Iowa Supreme Court Attorney Disciplinary Bd. v. Kozlik

• Decision Date: 22 May 2020
• Docket Number: No. 19-1934,19-1934
• Citation: 943 N.W.2d 589
• Parties: IOWA SUPREME COURT ATTORNEY DISCIPLINARY BOARD, Complainant, v. Michael D. KOZLIK, Respondent.
• Court: Iowa Supreme Court

943 N.W.2d 589

IOWA SUPREME COURT ATTORNEY DISCIPLINARY BOARD, Complainant,

v.Michael D. KOZLIK, Respondent.

No. 19-1934

Supreme Court of Iowa.

Filed May 22, 2020

Rehearing Denied June 12, 2020

Tara van Brederode and Allison Schmidt, Des Moines, for complainant.

Drew Kouris, Council Bluffs, for respondent.

McDONALD, Justice.

The Iowa Supreme Court Attorney Disciplinary Board filed a complaint against Michael D. Kozlik. The complaint alleged Kozlik violated Iowa Rules of Professional Conduct 32:8.4(b) and 32:8.4(c) while acting as the administrator of his uncle's estate. A division of the Iowa Supreme Court Grievance Commission found the Board failed to prove a violation of rule 32:8.4(b) and dismissed that complaint. The commission found the Board proved Kozlik violated rule 32:8.4(c) and recommended a public reprimand as the sanction. We find and conclude Kozlik violated rules 32:8.4(b) and (c) by misappropriating funds from the estate without a future colorable claim to said funds. We revoke Kozlik's license to practice law in the State of Iowa.

I.

Michael Kozlik was admitted to practice law in Nebraska in 1979 and in Iowa in 2000. His law office is located in Omaha. Kozlik's primary practice is estate planning and administration. He has served as the personal representative in a number of estates. He has served as an expert witness on probate fees in proceedings in Nebraska. While Kozlik primarily practices law in Nebraska, he has performed probate work on this side of the river.

The ethical violations in this case arise out of Kozlik's service as the administrator of his uncle's estate. Duane and Frances Slightam, Kozlik's uncle and aunt, had no children of their own. They were very close to their nephews Kozlik and his brother Doug. Kozlik spent a great deal of time with his uncle and aunt, helped them on their farm, and even considered them his second parents. Toward the end of their lives, Duane and Frances began to lose their ability to live independently. Kozlik and other family members convinced Frances that Duane had to move to a care facility in 2013. Kozlik was appointed Duane's guardian, and Treynor State Bank (TS Bank) was appointed Duane's conservator.

Duane passed away in June 2015, and Frances was the sole beneficiary of his estate. Attorney Leo Martin opened Duane's estate in March 2016 in Pottawattamie County. Kozlik was appointed administrator of Duane's estate, and TS Bank was appointed executor. Mary Jewell, a trust officer at TS Bank, served as the representative of TS Bank.

Six months after Duane's estate was opened, Kozlik began to write checks from the estate's bank account to himself. Over the next two years Kozlik wrote a total of twelve checks on the estate's account made payable to himself in the total amount of $39,350.

Date of Check	Check #	Amount
11/23/16	1001	900
11/23/16	1002	150
2/03/17	1004	2500
6/05/17	1005	1500
6/23/17	1006	1500
6/27/17	1007	10,000
9/08/17	1008	3500
9/29/17	1009	5000
2/28/18	1012	5000
6/08/18	1016	3500
6/13/18	1017	2300
9/25/18	1018	3500
TOTAL	$39,350

According to Kozlik, all but one of the withdrawals was for fees earned and expenses incurred in the administration of Duane's estate. The one exception was a withdrawal in the amount of $10,000 in June 2017. According to Kozlik, he paid himself that money as a deduction to the estate to offset $43,000 in interest income the estate had earned upon cashing government bonds. Kozlik testified that, as it turned out, the estate did not need the deduction so he repaid it. However, Kozlik returned only $9700 of those funds to the estate's account in December 2017. Kozlik did not obtain court authorization prior to making any of these payments to himself.

Kozlik testified two or three of the checks were deposited into his personal checking account and the remainder into his operating account at his law firm. He testified he used the funds "for paying bills and living expenses" and for expenses and disbursements related to his law practice.

The unauthorized payments came to light at the end of 2018. Frances passed away in April 2018. Her will was admitted to probate later that month. Christopher Juffer served as the attorney for Frances's estate, and TS Bank served as the executor. Because Frances was Duane's sole beneficiary and because Duane's estate was still pending, TS Bank needed additional information from Duane's estate to prepare an inventory and report in Frances's estate. Juffer filed two delinquency notices in Duane's estate, alleging "substantial delays in the finalization" of Duane's estate. Juffer filed a petition in November 2018 to remove Kozlik as administrator of Duane's estate, to obtain records from Duane's estate, and for an accounting of Duane's estate. Martin, the attorney for Duane's estate, immediately contacted Kozlik and Juffer to make arrangements to prepare the requested documents. When Martin reviewed the documents Kozlik sent to him, Martin discovered the unauthorized payments Kozlik had made to himself. Martin quickly contacted Kozlik. Kozlik did not make any excuses and took full responsibility for his conduct.

Shortly thereafter, in December 2018, Martin arranged a meeting attended by Martin, Kozlik, Juffer, and Jewell. At the December meeting, Martin did most of the talking, but Kozlik admitted to making payments to himself from Duane's estate without court authorization. Kozlik provided copies of all the documentation regarding the payments and the lone deposit related to the return of funds allegedly paid for tax planning purposes. Kozlik stated he did not know he needed a prior court order when he made the payments, but he understood it now. Kozlik promised to repay all of the unauthorized payments with interest. He apologized and admitted he committed an ethical violation. Kozlik stated he was going to self-report to the Iowa State Bar Association and to the Iowa Supreme Court. Kozlik repaid the funds to Duane's estate within two weeks of the meeting.

After Kozlik repaid the funds to Duane's estate, there were additional proceedings in the pending matter. As noted above, in November 2018, Juffer had filed a petition to remove Kozlik as the administrator of Duane's estate. Kozlik did not resist the petition, and the court removed him as administrator of the estate in March 2019. The order removing Kozlik as administrator of the estate found "Kozlik does not dispute the allegation that he inappropriately removed funds from the Estate of Duane Slightam." The court found Kozlik had mismanaged the estate, and the court appointed TS Bank as succeeding administrator.

There was also the additional matter of Kozlik's fees for the administration of Duane's estate. Pursuant to Code section 633.197, the ordinary fee for Duane's estate was capped at $9263.37. See Iowa Code § 633.197 (2017) (limiting reasonable fees for personal representatives). Kozlik filed an application for a personal representative fee for reasonable services in this amount plus reimbursement for actual and necessary expenses in the amount of $1223.69, for a total request of $10,487.06. Juffer, on behalf of Frances's estate, objected to the fee request. At the hearing on fees, Juffer testified he believed Kozlik stole funds from Duane's estate. Juffer testified, based on his dealings with Kozlik, that Kozlik "knew he was not supposed to take money from the estate. He continually took money from the estate. He knew he was not entitled to it." In May 2019, the district court awarded Kozlik ordinary fees in the amount of $4631.69 (half of the requested amount) plus expenses for a total of $5855.38.

While these matters in Duane's estate were being litigated and resolved, the ethical complaint moved forward. Kozlik did in fact self-report the unauthorized payments from the estate. The day after the December meeting with Martin, Juffer, and Jewell, Kozlik addressed a letter to the Iowa State Bar Association. He stated, "I am the administrator of my uncle's estate. I paid myself administrator fees without prior court order." The Iowa State Bar Association forwarded the letter to the Board.

The Board filed this complaint against Kozlik. The complaint alleged Kozlik knowingly converted funds in violation of Iowa Code sections 714.1(2) and 714.2(2).

The complaint charged Kozlik with violating Iowa Rules of Professional Conduct 32:8.4(b) (committing "a criminal act that reflects adversely on the lawyer's honesty, trustworthiness, or fitness as a lawyer") and (c) (engaging "in conduct involving dishonesty, fraud, deceit, or misrepresentation"). The complaint provided Kozlik with notice the Board sought revocation of his license as a possible sanction.

At the commission hearing, Kozlik admitted he committed an ethical violation. One of the commissioners asked Kozlik what rule he believed he had violated. He answered, "I should not have taken money out prior to getting a court order." He further stated, "I paid myself fees out of Duane's account. I should have gotten a prior court order allowing them. It's an ethical violation." However, Kozlik denied he had committed the ethical violations charged.

Q. Your position at this hearing, though, is that you did not violate either of the rules that the Board is alleging you violated, though; is that correct? A. Well, I think they have to prove that I had a mental intent to steal and that was never the case. It's called scienter. Unless they prove scienter, their case fails. I think the testimony was from both Leo [Martin] and Mary [Jewell] that they never believed that I was stealing. I never had an intent to steal. In fact, I always had the intention of disclosing. That's one of the reasons why I used checks. I didn't use an ATM.

Was it dumb for me to do it without the court order? Amen, Brother. That's me. I'm the poster child for that. I admit that freely. Did I deceive anyone? Without deception—the second allegation there has to be a deception or a cover-up. No evidence of a cover-up or a deception.

Q. So your position then is that you did

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