In re Holcomb

• Decision Date: 20 December 2007
• Docket Number: No. 200,448-2.,200,448-2.
• Citation: 173 P.3d 898,162 Wn.2d 563
• Court: Washington Supreme Court
• Parties: In the Matter of the DISCIPLINARY PROCEEDING AGAINST James Byron HOLCOMB, an attorney at law.

173 P.3d 898

162 Wn.2d 563

In the Matter of the DISCIPLINARY PROCEEDING AGAINST James Byron HOLCOMB, an attorney at law.

No. 200,448-2.

Supreme Court of Washington, En Banc.

Argued September 11, 2007.

Decided December 20, 2007.

Brett Andrews Purtzer, Attorney at Law, Tacoma, WA, James Byron Holcomb, Attorney at Law, Bainbridge Island, WA, for Petitioner.

M. Craig Bray, Washington State Bar Association, Seattle, WA, for Respondent.

FAIRHURST, J.

¶ 1 James Byron Holcomb appeals the Washington State Bar Association (WSBA) Disciplinary Board's (Board) recommendation that he be suspended from the practice of law for six months. The WSBA charged Holcomb with two counts of misconduct arising out of his representation of John C. Schiffner. The hearing officer and Board concluded that Holcomb violated former RPC 1.8(a) (1993 & 2000) and former RPC 1.7(b) (1995) because Holcomb sought and obtained 24 interest free loans from Schiffner, Holcomb did not advise Schiffner that he could seek independent counsel about the advisability of entering into the transactions, and Holcomb did not inform Schiffner of Holcomb's precarious financial condition.

¶ 2 Holcomb does not challenge the hearing officer's and Board's findings of fact. Holcomb argues that, because the source of funds for the loans was a checking account held in the name of Schiffner, Schiffner's wife, and the Schiffners' revocable trust, he did not engage in a transaction with his client, who was Schiffner individually. Holcomb further argues that the Board erred in imposing a six month suspension because his actions were merely negligent rather than knowing. The WSBA argues the court should affirm the hearing officer's and Board's conclusions of law and argues the recommended six month suspension is appropriate.

¶ 3 We hold that the hearing officer and Board properly determined that Holcomb violated former RPC 1.8(a) and former RPC 1.7(b) and impose the Board's recommended sanction of a six month suspension.

I. FACTUAL AND PROCEDURAL HISTORY

A. Factual background

¶ 4 Holcomb was admitted to the practice of law in Washington on September 22, 1967. In 1998, Holcomb agreed to represent Schiffner for an hourly fee to review files and make recommendations regarding an equal employment opportunity action Schiffner had filed pro se against the secretary of the navy. Holcomb and Schiffner later signed a second fee agreement in which Holcomb agreed to represent Schiffner for an hourly fee at an Equal Employment Opportunity Commission (EEOC) hearing.

¶ 5 When the EEOC denied Schiffner's claim and Schiffner decided to appeal to the United States District Court for the Western District of Washington, Schiffner and Holcomb agreed to a contingent fee arrangement and signed a third fee agreement. In November 2002, the district court dismissed Schiffner's appeal. In early January 2003, Holcomb agreed to determine the likelihood of success at the United States Court of Appeals for the Ninth Circuit, and he and Schiffner entered into a fourth fee agreement in which Holcomb agreed to file a notice of appeal at the Ninth Circuit Court of Appeals and seek mediation of Schiffner's claim. Sometime in early March 2003, Schiffner and Holcomb reached an impasse regarding the representation in the appeal and Holcomb withdrew.

¶ 6 The disciplinary matter in this case arose out of a series of loans that Holcomb requested from Schiffner.¹ From December 1999 through March 2001, Holcomb borrowed a total of $52,300 in 24 individual loans. The amount of each individual loan ranged from $750 to $3,500. Most of the loans were outstanding for no more than two weeks. Some of the loans were paid back via postdated checks given at the time the loan was issued. However, the last loan was outstanding for over a year. Nevertheless, Holcomb eventually repaid all of the loans.

¶ 7 The loans were not subject to a written loan agreement, payment of interest, penalties or fees, or a schedule for repayment of the principal. Holcomb did not provide security for the loans, although most of them were short term and for relatively small amounts. Holcomb did not advise Schiffner that his personal interests might conflict with Schiffner's, obtain a written waiver of a conflict of interest, provide Schiffner with information about his current financial condition, or advise Schiffner that he could seek independent counsel about the suitability of his loan request.

¶ 8 Eleven of the loans were made by cashier's check to J. Byron Holcomb and contained references to John C. Schiffner, John Schiffner, or Schiffner. Thirteen loans were made by personal check from an account in the name of the Schiffner trust agreement, John C. Schiffner, and Anita G. Schiffner (Schiffner's wife). Eight of the personal checks were signed by Schiffner. Three of the personal checks were signed by his wife. Neither Schiffner nor his wife signed as trustee of the Schiffner trust agreement. Holcomb repaid the loans by personal checks made payable to John Schiffner, with no reference to the trust or Schiffner's wife.

B. Procedural history

¶ 9 The WSBA filed a complaint with the Board under ELC 10.3, charging Holcomb with two counts of misconduct. Count one charged him with violating former RPC 1.8(a)² (conflict of interest; prohibited transactions; current client) and count two charged him with violating former RPC 1.7(b)³ (conflict of interest; general rule).

¶ 10 Following testimony and closing arguments, the hearing officer entered 12 findings of fact. In addition to admitted allegations, the hearing officer found: (1) there was no meeting of the minds regarding the fee agreement for the appeal to the Ninth Circuit Court of Appeals and the representation ended; (2) while representing the Schiffners, Holcomb had received multiple short term loans totaling $52,500⁴ from the Schiffners; (3) the loans were made by checks written on an account for the Schiffner trust, which is made up of John and Anita Schiffner, and for whom the money is held in trust; (4) when obtaining the loans from the Schiffners, Holcomb did not advise them that his personal interests might conflict with their interests; (5) Holcomb never advised the Schiffners that they could seek the advice of independent counsel regarding whether they should loan him the money he had requested; (6) Holcomb did not discuss with the Schiffners whether the loans would bear interest or whether they would contain any provisions for fees or penalties for late or incomplete payments or bank charges incurred by the Schiffners in connection with a payment; (7) the loans were not evidenced by promissory notes or other written instruments; (8) none of the loans provided for interest, late fees, penalties for checks not backed by sufficient funds, or other such common loan requirements; (9) at the time of the loans Holcomb was having cash flow problems but owned significant real property assets; (10) none of the loans was secured; (11) some of Holcomb's payments were late and some of the checks he had written did not clear the bank; and (12) the Schiffners bore the consequences of Holcomb's late payments or insufficient funds, including additional bank charges.

¶ 11 The hearing officer entered five conclusions of law. He concluded Holcomb was culpable on count one, the violation of former RPC 1.8(a), because he entered into loan transactions with Schiffner "when the terms were not fair and reasonable to [Schiffner] and were not fully disclosed and transmitted in writing to [Schiffner]." Findings of Fact, Conclusions of Law and Hearing Officer's Recommendation (FFCL) at 9, ¶ 14. He found unconvincing Holcomb's attempts to narrowly define his representation to Schiffner individually and commented that such a definition would provide a lawyer with a defense whenever he or she entered into a transaction with a married client. The hearing officer was also troubled by Holcomb's arguments that his constitutional right to contract had been violated because the hearing officer stated that the contract terms Holcomb had secured with Schiffner for the loans were facially unreasonable. The hearing officer concluded the WSBA proved by a clear preponderance of the evidence that Holcomb was culpable on count two, the violation of former RPC 1.7(b), because he continued to represent Schiffner while using him as the source for multiple short term loans. He also found Holcomb's claims about the "alter ego" of the trust unpersuasive based on testimony at the hearing. FFCL at 10, ¶ 18.

¶ 12 In determining the appropriate sanction for Holcomb's violations, the hearing officer applied the American Bar Association's Standards for Imposing Lawyer Sanctions (1991 ed. & Supp.1992) (ABA Standards). First, he determined that the presumptive sanction in the ABA Standards was found in standard 4.32.⁵ He stated that Holcomb "acted knowingly," "knew he was seeking to borrow money from a client," and by "entering into the loan transactions with the Schiffners [he] knowingly failed to avoid the conflicts of interest with his client." FFCL at 11, ¶¶ 21-23. He held that Holcomb's conduct "caused actual and potential injury to the client and to the public." FFCL at 11, ¶ 24. The Schiffners "became uncomfortable in their dealings" with Holcomb. FFCL at 11, ¶ 25. He concluded there was "actual pecuniary harm" because the Schiffners did not earn interest and were not reimbursed for fees and charges. FFCL at 11-12, ¶ 26. Finally, he concluded that because Holcomb was compromised financially, his judgment also may have been compromised. The hearing officer concluded that the appropriate presumptive sanction was suspension.

¶ 13 Next, the hearing officer evaluated the parties' proposed aggravating and mitigating factors.⁶

¶ 14 The hearing officer adopted all of the WSBA's proposed aggravating factors, which were: (b) dishonest or selfish motive, (d) multiple offenses, (g) refusal to acknowledge wrongful nature of...