Iowa Supreme Court Attorney Disciplinary Bd. v. Stoller

• Decision Date: 13 May 2016
• Docket Number: No. 15–1824.,15–1824.
• Citation: 879 N.W.2d 199
• Parties: IOWA SUPREME COURT ATTORNEY DISCIPLINARY BOARD, Complainant, v. Larry Alan STOLLER, Respondent.
• Court: Iowa Supreme Court

879 N.W.2d 199

IOWA SUPREME COURT ATTORNEY DISCIPLINARY BOARD, Complainant,

v.Larry Alan STOLLER, Respondent.

No. 15–1824.

Supreme Court of Iowa.

May 13, 2016.

Tara M. Van Brederode and Patrick W. O'Bryan, Des Moines, for complainant.

Kevin J. Driscoll and Kellen B. Bubach of Finley Law Firm, P.C., Des Moines, for respondent.

ZAGER

, Justice.

In this disciplinary case, the Iowa Supreme Court Attorney Disciplinary Board (Board) charged an attorney with violations of several of our ethical rules arising out of two separate matters. After a hearing, the Grievance Commission of the Supreme Court of Iowa found that in the first matter, the attorney violated the rules regarding conflicts of interest and conduct involving dishonesty, fraud, deceit, or misrepresentation. The commission also found violations of the rules regarding conflicts of interest arising out of the attorney's representation of the second client. The commission recommended we suspend the attorney's license for a total of three months. Upon our de novo review, we concur in most of the findings of rule violations but find that the appropriate sanction is a sixty-day suspension.

I. Background Facts and Proceedings.

Attorney Larry Stoller obtained a law degree from Creighton University in 1980 and received his license to practice law in Iowa in the same year. Stoller has practiced in his own firm with partners in the past but is currently a sole practitioner. His practice is located in Spirit Lake, Iowa. He has had one prior public reprimand. The current case involves two separate client matters. The first matter arises from Stoller's actions with regard to Okoboji Cocktails, Inc. (OCI matter), and the second matter arises from Stoller's actions with regard to his former clients, Robert and Marcia Zylstra (Zylstra matter). Each matter will be discussed in turn.

A. OCI Matter. The OCI matter arises from a lease between OCI and Stoller's clients, Martin and Melinda Marten. OCI leased property from the Martens for the operation of a restaurant and bar. It was an oral lease which called for monthly rent of $1725.

OCI was a corporation formed in 2007 with three investors: Troy Dahl, his mother Jolene Schmidtke, and Diane Chaplin. Each of the investors received shares of stock in OCI. The officers of OCI were Troy Dahl, President; Jolene Schmidtke, Secretary; and Diane Chaplin, Vice President. Chaplin was also the registered agent for OCI. Chaplin managed OCI for approximately three years. In March 2010, Chaplin had a falling out with Dahl and Schmidtke over compensation for her services, and Chaplin was terminated and thereafter locked out of OCI. Chaplin's name was taken off the OCI bank accounts. Dahl and Schmidtke continued to operate OCI. Chaplin retained her stock in OCI, was never removed as an officer of the corporation, and continued as the registered agent for OCI according to the Secretary of State's website. Chaplin testified that she wrote a letter of resignation from the corporation on her home computer around this time and gave it to Stoller to send to Schmidtke and Dahl. However, Stoller does not have any recollection of delivering any such letter.

In September 2010, the corporation did not file its biennial report with the Secretary of State and the corporation was administratively dissolved. As a result, OCI was unable to obtain a new liquor license in January 2011. Dahl and Schmidtke did not notify the Martens that they were closing the business and abandoned the premises. OCI did not pay February rent to the Martens, which alerted the Martens to the abandonment. When the Martens' rental agent, Sara Anderson, attempted to contact Dahl regarding the past-due rent, she did not receive any response. After the failed attempts to contact Dahl, Anderson visited the premises. She found that the door had been left open, the utilities were turned off, and rotten food and garbage were strewn about the restaurant. Since Stoller represented the Martens, she contacted him for advice.

Stoller advised Anderson and the Martens that Schmidtke and Dahl's behavior meant they had abandoned the property and the Martens had the duty to mitigate their damages by securing the property and preventing further waste. Pursuant to Stoller's advice, Anderson changed the locks, turned the heat back on, and cleaned the food and garbage from the restaurant. After the locks were changed, Stoller sent a letter to OCI, Dahl, and Chaplin notifying them of the abandonment and advising them that the Martens were requesting past-due rent and damages for the clean-up. Stoller also advised them of the Martens' intent to exercise all rights as to a landlord's lien on the remaining property. Once the locks were changed, OCI was barred from re-entering the building or from obtaining the restaurant and bar equipment that remained.

On March 29, Stoller sent a “Notice of Retention of Equipment and Fixtures” to Chaplin only as the registered agent of OCI. The notice stated that OCI had twenty days to either pay the past-due rent or object to the Martens' retention of all of the personal property, fixtures, and equipment remaining in the leased premises. If OCI did not respond, the Martens would sell the remaining assets in full satisfaction of any indebtedness of OCI. Because it was sent only to Chaplin, no contact was made with either Schmidtke or Dahl regarding the notice. Despite having been in business with Schmidtke and Dahl for three years, Chaplin claimed that she did not have any knowledge of how to contact them about the notice.

On March 30, ostensibly on behalf of OCI, Chaplin signed a “Consent to Landlord's Retention of Equipment Secured By Landlord's Lien,” giving sole ownership of all of the remaining assets of OCI to the Martens in satisfaction of OCI's rental liability.

On April 4, Troy Dahl, on behalf of OCI, sent a letter to the Martens demanding access to the leased premises for the purpose of removing the personal property and equipment.¹ On April 6, Stoller established a new corporation on behalf of Chaplin, Chaplin's Inc. Through this new corporation, Stoller negotiated a new lease whereby Chaplin leased the premises previously leased to OCI, as well as the furnishings and equipment. The Martens charged Chaplin the same monthly rent. Chaplin then opened a new bar and restaurant in the same location using the OCI equipment she had allowed the Martens to retain. The only difference was Chaplin called her bar and restaurant “Chaplin's.” The record does not disclose that there were any discussions between Stoller, the Martens, or Chaplin about the potential conflict of interest between the parties, or a formal waiver of the conflict.²

By April 8, Peter C. Cannon officially began representing OCI. On this date, Cannon sent a letter to Stoller advising him of his representation of OCI and making reference to a letter Stoller had written to Cannon on April 6 suggesting that Stoller was somehow representing OCI. However, the record does not contain this letter. Cannon again demanded access to the formerly leased premises for purposes of removing OCI personal property and equipment left on the business premises. The Martens refused since they had already leased the equipment to Chaplin.

Ultimately, OCI brought an action in replevin to recover the equipment. After a hearing, the district court issued its order on June 13. In relevant part, the district court found the transaction between Chaplin and the Martens was a sham transaction. The district court held that even if Chaplin were the registered agent and an officer of the corporation, she would not have had the authority—actual or apparent—to sell all or substantially all of the assets of the corporation. The district court further held that the equipment had a value of $35,785 “in place,” and a liquidation value of $16,046.50. The district court ultimately concluded that OCI owned the equipment, but since the Martens possessed a landlord's lien, they were still entitled to possession superior to the claim of OCI. The district court denied the temporary writ of replevin. However, in its order on reconsideration dated July 1, the district court concluded that OCI had a superior right to the property and it was entitled to a writ of replevin and possession of the property upon the filing of an appropriate bond.

OCI ultimately filed a lawsuit against the Martens and Chaplin for the recovery of the bar and restaurant equipment. Stoller continued to represent the Martens and Chaplin in this lawsuit, including the filing of numerous counterclaims brought on behalf of the Martens and Chaplin. In August, OCI filed a motion to amend its petition to name Stoller as an additional defendant. The district court granted the motion to amend the petition and also granted the motion to remove Stoller as the attorney for the Martens and Chaplin. Stoller's malpractice carrier provided his defense, and eventually a settlement was reached.

B. Zylstra Matter. Many of the facts underlying the Zylstra matter are also included in our related case filed today, NuStar Farms, LLC v. Zylstra, 880 N.W.2d 478, ––––, 2016 WL 2772186 (Iowa 2016)

.

1. NuStar Farms representation. Stoller began representing Robert and Marcia Zylstra in 2002. He thereafter represented them in a number of legal matters between 2002 and 2014. Although Stoller represented the Zylstras on a number of legal issues, they also used the services of other attorneys throughout this time period. At issue for the purposes of this disciplinary proceeding are a meeting in January 2007 and a small claims case concluding in 2014.

On January 24, 2007, Stoller met with Robert Zylstra at his office to discuss several manure easement agreements and estate planning. At the time of the meeting, the Zylstras were part owners of Sibley Dairy, LLP, which was in the process of selling its dairy operation to NuStar Farms, LLC. Stoller did not represent Sibley Dairy in this sale. However, Robert asked Stoller for...