In re Schuman
| Decision Date | 10 June 2021 |
| Docket Number | No. 19-BG-630,19-BG-630 |
| Citation | 251 A.3d 1044 |
| Parties | IN RE Jonathan R. SCHUMAN, Respondent. A Member of the Bar of the District of Columbia Court of Appeals (Bar Registration No. 459087) |
| Court | D.C. Court of Appeals |
Jonathan R. Schuman, pro se.
Jelani C. Lowery, Assistant Disciplinary Counsel, with whom Hamilton P. Fox, III, Disciplinary Counsel, and Myles V. Lynk, Senior Assistant Disciplinary Counsel, were on the brief, for the Office of Disciplinary Counsel.
Before Beckwith, McLeese, and Deahl, Associate Judges.
Schuman & Felts—a law firm serving landlords in the District of Columbia—received refund checks totaling several hundred thousand dollars from the D.C. Superior Court in 2013. The checks refunded court fees paid to carry out evictions that never occurred. Though the court fees were originally paid out of Schuman & Felts's operating account, the firm was reimbursed by its clients for advancing the fees. Any refund thus belonged to the firm's clients and not to the firm. Jonathan Schuman, the firm's sole managing partner, decided how to handle the refund checks. Current clients received their refunds. Former clients did not and were unaware of their existence. Their refunds were instead deposited into Schuman & Felts's operating account and used to pay the firm's business expenses.
That scheme ultimately came to light. Now the Board on Professional Responsibility recommends that Schuman be disbarred for it. More specifically, it recommends disbarment based on in its view that Schuman violated the following District of Columbia Rules of Professional Conduct: Rule 1.15(a), commingling and intentional misappropriation of client funds; Rule 1.15(a), failure to keep proper records; Rule 1.15(c), failure to notify and deliver client funds; and Rule 8.4(c), engaging in conduct involving dishonesty. Schuman challenges the Board's recommendation as to each rule violation found. His primary retort is that the Board misinterpreted Rule 1.15. He contends that the refunded court fees were not entrusted client funds—and thus, could not have been misappropriated under that rule—because the court fees were paid out of Schuman & Felts's operating account and were originally paid by the firm's clients to satisfy a legal bill. We disagree and hold that the refund checks were entrusted client property that Schuman was required to handle in accordance with Rule 1.15.
Because Schuman misappropriated his former clients’ funds, disbarment is the presumptive sanction. In re Addams , 579 A.2d 190, 191 (D.C. 1990) (en banc). Schuman contends this presumption is overcome here because his misconduct stemmed from severe depression and, in his view, that qualifies as an "extraordinary circumstance[ ]" worthy of mitigating the presumptive sanction. Based on the record before us, we cannot fault the Board for determining that Schuman failed to establish a causal connection between his depression and his misconduct. We therefore adopt the Board's recommended sanction and disbar him.
In 1998, Schuman became a member of the D.C. Bar and joined his father's law firm, Schuman & Felts. He later joined the ranks of partner alongside his father and another attorney, Timothy Cole, with each possessing a one-third partnership interest in the firm. In 2012, Schuman's father retired, transferring his one-third share of the partnership to Schuman. Displeased with this decision, Cole left Schuman & Felts in early 2012, "taking as many as 70 percent of the firm's clients with him." The "[l]oss of clients to Mr. Cole's new firm caused considerable ... financial damage to Schuman & Felts" and "the need for additional income to replace that lost to Mr. Cole's firm became critical by early 2013."
As if on cue, in January 2013, Schuman & Felts began receiving checks—sometimes hundreds of checks at a time—from the D.C. Superior Court for $165 each. The checks came without warning or explanation, with the only identifying feature on each being a landlord/tenant docket number. Schuman's staff called the Clerk of the Landlord & Tenant Branch of the D.C. Superior Court, who advised that the checks were refunds for certain "Writ of Restitution" fees paid by Schuman & Felts, dating back to 2009. Writs of Restitution are orders permitting a landlord to evict a tenant. The refunds were for the many instances where writs were paid for but never executed. While Schuman & Felts had initially paid the writ fees out of its operating account, by the time it began receiving the refund checks, its clients had reimbursed the firm for those expenses. The refunds, in short, belonged to the clients who had paid for the unexecuted writs.
Schuman acted accordingly as to refunds owed to his firm's current clients: he forwarded their respective refund checks or, when authorized to do so, credited their refunds to their accounts. But former clients were left in the dark. Their refunds were deposited into Schuman & Felts's operating account and used to pay the firm's expenses. Schuman later offered an explanation for the disparate treatment. As he explained it, writ refunds were forwarded to current clients not out of financial obligation but "as a matter of goodwill," to "demonstrat[e] his attentiveness to his clients." He simply had no similar need or desire to build goodwill with clients who had left the firm.
From January 2013 to February 2014, the firm deposited $316,220 worth of clients’ writ refund checks into its operating account. Yet bank records showed the operating account's balance fell to about $85,000 in February 2014. In other words, if not for the writ refunds, the firm's operating account balance would have been in the negative by more than $230,000 in February 2014; bank records further showed that the account's balance—absent the writ refunds—would have been in the negative in all but one month of the preceding year. Schuman confirmed as much when he testified that the refunds belonging to former clients were used to "float the firm."
The scheme started to unravel in early 2014 when Cole, Schuman's former partner, inquired whether Schuman & Felts had received any writ refunds for his client, WDC-1 (previously a client of Schuman & Felts). Schuman replied that he "endorsed the backs of the checks and ... forwarded to the clients." When Cole pressed for more information, including documentation, Schuman testified that he checked with a staff member and then informed Cole that "[a]nything that came in for WDC-1 should have gone to them." The staff member in question testified, to the contrary, that Schuman never asked her to look into the WDC-1 refunds. Cole then contacted the D.C. Courts Financial Operations Budget & Finance Division and discovered that Schuman had deposited two writ refund checks belonging to WDC-1 into Schuman & Felts's operating account. After learning this, Cole filed a complaint with the Office of Disciplinary Counsel.
Following Cole's inquiry, Schuman consulted with an attorney about his handling of the writ refunds. On counsel's advice, he then began forwarding writ refunds to former clients. By the end of March, Schuman & Felts had returned $257,400 worth of writ refunds to former clients. During Disciplinary Counsel's investigation into Cole's complaint, Schuman was asked to account for the $58,820 difference between the amount of writ refunds deposited into the firm's operating account and the amount Schuman refunded to former clients. Schuman provided records accounting for $24,429 of the shortfall, but was unable to account for the remainder.
After its investigation, Disciplinary Counsel charged Schuman with violating Rules 1.15 and 8.4 of the District of Columbia Rules of Professional Conduct. A Hearing Committee then held a multi-day hearing in August and October 2018.
The Hearing Committee found that Disciplinary Counsel established by clear and convincing evidence that Schuman violated Rule 1.15(a) by commingling and intentionally misappropriating client funds; Rule 1.15(c) by failing to promptly notify clients of Schuman & Felts's receipt of the writ refunds, as well as failing to promptly deliver those funds; and Rule 8.4(c) by acting dishonestly in retaining and spending his former clients’ writ refunds. It did not, however, find that Disciplinary Counsel carried its burden in proving that Schuman violated Rule 1.15(a) ’s record keeping requirements relating to the unaccounted-for $34,391 worth of writ refunds deposited into Schuman & Felts's operating account. And it did not find it necessary to consider Schuman's misstatements to Cole regarding WDC-1's writ refunds to reach its decision that Schuman violated Rule 8.4(c). On review, the Board largely agreed with the Hearing Committee's findings but found that Disciplinary Counsel had carried its burden of establishing that Schuman violated Rule 1.15(a) ’s record keeping requirements and that, in addition to the dishonesty inherent in Schuman's handling of the writ refunds, Schuman also violated Rule 8.4(c) when he made false statements to Cole regarding WDC-1's writ refunds.
Schuman takes exception to each of the rule violations found by the Board, primarily arguing that his conduct did not violate the relevant rules. We address each rule violation in turn, accepting the Board's "findings of fact ‘unless they are unsupported by substantial evidence of record,’ " and reviewing "questions of law and ultimate facts de novo ."
In re Martin , 67 A.3d 1032, 1039 (D.C. 2013) ().
The Board found that Schuman intentionally misappropriated and commingled client funds in violation of Rule 1.15(a) when he retained and spent writ refunds belonging to former clients. Schuman does not challenge the Board's factual findings as to either violation, but instead asserts that the...
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