Iowa Supreme Court Attorney Disciplinary Bd. v. Kelsen

• Decision Date: 05 September 2014
• Docket Number: No. 14–0507.,14–0507.
• Citation: 855 N.W.2d 175
• Parties: IOWA SUPREME COURT ATTORNEY DISCIPLINARY BOARD, Complainant, v. David S. KELSEN, Respondent.
• Court: Iowa Supreme Court

855 N.W.2d 175

IOWA SUPREME COURT ATTORNEY DISCIPLINARY BOARD, Complainant

v.David S. KELSEN, Respondent.

No. 14–0507.

Supreme Court of Iowa.

Sept. 5, 2014.

Charles L. Harrington and David J. Grace, Des Moines, for complainant.

David S. Kelsen, Waterloo, pro se.

Opinion

MANSFIELD, Justice.

This matter comes before us on report of a division of the Grievance Commission of the Supreme Court of Iowa. See Iowa Ct. R. 35.10. The Iowa Supreme Court Attorney Disciplinary Board (Board) charged David S. Kelsen with trust account violations in representing a client. The grievance commission found that Kelsen had violated all rules as alleged by the Board and recommended that Kelsen receive a public reprimand.

On our review, we find that all of the violations took place. We also find that, among those violations, Kelsen converted $7500 of client funds to personal use without a colorable future claim to the funds. Accordingly, we revoke Kelsen's license to practice law in this state.

I. Factual Background and Prior Proceedings.

David Kelsen is a seventy-five-year-old attorney. He has been practicing law in Iowa since 1962. He currently works as a sole practitioner in Waterloo.

This case involves Kelsen's alleged mishandling of client funds in the course of his representation of Matthew Cox. Cox came to Kelsen in February 2012 for legal assistance. Cox anticipated losing his job and believed he might have a legal claim against his employer.

On February 13, Kelsen and Cox signed an engagement letter for legal representation at an hourly rate. The agreement required a retainer of $1000 and specified that fees were “normally based on an hourly rate of $150.00 per hour for routine matters, and on an hourly rate of $250 for court presence and preparation.”

Cox gave Kelsen a check for $1000, which Kelsen deposited in his client trust account. Kelsen, according to his own testimony, “got to work immediately.” As Kelsen put it, “The emails started to go; I'm getting telephone calls [from Cox] all day long.” Kelsen also provided legal advice to Cox's personal consulting company.

In early March, Kelsen withdrew the entire $1000 from the client trust account in two separate transactions. Kelsen claimed that at the time he withdrew the funds, he had earned them. Kelsen acknowledged, however, that he did not keep any records of the time he was devoting to the Cox matter.

On March 9, Cox brought Kelsen another check, this one for $2000. Cox wrote “attorney retainer” on the check. Kelsen did not deposit that check in his trust account but, instead, on March 12 ran it through another account. Kelsen, however, did take $900 in cash from the $2000 and put it in his trust account. Kelsen kept the remaining $1100 which he claimed he had earned as of March 12.

The next day, March 13, Kelsen withdrew $150 in cash from his client trust account. On March 16, Kelsen withdrew an additional $500.

On April 18, Cox gave Kelsen another $2000 check. According to the handwritten byline on the check, this was for “legal representation.” Kelsen cashed the check at Cox's bank and again deposited only a part of the proceeds—this time $1000—into his trust account. As before, Kelsen maintained that he had kept what he had earned and deposited into the trust account the remainder that he had not yet earned.

On April 24, Kelsen withdrew another $500 of the Cox funds from the trust account. This left a Cox-related balance of $750 in Kelsen's client trust account.

While Kelsen was making these various withdrawals from his client trust account, he never notified Cox he was doing so or provided Cox with a contemporaneous accounting.

By late June, Cox had permanently lost his job and was apparently ready to file suit against his former employer if necessary. Kelsen himself was in difficult financial circumstances. He owed his landlord $3300 and had some other office expenses that needed to be paid.

Cox gave Kelsen a check for $7500. He had written out the check on June 28; it is not clear whether he gave it to Kelsen that day or on the 29th. The memo line of the check as completed by Cox said, “Advance payment for deposition, discovery, etc.”

Kelsen also sent a contingent-fee agreement to Cox, signed by Kelsen and hand-dated by him June 29. The agreement recited that Cox was retaining Kelsen to file suit against Cox's employer. Under “expenses,” the agreement said Cox would be responsible for all expenses incurred and that “Client shall advance the sum of $7500 to Attorney on June 29, 2012.”

Kelsen did not deposit Cox's $7500 check in his trust account. Instead, on June 29, Kelsen put it in his business account and immediately used $3300 to pay his landlord that day. The balance of the $7500 was used by Kelsen to cover other expenses unrelated to Cox's potential lawsuit.¹

On or about July 7, after having consulted with another attorney, Cox decided to terminate Kelsen's services. He asked Kelsen to return the $7500. Kelsen reached an agreement to repay Cox at the rate of $1000 per month beginning September 1. Kelsen made the September and October payments as agreed but failed to make the November and December payments. This resulted in the filing of a disciplinary complaint against Kelsen. Kelsen eventually repaid the full $7500 by May 2013.

The Board filed its complaint against Kelsen on September 9, 2013. The complaint described Kelsen's handling of the different Cox transfers of money and alleged that Kelsen had failed to notify Cox of the time, amount, and purpose of withdrawals from the client trust account; failed to provide accountings; failed to deposit advance payments into the trust account; and failed to promptly return funds to Cox after Cox terminated Kelsen's representation. The complaint concluded with allegations that Kelsen had violated Iowa Rules of Professional Conduct 32:1.15 (safekeeping of property) and 32:1.16(d) (terminating representation) and Iowa Court Rules 45.1 (client trust account), 45.2 (action required upon receiving funds, accounting, and records) and 45.7 (advance fee and expense payments). Kelsen filed his answer on October 3, admitting all allegations of the complaint.

Kelsen was served with interrogatories, requests for admissions, and requests for production of documents on September 13. He did not respond to these items, and on November 25, the Board filed a motion to compel. Kelsen did not resist the motion to compel, and on December 12, the commission ordered Kelsen to respond to the interrogatories and the production requests by December 27 or face sanctions. Because Kelsen had not responded to the Board's requests for admissions, the matters were deemed admitted. See Iowa Rs. Civ. P. 1.510(2), 1.511 ; Iowa Ct. R. 35.6. Kelsen subsequently answered the interrogatories and responded to the requests for production.

A hearing took place before the grievance commission on January 29, 2014. The Board did not call any witnesses. Kelsen testified on his own behalf.

Kelsen emphasized a number of family difficulties he was facing in 2012. His wife had lost her job and was dealing with serious health problems. Kelsen's secretary had left, and Kelsen did not replace her because of his financial constraints. A stepson had used forged checks to take funds from Kelsen's law firm.

Kelsen testified that Cox understood the $7500 would be used not only for case-related expenses, but also for expenses related to the operation of Kelsen's office. As he put it,

I owed [my landlord] $3,300, plus I had some other office expenses that needed to be paid, just your routine office expenses. And so Mr. Cox agreed to make the $7,500 payment; this was not solely to be used for the discovery and other expenses in conducting the case itself, but ... it was his intention that I use those funds to make these payments. He knew that up front. The reason he knew it is because I had attempted to get a loan from the bank, but because of the problem I had with the banks because of the [stepson's] forgery things and having to change banks, I was not able to get a loan. And so Mr. Cox agreed to—from the time that he paid me the $7,500 to allow me to use funds directly for the payment of those expenses that I had incurred, much of which had incurred during the time when I was actively representing him starting in February. So he was very aware of it, and consented to it. In fact, on the day he actually made the payment, he left my office in the morning, he went back to his house and visited with his wife about it because he wanted her to understand what he was doing and why. He was doing it, I think, not only because of the needs for the representation matter, but he was doing it because he felt it was something that he could do for me personally. And he's a Christian person, and he was acting in a way that he thought would be helpful, but it was also a contractual matter in that what the intention was here is that I would actually repay him for any of the expense that was made from that $7,500 payment that he made from the proceeds, from the recovery from the suit. It was our anticipation that settlement would take place fairly quickly, and that we might not even have to file the petition because we were going to start negotiations with [the employer] and their counsel immediately upon the termination situation.

When asked by a commission member why the proposed contract he sent to Cox did not mention preexisting office expenses, Kelsen said this was because he used a “bar form for an attorney fee contract that was available.” He explained, “I was working on my computer at home trying to do this about 11:00 at night in order to get something in place on that that would basically confirm what we had agreed to.”

Kelsen testified that he would generally provide an accounting to his clients with his monthly billing. He was familiar with the rules on client trust accounts, and as a longtime practitioner, had met with representatives from the client security commission several times.

Kelsen...