Iowa Supreme Court Attorney Disciplinary Bd. v. Arzberger

• Citation: 887 N.W.2d 353
• Decision Date: 10 November 2016
• Docket Number: No. 15–2109.,15–2109.
• Parties: IOWA SUPREME COURT ATTORNEY DISCIPLINARY BOARD, Complainant, v. Kristy Boyer ARZBERGER, Respondent.
• Court: United States State Supreme Court of Iowa

887 N.W.2d 353

IOWA SUPREME COURT ATTORNEY DISCIPLINARY BOARD, Complainant,

v.Kristy Boyer ARZBERGER, Respondent.

No. 15–2109.

Supreme Court of Iowa.

Nov. 10, 2016.

Tara van Brederode and Amanda K. Robinson, Des Moines, for complainant.

David L. Brown of Hansen, McClintock & Riley, Des Moines, for respondent.

APPEL, Justice.

In this disciplinary case, the Iowa Supreme Court Attorney Disciplinary Board (Board) charged the respondent, Kristy B. Arzberger, with a violation of Iowa Rule of Professional Conduct 32:1.5(a) (“A lawyer shall not make an agreement for, charge, or collect an unreasonable fee or an unreasonable amount for expenses, or violate any restrictions imposed by law.”). This case arises from Arzberger charging and collecting extraordinary fees in a probate case without court approval. After a hearing, the commission recommended a thirty-day suspension.

For the reasons expressed below, we conclude that the respondent violated Iowa Rule of Professional Conduct 32:1.5(a). We suspend the respondent's license to practice law for thirty days.

I. Factual and Procedural Background.

A. Factual Background. Arzberger is a Mason City lawyer licensed to practice law in Iowa. She began practicing law in 1986 and has been in private practice as a solo practitioner since 1988. Her practice has included family law, agribusiness matters, real estate, and probate work. Over the years, she has had a commendable record of public service and community activities in the Mason City area, including service on boards of directors of the Crisis Intervention Service, the Red Cross, Mason City Noon Rotary, Girl Scouts of North Iowa; the United Way Allocation Committee; and the foundation board of the North Iowa Area Community College. She has been active in church affairs, has mentored at-risk youth, and has provided pro bono legal work.

Arzberger has a prior history of private admonitions. In 2002, the Board privately admonished her for falsely telling a client that a petition for visitation rights had been forwarded to the sheriff for service. While Arzberger indicated that mistake was made by her secretary, the Board concluded that Arzberger failed to supervise nonlawyer personnel in connection with their communications with clients. In 2008, the Board privately admonished Arzberger for conduct prejudicial to the administration of justice when, in an appeal of a dissolution-of-marriage case, she ignored a notice of default for want of prosecution.

The matter now before us relates to allegations that Arzberger charged extraordinary fees without court approval in probating the estate of John Nepstad. Although the issue before us is relatively narrow, a full understanding of the factual posture of this case is necessary to resolve this appeal.

Arzberger represented John Nepstad (John) for a number of years and drafted his last will and testament. John died on July 4, 2011. After John's death, Matthew Nepstad (Nepstad), John's son who resides in Minnesota, contacted Arzberger to inquire about her serving as the estate's attorney and probating the estate.

On July 5, Arzberger sent Nepstad a letter outlining the probate process. Arzberger told Nepstad that “[t]he cost of probating the estate is set per Iowa law. For ordinary services the fees are $220 for the first $5000.00 and 2% of the remaining estate.” This statement did not track with Iowa Code section 633.198 (2011), which does not set ordinary fees but instead provides for a reasonable fee, subject to court approval, that ordinarily should not exceed the amount Arzberger quoted.

Arzberger's July 5 letter also addressed the possibility of extraordinary fees. Arzberger stated, “In the event the liquidation of the estate calls for extensive work, for example, selling real estate, an attorney may ask for extra-ordinary fees. These fees must be approved by the Court.” Nepstad was appointed the executor of the estate on July 26. He subsequently retained Arzberger to represent the estate in the probate matter.

A complication in the probate matter soon arose. In the past, John had been in a relationship with Lori Thomas. John's will provided, “If at the time of my death Lori and I are still residing together ... I give, devise and bequeath my residence to Lori.” After John's death, Thomas claimed that she and John were, in fact, living together at the time of John's death, thereby entitling her to John's residence under the express terms of John's will. Further, Thomas claimed entitlement to ongoing support from the estate.

Thomas filed suit on August 29, seeking title to the residence and spousal support. She demanded a jury trial and submitted discovery requests. Arzberger forwarded Thomas's August 29 documents to Nepstad the following day. In an email dated August 30, she informed Nepstad, “This is not a normal probate proceeding. Therefore, I will be asking the court for extraordinary fees above the statutory fee allowed by law. ” (Emphasis added.)

Arzberger began to prepare for trial on Thomas's claims. On December 20, Thomas served answers to interrogatories on Arzberger, which stated that Arzberger “may be called as a witness” in the litigation. Notwithstanding the receipt of this information, Arzberger continued to work on the Thomas matter in late December 2011 and early 2012, including, among other things, reviewing and drafting of discovery and drafting an outline of the case.

On April 5, 2012, Thomas's counsel raised the issue of whether Arzberger had a conflict of interest in connection with her representation of the estate in the Thomas matter. Arzberger consulted a district court judge, who advised that although a conflict might not be present if her testimony would be favorable to the estate, it would be advisable to hire other counsel to avoid the potential for a mistrial.¹

On April 13, 2012, Arzberger applied to the district court for permission to employ additional counsel in order to “avoid the appearance of impropriety” should she have to testify in the Thomas matter. In the application, Arzberger stated that she would “remain as designated attorney for probate of the estate except for defending the estate against the claims of Lori A. Thomas.” On the same day, the district court granted the application, directing Nepstad to “immediately retain additional counsel of his choosing to defend the claims of Lori A. Thomas.” The order also stated “Arzberger shall remain the designated attorney for the Estate as to all other probate matters. ” (Emphasis added.)

Nepstad, on the advice of Arzberger, retained Colin Murphy to defend the Thomas claim. Murphy was retained in late April, but his bill for the estate indicates he began work twelve days before trial. Arzberger continued to work on the Thomas matter. For example, her billing statement in the Thomas matter indicated that in June of 2012, Arzberger reviewed the file, began compiling discovery responses, drafted witness and exhibit lists, contacted witnesses, generated notes to the file, and drafted subpoenas for witness appearances at trial.

The trial on Thomas's claims occurred on June 27, 2012. Both Arzberger and Murphy attended the trial, with Murphy conducting the examination of witnesses, including Arzberger herself. The day after trial, Nepstad sent an email to Murphy and Arzberger asking for a bill for all work done on the matter through the end of June. In the email, Nepstad stated that he understood that the fees for “the normal estate work is a percentage of the final assets so I don't need that as I already have a good idea of the fees associated with it.”

Both Arzberger and Murphy responded to Nepstad's June 28 email on the same day. Arzberger stated, “As to fees related to the litigation ... we will be working on this and have it out to you [Nepstad and Murphy] both in an Affidavit format for filing with the Clerk to which we can add [Murphy's] fees within the week.” (Emphasis added.) Murphy responded by stating that he would prepare a total of his time spent preparing for trial and the trial itself. Nepstad requested to be able to review the fee affidavit before it was filed. Arzberger promptly replied that Nepstad was welcome to do so and “[i]nquire as you feel appropriate.”

On July 16, the district court entered its ruling in the Thomas matter. In its ruling, the district court stated, “The estate was represented by counsel Kristy B. Arzberger and [Colin] Murphy.” The district court further noted that, “Kristy Arzberger was called as a witness on behalf of the estate, therefore, by agreement of the parties, Mr. Murphy acted as counsel of record for the hearing in this matter.”

With respect to the substance of the dispute, the district court held that Thomas failed to meet her burden of showing that the parties had a common law marriage or that the parties resided together at the time of John's death. The district court declined to award attorney fees to the estate. Costs were assessed against Thomas.

On July 17, Arzberger submitted an invoice for fees to Nepstad in connection with the Thomas matter totaling $6325.20. The Arzberger invoice contained itemization for services but no hourly rate. The invoice included fees of $2564.25 incurred after the entry of the April 13 order authorizing the hiring of additional counsel for the estate. It also included a June 27 entry for work labeled “attend trial, testify, and assist in preparation” in the amount of $1316.25. Arzberger stated, “These will be the fees that will be due this office, over and above statutory fees for the normal estate work.” On July 23, 2012, Murphy submitted a fee statement to Nepstad totaling $3698.30 at a rate of $150 per hour for legal services.

No application for extraordinary fees in connection with the Thomas matter, however, was filed with the district court. As a result, contrary to Iowa Code section 633.199 and Iowa Court Rule 7.2(3), no district court order approving the extraordinary fees was entered in the Thomas matter.

On July 31, Nepstad...