In re Petition For Disciplinary Action v. Jo M. Fairbairn

• Decision Date: 14 September 2011
• Docket Number: No. A10–0977.,A10–0977.
• Citation: 802 N.W.2d 734
• Parties: In re Petition for DISCIPLINARY ACTION AGAINST Jo M. FAIRBAIRN, a Minnesota Attorney, Registration No. 28137.
• Court: Minnesota Supreme Court

802 N.W.2d 734

In re Petition for DISCIPLINARY ACTION AGAINST Jo M. FAIRBAIRN, a Minnesota Attorney, Registration No. 28137.

No. A10–0977.

Supreme Court of Minnesota.

Sept. 14, 2011.

Syllabus by the Court

Attorney's misappropriation of $144,000 in client funds warrants an 18–month suspension from the practice of law followed by a 3–year probationary period and a permanent prohibition against being an authorized signer on a client trust account, where the attorney repaid the funds before she was notified of the Director's investigation and there were substantial mitigating factors.

Martin A. Cole, Director, Cassie Hanson, Senior Assistant Director, Office of Lawyers Professional Responsibility, St. Paul, MN, for petitioner.Allen I. Saeks, Leonard, Street and Deinard Professional Association, Minneapolis, MN, for respondent.

OPINION

PER CURIAM.

The Director of the Office of Lawyers Professional Responsibility (“the Director”) filed a petition for disciplinary action against respondent Jo M. Fairbairn for both the intentional and unintentional misappropriation of client trust account funds. After a hearing on the petition, the referee recommended a 6–month suspension, a prohibition on access to client trust funds, and payment of $900 in costs. The Director disputes several of the referee's findings of facts, the referee's failure to find aggravating factors, and the recommended sanction. The Director argues that Fairbairn should be disbarred. Fairbairn admits she intentionally misappropriated funds and agrees with the referee's recommended sanction of a 6–month suspension, but disputes the referee's finding that she was not entitled to mitigation on the basis of a severe psychological disorder. We suspend Fairbairn from the practice of law for a minimum of 18 months.

For most of her legal career, Fairbairn has been a shareholder in the intellectual property law firm of Kinney & Lange, P.A. (the “firm”). Since 2006 or 2007, Fairbairn has also been the firm's treasurer, with primary responsibility for the firm's client trust and operating accounts.

In 2008, the firm suffered the effects of the economic recession and lost client revenue. On October 1, 2008, Fairbairn transferred $25,000 from the firm's client trust account to the firm's operating account. Two days later, Fairbairn transferred another $35,000 from the client trust account to the operating account. Without the two transfers, the firm's operating account would have been overdrawn on October 3. The transfers, however, created a $60,000 shortage in the trust account. On October 31, 2008, Fairbairn transferred $25,000 from the firm's operating account back to the client trust account. Two months later, Fairbairn transferred another $35,000 from the firm's operating account to the client trust account in order to eliminate the shortage in the firm's trust account.

However, between January 5 and February 2, 2009, Fairbairn transferred an additional $84,000 from the firm's client trust account to the firm's operating account, leaving only a $3,219.37 balance in the trust account. The trust account became overdrawn on February 27, 2009, when the firm attempted to transfer funds from the client trust account to the firm's operating account.

U.S. Bank (the “Bank”) notified the firm of the February 27, 2009, overdraft by written notice. Under Minn. R. Prof. Conduct 1.15(k)–( l ), an overdraft in a lawyer trust account is also promptly reported by the financial institution to the Office of Lawyers Professional Responsibility; the Director's office received a copy of the Bank notice on March 5, 2009. After transferring $4,000 to the client trust account on February 24, 2009, Fairbairn transferred an additional $80,000 from the firm's operating account to its client trust account between March 2 and March 10, 2009. By March 10, all of the money transferred from the client trust account to cover the firm's operating expenses had been returned to the trust account.

Shortly after making the final transfer to reimburse the trust account in full for the misappropriation, Fairbairn received a letter from the Director requesting an explanation for the overdraft in the trust account. Fairbairn provided the Director with the firm's books and records associated with the client trust account. The Director's audit of the firm's accounts revealed Fairbairn's unauthorized transfers from the client trust account. The Director also discovered a shortage of $1,944 that predated Fairbairn's responsibility for the account and two instances in which checks issued to a client from the trust account exceeded the amount to which the client was entitled, resulting in the inadvertent misappropriation of other client funds to cover the excess amounts disbursed.

The Director filed a petition for disciplinary action against Fairbairn, alleging that she violated Minn. R. Prof. Conduct 1.15(a) ¹ and 8.4(c) ². In her answer, Fairbairn admitted that she made the transfers but asserted several mitigating factors, including: (1) a severe psychological disorder, (2) extreme stress, (3) full restitution, (4) lack of harm, (5) remorse, (6) cooperation with the investigation, (7) contributions to the legal community, and (8) no prior disciplinary history.

At the disciplinary hearing, Fairbairn again admitted making the transfers. Fairbairn presented the deposition testimony of her psychiatrist, Dr. Karen Dickson, who stated that Fairbairn had been treated for recurrent major depression, with periodic breakthroughs of very severe depression, for 21 years. Fairbairn also called as a witness her therapist, Rosemary Martin, who testified that Fairbairn had an adjustment disorder and major depression with underlying post-traumatic stress attributes resulting from childhood abuse and trauma. Fairbairn testified to stressors in her personal and professional life existing at the time of her misconduct. Fairbairn stated that her older sister's suicide three years earlier at the age of 59 affected her because, at the time of the misappropriation, Fairbairn was approaching age 59. Fairbairn further testified that, during the time of the misconduct, she took care of her daughter and infant grandchild because her daughter could not lift the baby following a caesarean birth. Fairbairn also explained that she suffered from additional stress as a result of a condition that required her to take medication that is dangerous if taken incorrectly.

The referee found that Fairbairn had violated Minn. R. Prof. Conduct 1.15(a) and 8.4(c). The referee found no aggravating factors. The referee made several findings of fact that supported mitigating circumstances, but expressly listed only one—that the conduct was unlikely to happen again—as a mitigating factor. The referee recommended that Fairbairn be suspended from the practice of law for six months and permanently prohibited from handling client trust accounts.

I.

The Director challenges the following finding of fact by the referee: “The transfers from the trust account to [the] K & L firm account were for the benefit of the firm and thereby provided incidental benefit to the Respondent. The transfers were not primarily for the benefit of Respondent.”

The referee requested a transcript of the proceedings, a copy of which was timely filed with the court. As a result, the referee's findings in this matter are not conclusive. Rule 14(e), Rules on Lawyers Professional Responsibility (RLPR). Instead, we review the referee's findings, as well as the referee's failure to make specific findings, for clear error. In re Mayne, 783 N.W.2d 153, 158 (Minn.2010) (reviewing the referee's findings for clear error); In re Albrecht, 779 N.W.2d 530, 535 (Minn.2010) (reviewing the referee's absence of specific findings for clear error). Findings are clearly erroneous if, after review, we are “left with the definite and firm conviction that a mistake has been made.” Albrecht, 779 N.W.2d at 535–37 (quoting In re Strid, 551 N.W.2d 212, 215 (Minn.1996)) (internal quotation marks omitted). A referee's findings will be upheld if they are supported by the evidence. Id.

Fairbairn testified that it is Kinney & Lange's practice to request that smaller clients, as well as new clients and clients with a poor payment record, advance funds to the firm for filing, maintenance, and other fees payable to the United States Patent and Trademark Office or to comparable agencies in foreign countries. For larger clients, however, the firm paid filing and other fees to the Patent and Trademark Office without requiring such clients to advance the funds.

According to the undisputed evidence before the referee, the balance in the Kinney & Lange operating account at the end of the day on September 30, 2008, was approximately $43,500. The following morning, Fairbairn transferred $25,000 from the firm's client trust account to the firm's operating account. On October 3, Fairbairn transferred another $35,000 from the firm's client trust account to the firm's operating account. Between October 1 and October 3, checks cleared the firm's operating account payable to the Patent and Trademark Office, the Minnesota Department of Revenue, the Internal Revenue Service, various employees of the firm, and the 312 Partnership (the entity owned in part by Fairbairn and her husband, from which the firm leased the building). Without the transfers of the misappropriated funds from the firm's client trust account, the firm's operating account would have been overdrawn on October 3.

Similarly, according to the uncontroverted evidence before the referee, the balance in the firm's operating account at the end of the day on January 2, 2009, was $62,973.95. On Monday, January 5, Fairbairn transferred $25,000 from the firm's client trust account to the firm's operating account. Fairbairn subsequently transferred another $30,000 from the firm's client trust account to the firm's operating account on January 7. Between ...