In the Disciplinary Matter Involving Stepovich
386 P.3d 1205, 2016 Alas. LEXIS 136 (2016)
Rule of Law:
An attorney who knowingly drafts a legal instrument naming themselves as a contingent beneficiary violates ethical rules against conflicts of interest (Alaska Rule of Professional Conduct 1.8(c)) and causes potential injury to the client, warranting a suspension from practice, with the duration determined by applying aggravating and mitigating factors.
Facts:
- Michael Stepovich (attorney) and a client had been friends for several decades.
- In May 2009, the client, who was diagnosed with cancer and described as "in bad shape," asked Stepovich to draft his will, despite probate being outside Stepovich's usual practice areas.
- The client had an estate with assets exceeding $800,000, was married with no children, but had a living mother and two siblings.
- The will drafted by Stepovich bequeathed specific items to the siblings, nothing to the mother (who was a beneficiary on a six-figure bank account outside probate), and the remainder of the estate to the client's wife.
- The will named Stepovich as the sole contingent beneficiary; Stepovich testified he initially resisted this but agreed at the client's insistence, stating he would give any inherited money away.
- Stepovich had previously helped the client and his wife with other legal matters and never charged for his professional services.
- The client died approximately six weeks after signing his will.
- Because the client's wife survived, Stepovich, as the contingent beneficiary, received nothing.
Procedural Posture:
- The Alaska Bar Association filed a petition for formal hearing in December 2013, alleging Michael Stepovich violated Alaska Rule of Professional Conduct 1.8(c).
- In July 2014, Bar Counsel and Stepovich entered a Stipulation for Discipline by Consent, agreeing Stepovich violated Rule 1.8(c) negligently and recommending public censure.
- The Alaska Bar Association's Disciplinary Board rejected the stipulation, finding the proposed discipline too lenient due to Stepovich's prior disciplinary record and concerns about his mental state.
- The matter was referred to an Area Hearing Committee (Committee) for development of the record on the appropriate sanction.
- The Committee heard testimony in January 2015, found Stepovich grossly negligent, but concluded that a previously stayed one-year suspension from an earlier discipline should not be imposed, reasoning it applied only to new trust fund violations, and recommended public censure.
- The Disciplinary Board conducted another hearing, again found public censure too lenient, concluding that a six-month suspension was the appropriate sanction; the Board orally agreed with the Committee's "gross negligence" finding and disagreed with its "same or similar" conduct conclusion, but its later written decision took no express position on these points, instead stating the prior ethical violation was an aggravating factor to be afforded significant weight.
- Stepovich appealed the Disciplinary Board’s decision to the Alaska Supreme Court, arguing for a public reprimand.
- Bar Counsel's brief on appeal did not support the Board's recommended six-month suspension, suggesting it was unwarranted.
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Issue:
Does an attorney's knowing violation of Alaska Rule of Professional Conduct 1.8(c) by drafting a will that names himself as a contingent beneficiary, thereby causing potential injury to the client, warrant a suspension from practice, and if so, what is the appropriate duration considering aggravating and mitigating factors, and should a previously stayed suspension be imposed for "same or similar" misconduct?
Opinions:
Majority - Maassen, Justice
Yes, an attorney's knowing violation of Alaska Rule of Professional Conduct 1.8(c) by drafting a will naming himself as a contingent beneficiary, causing potential injury to the client, warrants a 12-month suspension from practice, but a previously stayed one-year suspension is not imposed because the current misconduct is not "the same or similar" to the prior violation. The court applies a three-step analysis to determine sanctions: (1) duty violated, mental state, and injury; (2) recommended sanctions under ABA standards; and (3) aggravating/mitigating factors. Stepovich violated Rule 1.8(c) by drafting a will that named himself as a contingent beneficiary. The court found Stepovich acted "knowingly," not negligently, because he was consciously aware that the will he drafted identified him as a contingent beneficiary and created an "obvious conflict of interest," even if he claimed ignorance of the specific ethics rule. The client suffered a "real injury" by not receiving "detached advice" regarding his will, which the ABA Standards consider as equally important as actual injury. Under ABA Standards § 4.32, a knowing conflict of interest causing injury or potential injury generally warrants suspension, with § 2.3 suggesting a baseline of at least six months. The court identified three significant aggravating factors: Stepovich's prior disciplinary offenses (three separate incidents over 20 years, including a serious trust fund violation six months prior to drafting this will, while a stayed suspension was pending), his substantial experience in the practice of law (32 years), and the vulnerability of the client (gravely ill with cancer). Three mitigating factors were recognized: absence of a dishonest or selfish motive (Stepovich did not expect to inherit and agreed at the client's insistence), remorse, and cooperation with the disciplinary proceedings (though given little weight as it occurred after the investigation began). The court weighed the significant aggravating factors, particularly the prior disciplinary history, against the mitigating factors, increasing the baseline six-month suspension by an additional six months to a total of 12 months. The court determined that the Rule 1.8(c) violation was not "the same as or similar to" the prior trust-account violation for which Stepovich received a stayed suspension in 2006. The 2006 violation involved knowing misappropriation of client funds (Rule 1.15), distinct from the current conflict of interest in will drafting, and a broad interpretation of "similar" would be unwarranted. Therefore, the one-year stayed suspension from the 2006 matter is not imposed. As a condition of reinstatement, Stepovich is required to take and pass the Multistate Professional Responsibility Exam (MPRE), given his defense of ignorance of Rule 1.8(c).
Analysis:
This case significantly clarifies the application of attorney disciplinary standards, particularly by emphasizing that a lawyer's mental state for a conflict of interest can be 'knowing' even without explicit awareness of the specific ethical rule, focusing instead on the consciousness of the conduct's nature. It underscores that potential injury from the lack of 'detached advice' is a sufficient basis for substantial sanctions, reinforcing the public trust inherent in legal representation. The ruling also provides a critical interpretation of 'same or similar misconduct,' establishing a narrow construction that limits the circumstances under which a previously stayed suspension will be imposed, thereby providing greater predictability for attorneys under conditional discipline. The imposition of a 12-month suspension combined with an MPRE requirement highlights the court's commitment to upholding ethical standards, especially for experienced attorneys with a history of disciplinary issues.
