disciplinary handbook: volume v - Supreme Court - State of Ohio

O’Brien, Disciplinary Counsel v.
120 Ohio St.3d 334, 2008-Ohio-6198. Decided 12/4/2008.
Case Summaries- 238
Respondent failed to inform a bankruptcy trustee about home-sale proceeds respondent was holding in his trust
account on behalf of a client and then disbursed monies from that account per his client‘s instructions.
Respondent represented Stefan A. Unger in the sale of Unger‘s home. Respondent deposited $81,000 of sale
proceeds into his client trust account per Unger‘s request on November 1, 2004. Seven days later, Unger
filed for bankruptcy through attorney Robert Bardwell who rented office space from respondent and to
whom respondent referred Unger. Unger did not disclose the proceeds from the sale of his house to his
bankruptcy attorney nor include the asset in his bankruptcy petition. The trustee relied on this petition and
filed a no asset report with the court. The court discharged Unger‘s debts in March 2005. Respondent
became aware of the bankruptcy a week after it was filed. Unger told respondent, ―Don‘t worry about it,‖
when respondent inquired if Unger included the funds in his petition. Respondent discussed his proper course
of action with two attorneys. One of these attorneys, now deceased at the time of the hearing, advised that
consistent with legal ethics respondent should not disclose the existence of the funds to the bankruptcy court,
the trustee, or Unger‘s bankruptcy attorney. Respondent did not disclose, but subsequently disbursed monies
out of the account at Unger‘s direction eight times, with the largest disbursement going to a title company.
A week after Unger‘s debts were discharged, a former associate of respondent informed the trustee that
respondent was holding house-sale proceeds in his client trust account for Unger. The trustee withdrew his no
asset report and faxed respondent, claiming the funds belonged to the trustee and demanding the immediate
remittance of the funds along with an accounting and documentation of the real estate sale. Respondent
sought advice from two experienced attorneys whom confirmed the earlier advice from the attorney.
Respondent contacted Unger, alerting him to the trustee‘s actions. He insisted that Unger turn the funds
over to the trustee and account for the misrepresentation. Unger refused. Respondent then disclosed the asset
to Unger‘s bankruptcy attorney, but refused to turn over the funds remaining in the account to Unger. He also
answered the trustee‘s demands with a fax explaining that he was unable to answer the questions
because of attorney-client privilege. The trustee made another request for the funds and reminded respondent
that the trustee stood ―in the shoes of the debtor‖ with respect to attorney-client privilege. The trustee
threatened to file a motion to compel and seek sanctions, if her demands for remittal of the funds and tender of
the documents were not met within 10 days. Respondent tried to resolve matter by having Unger pay the
amounts owed the creditors plus an amount as fee to the trustee, but the trustee rejected the offer and renewed
her demands. Eventually she filed a motion to compel in the bankruptcy court. The court granted the motion
on September 19, 2005. Respondent failed to comply, claiming the first order had been misfiled by his staff.
So the trustee filed an additional motion on October 26, 2005. Respondent finally conveyed the remaining
funds and documents to the trustee on November 29, 2005. By then only $13,513.97 of the original
$81,000 remained in the client trust account. The trustee testified that creditors who filed proofs of claim
had received only 97 percent of the amounts owed. Respondent by motion requested relief from paying
attorney fees and costs. Subsequently, respondent paid attorney fees and costs and the matter was resolved
between the respondent and the trustee. The board viewed respondent‘s disbursement of house-sale proceeds
at Unger‘s direction as assisting Unger in conduct that the lawyer knows to be illegal or fraudulent. The
board found violations of DR 1-102(A)(5) and (6) and DR 7-102(A)(7). The Supreme Court agreed. In
mitigation, there was absence of any selfish motive and general good reputation and character. BCGD
Proc.Reg. 10(B)(2)(c) and (e). Respondent‘s refusal to admit wrongdoing was offset by the fact that
respondent relied on legal advice with respect to the assertion of the attorney-client privilege. No
mitigating effect was given to the improper disbursement of the house-sale proceeds, because respondent did
not seek advice regarding the disbursement issue. The board recommended a six-month stayed suspension on
the condition that respondent commit no further misconduct. The Supreme Court agreed and so ordered.
Rules Violated: DR 1-102(A)(5) 1-102(A)(6), DR 7-102(A)(7)
Aggravation: NONE
Mitigation: (c), (e)
Prior Discipline: NO Procedure/ Process Issues: YES Criminal Conduct: NO
Public Official: NO Sanction: Six-month suspension, stayed