Douglas' Case
2007 N.H. LEXIS 235, 937 A.2d 891, 156 N.H. 613 (2007)
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Rule of Law:
An attorney's knowing conversion of client funds from a trust account, especially when a fee dispute exists and the act is concealed through misrepresentation, constitutes a violation of the Rules of Professional Conduct for which disbarment is the appropriate sanction, particularly in the presence of aggravating factors like prior similar misconduct.
Facts:
- In 1994, Marjorie VanderKruik retained attorney Caroline G. Douglas to represent her in a divorce, agreeing to pay a retainer and subsequent bills for services rendered.
- In 1997, VanderKruik became entitled to funds from an escrow account. Douglas persuaded VanderKruik to have these funds, totaling $49,790.44, wired directly into Douglas's trust account, claiming it was to protect the money from Douglas's own ex-husband.
- At this time, VanderKruik was actively disputing a large bill from Douglas and had expressed concerns about the fees charged.
- On September 15, 1997, Douglas, without VanderKruik's knowledge or permission, withdrew $49,000 in cash from the trust account, converted it to traveler's checks, and immediately began spending it on personal and business expenses.
- Douglas justified taking the money because she was in a 'cash crunch' and believed her client did not need it.
- Following the withdrawal, Douglas sent letters to VanderKruik on September 17 and 23, 1997, which falsely implied that the funds remained in the trust account but had been frozen by a court attachment, and asserted a lien on the supposedly intact funds.
Procedural Posture:
- The Supreme Court Committee on Professional Conduct filed a petition with the New Hampshire Supreme Court seeking the disbarment of attorney Caroline G. Douglas.
- The matter was referred to a Judicial Referee for fact-finding and a recommendation.
- The Judicial Referee found by clear and convincing evidence that Douglas violated several New Hampshire Rules of Professional Conduct.
- The Judicial Referee recommended that Douglas be suspended from the practice of law for five years as a sanction.
- The Supreme Court Committee on Professional Conduct disagreed with the recommended sanction and urged the Supreme Court to impose disbarment.
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Issue:
Does an attorney violate the Rules of Professional Conduct by unilaterally withdrawing disputed client funds from a trust account for personal use and subsequently misrepresenting the status of those funds to the client?
Opinions:
Majority - Broderick, C.J.
Yes. An attorney's conduct violates the Rules of Professional Conduct when she unilaterally withdraws disputed client funds and misrepresents their status. The respondent knowingly converted her client's property by withdrawing the $49,000 without permission, violating Rule 1.15(a)(1)'s duty to safeguard client funds. Because there was an active fee dispute, she also violated Rule 1.15(c) by failing to keep the disputed portion separate until the conflict was resolved. Furthermore, by sending letters that deliberately misled her client into believing the funds were still in the trust account, she engaged in dishonesty and misrepresentation, violating Rule 8.4(c). These actions, which demonstrate a profound lack of honesty and integrity, justify disbarment, especially given aggravating factors such as a prior, nearly identical disciplinary offense.
Analysis:
This decision establishes a firm precedent that the knowing conversion of client funds, coupled with dishonesty, is among the most serious ethical violations an attorney can commit. The court's choice to impose disbarment over the referee's recommended suspension underscores that mitigating factors like personal problems are given little weight against aggravating factors, especially a pattern of similar misconduct. This case serves as a stark warning to the bar about the sanctity of client trust accounts and the severe consequences of misappropriation and deceit, reinforcing that the primary goal of the disciplinary system is to protect the public, not to rehabilitate the attorney.
