Sanction Disagreement Before Ohio Supreme Court
An excellent case summary of a case scheduled for oral argument before the Ohio Supreme Court this Wednesday
The Board of Professional Conduct is recommending that the Ohio Supreme Court suspend Cuyahoga County John W. Gold for two years, with one year stayed, based on his handling of a client’s bankruptcy case.
Bankruptcy Trustee Seeks Funds from Gold’s Client
In July 2010, George Daher filed for bankruptcy. The trustee in Daher’s bankruptcy filed a report three months later showing there was no property available in the bankruptcy estate to distribute to creditors. In November 2010, the court closed the case.
In March 2012, Daher learned he was entitled to about $51,000 in unclaimed funds that were the result of an insurance claim that preceded his bankruptcy. Daher had forwarded the insurer’s money to his mortgage company, but the mortgage company never accepted it. When Daher tried to claim the money in 2012 he was told the mortgage company needed to relinquish its interest in the funds before he could have it.
Daher hired Gold to represent him, and Gold filed a lawsuit in Cuyahoga County Common Pleas Court seeking a declaratory judgment that would entitle Daher to claim the $51,000. Daher entered a contingency fee agreement with Gold.
In 2013, Gold notified Daher’s bankruptcy trustee of the unclaimed funds, and the trustee sought to reopen Daher’s bankruptcy case. Gold then agreed to represent Daher in the bankruptcy proceedings. Gold attempted to limit the ability of the bankruptcy trustee from acquiring any of the unclaimed funds, and he argued for summary judgment in the common pleas court case without addressing the interest of the bankruptcy trustee, who at that time was not a party to the lawsuit. Two months later, the trustee asked to intervene in the common pleas court case.
The trial court granted Daher the right to seek the unclaimed funds and allowed the trustee to join the case. The trustee returned to bankruptcy court and alleged the $51,000 belonged to the bankruptcy estate, not to Daher. Gold disputed the right of the trustee to pursue the funds, and in September 2013, Gold and the trustee reached an agreement where Gold would hold the $51,000 in his Interest on Lawyers’ Trust Accounts (IOLTA) until the bankruptcy court decided if all or some of the unclaimed funds belonged to the estate. Gold agreed that once the bankruptcy court ruled on the matter, he would transfer the funds from the IOLTA to the trustee.
Lawyer Withdraws Funds from Account
Within a month of the agreement, Gold withdrew $5,000 from the account without court approval. He then dispersed another $8,800 from the account without court approval.
In spite of the agreement, Gold argued that Daher’s bankruptcy case should be closed and that the trustee was not entitled to any funds. He also argued that he be entitled to hourly fees for representing Daher despite his contract with Daher that he entitled him to a percentage of the unclaimed funds.
As the two sides argued their cases, Gold withdrew about $9,500 from the account in December 2013. In March 2014, Gold gave Daher $2,000 from the account without court approval, and withdrew another $6,500. A month later, the bankruptcy court ruled all the funds belong to the estate and that Gold needed to transfer the money to the trustee.
Gold appealed the decision and continued to withdraw funds. By November 2014, he had withdrawn $48,872 from the account. The trustee and Daher reached a settlement that allowed Daher to retain $18,300 of the settlement funds in exchange for ceasing to file further appeals in the matter.
Gold refused to sign the settlement agreement, stating it did not properly address his attorney fees. In February 2015, the bankruptcy court ordered Gold to provide the trustee about $32,700 within five days, and allowed Daher to retain $18,300.
Client Receives Payment, Trustee Doesn’t
The day of the court ruling, Gold deposited $8,000 in his IOLTA account and wrote a check to Daher for $6,000. He also gave Daher $6,000 and kept the remaining $6,300 as his fee. Gold didn’t transmit the $32,700 to the trustee. Gold claimed he had a lien on the unclaimed funds and stated he was entitled to them for the work he did on the case. He stated he worked more than 240 hours, and should be paid $49,000 based on his customary $200 hourly rate.
The bankruptcy judge ruled that Gold raised the issue too late and should have addressed it before the case was closed. Gold declined to turn over the money, and it became clear to the judge that Gold didn’t have adequate records of his IOLTA funds that he could provide the court.
The bankruptcy court continued throughout 2015 to conduct hearings in the Daher bankruptcy, and held Gold in contempt of court. Gold also filed his own case for personal bankruptcy before the court. Gold failed to appear at the some of the hearings in the matters and, by March 2016, the bankruptcy court sanctioned Gold by fining him for the amount he was to transfer to the bankruptcy trustee, plus $1,600 in fines for noncompliance with court orders, and required him to pay the trustee’s attorney fees.
As Gold appealed the decision, he began settlement negotiations with the trustee and paid $16,000. He continued to make payments and, by the time of his disciplinary hearing concluded, he had paid the full $32,700 he owed.
Based on Gold’s action in the Daher matter, the Office of the Disciplinary Counsel brought the charges of rule violations to the professional conduct board.
Board Recommends Suspension
The board wrote the complaint essentially alleged that Gold:
Acted to obstruct the bankruptcy trustee from locating the whereabouts of settlement proceeds
Violated bankruptcy court orders
Failed to comply with agreements made with the bankruptcy trustee
Misappropriated funds from his client-trust account
Failed to appear at hearings
Engaged in intentional acts to avoid bankruptcy court orders
The board found Gold’s behavior similar to attorney: sanctioned by the Court in Disciplinary Counsel v. Marshall (2014). In a personal injury case, the attorney was ordered to place an $85,000 settlement check into her client trust fund and was told to hold it until a dispute about the case was settled. The attorney immediately disbursed all the money before the court could resolve the matter. The attorney was suspended for two years, with one year stayed.
The board noted that Gold presented more mitigating factors in his case than the attorney in Marshall, including his timely payment of restitution and his suffering from disorders. The board recommended Gold’s second year of suspension be stayed with the conditions that he comply with his Ohio Lawyer’s Assistance Program (OLAP) contract, make full restitution to the trustee (which he did), and commit no further misconduct. If he is reinstated to practice law, then he must spend a year under a monitoring attorney focused on the proper use of an IOLTA.
Attorney Objects to Sanction
Gold is not contesting the conclusions reached by the board, but argues there are differences between the behavior of Marshall and himself that warrants a lesser sanction. Gold proposes that his two-year suspension be fully stayed. He argues that Marshall was found to have caused harm to the judge with false statements regarding the judge’s integrity, and was jailed for contempt of court. He argues the board found fewer aggravating circumstances in his case, and more mitigating factors that should entitle him to a fully stayed suspension.
While he disagreed with the judge in his bankruptcy case, Gold asserts he made no false claims about the judge, and Marshall presented no claims of a qualified disorder that impacted her behavior as he did. Gold suggests his case is closer to Disciplinary Counsel v. Edwards (2012), where the attorney was given a two-year, fully stayed suspension for misappropriating $69,000 in client trust account funds for his personal use. Gold argues his conduct didn’t harm his client because he paid the funds the bankruptcy court agreed could be paid.
Disciplinary Counsel Supports Suspension
The disciplinary counsel agrees that Gold’s case is similar to Marshall in many respects, but the key difference is that Marshall wasn’t charged with misappropriating client funds, while Gold was. The disciplinary counsel states that the money belonged to Daher, even if he wasn’t entitled to keep it because it had to be transferred to his bankruptcy estate.
The disciplinary counsel asserts the Supreme Court has long held that the presumed sanction for a lawyer misappropriating funds is disbarment, and that since 1995 lawyers have been “on notice that a course of dishonest conduct will result in an actual suspension from the practice of law.”
The disciplinary counsel also notes the circumstances in Edwards are different than Gold’s, including that the attorney made full restitution to clients before the disciplinary proceedings began while Gold still owed the bankruptcy trustee $12,000 at the time of his panel hearing. The disciplinary counsel also notes that Gold admitted he wasn’t fully compliant with his OLAP contract and that his treating professionals were not fully aware of his conduct. Concluding that the Supreme Court has imposed actual suspensions for attorneys whose cases are similar to Edwards, the disciplinary counsel supports the board’s recommendation.
– Dan Trevas
(Mike Frisch)