Malpractice Findings Do Not Bind Disciplining Court

The Wisconsin Supreme Court imposed a 60 day suspension in a matter involving sloppy trust account administration and other misconduct:

Here, eight of the alleged counts of misconduct involved sloppy and careless trust account violations.  Accurate trust account records are important to ensure clients and the public have confidence in an attorney’s management of client funds.  We are mindful, however, that the referee found clients were not adversely affected by the trust account anomalies that occurred here.  Attorney McKloskey stipulated to this misconduct and argued, in mitigation, that he relied on an assistant to handle these matters. 

The remaining three counts of misconduct reflect serious errors of judgment, but again, there was no finding that Attorney McKloskey was dishonest or that he benefited financially from the misconduct he committed in connection with these complex and interrelated matters.  Therefore, we agree that a 60-day suspension is reasonable in this case.  The referee also recommended the court impose the costs of this litigation on Attorney McKloskey, and we accept that recommendation as well.

The court agreed with the conclusion of the referee that certain findings in a related legal malpractice action (finding no attorney-client relationship with a putative client) were not entitled to preclusive effect in the bar discipline case:

In proceedings before the referee, Attorney McKloskey advanced a number of affirmative defenses to the charges of misconduct relating to his handling of these matters.  He noted that in the civil malpractice action he was found to have represented the company, TJC, not D.C.  So, in proceedings before the referee, he argued that issue preclusion should apply, and he took the position that he did not represent D.C. in the Westerfeld litigation. 

The referee was not persuaded by these arguments.  Wisconsin courts hold that even when there is no express attorney-client relationship, such a relationship may be implied under the circumstances of a particular case, depending on the nature of the work performed and the circumstances under which client confidences may have been divulged. 

 As the referee noted, the range of disciplinary charges filed by the OLR was far broader in scope than the malpractice claim.  The referee also noted that Attorney McKloskey had represented D.C. on a number of related matters and had communicated directly with him regarding these matters, including consulting him about a $100,000 settlement offer in the Westerfeld matter.

In other words, D.C. reasonably relied on Attorney McKloskey to represent his interests in the Westerfeld matter.  Attorney McKloskey also knew about the parties’ divorce and knew that it was acrimonious.  The referee thus found that “[D.C.] was a client” and noted that Attorney McKloskey’s testimony in his own defense “left much to be desired.”  The referee concluded that “[Attorney] McKloskey should not have blindly accepted oral check writing instructions from [T.C.].” 

The attorney had represented a closely-held company and was found to have ceased to communicate with one of the two principals of the business during the course of complex litigation and the eventual resolution of the matter. (Mike Frisch)