Magic Words Not Uttered

The Minnesota Supreme Court has denied reinstatement to a petitioner who had been indefinitely suspended in 2018.

Klotz bears the burden of proof to prove by clear and convincing evidence that he meets the requirements for reinstatement. Klotz minimized his misconduct and failed to accept responsibility for the misconduct. Even though Klotz’s witnesses provided positive testimony, the panel found that their testimony was not enough to outweigh his own
testimony. The panel made many findings about whether Klotz changed his conduct and state of mind that led to the underlying misconduct; most critically, the panel found that Klotz’s testimony was not credible. Notably, the panel determined that Klotz has not demonstrated a renewed commitment to the ethical practice of law, and Klotz does not challenge those findings.

Based on our independent review of the record, we conclude that Klotz did not meet his heavy burden of proving, by clear and convincing evidence, that he has undergone the requisite moral change. Accordingly, we deny his petition for reinstatement.

Justice Anderson dissented

The Director contends that Klotz should not be reinstated because he did not show by clear and convincing evidence that he accepted responsibility for his actions. The panel found that Klotz did not accept responsibility because Klotz did not disclose the full details of his misconduct to several of his witnesses until shortly before the reinstatement hearing. This finding is clearly erroneous. Klotz shared the details of the misconduct with all but one of his witnesses well in advance of the reinstatement hearing. Moreover, every witness, including Klotz, testified that Klotz took sole responsibility for his actions and did not blame anyone else. Accordingly, I would conclude that the panel inappropriately relied on this fact in determining that Klotz failed to accept responsibility for his actions.

The Director also argues that Klotz failed to come to terms with the impact of the wrongfulness of his misconduct because he minimized his conduct toward the Director, calling his actions a “mistake,” and failing to use the word “misappropriation” to describe his misconduct. The panel found that Klotz’s testimony showed that he minimized his misconduct, in part based on these findings. This conclusion, too, however, also rested on partially erroneous findings.

First, the panel found that Klotz had excused his conduct by saying it was not as “nefarious” as it seemed. There is no support in the record that Klotz made that statement. Second, the panel focused on Klotz’s characterization of his misconduct as an “accounting mistake.” In doing so, the panel improperly considered Klotz’s previous thoughts in finding that he minimized his misconduct. We have held that the proper inquiry into remorse consists of looking at the petitioner’s “mental state and values” at the time of the reinstatement hearing. In re Dedefo, 781 N.W.2d 1, 9 (Minn. 2010). Klotz did at times call his misconduct an “accounting mistake,” but he only did so when referring to how he viewed his misconduct at the time he committed it. Accordingly, this testimony should not bear on the panel’s findings regarding Klotz’s mental state at the time of the hearing.

The court brushes aside the panel’s findings, explaining that even if Klotz did not use the phrase “accounting mistake,” Klotz still minimized his misconduct by calling it a “mistake.” I disagree. Black’s Law defines “mistake” as “[a]n error, misconception, or misunderstanding; an erroneous belief.” Mistake, Black’s Law Dictionary (11th ed. 2019). Klotz’s misconduct was certainly the result of an error in judgment. But the word “mistake” does not refer only to unintentional actions. I concede that his conduct was not merely a mistake and if Klotz had exclusively referred to his actions as mistakes, I would consider it a greater cause for concern. But that is not what happened here. While testifying, Klotz repeatedly used the word “misconduct” in discussing the reasons for his suspension. But he also called his behavior “wrong,” admitted that he “lied,” and transparently laid out the actions that led to his misconduct and subsequent suspension. The panel’s determination and the court’s conclusion that Klotz minimized his misconduct and was not remorseful does not take into consideration the entire record. I conclude that the “overwhelming evidence” from the hearing shows that Klotz demonstrated, by clear and convincing evidence, that he accepted responsibility and expressed remorse for his misconduct. See Trombley, 947 N.W.2d at 245.

Moral change

We suspended Klotz for misappropriating client funds, dishonesty toward the Director, creating a false and misleading document, and neglecting and lying to clients. Consequently, we must decide whether we are confident Klotz will not replicate that misconduct. In making this determination, we must keep in mind any conditions we impose on Klotz’s practice of law. Klotz must demonstrate moral change when it comes to his misconduct that involved dishonesty or “moral turpitude.” See Tigue, 960 N.W.2d at 715–16 (Thissen, J., dissenting). His dishonesty toward the Director, creation of a false and misleading document, and lies to clients all are dishonest acts. And, as demonstrated above, he has shown moral change when it comes to these instances of misconduct.

Justice Thissen joined the dissent. (Mike Frisch)