The Requisite Moral Change

The Minnesota Supreme Court has reinstated a suspended attorney with probationary conditions notwithstanding the concerns of the OLR

The Director of the Office of Lawyers Professional Responsibility challenges a number of the panel’s findings and disagrees with the panel’s recommendation.

The court summarized the misconduct

Severson was admitted to practice law in Minnesota in 1975. On February 18, 2015, we indefinitely suspended Severson, with no right to petition for reinstatement for a minimum of 1 year, for improper business dealings with a client and misrepresentation. In re Severson, 860 N.W.2d 658, 662–63, 674–75 (Minn. 2015). The misconduct for which Severson was disciplined centered on his dealings with D.S., a young woman whose parents had died when she was an infant and who lived with Severson’s family as a teenager. Id. at 663. D.S. was the beneficiary of insurance proceeds following her parents’ deaths, and her inheritance was placed in a conservatorship. Id. After her eighteenth birthday in April 1996, D.S. received approximately $500,000, the funds that had been in the conservatorship. Id.

Severson offered to invest the $500,000 that D.S. had received from the conservatorship, and in June 1996, the two entered into an investment agreement. Id. At that time, an attorney-client relationship existed between D.S. and Severson. Id. at 667.

The investment agreement created a conflict of interest, and Severson’s failure to obtain the consent of D.S. was a violation of Minn. R. Prof. Conduct. 1.7(b) (1996). Severson, 860 N.W.2d at 668. Severson also violated Minn. R. Prof. Conduct. 1.8(a) (1996), when he entered into the investment agreement with D.S. Severson, 860 N.W.2d at 668. The terms of the investment agreement were unfair and unreasonable because they did not provide “security for D.S.’s investment, limit the types of investments Severson could make, or provide for a penalty, or the recovery of her funds if Severson did not comply with the agreement.” Id. Severson also “did not adequately explain the transaction to D.S. or advise her to seek independent counsel.” Id. at 672.

In 2007, D.S. asked Severson to return the $500,000. Id. at 664. Severson did not repay D.S., and by 2008, Severson “was in serious financial trouble.” Id. In 2007, Severson acquired an equine facility that he later sold on a contract for deed. Id. The purchasers defaulted on the contract for deed and Severson then assigned his seller’s interest in the facility to D.S. as security for what he owed her “and had D.S. sign a $250,000 mortgage regarding their interest in the equine center.” Id. Severson once again violated Minn. R. Prof. Conduct 1.7(a)(2), 1.7(b), and 1.8(a), when he assigned his seller’s interest to D.S. Severson, 860 N.W.2d at 665, 666 n.5. He also acted dishonestly, in violation of Minn. R. Prof. Conduct 8.4(c) (2008), by having D.S. assign and mortgage her interest in the equine center to his creditors without telling D.S. that his financial insecurity necessitated the assignments and that her funds could be at risk. Severson, 860 N.W.2d at 669.

D.S. eventually hired an attorney to help her recover the $500,000 principal. Id. at 664. She sued Severson, and the parties reached a settlement in December 2010. Id. After paying her attorney fees, D.S. recovered just $300,000 of the original $500,000 that she had given to Severson to invest. Id.

Severson made misrepresentations to D.S. during the course of their legal dispute and to the Director during the disciplinary investigation, in violation of Minn. R. Prof. Conduct 8.1(a)–(b), 8.4(c)–(d). Severson, 860 N.W.2d at 664–65, 669, 672. Severson gave the attorney for D.S. misleading invoices for purported past legal services he had provided to D.S., in an attempt to reduce the amount he owed her. Id. at 664–65, 672. Severson also made a number of misrepresentations to the Director regarding where the funds of D.S. were invested and the legitimacy of his invoices for legal services. Id.

As Sam Cooke might sing, a change is gonna come

The requisite moral change “must be such that if the petitioner were reinstated, ‘clients could submit their most intimate and important affairs to him with complete confidence in both his competence and fidelity.’ ” Kadrie, 602 N.W.2d at 870 (quoting In re Herman, 197 N.W.2d 241, 244 (Minn. 1972)). In general, “to prove moral change a lawyer must show remorse and acceptance of responsibility for the misconduct, a change in the lawyer’s conduct and state of mind that corrects the underlying misconduct that led to the suspension, and a renewed commitment to the ethical practice of law.” Mose, 843 N.W.2d at 575. The evidence of this moral change “ ‘must come not only from an observed record of appropriate conduct, but from the petitioner’s own state of mind and his values.’ ” Id. (quoting In re Swanson, 405 N.W.2d 892, 893 (Minn. 1987)).

The court found that he had demonstrated remorse (a finding OLR challenged) and had accepted responsibility for the misconduct

With respect to this factor, the panel relied primarily on the testimony of Severson’s therapist, K.A., and her notes from her therapy sessions with Severson. The panel found that while Severson “continued to be defensive and to deflect responsibility” in his initial sessions with K.A., “after working with her regularly for several months, he began to change.” Although Severson’s progress has been inconsistent, K.A. believed that he was “sincere in his efforts to understand what he did wrong and sincere in his desire to accept responsibility.”

In sum, based on our independent review of the record, we hold that the panel’s findings and conclusions that Severson has proven that he has undergone the requisite moral change are not clearly erroneous. Severson met his burden of showing by clear and convincing evidence that he satisfied each of the requirements for reinstatement to the practice of law. We reinstate Severson, order him to complete payment of his annual registration fee within 30 days of the filing of this decision, and place him on probation for a period of 2 years, subject to certain conditions…

The conditions include mental health treatment, practice supervision and denial of access to entrusted funds with safeguards. (Mike Frisch)