Disciplinary Action Against Dvorak, In re

• Citation: 554 N.W.2d 399
• Decision Date: 17 October 1996
• Docket Number: No. C7-95-1179,C7-95-1179
• Parties: In re Petition for DISCIPLINARY ACTION AGAINST Shirley A. DVORAK, an Attorney at Law of the State of Minnesota.
• Court: Supreme Court of Minnesota (US)

Page 399

554 N.W.2d 399

In re Petition for DISCIPLINARY ACTION AGAINST Shirley A.

DVORAK, an Attorney at Law of the State of Minnesota.

No. C7-95-1179.

Supreme Court of Minnesota.

Oct. 17, 1996.

Kermit Edward Bye, Vogel, Kelly, Knutson, Weir, Bye & Hunke, Ltd., Fargo, ND, for Appellant.

Marcia A. Johnson, Director, Timothy M. Burke, Sr. Asst. Director, Office of Lawyers Professional Responsibility, St. Paul, for Respondent.

OPINION

PER CURIAM.

The Director of the Office of Lawyers Professional Responsibility filed a petition seeking public discipline of respondent, Shirley A. Dvorak, for conduct leading to her plea of guilty in federal court in North Dakota to a single misdemeanor count of filing a false tax return. Subsequently, the Director filed an amended petition adding a second count alleging Dvorak improperly billed Minnesota clients in a bankruptcy matter.

The Honorable Harlan L. Nelson conducted a hearing on the Director's petitions on December 4 and 5, 1995. On December 22, 1995, he issued his findings of fact, conclusions of law, and recommendation for discipline. The referee concluded that Dvorak's action in filing a false tax return violated Minnesota Rules of Professional Conduct (MRPC) 8.4(b) and (c). The referee also concluded that fees Dvorak charged clients in the bankruptcy matter violated MRPC Rules 1.5(a) and 3.4(c). He recommended that Dvorak be suspended from the practice of law for a minimum of 6 months, subject to reinstatement pursuant to Rule 18, Rules on Lawyers Professional Responsibility (RLPR), only after demonstrating she has met certain requirements as outlined by the referee. The Director urges a suspension of not less than 12 months.

Shirley Dvorak was admitted to practice in Minnesota in 1981. She is an honors graduate of the University of North Dakota Law School and was originally admitted to practice law in that state in 1976 and, subsequently, in Florida in 1992. Dvorak has spent her entire professional career with what is now the Moosbrugger, Dvorak & Carter law firm in Grand Forks, North Dakota. Although Dvorak has no prior history of discipline in Minnesota, she has been sanctioned twice in North Dakota for minor misconduct. In 1995 she was admonished for failing to adequately supervise a non-lawyer assistant and, in 1980, she was privately reprimanded for filing a lien for unpaid legal fees before judgment had been recorded in the case.

The alleged violation of MRPC Rules 8.4(b) and (c) arises out of Dvorak's conviction for a misdemeanor tax violation. On March 15, 1995, Dvorak and law partner John Moosbrugger each pleaded guilty in federal district court to a misdemeanor count of willfully filing a fraudulent or false tax return in violation of 26 U.S.C. § 7207 (1994). Although all four partners in the Moosbrugger firm underreported income in an identical amount, only Dvorak and Moosbrugger were charged criminally. Dvorak asserts that the omission was the innocent result of disarray in the firm's accounting records resulting from the forging of checks, embezzling of funds, and neglect of firm records by a former employee of the firm. However, Dvorak contends that she felt she had little choice but to plead guilty because she could neither risk a felony conviction nor afford the expense of defending at trial.

The alleged violation of MRPC Rules 3.4(c) and 1.5(a) arises out of Dvorak's handling of the bankruptcy of Minnesota clients Alex and Edna Wald. The Walds hired Dvorak to represent them in the Chapter 11 bankruptcy of their farming operation in May 1985. The Walds orally agreed to pay Dvorak a retainer of $5,000 and made an initial payment of $2,700 toward that retainer. Their fee arrangement was outlined in the required Statement Pursuant to Rule 2016(b) filed with the bankruptcy court. On February 26, 1987, Dvorak submitted an Application for Administrative Compensation Allowance to the bankruptcy court seeking total compensation of $20,075.27, including costs. After a hearing, the court awarded the firm $10,000 in fees and $3,566.52 in costs, for a total of $13,566.52. Dvorak appealed the compensation award.

The Walds subsequently voluntarily settled with their creditors. Before the bankruptcy was officially dismissed by the court and while appeal of the fee award was pending, however, Dvorak collected an additional $11,332.42 in fees from the Walds. Along with other interim payments, this brought the Walds' total fee payments to $19,647.42 and exceeded the bankruptcy court's order by $6,080.90. In 1992, after the Walds were contacted by an Internal Revenue Service agent investigating the Moosbrugger firm, they sought, and ultimately received, a refund from Dvorak and the firm in the amount of $6,080.90 in fees and $3,949.34 in interest.

Dvorak challenges certain of the referee's findings of fact, conclusions of law, and recommended discipline. Because Dvorak timely ordered a transcript, the referee's findings are not conclusive. Rule 14(e), RLPR. In disciplinary hearings, the standard of review for this court is whether the referee's findings and conclusions are clearly erroneous. In re Gurstel, 540 N.W.2d 838, 840 (Minn.1995); In re Montpetit, 528 N.W.2d 243, 245 (Minn.1995).

I.

We first consider whether the referee clearly erred in concluding that Dvorak's guilty plea to the misdemeanor of filing a false tax return establishes a violation of MRPC Rules 8.4(b) and (c). These rules provide that it is professional misconduct for a lawyer to "commit a criminal act that reflects adversely on the lawyer's honesty, trustworthiness or fitness as a lawyer in other respects" or to "engage in conduct involving dishonesty, fraud, deceit or misrepresentation." MRPC 8.4(b)-(c).

Dvorak acknowledges that Rule 19(a) of the RLPR provides that a lawyer's criminal conviction is "conclusive evidence that the lawyer committed the conduct for which the lawyer was convicted" in disciplinary proceedings. Rule 19(a), RLPR. However, she argues that her misdemeanor conviction under 26 U.S.C. § 7207 does not, under the circumstances, violate MRPC Rules 8.4(b) and (c). Dvorak asserts that while this court has held that failure to file a tax return violates standards of professional conduct, see, e.g, In re Singer, 541 N.W.2d 313, 315 (Minn.1996); In re Chrysler, 434 N.W.2d 668, 669 (Minn.1989); In re Bunker, 294 Minn. 47, 55, 199 N.W.2d 628, 632 (1972), that does not dictate that the misdemeanor underreporting of income necessarily violates the rules. On the contrary, Dvorak argues that filing a false return under 26 U.S.C. § 7207 (punishable by a maximum fine of $10,000 and/or 1 year in prison) is inherently a less serious crime than failure to file under 26 U.S.C. § 7203 (punishable by a maximum fine of $25,000 and/or 1 year in prison), as evidenced by the more severe penalties imposed for the latter. In arguing that her misdemeanor conviction does not reflect adversely on her honesty, trustworthiness, or fitness as a lawyer, Dvorak also cites an affidavit filed with this court, in which the United States Attorney concedes that the plea was reached because of the anticipated difficulty of proving "outright fraud" in the case.

We are not unsympathetic to Dvorak's arguments that she felt she had little alternative but to plead guilty. The record reflects that Dvorak provides the sole support for herself and her husband, and has taken in her elderly mother. We believe that, faced with similar circumstances, many would choose to enter a plea in order to avoid the emotional and financial toll of a public trial. However, attorneys may not avoid the consequences of criminal conviction by attempting to relitigate the issue of guilt or innocence in subsequent disciplinary proceedings. Under the presumption created by RLPR Rule 19(a), we must presume that Dvorak committed the acts underlying her plea of guilty. Consequently, we cannot say the referee's conclusion that Dvorak violated MRPC Rules 8.4(b) and (c) is clearly erroneous.

II.

We next consider Dvorak's challenge to the referee's conclusion that in her billing of the Walds, Dvorak knowingly disobeyed an order of the bankruptcy court in violation of MRPC Rule 3.4(c) and, in so doing, charged an unreasonable fee in violation of MRPC Rule 1.5(a). Dvorak challenges the referee's findings and conclusions on two grounds: (1) that nothing in the order indicated that the court's award of fees in the case included the $5,000 paid pre-petition by the Walds, and (2) that the Wald bankruptcy was "essentially over" at the time of the Walds' final payment to the firm, and thus the bankruptcy court no longer had jurisdiction over the matter.

First, Dvorak argues that because the award was silent on the pre-petition fees previously disclosed to the court, the firm was actually entitled to receive the $5,000 plus costs paid pre-petition by the Walds, totalling $5,315, in addition to the $13,566.62 awarded by the court, for a total of $18,881.62. Although Dvorak acknowledges the court's authority to cancel or alter a pre-petition fee agreement, see 11 U.S.C. § 329, she contends that by remaining silent on the issue, the court did not alter the pre-petition agreement. Accordingly, Dvorak argues that even assuming the bankruptcy court had continuing jurisdiction at the time of the Walds' final payment to the firm, the amount of overpayment based on the $19,647.74 actually received by the Moosbrugger firm was only $766.12. In a deposition submitted to the referee, Dvorak's expert witness on bankruptcy law, David DeMars, agreed with her interpretation of the bankruptcy court's award.

The Director responds that the comments of the bankruptcy judge at the hearing considering the petition for attorney fees clearly indicated that the $10,000 award was the total amount of attorney fees he would award to the Moosbrugger firm:

THE COURT: I will award attorneys' fees in the case in the amount of $10,000, and I will award the full amount of...