A Minor Transgression With Escrow Funds

An unpublished decision of the California State Bar Court Review Department

Lee Willis Harwell, Jr., a respected attorney with over 30 years’ experience without discipline, appeals a hearing judge’s decision recommending he receive six months’ actual suspension for a grossly negligent misappropriation amounting to moral turpitude. (Bus. & Prof. Code,1 § 6106.) Harwell concedes he failed to maintain $2,521.41 in entrusted funds (Rules Prof. Conduct, rule 4-100(A)), but challenges the moral turpitude finding and asserts public discipline is unwarranted. The Office of the Chief Trial Counsel of the State Bar (OCTC) does not appeal.

We review the record independently (Cal. Rules of Court, rule 9.12), and agree largely with the hearing judge’s factual findings; however, we conclude they do not support gross negligence. In a set of unusual factual circumstances involving a client’s failure to cash a check for nearly four years, Harwell miscalculated the minimum balance he was required to keep in his client trust account (CTA), and hence, failed to maintain the necessary amount. For this negligent failure to maintain entrusted funds, we find him culpable under rule 4-100(A) only.

After considering the standards and decisional law, the presence of significant mitigation, and the absence of aggravation, we conclude discipline is unnecessary to protect the public, the courts, and the legal profession. An admonition is the appropriate disposition.

The attorney was retained to pursue debt collection actions. After he had collected one debt, deducted his fee and given the client a check, he learned that the client had earlier been enjoined from debt collection.

The attorney terminated representation in the remaining cases and felt he faced a “dilemma” on the collected one.

The client never cashed the check but

Nearly two years after he issued check number 1296 to [former client] Tucker, Harwell became aware of extra funds in his CTA. He reviewed his CTA statements for the previous several months and accounted for all funds belonging to current clients. He also confirmed that each check issued over the past year had been cashed. As he could not locate any discrepancy, he believed the funds were excess fees and withdrew them in May 2010. Thereafter, his CTA reflected a balance below $2,521.41 (the amount of check number 1296) on several occasions. At trial, Harwell credibly testified that he balanced his CTA every month but somehow lost track of Tucker’s check and missed the fact that it had not been negotiated.

In February 2012, more than three and a half years after Harwell issued check number 1296 and a year and a half after he withdrew what he believed to be excess funds, Tucker contacted him to request a replacement check. Tucker revealed that the check was uncashed and outdated. Harwell did not trust Tucker, given his earlier deceit in concealing the injunction. Moreover, Harwell believed that even if Tucker had not cashed the check, Harwell was equitably entitled to the $2,521.41 for his unpaid work on the injunction-barred cases. He responded skeptically, expressing surprise that Tucker had waited years to cash the check and suggesting the $2,521.41 count “as a set off” for his more than $12,000-worth of “time uselessly spent” on the enjoined cases due to Tucker’s dishonesty.

Tucker wrote back, claiming he had tried to cash Harwell’s check on several occasions, but was unable to do so because the CTA lacked sufficient funds. Harwell knew this assertion was false, as his CTA balance remained above $2,521.41 until May 2010, nearly two years after he issued the check. Since he doubted Tucker’s story and believed he had a valid lien in any case, Harwell did not respond further nor did he redeposit any monies in his CTA.

Eventually, Tucker complained to the State Bar. In January and late-April of 2013, the Bar sent Harwell two investigative letters. He responded promptly to each, explaining the events summarized above. He also furnished voluminous documentation supporting his account of the events, including deposit slips verifying that he returned the entire amount of the Bograns’ settlement ($3,448.50) to his CTA on May 1, 2013. In June 2013, per the State Bar’s advice, Harwell paid the $3,448.50 to the Bograns. 

The Review Board concludes that a negligent mistake does not involve moral turpitude. (Mike Frisch)