In Re Pierson
690 A.2d 941, 1997 D.C. App. LEXIS 32, 1997 WL 103396 (1997)
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Rule of Law:
An attorney's unauthorized use of client funds constitutes intentional misappropriation, for which the presumptive sanction is disbarment. A client's subsequent retroactive ratification of the use of funds does not cure the violation or reclassify the misconduct as simple negligence.
Facts:
- Kathryn A. Pierson represented Urban Shelters & Health Care Systems, Inc. in a rent collection case brought by Elenar Associates Limited Partnership.
- The parties reached a settlement requiring Urban Shelters to pay Elenar $13,500 in two installments.
- On December 21, 1992, Urban Shelters provided Pierson with a $6,750 check to make the first settlement payment.
- Pierson deposited the check into her firm's escrow account, which was overdrawn and being used as the firm's primary operating account.
- Without prior authorization, Pierson used the entire $6,750 to pay her law firm's operating expenses, causing her client to default on the settlement.
- In early January 1993, Pierson contacted her client's principal, Roy Littlejohn, who was a personal friend, and he retroactively approved the diversion of funds as a loan.
- After the first settlement failed, Pierson falsely told opposing counsel she possessed the funds for a new, higher settlement and subsequently paid with a check from her escrow account that she knew would bounce.
- Pierson made herself unavailable to opposing counsel for several weeks before eventually making good on the bounced check.
Procedural Posture:
- Bar Counsel brought charges of professional misconduct against respondent Kathryn A. Pierson.
- Following an evidentiary hearing, a hearing committee found Pierson had violated several ethics rules but concluded her actions did not constitute misappropriation or commingling.
- The hearing committee recommended that Pierson be suspended for three years.
- Bar Counsel appealed the hearing committee's findings to the Board on Professional Responsibility.
- The Board on Professional Responsibility reversed the committee's finding, concluding that Pierson's conduct did amount to misappropriation and commingling.
- The Board rejected the committee's recommended sanction and instead recommended that Pierson be disbarred.
- Pierson filed exceptions to the Board's report, bringing the matter before the District of Columbia Court of Appeals for final disposition.
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Issue:
Does an attorney's unauthorized use of client funds for her firm's operating expenses constitute intentional misappropriation warranting disbarment, even if the client subsequently provides retroactive approval for the use of the funds as a loan?
Opinions:
Majority - Terry, Associate Judge
Yes, the unauthorized use of client funds constitutes intentional misappropriation warranting disbarment, regardless of subsequent client ratification. Misappropriation is any unauthorized use of a client's funds, including temporary use, and is a per se offense where proof of improper intent is not required. The violation occurred the moment Pierson deposited the client's funds into her overdrawn operating account and spent them without prior permission. The common law of agency, which allows for retroactive ratification, cannot override the Rules of Professional Conduct. Allowing ex post facto approval would put clients in a position to be pressured by their attorneys to excuse misconduct. Pierson's conduct was not simple negligence because she did not have a good faith belief she was entitled to the funds; she merely hoped for future approval. Under the standard set in In re Addams, the presumptive sanction for intentional misappropriation is disbarment unless extraordinary circumstances are present, which Pierson failed to demonstrate.
Concurring - Schwelb, Associate Judge
Yes, under the controlling precedent of In re Addams, disbarment is the required sanction. While joining the majority opinion, the concurrence expresses discomfort with what is viewed as an overly inflexible rule established in Addams. The author suggests that the sanction of disbarment is harsh in this specific context, especially when compared to lesser sanctions imposed for other types of serious attorney misconduct. The opinion highlights that a majority of the Board on Professional Responsibility shared this reluctance, feeling that the mitigating factors in Pierson's case might have warranted a sanction less severe than disbarment if the court's precedent allowed for more flexibility.
Analysis:
This decision strongly reaffirms the strict disciplinary standard for attorney misappropriation of client funds established in In re Addams. It clarifies that the violation is complete upon the unauthorized use of the funds, and subsequent client forgiveness or ratification is legally irrelevant to the finding of misconduct. The case establishes a bright-line rule that an attorney's hope for future approval does not mitigate the intentional nature of the act, distinguishing it from cases of simple negligence where an attorney has a mistaken but good-faith belief in their right to the funds. This reinforces the high fiduciary duty lawyers owe their clients and serves as a powerful deterrent against the commingling and personal use of client money.
