Iowa Supreme Court Finds Sufficient “Remedial Measures” In The Face of Unknowing Submission Of Forged Documents

The Iowa Supreme Court ordered a suspension of no less than 60 days despite overturning the most serious misconduct findings against the attorney.

The [grievance] commission found Crotty violated several ethical rules while representing the administrator of the estate when he failed to disclose to the court that certain documents filed with the court in the probate proceeding bore forged signatures and by charging and receiving excessive and unauthorized attorney fees. The commission found Crotty violated ethical rules in the worker’s compensation matter by practicing law after his license had been suspended for failing to comply with continuing legal education requirements. The commission recommended Crotty’s license to practice law in Iowa be suspended for at least three months and that as a condition of any reinstatement he be required to show completion of at least eight hours of continuing legal education on probate law.

The underlying matter involved a lien against property granted to the client’s stepmother in her divorce from the client’s father. The lien was not satisfied when the property sold.

The attorney looked to the estate to satisfy the claim under a contingent fee arrangement.

[Client] Leonard told Crotty that two of his siblings—Richard Jr. and Ronald—were not supportive of the estate’s claim against Nancy and wanted nothing to do with it. Relying on Leonard’s representation, Crotty prepared renunciation documents for signature by Richard Jr. and Ronald and gave the documents to Leonard on September 19. Leonard left Crotty’s office with the documents and brought them back bearing signatures later the same day. Crotty’s secretary thought it unusual that Leonard could have secured his brothers’ signatures in less than an hour. Yet when Crotty asked Leonard directly about the authenticity of the signatures, Leonard attested that his brothers had signed the renunciations. Relying on Leonard’s affirmation of the authenticity of his brothers’ signatures, Crotty filed the renunciations with the court.

[Stepmother] Nancy responded quickly through counsel to Crotty’s demand letter and agreed to pay the sum of $34,600 in exchange for satisfaction of the judgment lien. On September 24, Crotty presented Leonard’s application to a district court judge for approval of the estate’s settlement of the claim against Nancy and Crotty’s claim for attorney fees. The application briefly described the factual and legal bases for the estate’s claim against Nancy and requested the court’s approval of a settlement in the amount of $34,600 and Crotty’s attorney fee. Notably, the application did not disclose to the court the gross amount of the attorney fee claimed by Crotty in connection with the proposed settlement or a formula for its computation; nor did the application itemize the amount of time spent or the work performed by Crotty in achieving the settlement for the estate. The district court signed an order prepared and presented by Crotty, finding the settlement was “reasonable and in the best interests of the estate,” and further finding “[Crotty’s] fees hereunder are fair and reasonable and were necessary.”

Crotty prepared and Leonard signed a release which was provided to Nancy in consideration for her payment of $34,600 to the estate. Crotty retained the sum of $11,533.33 from the settlement proceeds as his fee. He distributed the remainder of the proceeds to Leonard for distribution to the heirs.

But

Leonard made uneven initial distributions of the net settlement proceeds to his brothers: $9033.33 to Michael, $1500 to Richard Jr., and $1500 to Ronald. Richard Jr. and Ronald found it peculiar that the distributions to them were in cash and decided to investigate the terms of the settlement. In the course of their investigation, Richard Jr. and Ronald revealed to Crotty that they had not signed the renunciations. Upon learning this, Crotty sent a letter to Leonard on October 23 revealing Crotty’s discovery of the fact that the signatures on the renunciations were forged and demanding that he return the settlement proceeds.

Although the record does not disclose the substance of Leonard’s response to Crotty’s letter of October 23, Crotty concedes that, when confronted, Leonard admitted he forged his brothers’ signatures on the renunciations. Armed with Leonard’s admission of the forgeries, Crotty prepared and Leonard signed an application for the appointment of a successor administrator. The application filed on November 14 alleged that Leonard’s actions as administrator had “resulted in less than amicable relationships with the remaining heirs” and that the best interests of the estate would be served by the appointment of his brother, Ronald, as administrator.

The application for appointment of a successor did not inform the court that the signatures on the two renunciations previously filed in the case were forged, nor did it reveal that Leonard had made uneven distributions of the settlement proceeds to the heirs. However, Crotty testified that he revealed the forgeries in conversations with two district court judges before the order appointing Ronald as the successor administrator was issued on November 14. Both of those judges testified before the grievance commission. One of them did not recall having such a conversation with Crotty; the other judge—the one who signed the order appointing Ronald as successor administrator—recalled having a conversation with Crotty about the fact that the renunciations bore forged signatures but did not recall discussing other measures Crotty might or should take to memorialize the forgeries in the court file. 

The court rejected some of the charges

We conclude the Board failed to prove Crotty either counseled Leonard to forge the signatures of his brothers or knowingly assisted him in perpetrating a fraud on the court. We credit Crotty’s testimony that he was unaware of the forgeries when he filed the renunciations with the court. We also are convinced that Crotty verbally revealed the forgeries to the court when he presented the application and order for appointment of a successor administrator. Although we believe it would have been a better practice to further disclose the forgeries in a motion to withdraw the renunciations filed in the probate proceeding, we find the Board failed to meet its burden to prove a violation of rule 32:1.2(d).

And the measures taken after learning of the forgeries satisfied the “reasonable remedial measure” obligation

Although, as we have already noted, it would have been better if Crotty had disclosed the forgeries in a writing filed with the court or specifically sought direction from the court as to any additional measures he should take under the circumstances, we cannot say on this record that his verbal disclosure of the forgeries to the court was an unreasonable measure under the circumstances presented here. Accordingly, we find no violation of rule 32:3.3(a)(3)…

Although he could have taken more aggressive remedial measures, we find Crotty’s failure to do so was not motivated by a purpose to deceive or defraud the court or the decedent’s heirs, nor was it the result of an intentional misrepresentation. Crotty explained that he chose to disclose the forgeries in a conversation with the court rather than in a motion or application because he was fearful of Leonard’s reaction. While this explanation might support a finding that Crotty was lacking in courage to face a client’s wrath if the forgery were revealed to the court in writing, we are not persuaded that the Board proved Crotty’s conduct in this context was of a type prohibited under rule 32:8.4(c).

He did violate rules governing fees and practiced after suspension in an unrelated matter.

Sanction

In 1980, Crotty was found in contempt and fined $500 for practicing law in Iowa while holding a certificate exempting him from continuing education requirements. Second, Crotty was an experienced lawyer on the verge of retirement at the time he committed the violations discussed above. We view his substantial experience in the practice of law as an aggravating factor. Id.

We find one mitigating factor in this case as well. Crotty forthrightly admitted that he performed legal services for Freeman after his license was suspended. We consider his recognition of some wrongdoing as a mitigating circumstance affecting our determination of the appropriate sanction.

After consideration of the record, relevant precedent, and aggravating and mitigating factors, we conclude a suspension of sixty days is appropriate. We conclude Crotty’s misconduct in taking unauthorized fees in the Cleaver estate is similar to the conduct in Evans and Arzberger in which suspensions of thirty days were imposed. A slightly longer suspension of sixty days is warranted in this case, however. Crotty continued to perform legal services in the Freeman matter for several days after his license was suspended and this is the second time he engaged in the practice of law in Iowa when he was not authorized to do so. Additionally, we find troubling Crotty’s use of an improper small-claims action to coerce a client into paying a fee that Crotty knew was not due and could only be obtained through the auspices of the probate court.

(Mike Frisch)