Choice Of Law Concerns Do Not Prevent Disbarment

Disbarment has been imposed by the District of Columbia Court of Appeals for intentional misappropriation

Disciplinary counsel charged respondent Joseph Owens with numerous ethical violations including misappropriation of client funds. The case involves a somewhat complicated choice-of-law question that we detail below, but it is not terribly relevant to the bottom-line dispute about whether Owens committed intentional misappropriation. Both the Hearing Committee and the Board on Professional Responsibility concluded that Owens had intentionally misappropriated client funds no matter which jurisdiction’s rules of professional conduct applied to Owens’s misconduct. Consistent with the usual sanction for intentional misappropriation, both the Committee and the Board recommend that we disbar Owens. Owens objects to that recommendation in numerous respects, principally arguing that he did not commit intentional misappropriation.

We agree that Owens committed intentional misappropriation no matter which jurisdiction’s rules apply—with Virginia’s and Maryland’s as the only viable candidates—and disbar Owens from the practice of law.

The representation involved a security clearance matter; the client discharged Respondent before the agreed services were completed, sought an accounting and sued for return of the fee

At the trial, Owens testified that he had entered into a flat fee agreement with Joselson and that he was entitled to the full $4,000 under the early termination clause because he had worked at least sixteen hours on the case, though he conceded he had not kept any corresponding time records. Applying the termination provision, the Maryland court entered a judgment in favor of [client] Joselson for an additional refund of $1,750, permitting Owens to retain just $250 of the initial fee for what the court assessed to be one hour of work.

Respondent had moved to dismiss the disciplinary charges

Disciplinary counsel conceded that it was “somewhat unclear” which jurisdiction’s rules apply. Owens practiced primarily in Maryland, but the DOHA proceeding that he was retained to represent Joselson in was expected to take place in the District or Virginia so that the rules of any of the three could plausibly apply. Any imprecision in that charging decision was immaterial, in Disciplinary Counsel’s view, and was no basis to dismiss the charges against Owens. If the Committee determined that Virginia or Maryland’s rules applied instead of the District’s, the appropriate remedy was to apply the correct jurisdiction’s rules in its adjudication of the case, not to dismiss it entirely. And the rules of all three jurisdictions are virtually identical and Owens had violated the substance of each set of rules in identical respects. So, in Disciplinary Counsel’s view, Owens had received clear notice of the charges against him regardless of which jurisdiction’s rules the Board ultimately decided to apply.

The court on dismissal

Owens first argues that we should not pursue this case further because he practices principally in Maryland and, despite Joselson lodging a complaint with the Maryland Attorney Grievance Commission, Maryland authorities did not charge Owens with any misconduct. So at least as a prudential matter, Owens argues that we should defer to Maryland’s decision not to pursue disciplinary charges against him and do likewise ourselves. We disagree.

This court and its disciplinary arm are charged with policing the District’s bar, regardless of what choices neighboring jurisdictions have made on the matter. Our rules of professional conduct explicitly subject any lawyer “admitted to practice in [the District] . . . to the disciplinary authority of [the District], regardless of where the lawyer’s conduct occurs.” D.C. R. Pro. Conduct 8.5(a) (emphasis added); see also In re Winstead, 69 A.3d 390, 395-96 & n.5 (D.C. 2013) (rejecting argument that we lack authority to discipline a member of the D.C. Bar for their out-of-District conduct). And for good reason: The District has a strong interest in maintaining the fitness and professionalism of those licensed to practice law in its courts. That interest is not diminished simply because an attorney’s fitness is called into question by misconduct that occurs elsewhere. Owens is a member of the D.C. Bar and by that fact alone, he is subject to our disciplinary authority. And we have a strong interest in keeping attorneys who have committed intentional misappropriation out of our bar, wherever their principal place of practice is.

As to the potentially thorny choice of law issue

While we tentatively agree with the Committee and Board that Virginia’s rules apply to the DOHA-related misconduct, we echo their view that it is ultimately immaterial whether Virginia’s or Maryland’s rules—the only potential candidates that any party advances—apply. That choice turns on whether at the time of the alleged misappropriation, the anticipated DOHA hearing counted as a “matter pending before a tribunal” that “sits” in Virginia for purposes of Rule 8.5(b). See D.C. R. Pro. Conduct 8.5(b) (if the alleged misconduct occurred “in connection with a matter pending before a tribunal . . . the rules of the jurisdiction in which [that] tribunal sits” apply, but if there is no such pending matter, the applicable rules are those of “the admitting jurisdiction in which the lawyer principally practices[] provided” the particular conduct did not have its “predominant effect in another jurisdiction in which the lawyer is licensed to practice”). We decline to wade into that question because we find that substantial evidence supported the Board’s findings that Owens committed intentional misappropriation under either jurisdiction’s rules. We will therefore begin by examining Virginia’s rules, and why Owens’s conduct constituted misappropriation under them; and in a moment, we will explain why his conduct is also misappropriation under Maryland’s rules (as the Committee and Board likewise reasoned).

Misappropriation under Virginia law

Whether or not Owens performed sixteen billable hours of work on Joselson’s case, Owens had not earned the $4,000 fee because he had yet to perform a significant portion of the contemplated work so that this flat fee had not yet been earned. Contrary to some of Owens’s contentions through these disciplinary proceedings, the retainer agreement clearly set out a flat fee—its plain terms established that “Client will pay a fee of $4,000.00 . . . cover[ing] all services and expenses of the Firm working on Client’s behalf.” And under Virginia law, flat fees advanced to an attorney “remain the property of the client”—and thus must be held in escrow—“until they are earned by the attorney.” See Virginia Legal Ethics Opinion 1606, approved 2016. Unless there is an agreement that says otherwise, “none of the flat fee is earned until the matter is concluded.” Virginia Legal Ethics Opinion 1899, approved 2023 (describing longstanding Virginia law). While Virginia’s rules allow an attorney to withdraw portions of a client’s advanced fees under certain circumstances, including with the express consent of the client, “upon an accounting to the client,” or “when other fees/costs or expenses are agreed upon in advance,” none of those circumstances applied here. Va. Rule 1.15 cmt. 2a. At the time he took the full fee, Owens had not obtained Joselson’s consent, provided an accounting, or met any agreed-upon milestones warranting partial payment, nor had the matter concluded. We therefore have little trouble finding that Owens had not earned that flat fee because he had not performed substantial portions of the agreed-upon representation, let alone done enough so that “the matter [was] concluded.” Virginia Legal Ethics Opinion 1899, approved 2023.

Respondent contended that Maryland rules were the correct one; maybe so but

Maryland’s precedents are just as clear as Virginia’s that “the full flat fee is not earned until all the work associated with the fee is completed.”

“Flat fees” and misappropriation and the applicability of the court’s recent decision in In re Alexei

But even under our rules, Owens is simply wrong that there was any unclarity in our law that his conduct constituted misappropriation. It has been our law since 2009 that an attorney cannot withdraw the entirety of a flat fee until the entirety of the contemplated work has been performed. See In re Mance, 980 A.2d 1196, 1202 (D.C. 2009) (“Such a fee is earned ‘only to the degree that the attorney actually performs the agreed-upon services.’” (quoting Alec Rothrock, The Forgotten Flat Fee; Whose Money Is It and Where Should It Be Deposited?, 1 Fla. Coastal L.J. 293, 347 (1999))). Alexei involved the more nuanced question of whether an attorney misappropriates funds when they withdraw any portion of a flat fee, in proportion to the amount of the contemplated work that had been performed, prior to all services being rendered. We held in Alexei that taking any portion of the flat fee was indeed misappropriation, but reasoned that was not entirely clear from Mance itself so we  opted to apply that rule only prospectively. Alexei, 319 A.3d at 415. Alexei is of no help to Owens because he did not take some portion of Joselson’s $4,000 fee that was roughly proportionate to the percentage of the representation that he had completed—he took it all, despite the vast bulk of the agreed-to work still yet to be done. So whatever uncertainties remained after Mance and were later clarified in Alexei, they do not impact our analysis here: Taking the full flat fee prior to completion of the contemplated representation is clear as day misappropriation, and Mance made that clear.

Sanction rule regardless of choice of law

In determining the appropriate sanction, we apply the District’s law regardless of which jurisdiction’s substantive rules established the underlying misconduct. Tun, 286 A.3d at 543. Under our law, the appropriate sanction for an attorney guilty of misappropriating client funds turns on their level of culpability. While an attorney who acted only negligently may receive a lesser sanction, the intentional or reckless misappropriation of client funds will “trigger[] the virtually automatic sanction of disbarment” absent “extraordinary” mitigating circumstances.

No such circumstances here

Owens continues to insist upon an unreasonable interpretation of the contract that would have justified his conduct rather than admit wrongdoing. He was found to have provided deliberately dishonest testimony to the Committee, a “significant aggravating factor.” In re Chapman, 962 A.2d 922, 924 (D.C. 2009) (per curiam). And it took months for Owens to return the disputed funds to Joselson, and he did so only after a court ordered him to. Over the past thirty-five years, we have found that extraordinary circumstances warranted a sanction other than disbarment only once when confronted with intentional or reckless misappropriation, and this case does not resemble it in any respect. Hewett, 11 A.3d at 290 (declining to disbar attorney who intentionally misappropriated client funds solely to benefit the client). In light of these considerations, we see no reason to depart from our ordinary sanction in Owens’s case.

(Mike Frisch)