In re Majors
| Citation | 973 N.W.2d 621 |
| Decision Date | 04 May 2022 |
| Docket Number | A21-0242 |
| Parties | IN RE Petition for DISCIPLINARY ACTION AGAINST B. Joseph MAJORS, II, a Minnesota Attorney, Registration No. 0066734. |
| Court | Minnesota Supreme Court |
Susan M. Humiston, Director, Binh Tuong, Managing Attorney, Office of Lawyers Professional Responsibility, Saint Paul, Minnesota, for petitioner.
B. Joseph Majors, II, Park Rapids, Minnesota, pro se.
The Director of the Office of Lawyers Professional Responsibility (Director) filed a petition for disciplinary action against B. Joseph Majors, II. The Director alleged that Majors misappropriated client funds, failed to safeguard client funds, and used an improper fee agreement. We appointed a referee, who concluded that Majors failed to safeguard client funds and used an improper fee agreement, but that the Director failed to show by clear and convincing evidence that Majors misappropriated client funds. The referee recommended that Majors receive a public reprimand and a two-year term of supervised probation.
The Director challenged the referee's findings of fact and conclusion that Majors did not misappropriate client funds. Majors agrees with the referee's findings and conclusion. We conclude that the referee erred in finding that Majors did not misappropriate client funds. We further conclude that, given the unique facts of this case, the appropriate discipline is a suspension for 90 days.
B. Joseph Majors, II, was admitted to practice law in Minnesota in 1973. For most of his career, he practiced law as an Assistant Wadena County Attorney or the Wadena County Attorney; since 2011, he has maintained a solo practice in Park Rapids. Majors has been admonished or warned seven times over his career for misconduct unlike and unrelated to the conduct in this matter. All but one of these disciplinary actions took place over twenty-five years ago. The misconduct here arises from two more recent client matters and the Director's disciplinary investigations into those matters. For the first matter, involving the client C.L., the Director alleged that Majors misappropriated client funds and failed to safeguard client funds. In the second matter, involving the client A.C., the Director alleged the use of an improper fee agreement. Each matter is addressed below.
In January 2020, Majors agreed to represent C.L. in domestic-abuse and divorce matters under an hourly fee arrangement with no written fee agreement. That same month, on January 23, 2020, we filed an order placing Majors on involuntary restricted status because he had not complied with continuing legal education requirements. One week later, although Majors remained on restricted status, C.L. paid Majors a $1,500 advance fee, including a $380 filing fee advance. Majors deposited the funds into his business operating account instead of his trust account. He had not yet earned any part of the fee.
On February 26, 2020, Majors was reinstated to active status. Between March 3 and March 26, Majors billed C.L. $990 and paid a cost on C.L.’s behalf totaling $54.82, leaving $455.18 of C.L.’s unearned funds in his business account. Although C.L.’s advanced funds were not depleted, on March 27, 2020, C.L. paid Majors another unearned $1,000 advance fee. Majors deposited the funds into his business account. On May 7, 2020, C.L. paid Majors a final $300 advance fee, which Majors again deposited into his business account. At this time, Majors held $894.18 of C.L.’s funds in the account, portions of which remained unearned, and which included the filing fee advance.
Throughout his representation of C.L., Majors continued to withdraw from his business account to pay business expenses. These withdrawals led to repeated shortages, during which the account balance did not cover C.L.’s advanced and unearned funds. The largest shortages exceeded $1,000, but they were sometimes as small as $29.03. Majors paid general business expenses from the account, including cleaning services, payroll, and rent. He noted at his disciplinary hearing and at oral argument, however, that he always had enough funds available in his other accounts to protect C.L.’s financial interests.
In May 2020, the Director wrote to Majors advising him of the ongoing investigation into this matter1 and that, absent a compliant written flat-fee agreement, all unearned fees must be deposited into a trust account and withdrawn when earned under Minnesota Rule of Professional Conduct 1.15(c)(5). The Director also asked Majors to provide documents showing that any unearned fees were transferred to a trust account or refunded to C.L. Almost a month later, Majors responded to the Director. He provided a copy of a written retainer agreement with C.L. dated June 7, 2020. He also said that he would continue holding the unearned balance of $38.68 from C.L. in his business account—not his trust account—until the next billing period, at which point he would have earned the remaining balance. One month later, on July 8, 2020, Majors earned the $38.68 balance.
In the second client matter, A.C. retained Majors to represent him in defense of felony-controlled substance charges in April 2016. In their fee agreement, A.C. agreed to pay a flat legal fee of $7,500. The agreement further stated that the legal fees would not be held in trust and would not be refunded if A.C. terminated the agreement. The agreement did not provide the five notifications for nonrefundable fee agreements required by Minnesota Rule of Professional Conduct 1.5(b)(1).
At the July 6, 2021 disciplinary hearing, Majors admitted to all the facts presented by the Director. Majors also admitted that the fee agreement with A.C. violated Minnesota Rule of Professional Conduct 1.5(b)(1). He testified, however, that he had C.L.’s permission to keep money in the operating account so that he could pay the court filing fee as soon as he located and served C.L.’s wife, and that he had sufficient funds to safeguard C.L.’s advances should expenditure of the unearned funds become necessary. Majors further testified that he no longer uses non-compliant fee agreements, his misconduct caused neither A.C. nor C.L. any harm, he understood that he must stay abreast of professional ethics rules, and he was no longer accepting new clients.
Finding Majors's testimony to be credible, the referee found that Majors failed to safeguard client funds and used an improper fee agreement, violating Minnesota Rules of Professional Conduct 1.15(a),2 1.15(c)(5),3 and 1.5(b)(1)–(3).4 Although the referee implied that Majors may have accidentally misappropriated client funds, she noted that Majors did not defraud or deceive C.L., and that Majors ultimately earned all the advanced fees. The referee therefore found that the Director failed to present clear and convincing evidence that Majors intentionally misappropriated client funds in violation of Minnesota Rule of Professional Conduct 8.4(c).5 The referee ultimately recommended that Majors receive a public reprimand and two years of supervised probation.
The Director asks this court to impose a higher level of discipline to reflect the serious nature of misappropriation. Majors maintains that he did not misappropriate client funds.
When one of the parties in a disciplinary matter timely orders a transcript, as the Director did here, the referee's findings of fact and conclusions of law are not binding. Rule 14(e), Minnesota Rules on Lawyers Professional Responsibility (RLPR). We nevertheless extend "great deference" to those findings and conclusions, In re MacDonald , 906 N.W.2d 238, 243 (Minn. 2018), and review the referee's application of the Minnesota Rules of Professional Conduct to the facts of the case for clear error, In re Aitken , 787 N.W.2d 152, 158 (Minn. 2010). The clearly erroneous standard is met "when we are left with the definite and firm conviction that a mistake has been made." In re Quinn , 946 N.W.2d 583, 589 (Minn. 2020) (citation omitted) (internal quotation marks omitted).
The Director challenges the referee's findings and conclusion that Majors did not misappropriate client funds in the C.L. matter. Accordingly, the Director asks this court to impose more extensive discipline—a minimum suspension of 18 months—than the public reprimand and two-year supervised probation recommended by the referee.
"A lawyer [intentionally] misappropriates funds when funds are not kept in trust and are used for a purpose other than one specified by the client." Quinn , 946 N.W.2d at 589 (Minn. 2020) (citation omitted) (internal quotations omitted). Conduct is intentional misappropriation when the balance in a business account is "repeatedly less than the total amount of client funds" that should have been held. In re Eskola , 891 N.W.2d 294, 297 (Minn. 2017). Even "borrowing" funds that the attorney later replaces is considered to be intentional misappropriation—it does not matter that the attorney did not intend to permanently deprive the client of those funds. Id. at 299 (quoting In re Fairbairn , 802 N.W.2d 734, 743 (Minn. 2011) ).6
In short, when an attorney holds client funds in a business account and spends them for any purpose not intended by the client, and the account balance dips below the amount of the client's money that should be present in the account, the attorney intentionally misappropriates those funds in violation of Minnesota Rules of Professional Conduct 1.15(a) and 8.4(c). See Eskola , 891 N.W.2d at 299 ().
Here, it is uncontested that Majors kept C.L.’s funds, including unearned fees and an advanced filing fee, in his business account rather than his trust account. It is also uncontested that he used those funds for non-client expenses, including his office...
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