Disciplinary Action Against Pyles, In re

• Decision Date: 01 April 1988
• Docket Number: No. C4-87-395,C4-87-395
• Citation: 421 N.W.2d 321
• Parties: In re the Petition for DISCIPLINARY ACTION AGAINST David A. PYLES, an Attorney at Law of the State of Minnesota.
• Court: Minnesota Supreme Court

Page 321

421 N.W.2d 321

In re the Petition for DISCIPLINARY ACTION AGAINST David A.

PYLES, an Attorney at Law of the State of

Minnesota.

No. C4-87-395.

Supreme Court of Minnesota.

April 1, 1988.

Syllabus by the Court

1. Attorney charged with multiple claims of professional misconduct failed to establish by clear and convincing evidence psychological disability as a valid mitigating factor excusing in whole or in part the misconduct.

2. Under the facts of this case, the appropriate disciplinary sanction for an attorney guilty of multiple instances of misconduct is indefinite suspension from the practice of law.

William J. Wernz, Director, Lawyers Professional Responsibility, Candice M. Hojan, Sr. Asst., St. Paul, for appellant.

Theodore J. Collins, St. Paul, for respondent.

Heard, considered, and decided by the court en banc.

PER CURIAM.

The referee appointed by the court in this lawyers disciplinary action found that respondent David A. Pyles had violated rules of professional conduct applicable to lawyers: by misappropriating client funds on three separate occasions; by making a false representation to a client; by failing to maintain adequate financial records in his law practice and falsely certifying to this court that he had; by handling a matter when he had a conflict of interest with a client; and by failing to timely file income tax returns. The referee rejected Pyles' mitigation assertion that during the relevant times he was "suffering from severe depression and psychological problems which were the cause of the conduct." The referee recommended disbarment as the appropriate discipline. While we acknowledge that the nature and extent of the misconduct and the absence of an established mitigation defense ordinarily would warrant the recommended disbarment, due to special circumstances in this case, we conclude that the goal the referee had in mind--protection of the public--can best be substantially served by imposing the sanction of indefinite suspension.

The Director's original petition seeking disciplinary sanctions charged that respondent had misappropriated client funds, had misappropriated escrowed funds, had made misrepresentations to conceal those misappropriations, had failed to keep adequate trust account records and had made false certifications relative thereto. In a subsequent disciplinary petition, the Director alleged that respondent had undertaken representation of a client with whom he had a conflict of interest and that he had failed to file timely income tax returns. Respondent, in his answer, generally admitted the allegations of both petitions with one exception. He denied that investment advice given a client violated any disciplinary rule governing a lawyer's conflict of interest with a client. With that sole exception, respondent's defense was one claiming mitigation because, he claimed, at the time the violations occurred he was experiencing severe psychological problems which were the cause of his conduct. The referee's fact findings which generally substantiated the allegations of the petition are summarized below.

1. Misappropriation:

(a) By his will John Davis devised two-thirds of his estate to a sister with the remainder to his church. In 1986, during the course of probating the Davis estate, respondent received approximately $45,000 of funds belonging to the estate. He deposited those funds in his office trust account. Thereafter those deposited funds were not only wrongfully used to repay other clients whose trust funds had been misused, but also were misappropriated for the respondent's own personal and family use. Ultimately, sufficient funds were returned to the trust account to replace the misappropriations so that in the end the Davis estate suffered no loss.

(b) In the same year, while acting as an escrow agent in a real estate transaction involving a client, respondent deposited approximately $15,000 in his trust account. He likewise misappropriated a portion of those funds to his own personal use, and disbursed some of the funds to others without proper prior authorization. As with the Davis funds, those funds were eventually returned, but not until after these disciplinary proceedings were instituted. These misappropriations by the respondent violated Rules 1.15(a), (b)(4); 8.4(b), (c), Minnesota Rules of Professional Conduct (MRPC).

2. Misrepresentation: The attorney for a real estate vendor who was entitled to escrow funds being held by respondent requested disbursement of the funds. For more than a month thereafter, though repeatedly promising to remit, respondent failed to do so. In fact he was unable to do so because the escrowed funds had been misappropriated and the trust account closed. After three more months had passed, the contract vendor, who had not yet received the escrowed money due him, made a complaint to the Lawyers Board on Professional Responsibility. Respondent initially falsely represented to the Director's office that he had a cashier's check for the amount due the vendor, when, in fact he had no check. Only later did respondent acknowledge that the vendor's money was neither in his trust account nor represented by a certified check. The misrepresentations made to the vendor's attorney violated Rules 4.1 and 8.4(c), MRPC. His misrepresentation to the Director violated Rules 8.1(a)(1) and (3), MRPC as well.

3. Inadequate Trust Account Records:

(a) Since July 1, 1983, all practicing lawyers in Minnesota have been required to maintain an "Interest on Lawyers Trust Account" (IOLTA). Though respondent maintained an IOLTA, during four of the first six months of 1986 the account had negative balances, had overdraft charges, and showed at least six checks returned for insufficient funds. This account was ultimately closed in July 1986.

(b) From October 1985 through September 1986, respondent and another attorney maintained an IOLTA in a Hopkins bank. In July and August 1985 that account had overdrafts and two checks were returned for insufficient funds. No funds from this account were ever paid over to the Lawyers Trust Account Board. Money from both accounts was used by respondent to meet his other financial obligations. Shortages in IOLTA accounts and failure to remit trust funds violated Rules 1.15(a), (b)(3), (b)(4), (c), (d), (e), 8.4(b), (c), MRPC.

(c) As a practicing attorney respondent was required to maintain an accounting system that provided for a monthly reconciliation of statements with client subsidiary ledgers, and annotation of checks and deposit tickets sufficient to establish whose funds were in trust. DR 9-104(A), Minnesota Code of Professional Responsibility (MCPR), and after September 1, 1985, Rule 1.15(g), MRPC. Although respondent failed to maintain a complying system, in both 1985 and 1986, he did falsely certify to this court that he had in violation of DR 1-102(A)(4) and DR 9-104(B), MCPR, and, after September 1, 1985, Rules 8.4(c) and 1.15(h), MRPC.

4. Conflict of Interest: While representing clients named Lundgrens, respondent suggested to them that they invest funds in one of his corporate clients' firms. At the time respondent made the suggestion he knew that at least four corporate checks which had been issued to him had been dishonored upon presentation for payment. The Lundgrens subsequently did invest funds in the corporation--a portion of which came back to the respondent as attorney fees for representation of the corporation in securing refinancing. Respondent disputed the Director's claim that he had failed to make a sufficient disclosure to the Lundgrens of the nature and extent of his connection with the corporate client and of the risk of investing in the corporation. Notwithstanding respondent's assertion, there exists sufficient credible evidence to sustain the referee's finding that the respondent's conduct violated Rules 1.7(b) and 8.4(c), MRPC. ¹

5. Income Taxes: Respondent had sufficient income to require that he file federal and state income tax returns for the years 1981 through 1983. He failed to file those returns until August of 1984. Beyond taxes which had been withheld or paid on estimates, no taxes were due for those years. His 1985 returns were filed when eight months past due, and after the Director's petition for disciplinary action had been filed. On the day of the referee hearing, that tax, interest, and penalty were paid. Prior to September 1, 1985, respondent's failure to file those returns violated DR 1-102(A)(5) and (6), MCPR, and thereafter Rule 8.4(d), MRPC, and our holding in In re Bunker, 294 Minn. 47, 199 N.W.2d 628 (1972).

6. Mitigation: As mitigation excusing the misconduct, the respondent contends that the various instances of misconduct were the direct result of a psychological disability. One advancing such a claim has the burden of establishing by clear and convincing evidence each of the five requirements outlined in In re Weyhrich, 339 N.W.2d 274 (Minn.1983). ²

The referee made four key findings relative to respondent's mitigation claim. First, he acknowledged that respondent had psychological difficulties in the nature of an adjustment disorder, but observed that that type of disorder is not a "severe" problem on a recognized psychological diagnostic scale and "did not result in impairment of respondent's cognitive functions, his ability to direct his actions, or to know right from wrong." Secondly, although acknowledging that respondent's adjustment disorder "may have contributed in some way" to respondent's financial problems, the referee noted that respondent knew he was wrongfully taking client funds, and that personal financial reverses and poor investment choices were the immediate cause of respondent's misappropriations. Thirdly, the referee acknowledged that respondent was undergoing counseling but observed that continuation of the counseling was indefinitely indicated into the future. Implicit in that finding was that up until...