In The Matter Of The Disciplinary Proceeding v. Preszler

• Decision Date: 17 June 2010
• Docket Number: 570-5.,No. 200,200
• Citation: 232 P.3d 1118,169 Wash.2d 1
• Parties: In the Matter of the DISCIPLINARY PROCEEDING AGAINST Terry J. PRESZLER, an Attorney at Law.
• Court: Washington Supreme Court

169 Wash.2d 1

232 P.3d 1118

In the Matter of the DISCIPLINARY PROCEEDING AGAINST Terry J. PRESZLER, an Attorney at Law.

No. 200,570-5.

Supreme Court of Washington,

En Banc.

Argued Feb. 24, 2009.

Decided June 17, 2010.

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COPYRIGHT MATERIAL OMITTED

Kurt M. Bulmer, Attorney at Law, Seattle, WA, for Petitioner.

Joanne S. Abelson, Washington State Bar Assc., Seattle, WA, for Respondent.

FAIRHURST, J.

¶ 1 Terry J. Preszler appeals the Washington State Bar Association (WSBA) Disciplinary Board (Board) recommendation to suspend him for three years from the practice of law. Preszler charged an unreasonable fee, gave mistaken legal advice, filed false documents with a tribunal, failed to supervise his paralegal, and did not obtain the requisite approval of the bankruptcy court before distributing proceeds from his client's personal injury claim to himself. Based on this misconduct, the hearing officer and the Board found Preszler violated six Rules of Professional Conduct (RPC). Preszler does not argue he did nothing wrong. Rather, he claims the hearing officer and the Board erred by finding that Preszler committed conduct prejudicial to the administration of justice based on a single instance of impropriety. Preszler also argues they should have merged two of the charged counts of misconduct. Mostly, though, Preszler contends the Board improperly applied the sanctions analysis. He argues he did not act knowingly, did not cause a serious actual or potential injury, and is entitled to mitigation of the presumptive sanction. Rejecting most of Preszler's arguments, we impose the Board's recommended sanction of a three year suspension.

I. FACTUAL BACKGROUND

¶ 2 On December 19, 2000, Kinnie Gerrard and Jeffery Gerrard hired Preszler to represent them in a chapter 13 bankruptcy. In 2000, Preszler had 15 years of experience working on personal bankruptcy cases. The Gerrards told Preszler that Kinnie ¹ had an unresolved prebankruptcy personal injury claim stemming from a car crash that happened on September 6, 2000. Although Preszler did not learn the details of the personal injury claim or its value, he listed the claim as an asset of the bankruptcy estate with a “current value” of $16,150 when he filed the Gerrards' chapter 13 bankruptcy on April 4, 2001. Decision Papers (DP) at 7, ¶ 4; Ex. 16. Preszler knew that 11 U.S.C. § 522(d)(11)(D) permitted an individual debtor to claim an exemption of up to $16,150 for certain personal injuries. DP at 7, ¶ 4; Ex. 16. On October 12, 2001, the United States Bankruptcy Court for the Eastern District of Washington entered an order confirming the Gerrards' chapter 13 plan-a base of $13,743.88 with monthly payments for 58 months. At this time, Preszler did not represent Kinnie in her personal injury claim.

¶ 3 By August 18, 2003, Kinnie had yet to settle her personal injury claim, so she and her husband met with Preszler. Kinnie was concerned because the statute of limitations for the claim would run on September 6 2003. Preszler told the Gerrards that he thought the claim was worth about $53,000, which Kinnie said she would accept. Preszler said that due to the statute of limitations, he was not interested in handling the case, but, as a courtesy, he called the Allstate insurance adjuster handling the claim. Both Preszler and the Gerrards understood that Preszler would not receive a fee for his help. Preszler said Kinnie would settle for $53,000. The adjuster said she could not settle for that amount without additional medical information, but if Kinnie could provide the records, the adjuster would reevaluate the claim. The adjuster did not believe that Preszler represented Kinnie. Preszler instructed Kinnie to obtain and deliver the necessary records to the adjuster, but Preszler reiterated that he did not want to take the case.

¶ 4 The Gerrards met with Preszler the next day, August 19, 2003. Jeffery wanted to hire Preszler for the personal injury claim, but because Kinnie's brother-in-law had died the day before and Kinnie was emotional, Preszler told Kinnie that she should not decide that day, and she did not hire Preszler.

¶ 5 On August 20, 2003, Kinnie saw her doctor and asked that he fax the requested medical records to the adjuster. On August 21, 2003, Kinnie called the adjuster to discuss Kinnie's claim. At Kinnie's request, the adjuster sent a letter outlining their conversation to Preszler. Preszler received and reviewed it.

¶ 6 On August 22, 2003, the adjuster called Kinnie and told her that she received the needed medical information. The adjuster offered policy limits of $50,000 to Kinnie, $19,000 of which would reimburse State Farm Insurance for personal injury protection benefits, and the remaining $31,000 would go to Kinnie. To accept the offer, Kinnie had to sign a release of claims against Allstate's insured. At Kinnie's request, the adjuster faxed the settlement paperwork to Preszler. Preszler received the release and the adjuster's letter confirming the settlement offer.

¶ 7 Kinnie arranged an appointment with Preszler for that same day, August 22, 2003, where they discussed the settlement paperwork. Preszler explained that he could ask for the personal injury exemption in the bankruptcy plan to be increased from $16,150 to $17,425, but the remainder of the settlement proceeds would go to the Gerrards' creditors in the bankruptcy. Actually, Preszler could have exempted almost $10,000 more of the personal injury recovery proceeds under the “Wild Card” exemption in 11 U.S.C. § 522(d)(5).

¶ 8 At the August 22, 2003, meeting, Kinnie and Preszler signed a contingency fee agreement, which was backdated to August 18, 2003. The agreement provided that Preszler would receive one-third of the remaining $31,000. Kinnie asked whether she would in fact receive $17,425. Preszler promised she would and handwrote a guarantee to that effect on the fee agreement.

¶ 9 Preszler sent the settlement paperwork to the adjuster and requested a settlement check payable to Kinnie and Preszler. Preszler's office received the check on August, 27, 2003, and deposited the money as a credit to Kinnie in Preszler's trust account. Preszler instructed his paralegal to contact the trustee of the Gerrard bankruptcy estate to determine the process for disbursing the funds to himself. Based on the directions from the trustee's employee, Preszler's paralegal drafted an application for an order approving Preszler's appointment as an attorney for the trustee in the personal injury claim.² Preszler had not used such an application, and he asked his paralegal if the trustee wanted the application. The trustee confirmed he did. Preszler signed the application without reading it thoroughly or fully grasping its meaning. The application provided that Preszler (1) is a fiduciary to the Gerrard bankruptcy estate, (2) represents under penalty of perjury that “the case needs an attorney to settle,” (3) will render services to “settle with Allstate Insurance the personal injury claim,” (4) will be paid pursuant to the contingent fee agreement executed by Kinnie, (5) will take payment under the contingent fee agreement “in accordance with 11 U.S.C. [§§] 329 and 330 and [ Fed. R. Bank. P.] 2016,” which require approval by the bankruptcy judge prior to the time payment is disbursed, and (6) has read the application materials and verifies “that they are true and accurate and that they disclose all material facts required to the best of my knowledge and belief.” Ex. 11. When the trustee received the application, he did not know that Kinnie's claim had already been settled.

¶ 10 Preszler prepared and reviewed amended bankruptcy schedules. Even though he had the settlement in hand, he left blank a box in schedule B reserved for designating the current market value of Kinnie's personal injury claim. Schedule C claimed that $17,425 of the proceeds from the car accident claim was exempt from creditors, but he wrote “[u]nknown” in the schedule C space for listing the current market value of the car accident claim. The Gerrards signed the amended schedule on August 29, 2003. After reviewing the amended schedules, the trustee inquired further and learned about the settlement with Allstate. The trustee also discovered that while the contingency fee agreement bore the date of August 18, 2003, it actually had been signed on August 22, 2003. The trustee had concerns but did not pursue them.

¶ 11 On September 3, 2003, the trustee's employee told Preszler's paralegal that the trustee signed the application but could not file it until the Gerrards agreed to commit nonexempt proceeds from Kinnie's personal injury claim to funding the bankruptcy plan. Preszler signed and filed a stipulation agreeing to commit the nonexempt proceeds to funding the plan. Preszler's paralegal prepared an order approving employment, which Preszler signed. That order stated that Preszler was employed “with regards to an ongoing personal injury case” and “to continue the personal injury case in order to obtain a resolution and settlement.” Ex. 15. The order mandated that compensation accord with the federal statutes and bankruptcy court rules requiring Preszler to request court approval to disburse before doing so. Preszler signed the order, as did the bankruptcy judge.

¶ 12 On September 15 and 16, 2003, without first obtaining a court order, Preszler disbursed $10,323 to himself from the Gerrards' trust account. Preszler did not prepare a settlement statement, nor did he disclose the disbursement to the Gerrards, the trustee, or the bankruptcy court.

¶ 13 After talking to Preszler's paralegal in late September, Kinnie learned that she might have been able to use more of the settlement payment to reduce the term of her chapter 13 bankruptcy plan. Kinnie hired Bill Hames, a bankruptcy attorney. Hames called Preszler to tell him that Preszler had failed to utilize the wild card exemption. He tried to convince Preszler to waive...