The Joy Of Ignorance

A District of Columbia Ad Hoc Hearing Committee got the message from a recent Court of Appeals decision and – by majority vote – held that an attorney’s misappropriation of an advanced fee was “negligent” because of the attorney’s ignorance of his ethical obligations with respect to entrusted funds.

The Court of Appeals’ recent decision in In re Haar…(“Haar III”) further supports the majority’s finding that Respondent acted negligently. Haar III involved an immigration attorney who, like Respondent, did not deposit his client’s flat fee in a trust account due to a lack of a full understanding of the Mance decision or the application of Rule 1.15(c). Haar III at at 18-19. Similarly, the respondent in Haar III “did not take active steps to stay updated on the field of legal ethics,” a lapse the Court called “lamentable but not automatically render[ing] him ‘consciously indifferent’ with respect to any violation of the Rules of Professional Conduct, regardless of context.” Id. at 21 (emphasis in original). The Court further noted that the respondent’s immigration matters did not typically involve large fees and were resolved quickly, “and thus his cases were not pending for very long. ” Id. Such client turnover “may have [given] little reason to consider Mance‘s application to unearned fees.” 

Thus, a majority of the Hearing Committee proposes a suspension of eight months with restitution.

Committee Chair Daniel C. Schwartz dissented and would find the misappropriation at least reckless requiring disbarment.

He urges the Court of Appeals to reconsider its en banc Addams decision, laments the disparate impact of the Rule on solo and small firm attorneys and notes the flexibility shown by recent negotiated discipline cases imposing three-year consent suspensions with fitness.

My commentary on Haar is linked here.

The Mance decision – designed to protect the legitimate interests of all clients who entrust advanced, unearned fees to a D.C. attorney – was issued in 2009.

We agree with Bar Counsel, that for purposes of Rule 1.15(d), money paid by a client as a flat fee for legal services remains the client’s property, and counsel may not treat any portion of the money otherwise until it is earned, unless the client has agreed otherwise. As we announce this interpretation of the rule for the first time in this case, however, we apply it prospectively, and we adopt the Board’s recommendation that respondent receive a public censure for commingling funds.

Thirteen years later, ignorance of this core obligation remains a viable basis for a reduced sanction. (Mike Frisch)