Fiduciary Breach Charges Rejected In Illinois

The Illinois Supreme Court has suspended an attorney for three months for his neglect of an estate matter.

The court does not often issue full opinions in disciplinary matters; the vast majority of the court’s actions are orders.

The court rejected a number of arguments pressed by the Administrator and in particular criticized arguments of misconduct based on fiduciary duties outside the practice of law

 Despite this court’s order, the Administrator continues to seek discipline  based on respondent’s conduct as trustee and executor without basing the charge  on a specific alleged violation of a Rule of Professional Conduct. The  Administrator’s brief is replete with argument based on the legal theory of  breach of fiduciary duty rather than specific disciplinary rules. In keeping with our March 14, 2014, order, we do  not address this issue.

The court also rejected dishonesty charges

…there is no evidence that respondent intended to deceive. To the  contrary, the evidence establishes that respondent provided what he believed to  be truthful information to Boers. The first letter, dated April 18, 2001, set  forth respondent’s understanding of the arrangement between Boers and Hannah,  including that she would receive “interest” on her investment. Respondent had no  independent knowledge of whether the monthly payments to Boers were or were not  actually interest. Hannah sent to respondent the funds remitted to Boers, and  the cover letters to Boers stated exactly what Hannah told respondent to write  to her. The subsequent cover letters merely followed a form repeating the  message that respondent received from Hannah: the checks represented “interest.”  There is no clear and convincing evidence that respondent made a statement that  he knew was false.

It was the Administrator’s burden to prove by clear and convincing  evidence that respondent’s statements in his cover letters to Boers were false.  However, the Administrator presented no evidence whatsoever to establish what  was the nature of the payments. After carefully reviewing the record, we hold  that the Hearing Board’s finding of dishonesty in violation of Rule 8.4(a)(4)  was against the manifest weight of the evidence. We conclude that respondent did  not violate Rule 8.4(a)(4) as alleged in count VI.

That left only neglect and commingling

Regarding the neglect of Sloan’s estate, this court has repeatedly  observed that neglect in the performance of an attorney’s duties to a client can  be sufficient to warrant discipline. Where a corrupt motive and moral turpitude  are not clearly shown, suspension is a proper punishment.  Regarding the finding of commingling, we recognize  that respondent maintained a client trust account. However, he used the account  as he would any other business account, commingling his personal funds with  client funds. This practice violated respondent’s professional duty to maintain  client funds in a separate account. This court has repeatedly stated that  commingling will not be countenanced.  Commingling is a ground for suspension, as is misrepresentation (citations omitted)

The precedent that the court relies upon in dismissing the fiduciary breach allegations is linked here. I think that the dissent in the case makes the better argument in favor of finding that fiduciary violations are sanctionable under the court’s ethics rules. (Mike Frisch)