Unreasonable Reliance

The Ohio Supreme Court has imposed a stayed one year suspension of an attorney who disbursed trust funds in mistaken reliance on his client’s representation. 

The client was in contempt of an order to pay spousal support

Judge Campbell again found [client] Bittner in contempt of court for failure to pay spousal support and ordered him to immediately serve 30 days in jail. The court offered Bittner the opportunity to purge his contempt and secure his release from jail by paying his $58,242.93 spousal-support arrearage in full.

Then

After the hearing, Bittner told Owens that his current wife, Yulia Nedelko, would wire funds into Owens’s client trust account to pay the arrearage and obtain his release. Owens went to his bank, where he obtained a counter check for $58,242.93 drawn on his client trust account. At that time, his client trust account contained $79,070.03, approximately $74,000 of which he held on behalf of 19 clients—but none of those funds belonged to Bittner. While Owens was at the bank, he obtained a “run sheet” from the teller, which showed that no money had been wired into the account on Bittner’s behalf since the hearing that day. Thereafter, Owens presented the counter check to the Delaware County Child Support Enforcement Agency (“CSEA”) and received a receipt, which he submitted to the common pleas court to secure Bittner’s release from jail.

For unknown reasons, Nedelko did not transfer any funds into Owens’s client trust account on Friday, July 29, 2016. Owens made no effort to determine whether the funds had been wired into the account on July 30 or 31, 2016. On Monday, August 1, Owens spoke with Bittner and learned that the funds had not been wired. But Owens took no action either to protect the client funds held in his client trust account or to disclose Bittner’s nonpayment to the court. That same day, Nedelko wrote a $58,242.93 check payable to Owens and overnighted it to him.

 Owens received Nedelko’s check on August 2, signed it over to Child Support Payment Central (“CSPC”), and issued a stop-payment order on the counter check he had previously issued to CSEA from his client trust account. He then took Nedelko’s check to CSEA to replace that check. Although he explained that the counter check might not clear due to its amount, he failed to inform anyone at the agency that he had placed a stop-payment order on it. CSEA’s director, Joyce Bowens, told Owens that CSPC would not accept the replacement check because it was not made payable directly to the agency.

As to misconduct

…the panel heard and considered conflicting evidence from several witnesses, including Owens. At the hearing and in his objections, Owens insisted that he had every reason to believe that Nedelko had wired $58,242.93 to him before he delivered his client-trust-account check to CSEA. Based on that belief, he contends that he did not jeopardize client funds or make a misrepresentation to CSEA and the court when he issued that check to satisfy Bittner’s spousal-support obligation and secure Bittner’s release. But the record demonstrates that Owens’s beliefs were not reasonable.

It is undisputed that Owens had a duty to protect the client funds entrusted to his care. See Prof.Cond.R. 1.15. But Owens himself testified that after he obtained the counter check from his bank and verified that Bittner’s funds had not been wired into his client trust account, he went directly to the CSEA office— less than five minutes away—and handed over a $58,242.93 check drawn on his client trust account. Although he testified that he relied on his wealthy, long-term client’s assurances that a wire transfer was imminent, that client had been jailed for contempt based on his failure to pay any spousal support for nearly four years. Owens also testified that he relied on a Delaware County CSEA employee’s representation that CSPC (a separate but related agency located in Franklin County) would not process his check until Wednesday, August 3, at the earliest. However, that employee testified only that the earliest the check would be mailed from CSEA to CSPC was Monday, August 1, not that CSPC would not process it until Wednesday or later.

Misrepresentation

Once he learned that the facts were not as he originally believed, he had a duty to step forward and correct his prior representations to avoid engaging in misrepresentation by omission…

Instead of taking reasonable action to correct his misrepresentation, however, Owens waited nearly six weeks for Bittner, the contemnor and primary beneficiary of Owens’s misrepresentation, to satisfy the prerequisite for his release from jail by purging his contempt. That delay further postponed Delores’s spousal support payment and also interfered with the court’s ability to enforce its judgments.

Two justices dissented and would suspend for six months with conditions. (Mike Frisch)