasons, we find that Friedman violated DR 1-
102(A)(4), DR 9-102(A), and DR 1-102(A)(3), and therefore impose
the sanction of a three-year suspension from the practice of law.
[Fn. 75]
MATTHEWS, Chief Justice, dissenting as to sanctions.
I agree with the opinion of the court that Friedman
knowingly and intentionally misapplied trust funds and that in so
doing he engaged in serious criminal conduct. But for the reasons
that follow, I would impose a period of suspension of four years.
The ABA Standards generally call for disbarment in a case
like this. [Fn. 1] But these standards are only guidelines and in
deciding the question of what sanction was appropriate the
disciplinary board paid particular attention to this court's case
of In re Mann. [Fn. 2] In Mann a majority of this court imposed a
three-year suspension on a defalcating lawyer. The board in the
present case found that Friedman's conduct was "overall, more
reprehensible than . . . Mann's,"and so imposed a four-year period
of suspension.
I agree with the board that Friedman's conduct is worse
than Mann's in several respects. Friedman converted more client
funds, as much as $72,000 at one point, whereas Mann's conversion
was only a little more than $2,000. [Fn. 3] The duration of
Friedman's misappropriation lasted more than a year, whereas the
duration of Mann's conversion was less than a month. [Fn. 4] Mann
reported his breach voluntarily soon after it occurred and fully
cooperated with the bar. [Fn. 5] Friedman, by contrast, never
reported his breaches and did not tell the truth concerning them.
Considering Mann as the most directly applicable
precedent, I would accept the disciplinary board's recommendation
and suspend Friedman for four years.
BRYNER, Justice, dissenting.
I. INTRODUCTION
I disagree with the court's use of its independent fact-
finding power to conclude that Friedman acted dishonestly [Fn. 1]
and engaged in criminal misconduct [Fn. 2] by intentionally
misapplying settlement funds. The disciplinary board's
recommendation of a four-year suspension leaned heavily on the
hearing committee's finding that Friedman's conduct amounted to
misapplication of property -- a finding that the court affirms
independently. If I thought that the committee had made this
finding properly or that the board had properly approved it, I
might be inclined to agree with Justice Matthews that Friedman's
sanction should be governed by In re Mann. [Fn. 3] But the bar's
finding of criminal misconduct reflects a fundamental
misunderstanding of applicable law. And in my view the court
compounds this error -- and compromises its own precedent -- by
attempting to use its power of independent review as a cure for the
bar's failure to accord Friedman due process.
II. THE BAR'S DISCIPLINARY FINDINGS ARE LEGALLY FLAWED.
A. Referring to Friedman's Conduct as Intentional Is
Ambiguous.
The hearing committee, the disciplinary board, and the
court have called Friedman's conduct "intentional"without
specifying what they mean. But in ordinary usage, saying that
someone acted intentionally can mean different things. As applied
to Friedman's conduct, "intentional"could have several meanings.
It will help at the outset to clarify this ambiguity.
Friedman might be said to have acted intentionally (1) if
he knowingly signed trust account checks without making a
reasonable effort to determine what funds would actually pay them;
(2) if he knowingly signed trust account checks to be paid out of
specific settlement funds without making a reasonable effort to
determine if the settlement was final and fully paid; (3) if he
signed trust account checks out of settlement funds that he knew
were not yet fully paid but mistakenly thought that such premature
payments were proper; or (4) if he signed trust account checks that
he actually knew to be premature, knowing that this conduct was
improper.
The first and fourth of these meanings deserve special
attention here. The first -- that Friedman acted intentionally by
voluntarily signing checks that turned out to be premature -- is
significant because the disciplinary committee adopted this meaning
in finding that Friedman had committed intentional misconduct. The
fourth -- that Friedman acted intentionally because he knew that he
was writing premature checks and knew that his conduct was improper
-- is vital because it is the only form of intent that qualifies as
criminal misapplication of property. Alaska law uses this narrow
meaning to define the essential elements of the crime: under the
Alaska Criminal Code's definition, a person who commits
misapplication of property must knowingly engage in conduct that is
listed within the statutory definition of "misapply"with actual
knowledge that this conduct is improper. [Fn. 4]
B. The Hearing Committee Improperly Applied a Conclusive
Presumption of Intentional Conduct.
I agree with Justice Matthews's partial dissent that if
Friedman wrote checks from his trust account knowing that he was
wrongfully "borrowing"money from client or settlement funds, he
would deserve a severe sanction: this conduct would indeed amount
to a misapplication of property, would make Friedman's case at
least as serious as In re Mann, and would therefore presumptively
warrant disbarment under section 4.11 of the ABA Standards. But
this is not what the hearing committee and disciplinary board found
that Friedman actually did.
Friedman unequivocally testified that he knew it would be
improper to make advance payments to himself -- or "borrow"-- from
trust funds; he insisted that he never would have done so
knowingly. On two separate occasions in his pre-hearing
correspondence with the bar, he expressly represented that the
entire $81,000 Cal-Alaska payment on the Uyak II settlement
actually remained untouched in his trust account until after the
case was completely settled. The bar later proved these statements
to be untrue. But Friedman nevertheless insisted that he believed
them to be true when he made them.
At the sanctions hearing before the hearing committee,
Friedman portrayed himself as a disorganized and unsophisticated
solo practitioner who lacked business experience; during the period
at issue, he was beset by a variety of problems -- a nagging back
injury, a disintegrating marriage, and a burgeoning caseload.
Given these circumstances, Friedman claimed, he naively trusted his
staff -- an inexperienced secretary and a part-time bookkeeper --
to know what checks to write and when to write them. According to
Friedman, he usually told his staff that a case had settled, the
amount of the settlement, and the basic fee agreement. But he
ordinarily gave them no further direction, paying little attention
to what checks they prepared for his signature. From time to time
they left piles of checks on his desk for his signature, and he
would just sign them. As Friedman's counsel put it in arguing the
point to the disciplinary board: "[Y]ou asked why did he, quote,
take the money. He didn't take the money. He signed checks. And
the short answer is because it was sloppy." The essence of
Friedman's claim, then, was that he never actually understood what
he was doing.
If this claim is true (and the committee's sanctions
findings suggest that it is), it would preclude a finding that
Friedman acted intentionally in the sense required to prove
criminal misapplication of property. But the hearing committee
never determined Friedman's actual intent. Before the committee
conducted its hearing on the merits of the disciplinary petition,
the bar moved for summary judgment. In advancing this motion, the
bar relied on Friedman's early correspondence claiming that the
entire $81,000 Uyak II settlement payment remained in his trust
account until after the case was completely settled. The bar had
subsequently obtained, and filed with the committee, bank records
establishing that Friedman's claim was untrue -- that Friedman had
in fact drawn down the Uyak II settlement funds prior to final
settlement. Because Friedman did not dispute these records showing
premature payments, the bar asserted that the undisputed evidence
before the committee conclusively established that Friedman had
made trust account payments to himself prematurely. The bar
bridged the gap from conduct to intent by invoking a legal
presumption. The bar contended that Friedman's guilt of
intentional misconduct was conclusively established by the
undisputed evidence that he had written premature trust account
checks.
This contention prevailed. Despite substantial evidence
indicating that Friedman did not actually know that his trust
account payments were premature, and even though Friedman had not
yet been able to mount his full defense, the hearing committee
granted the bar's motion for summary judgment. Noting that
Friedman had knowingly written trust account checks that were in
fact premature, the hearing committee relied on In re West and In
re Triem to conclusively presume that he acted intentionally:
[T]he impairment and misapplication of
settlement funds and the corresponding breach of Friedman's
fiduciary duties were "the natural and probable consequences of his
. . . knowing actions"in writing checks against the Uyak II
settlement proceeds before the express conditions of his trust
allowed him to do so. Friedman's misapplication of trust funds was
therefore intentional as defined by the Alaska Supreme Court in
West and Triem.
But the committee's reasoning is legally flawed. West
and Triem speak of a permissive inference, not a conclusive
presumption: the rule they describe permits a fact-finder to infer
intent from knowing conduct, but does not require it. Indeed, in
cases involving proof of criminal conduct, a rule that requires
intent to be presumed from the natural consequences of the
accused's conduct has been denounced as flatly unconstitutional.
The law recognizes that intent is an issue of fact and so, like
other facts, must be determined by the totality of the
circumstances in each case. Hence, for purposes of deciding the
bar's summary judgment motion, the committee was required to view
the evidence in the light most favorable to Friedman and to draw
all inferences in his favor. Here, even if Friedman's intent to
write premature checks might be inferred from his acts of writing
checks that he should have known would be premature, he nonetheless
disputed this inference, maintaining that he did not actually know.
In ruling on summary judgment, the committee was obliged to draw
the inference in Friedman's favor.
The committee's treatment of "knowledge"as an undisputed
point and of "intent"as a conclusively presumed matter thus
blurred the critical question raised by Friedman's defense: whether
Friedman actually intended the natural and probable consequences of
his conduct, that is, whether he actually knew that the trust
account checks were premature or merely knew that he was writing
trust account checks and should have known that the checks were
premature.
At first blush, one might read the hearing committee's
findings to mean that Friedman actually knew that he was
"borrowing"client funds: the summary judgment decision stated that
"Friedman's actions in writing checks against his settlement funds
that had not yet been received, thus 'borrowing' against the
$81,000 that he held in trust . . . , were 'knowing.'" Yet two
factors preclude interpreting this language as a finding that
Friedman actually knew that he was writing premature checks, or
"borrowing"his client's funds.
First, because it was ruling on a summary judgment
motion, the committee ostensibly based this finding on the
undisputed evidentiary record then before it. In so doing, it
relied on Friedman's affidavit. Yet when the affidavit is read in
the light most favorable to Friedman, as the committee presumably
read it, it hardly concedes knowledge of prematurity; rather, it
only acknowledges that Friedman knowingly signed trust account
checks that he should have recognized would be premature and that
did turn out to be premature. Indeed, had Friedman conceded
knowing that his payments were premature he would have abandoned
his core defense -- that he never knew what checks he was signing.
To read the summary judgment decision as saying that Friedman
actually knew his checks were premature, then, we would have to
conclude that the committee misapplied the basic rules of summary
judgment and construed his affidavit as a total surrender.
Second, the committee's later sanctions hearing findings
affirmatively establish its belief that Friedman signed the checks
without actually knowing that they were premature. At the end of
the sanctions hearing, the bar challenged as implausible Friedman's
claim that he had written the trust account checks without knowing
that the payments were premature. In advancing this argument, the
bar accused Friedman of lying when he falsely informed the bar that
Cal-Alaska's entire $81,000 Uyak II payment "remained in my
attorney-client trust account until August of 1991." Yet the
committee rejected the bar's argument on this point; refusing to
find that Friedman had lied, it expressly determined that he had
only been negligent:
Friedman made several significant false
statements in correspondence to Bar counsel during the disciplinary
process. Although we do not find that these misrepresentations
were knowing or intentional, we believe that Friedman, upon
reasonable investigation, should have known that the statements
were false at the time they were made.
(Emphasis added.)
It would have been self-contradictory for the committee
to make this finding at the sanctions stage if it had already
found, in its summary judgment ruling, that Friedman actually knew
that the checks were premature when he signed them. Had that been
the case, Friedman certainly would have known when he corresponded
with the bar that his statements concerning the Uyak II trust funds
were false. Yet the committee's sanctions decision found only that
Friedman "should have known." Similarly, had the committee earlier
found that Friedman signed checks that he actually knew were
premature, it would have been senseless for the committee to
suggest in its sanctions decision that the bar's inquiry concerning
the trust account payments should have prompted Friedman to
undertake a "reasonable investigation"before responding: he
already would have known. The sanctions decision, then, confirms
that after hearing Friedman's defense at the sanctions hearing, the
committee believed that he did not actually know that he had
written premature checks -- that he "just wouldn't have done that."
Yet despite its obvious acceptance of Friedman's defense,
the hearing committee never revisited or questioned the legal
underpinnings of its prior summary judgment decision. The only
logical explanation for this is that the committee still felt
constrained by its mistaken understanding of Triem and West --
cases that it continued to view as establishing a mandatory
presumption of intentional conduct.
The committee's continued reliance on this mandatory
presumption also suggests a plausible explanation for both its
lenient sanctions recommendation and its effort to rest that
recommendation on a strained distinction between the wrongfulness
of "borrowing"and permanently converting client funds. Believing
itself bound as a matter of law to presume that Friedman had acted
with an intent that the committee believed he had not actually had,
the committee may well have been strongly motivated to ameliorate
his situation by attempting to draw technical distinctions -- no
matter how implausible -- between these two forms of criminal
intent. Although the disciplinary board and the court have rightly
condemned these distinctions as legally untenable, the committee's
reliance on them is nonetheless telling, for it betrays the
committee's discomfort with the notion that the law conclusively
deemed Friedman's conduct "intentional,"even though he did not
actually know that his checks were premature.
If the committee had realized that it was not bound by a
mandatory presumption -- that it was free to determine Friedman's
actual intent as it would determine any other ordinary factual
matter -- it no doubt would have found that his conduct amounted to
negligent -- or perhaps even reckless -- professional misconduct.
I certainly do not suggest otherwise. But the foregoing
circumstances also establish that the committee would not have
found that he actually intended to "borrow"client funds. For it
makes no sense to suppose that the committee would find in one
breath that Friedman knew he was writing trust checks prematurely,
yet would conclude in the next that he deserved a break because he
only wanted to "borrow"his client's money. That conclusion would
have flown in the face of Friedman's own statements insisting that
he knew that "borrowing"trust funds was wrong and never would have
done it. Hence, if the committee believed that Friedman actually
intended to write premature checks, it would have had to conclude
that he lied in his pre-hearing correspondence and perjured himself
at the sanctions hearing.
In summary, then, the only plausible explanation for the
hearing committee's recommendation of leniency and for its
unequivocal finding that Friedman's pre-hearing correspondence did
not intentionally misrepresent the condition of his trust accounts
is that the committee did not believe that Friedman actually knew
he was "borrowing"client funds when he wrote the disputed checks;
it legally presumed that he knew. Given the committee's mistaken
reliance on this conclusive presumption, its finding of intentional
misconduct is factually and legally flawed.
C. The Disciplinary Board's Recommendation Incorporates the
Hearing Committee's Erroneous Finding of Intentional Conduct.
The disciplinary board's subsequent action did nothing to
correct the committee's mistaken reliance on a mandatory
presumption of intent. The board expressly adopted the hearing
committee's summary judgment findings, including its finding of
knowing and intentional conduct. The board's only point of
disagreement with the committee was with the committee's analysis
of the legal consequences of finding an intentional misapplication
of funds. In accepting the committee's findings on this point at
face value, the board mistook them to mean that the committee found
that Friedman actually knew that his trust payments were premature.
Acting on this interpretation, the board understandably rejected
the committee's recommendation for leniency as untenable.
D. The Court's Reliance on Independent Fact-finding
Compounds the Disciplinary Board's and Hearing Committee's Errors.
Today's opinion chooses to overlook the significance of
these procedural flaws; by so doing, it invokes the court's
independent fact-finding powers to cure a denial of due process. In
giving short shrift to the fundamentally flawed process below, the
court tacitly views Friedman's defense as too implausible to
warrant serious consideration. Yet this is a profoundly troubling
view. It ignores the hearing committee's unmistakable conclusion
that Friedman did present a credible defense. Even though the
hearing committee heard Friedman's defense in the procedural
context of the sanctions hearing, where the issue of intentional
conduct had been foreclosed by its earlier summary judgment ruling,
the committee concluded that Friedman might not have known that the
trust account checks were premature when he signed them. Having
seen and heard the testimony, the committee was far better
positioned to judge the issue of Friedman's intent than we are.
In my view, then, the committee's acceptance of
Friedman's defense strongly counsels restraint in the exercise of
our independent fact-finding powers. Sound precedent counsels
restraint, too. This court is certainly empowered to "review[] the
evidence adduced before the hearing committee independently while
giving deference to the findings of the board." Yet we can receive
no appropriate guidance from the board without a meaningful and
complete set of findings that reflect a correct understanding of
applicable law:
Though this court has the authority, if
not the obligation, to independently review the entire record in
disciplinary proceedings, findings of fact made by the Board are
nonetheless entitled to great weight. The deference owed to such
findings derives from the responsibility to conduct disciplinary
proceedings which this court has delegated to the Bar Association.
Where findings of fact entered by the Board are challenged on
appeal to this court, we therefore hold that the respondent
attorney bears the burden of proof in demonstrating that such
findings are erroneous. As a general rule, moreover, we ordinarily
will not disturb findings of fact made upon conflicting evidence,
or where such findings reflect the relative credibility of
witnesses.[]
Here, because Friedman's defense turns largely on
testimonial credibility and the hearing committee's factual
findings incorporate a mistaken understanding of applicable law --
one that indelibly colored its sanctions decision and tainted the
disciplinary board's ultimate recommendation -- I would find it
inappropriate to invoke our original fact-finding power without
first remanding to the bar for clarification.
By exercising original fact-finding power to reject
Friedman's defense without first clarifying precisely what the
hearing committee found and how it reached its findings, the court
today bypasses the very process that our rules establish as the
starting point for independent review; it thus leaves no room at
all for the guidance and deference that we have previously found
crucial in cases turning on testimonial credibility. In my view,
the supreme court must use its independent review power sparingly,
as a supplement to, not as a substitute for, the carefully
structured process of hearings and recommendations that is supposed
to precede, illuminate, and enable independent review.
III. CONCLUSION
Because I would decline to exercise independent fact-
finding power in these circumstances and would instead remand for
proper findings, I dissent from the court's opinion.
FOOTNOTES
Footnote 1:
(1) The December 13, 1990, check for $6,000 that paid
Friedman fees of $3,000 in UYAK II also included fees for the Bear
matter. Not until February or March 1991 were Bear settlement
proceeds deposited in the trust account or paid to the Bear client.
(2) In November 1990 Friedman signed a $14,600 trust account check
in part to pay himself fees in the Goeckel matter, but settlement
proceeds in Goeckel were not received before late December 1990.
(3) In late December 1990 Friedman signed a trust account check
for $8,000 to pay himself fees in the Whitt and Hamilton matters.
Friedman did not deposit the Whitt settlement funds or pay his
client any part of the Whitt settlement until mid-February 1991.
Friedman did not deposit the Hamilton settlement funds, make an
accounting to his client, or pay her any part of the Hamilton
settlement before late February. (4) In January and early February
1991 Friedman signed four trust account checks totaling $51,500
payable to himself; his books allocated them as payment for fees in
the Mathias matter, but Friedman did not deposit the Mathias
settlement funds until late February 1991. He also paid the
Mathias client $1,500 from the trust account about four weeks
before he deposited the Mathias settlement proceeds.
Footnote 2:
These provisions were part of the disciplinary rules, embodied
in the Code of Professional Responsibility, that applied when the
Friedman transactions took place. The Code has since been
superseded by the Alaska Rules of Professional Conduct, which
became effective July 15, 1993. See Alaska Supreme Court Order No.
1123 (April 14, 1993).
Footnote 3:
Appellate Rule 210(c), which requires submission of excerpts
of the appellate record to give this court the most relevant record
materials, applies to disciplinary proceedings. See Alaska Bar R.
25(g). The failure of both parties to provide excerpts has impeded
our consideration of this case.
Footnote 4:
In re Triem, 929 P.2d 634, 640 (Alaska 1996) (quoting In re
Frost, 863 P.2d 843, 844 (Alaska 1993)).
Footnote 5:
See id.
Footnote 6:
See id.
Footnote 7:
See In Re Wiederholt, 877 P.2d 765, 767 (Alaska 1994); Frost,
863 P.2d at 844-45.
Footnote 8:
See In re Mann, 853 P.2d 1115, 1116 (Alaska 1993).
Footnote 9:
American Bar Association, Standards for Imposing Lawyer
Sanctions (1991) [hereinafter ABA Standards].
Footnote 10:
See Frost, 863 P.2d at 844-45, 854.
Footnote 11:
See In re Buckalew, 731 P.2d 48, 51-56 (Alaska 1986).
Footnote 12:
See id. at 52.
Footnote 13:
Id.
Footnote 14:
See id.
Footnote 15:
DR 1-102(A) provides in part: "A lawyer shall not: . . . (4)
[e]ngage in conduct involving dishonesty, fraud, deceit, or
misrepresentation."
Footnote 16:
See In re West, 805 P.2d 351, 353-54 (Alaska 1991).
Footnote 17:
ABA Standards at 17. See also Mann, 853 P.2d at 1117-18.
Footnote 18:
West, 805 P.2d at 354 (quoting ABA Standards at 01:807
(1986)).
Footnote 19:
Triem, 929 P.2d at 648.
Footnote 20:
See In re Frost, 863 P.2d 843, 844 (Alaska 1993).
Footnote 21:
The following exchanges make this clear:
Q: Can you tell us why you didn't ask if the
money was in the trust account?
A: I -- it just never occurred to me to ask.
I always assumed that the money was there. I
wouldn't have written a check if the money
wasn't there.
Q: You assumed that the settlement money was
in the account? Or you assume that . . . .
A: Yeah.
Q: . . . . general money in the account or
other money in the account?
A: No. I assumed that the settlement money
was in the account.
Inquiry on this subject continued:
Q: When you signed the checks that we've
just been talking about, the . . . .
A: Bayer (ph), Geckle (ph) . . . .
Q: Hamilton . . . .
A: Hamilton, Witt.
Q: . . . . Witt, et cetera checks . . . .
A: Mathias (ph). Right.
Q: . . . . did you know they were being
drawn on your trust account?
A: Did I know that the checks were being
drawn on the trust account?
Q: Yes.
A: Yes, I did.
Q: Okay. Did you know that you were paying
yourself fees when the settlement proceeds had
not yet arrived?
A: No, I did not. I never . . . .
Q: You test -- I'm sorry?
A: I just -- I just wouldn't have done that.
The inquiry returned to the subject:
Q: So you felt that the -- if you felt that
the companies were good for the money, in
other words, that they would send a settlement
check for X amount of dollars in the Bayer
(ph) case, for example, and that that money
would hit your trust account and be available
for disbursements, can you tell us why your
clients weren't cut a check at the same time
that you were cut a check for your fees?
A: I don't think you've got my thinking down
here. I mean, I -- I -- I hear what you're
saying.
Q: Uh-huh [affirmative].
A: I guess, now -- now I understand what you
meant when you said, did you rely on the
companies. I wasn't relying on companies when
I cut -- when these checks were drawn. I
wasn't relying on anything when the checks
were drawn because I wasn't cognizant that the
check was drawn to that account, to that --
to, you know, to that client, and that the
check wasn't there. I just was not aware of
that at the time. If I had been aware of that
at the time, I wouldn't have cut the check or
I wouldn't have had -- I wouldn't -- the check
would not have been issued. I didn't need --
I -- I keep saying that and I'm sorry. I
don't mean to give that as a response, but it
-- it -- over and over, but I didn't need any
money to go from the trust account to the
general account at that time. That was not
the usual -- that was not the procedure that
we wrote checks before the settlement check
came in. That was not what we did. That was
not what we were supposed to do in the office.
That wasn't office policy.
. . . .
Q: And as an attorney . . . you were bound
by Disciplinary Rule [9-102] on the
proper handling of your trust account?
A: I don't know what the number of the rule
is. I know -- how -- I know that I
wasn't supposed to -- I'm not supposed to
do that. And I -- I knew I wasn't
supposed to do that, but I wasn't -- I
didn't know I was doing that it the time
it was happening.
Footnote 22:
DR 1-102(A) states in part: "A lawyer shall not . . . (5)
[e]ngage in conduct that is prejudicial to the administration of
justice."
Footnote 23:
See West, 805 P.2d at 352-53.
Footnote 24:
See In re Vollintine, 673 P.2d 755, 756-58 (Alaska 1983).
Footnote 25:
805 P.2d 351 (Alaska 1991).
Footnote 26:
See id. at 352-53.
Footnote 27:
Id. at 354 n.7.
Footnote 28:
673 P.2d 755 (Alaska 1983).
Footnote 29:
See id. at 756-58.
Footnote 30:
See e.g., Tedesco v. Mishkin, 629 F. Supp. 1474, 1483
(S.D.N.Y. 1986) (unauthorized, misleading, and inherently coercive
communications to class action members that frustrated court's
purpose); In re Riley, 691 P.2d 695, 700-01 (Ariz. 1984) (improper
ex parte comments to judge).
Footnote 31:
DR 9-102(A) states:
All funds of clients paid to a lawyer or law
firm, other than advances for costs and expenses, shall be
deposited in one or more identifiable insured depository accounts
maintained in the state in which the law office is situated and no
funds belonging to the lawyer or law firm shall be deposited
therein except as follows:
(1) Funds reasonably sufficient to pay
services charges may be deposited therein.
(2) Funds belonging in part to a client
and in part presently or potentially to the lawyer or law firm must
be deposited therein, but the portion belonging to the lawyer or
law firm may be withdrawn when due unless the right of the lawyer
or law firm to receive it is disputed by the client, in which event
the disputed portion shall not be withdrawn until the dispute is
finally resolved.
For purposes of this rule, "insured
depository accounts"shall mean government insured accounts at a
regulated financial institution on which withdrawals or transfers
can be made on demand, subject only to any notice period which the
institution is required to reserve by law or regulation.
Footnote 32:
Friedman also argues that the name of the account in which he
deposited the funds did not violate DR 9-102(A). But bar counsel
notes that it dismissed this charge and that the disciplinary board
did not base its sanction decision upon it. Therefore, it is not
an issue on appeal.
Footnote 33:
DR 1-102(A) states in part: "A lawyer shall not . . . (3)
[e]ngage in illegal conduct involving moral turpitude."
Footnote 34:
Because Friedman's conduct actually took place in California,
this is equivalent to a finding that if his conduct had taken place
in Alaska, it would have violated the statute.
Footnote 35:
AS 11.46.620(a).
Footnote 36:
See AS 11.46.620(d)(1).
Footnote 37:
See Moore v. State, 740 P.2d 742 (Alaska App. 1987). Bar
counsel cites Moore for the proposition that misapplication by a
fiduciary does not require intent to permanently deprive the owner.
But this argument fails to recognize that under Moore,
misapplication requires knowledge of the law itself.
Footnote 38:
This inquiry into mental state for the purposes of
misapplication of property differs from the inquiry into Friedman's
mental state regarding his fiduciary violations. Fiduciary
violations do not require subjective awareness of wrongdoing.
Footnote 39:
See 853 P.2d 1115, 1116-17 (Alaska 1993).
Footnote 40:
See id. at 1116.
Footnote 41:
See supra note 21.
Footnote 42:
The hearing committee also found that Friedman violated DR 6-
101(A)(3) by neglecting a legal matter entrusted to him. We find
it unnecessary here to decide whether this section applies to
intentional mishandling of client funds. Assuming it does apply,
intentionally mishandling trust funds in a legal matter -- the
conduct giving rise to a violation -- would also be a violation of
DR 1-102(A)(4). Finding a violation of DR 6-101(A)(3) would have
no bearing on the sanction and therefore has no independent
significance.
Footnote 43:
See supra Part III.B.1.
Footnote 44:
ABA Standards sec. 5.11 provides in relevant part:
Disbarment is generally appropriate when:
. . . .
(b) a lawyer engages in any other intentional
conduct involving dishonesty, fraud, deceit, or misrepresentation
that seriously adversely reflects on the lawyer's fitness to
practice.
Footnote 45:
See id.
Footnote 46:
See supra Part III.B.3.
Footnote 47:
ABA Standards sec. 4.11 states: "Disbarment is generally
appropriate when a lawyer knowingly converts client property and
causes injury or potential injury to a client."
Footnote 48:
ABA Standards sec. 4.12.
Footnote 49:
See ABA Standards sec. 4.12 commentary.
Footnote 50:
See AS 11.46.620(c), (d)(1).
Footnote 51:
ABA Standards at 5.
Footnote 52:
See In re Mann, 853 P.2d 1115, 1118 (Alaska 1993).
Footnote 53:
ABA Standards sec. 9.22 states:
Factors which may be considered in
aggravation. Aggravating factors include:
(a) prior disciplinary offenses;
(b) dishonest or selfish motive;
(c) a pattern of misconduct;
(d) multiple offenses;
(e) bad faith obstruction of the disciplinary
proceeding by intentionally failing to comply with rules or orders
of the disciplinary agency;
(f) submission of false evidence, false
statements, or other deceptive practices during the disciplinary
process;
(g) refusal to acknowledge wrongful nature of
conduct;
(h) vulnerability of victim;
(i) substantial experience in the practice of
law;
(j) indifference to making restitution.
Footnote 54:
See In re Triem, 929 P.2d 634, 640 (Alaska 1996).
Footnote 55:
See supra Part III.C.
Footnote 56:
ABA Standards sec. 9.32 states:
Factors which may be considered in mitigation.
Mitigating factors include:
(a) absence of a prior disciplinary record;
(b) absence of a dishonest or selfish motive;
(c) personal or emotional problems;
(d) timely good faith effort to make
restitution or to rectify consequences of misconduct;
(e) full and free disclosure to disciplinary
board or cooperative attitude toward proceedings;
(f) inexperience in the practice of law;
(g) character or reputation;
(h) physical or mental disability or
impairment;
(i) delay in disciplinary proceedings;
(j) interim rehabilitation;
(k) imposition of other penalties or
sanctions;
(l) remorse;
(m) remoteness of prior offenses.
Footnote 57:
In re Buckalew, 731 P.2d 48, 54 (Alaska 1986).
Footnote 58:
Id.
Footnote 59:
See Mann, 853 P.2d at 1116.
Footnote 60:
See id.
Footnote 61:
See id. at 1119.
Footnote 62:
805 P.2d 351 (Alaska 1991).
Footnote 63:
929 P.2d 634 (Alaska 1996).
Footnote 64:
See West, 805 P.2d at 352-53.
Footnote 65:
See id.
Footnote 66:
See id. at 354.
Footnote 67:
See id. at 360.
Footnote 68:
See 929 P.2d at 649.
Footnote 69:
See id. at 637.
Footnote 70:
See id. at 648-49.
Footnote 71:
See id.
Footnote 72:
He never attended college, was admitted to law school at
Golden Gate University at age thirty-five on the recommendation of
several Alaska lawyers, and graduated from the University of
California, Boalt Hall.
Footnote 73:
Admitted in California and Alaska, he has maintained a solo
practice in the San Francisco Bay Area. Testimony of numerous
character witnesses justified a conclusion that Friedman has a deep
commitment to helping people in need, possibly causing him to hire
unqualified personnel for his law office and to maintain a very
large caseload.
Friedman had little aptitude for the business side of
practice. He never had a bank account before he went to law
school.
Footnote 74:
Friedman was suffering emotionally and physically from a
divorce and a back injury.
Footnote 75:
We also accept the recommendation of the disciplinary board
that Friedman be assessed $3,213 in costs and attorney's fees
incurred by bar counsel in proceedings before the hearing committee
and the board.
FOOTNOTES (Justice Matthews' Dissent)
Footnote 1:
See ABA Standards sec. 4.11 and sec. 5.11, set out in the
opinion of
the court at Slip Op. at 25, footnotes 44 and 47.
Footnote 2:
853 P.2d 1115 (Alaska 1993).
Footnote 3:
See id. at 1116.
Footnote 4:
See id.
Footnote 5:
See id.
FOOTNOTES (Justice Bryner's Dissent)
Footnote 1:
DR 1-102(A)(4) (dishonest conduct).
Footnote 2:
DR 1-102(A)(3) (illegal conduct involving moral turpitude).
Footnote 3:
853 P.2d 1115 (Alaska 1993).
Footnote 4:
Specifically, AS 11.46.620(a) provides: "A person commits the
crime of misapplication of property if the person knowingly
misapplies property that has been entrusted to that person as a
fiduciary or that is property of the government or a financial
institution." Subsection (c) of the statute defines "misapply"as
meaning "to deal with or dispose of property contrary to (1) law;
(2) a judicial rule or order; or (3) the obligations of a fiduciary
relationship." When read together, these provisions require that,
to be guilty of misapplying property, a person must engage in
knowing conduct and must also know that the conduct is contrary to
law, a judicial rule or order, or a fiduciary duty. See Moore v.
State, 740 P.2d 472, 475 (Alaska App. 1987).
Footnote 5:
805 P.2d 351 (Alaska 1991).
[Fn. 5]
