IN RE DISCIPLINARY ACTION AGAINST HANVIK

• Decision Date: 27 April 2000
• Docket Number: No. C3-99-815.,C3-99-815.
• Citation: 609 N.W.2d 235
• Parties: In re Petition for DISCIPLINARY ACTION AGAINST James T. HANVIK, an Attorney at Law of the State of Minnesota.
• Court: Minnesota Supreme Court

609 N.W.2d 235

In re Petition for DISCIPLINARY ACTION AGAINST James T. HANVIK, an Attorney at Law of the State of Minnesota.

No. C3-99-815.

Supreme Court of Minnesota.

April 27, 2000.

Edward J. Cleary, Director, Eric T. Cooperstein, Senior Assistant Director, Office of Lawyers Professional Responsibility, St. Paul, for appellant.

Michael J. Hoover, Minneapolis, for respondent.

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

OPINION

PER CURIAM.

The Director of the Office of Lawyers Professional Responsibility filed a petition for disciplinary action against respondent James T. Hanvik on May 19, 1999. Hanvik responded on May 25, 1999, admitting most of the allegations in the petition. A hearing was held on August 20, 1999, where Hanvik presented mitigation evidence and evidence as to the few contested factual matters. The referee filed his Findings of Fact, Conclusions of Law and Recommendations for Discipline on September 30, 1999, in which he rejected Hanvik's mitigation claims of psychological disorder, remorse, pro bono work, and volunteer activities, and recommended that Hanvik be indefinitely suspended. We agree and order an indefinite suspension from the practice of law without leave to apply for reinstatement for two years.

James T. Hanvik was admitted to the practice of law in Minnesota on October 17, 1984. He has no prior disciplinary history. In December 1996, the Director of the Office of Lawyers Professional Responsibility (director) received a complaint from Sharon Henke, a client of Hanvik's, charging that he was withholding funds from her. An investigation of the complaint led to an audit of Hanvik's trust account for the period of November 1994 through August 1998. The audit discovered numerous misappropriations from Hanvik's trust account, as well as a general failure to maintain trust account records. The referee's findings of fact about the misconduct, which were not contested by either party, are summarized here.

Hanvik's misconduct primarily arose in three separate legal matters. The first count of misconduct involved Hanvik's actions while handling a legal matter for Sharon Henke from February 1995 to December 1996. Henke retained Hanvik to pursue a dram shop action and to handle the estate of her son, Kevin Conrad, who died on November 25, 1994, in a car accident after leaving a bar. Hanvik's representation violated a number of the Minnesota Rules of Professional Conduct (MRPC). First, Hanvik endorsed Conrad's last paycheck for $887.78 (Conrad paycheck), which was made out to Henke as the personal representative of his estate, without Henke's authorization. Then Hanvik deposited it in his trust account and disbursed the proceeds to himself, thus misappropriating the funds. Then, when Henke repeatedly inquired about the status of the check from March 1995 to November 1996, Hanvik failed to respond to her inquiries.

Hanvik settled the dram shop action, with Henke's authorization, for $8,500 in the fall of 1995. Shortly after negotiating the settlement, but prior to receiving a settlement check, Hanvik disbursed a portion of his share of the settlement to himself, thus misappropriating $2,000 of other clients' funds in his trust account to do so. Upon receiving the check, Hanvik gave Henke $5,000, deducting $264 for filing fees he had never incurred and retaining $328.97 to "take care of any final expenses that might arise."

Hanvik decided to withdraw from his representation of Henke in December 1996, prompted in part by her threats to complain about his mishandling of the Conrad paycheck. In his withdrawal letter, he told Henke that her accusations of "some sort of ethical lapse are entirely unfounded." He falsely stated "[n]otwithstanding the fact that we had, and have, every right to pay out those funds for services and costs, in reviewing my trust account records, I discovered that I have not expended any funds from the deposit of Kevin's check." Hanvik enclosed a check for $1,216.75 to cover the $887.78 Conrad paycheck and the $328.97 he had retained from the settlement.¹

Henke filed a complaint with the director's office a few days before receiving Hanvik's letter and check, which prompted an investigation. In response to a request by an investigator, Hanvik produced a ledger purporting to detail the trust account activity for the Henke representation. The ledger did not reflect Hanvik's disbursement of the Conrad paycheck, did not comport with Hanvik's other trust account records, and was not prepared contemporaneously with the documented transactions. Hanvik did not disclose to the investigator that the ledger was not accurate and he did not respond to the investigator's request for additional information about the ledger.

Based on these facts, the referee concluded that Hanvik violated Rules 1.4, 1.15(a), 1.15(b), 1.15(h), 4.1, 8.1(a)(1), and 8.4(c) of the MRPC during his representation of Henke and the subsequent investigation. Specifically, Hanvik misappropriated the Conrad paycheck, made false statements to Henke, failed to respond to Henke's inquiries about the Conrad paycheck, misappropriated trust account funds by distributing $2,000 to himself prior to receipt of the settlement check, falsely billed Henke for filing fees not incurred, and provided an incomplete and inaccurate ledger to the District Ethics Committee investigator. The referee found, however, that "notwithstanding Hanvik's misconduct," ultimately Henke did not suffer any loss "except for the use of the funds and interest on money she should have received earlier."

The second count of misconduct involved Hanvik's representation of J.B. in a personal injury claim. The claim was settled on November 17, 1994, for $5,000 with J.B.'s consent. Medicare held a subrogation claim of $1,934.46 on the settlement.² Knowing this, Hanvik falsely told a Medicare claims agent, Karen Holst, that the case was settled for $3,500, inducing Medicare to reduce its claim to one-third of the purported settlement amount, or $1,166.67. Then, although Hanvik gave J.B. her share of the settlement and wrote a check to himself for his fees, he did not forward the $1,166.67 subrogation amount to Medicare.

Holst wrote Hanvik in August 1995 and again in January 1997 inquiring about the status of the settlement. In response to these inquiries, Hanvik first falsely claimed that the delay was due to his inability to contact J.B. regarding the settlement of the Medicare claim. Then, in April 1997, Hanvik sent Medicare a check for $912.29 rather than the entire $1,166.67 that Medicare believed it was owed, explaining that he had deducted $150 for a knee brace purchased by J.B. in 1993, and $104.38 for one-half of the costs of the lawsuit J.B. had paid to him. Hanvik claimed that J.B. was entitled to that part of Medicare's share, but he did not forward the money to J.B., and never held those funds in his trust account in anticipation of forwarding them to J.B.

At the time Hanvik paid Medicare the $912.29, he did not have sufficient funds in his trust account from J.B.'s settlement to pay the entire subrogation claim. This was due to the fact that he had made additional disbursements totaling $750 to himself out of the account in March 1996 that he attributed to the J.B. case. Hanvik had issued the checks to himself as "cost reimbursements" and "fees" even though he was not entitled to any additional fees from the case and had been reimbursed for all costs.

On the eve of his disciplinary hearing, Hanvik sent a check for $500 to Medicare, a portion of the money he wrongfully kept by falsely representing the extent of J.B.'s settlement. Hanvik also brought to the hearing a check for $254.38 made out to J.B., claiming that he was unable to locate J.B. to reimburse her for those amounts he deducted from Medicare's claim.³ The referee concluded that Hanvik violated Rules 1.15(a), 8.4(c), and 8.4(d) of the MRPC for making false statements to Medicare and for misappropriating $750 in March 1996.

The third count of misconduct stems from Hanvik's meeting with T.K. on May 8, 1996, to discuss representing T.K. in a divorce. At the meeting, T.K. gave Hanvik a $500 retainer and told Hanvik not to proceed with an action until further contact. T.K. specifically instructed Hanvik not to contact him because he did not want his wife to know he was considering a divorce.

Hanvik deposited the retainer from T.K. in his trust account, but never heard from T.K. again about the divorce. While there were no withdrawals corresponding to T.K.'s funds during the audit period, the trust account balance fell to $108.23 in April 1998 indicating the retainer had been misappropriated. In an attempt to explain this discrepancy, Hanvik falsely claimed in a letter to the director on July 14, 1998, that he had earned all of T.K.'s retainer. In support of that claim, Hanvik produced a billing statement, dated June 15, 1996, which falsely represented that he had met with T.K. and prepared the necessary documents to initiate divorce proceedings. Although Hanvik may have been entitled to keep some of the retainer and T.K. never asked for the retainer to be returned, on the day of the hearing Hanvik returned the entire $500 to T.K. plus $130 in interest. The referee concluded that Hanvik violated Rules 1.15(a), 8.1(a)(1), and 8.4(c) of the MRPC by preparing a false billing statement and providing it to the director, and failing to hold T.K.'s retainer in his trust account.

Count four of the director's petition for disciplinary action identified various other misappropriations discovered during the investigation of Hanvik's trust account records. First, the trust account should have had a minimum balance of $2,000 through May 1996 corresponding to funds held on behalf of a client, Land Office Realty, Inc. (LORI), that were the subject of a bankruptcy action. However, from November 1994 to May 1996 the trust account held no more than $297.71. In May 1996, after ...