Iowa Supreme Court Attorney Disciplinary Bd. v. Fischer

• Decision Date: 15 April 2022
• Docket Number: 21-1068
• Citation: 973 N.W.2d 267
• Parties: IOWA SUPREME COURT ATTORNEY DISCIPLINARY BOARD, Appellee, v. John Karl FISCHER, Appellant.
• Court: Iowa Supreme Court

973 N.W.2d 267

IOWA SUPREME COURT ATTORNEY DISCIPLINARY BOARD, Appellee,

v.John Karl FISCHER, Appellant.

No. 21-1068

Supreme Court of Iowa.

Submitted February 23, 2022

Filed April 15, 2022

Tara van Brederode, Crystal Rink (until withdrawal), and Alexis W. Grove, for appellee.

Eashaan Vajpeyi and Melissa Ament of Ball, Kirk & Holm PC, Waterloo, for appellant.

Waterman, J., delivered the opinion of the court, in which all justices joined.

WATERMAN, Justice.

The Iowa Supreme Court Attorney Disciplinary Board charged attorney John Fischer with violating rules of professional conduct. The charges included misappropriation and conversion of client funds. A panel of the Iowa Supreme Court Grievance Commission found Fischer violated multiple rules of professional conduct, including conversion of client funds, and recommended revocation of his license. The Board requests revocation. Fischer admits certain violations, denies stealing, and argues for a suspension instead of revocation. On our de novo review, we determine that Fischer converted client funds without a colorable future claim, among other violations, and we therefore revoke his license to practice law in the State of Iowa.

I. Background Facts and Proceedings.

Fischer has been licensed to practice law in Iowa since 1979 and has been a solo practitioner in Vinton since 2014. He practices primarily in the areas of trusts and estates, probate, real estate, and tax. In 2012, Fischer received a private admonishment for improper collection of fees. In 2018, Fischer received a public reprimand for lack of diligence and failure to communicate with his clients. The Board's current complaint arises from Fischer's representation of several clients and audits of his trust account. Because we revoke his license for misappropriation, we truncate our discussion of the other matters. Iowa Sup. Ct. Att'y Disciplinary Bd. v. Crum , 861 N.W.2d 595, 604 (Iowa 2015) ("[T]here is ample evidence in the record to prove Crum misappropriated client funds. Therefore, it is unnecessary for us to address Crum's other violations."). We find the following facts on our de novo review of the record.

A. AlphaGen. AlphaGen Materials Technology, Inc. is an Iowa corporation. Fischer is a minority owner who has served as a director since its incorporation in 2008 and also serves as its vice president, secretary, and treasurer as well as its attorney. In March of 2012, AlphaGen was sued for breach of contract. Fischer filed an answer for the defendant and remained its counsel of record. In the months that followed, AlphaGen repeatedly failed to comply with discovery requests and court orders. After judgment was entered against the defendant, the plaintiffs pursued debtor's examinations, and AlphaGen continued to disobey court orders. A settlement was negotiated, which included Fischer as a named party. When Fischer, AlphaGen, and AlphaGen's president failed to honor the settlement, the plaintiffs filed a second lawsuit to enforce the settlement and pierce the corporate veil. Fischer was named as a defendant in the second lawsuit.

The pattern continued with more violations of discovery obligations and court orders. The court found the defendants, including Fischer, willfully and in bad faith violated court orders and imposed sanctions that ultimately included a default judgment. Fischer blamed an unresponsive client but offered no valid excuse for his personal failure to comply with document requests for records within his control.

B. Trust Account Audits. Fischer was audited in 2010, 2015, and 2019. Each audit revealed Fischer and his staff failed to maintain proper records of his client trust account. Some of his client trust accounts had negative balances. Fischer admits he did not maintain a separate account for each matter. He recognizes that he is responsible for supervising his staff and failed to "do an adequate job." Fischer admits he was "inept" and failed to prepare triple reconciliations from 2017 to 2019, contrary to his responses to annual client security commission questionnaires. The 2019 auditor concluded Fischer's client trust account was underfunded by $10,042. The client security commission's auditors testified they could not determine if Fischer used the funds for personal use because of the lack of records. Fischer promptly reimbursed the account in full. For at least six months after the 2019 audit, Fischer successfully balanced his trust account "to the penny."

C. Osborn Matter. Josh Osborn and his brother James Osborn own half-interests in RB Homes, Inc., which built spec homes. In 2011, high winds damaged the roof of a home they built and sold. The homebuyer's property insurer, Travelers Commercial Insurance Company, brought a subrogation action against the Osborn brothers and RB Homes. Fischer represented the defendants without a written fee agreement.

In May of 2014, the parties agreed to settle the lawsuit for $15,000. Each brother agreed to pay half of the settlement, or $7,500, and their share of the attorney fees. In September of 2014, Josh paid Fischer $9,200. Josh directed Fischer to pay $7,500 to Travelers for Josh's share of the settlement and to retain $1,700 as Josh's half of the attorney fees. Fischer did not send Travelers a check for $7,500. Instead, without informing Josh, Fischer used Josh's settlement money to cover James's attorney fees and sent Travelers a check for only $6,198. Travelers never cashed that check, and Fischer ultimately withdrew and spent that amount himself.

Josh testified at the grievance commission hearing that Fischer never told him that his payment would be used to cover James's share of the attorney fees. Fischer argued Josh was responsible for the entire bill as president of RB Homes. But when Fischer testified, he admitted to misapplying the money because he "was mad":

Q. So you don't dispute that Josh Osborn directed you to pay $7500 of that check to the opposing party, as they were settlement funds, correct?

A. The 7500, yes.

Q. And so you kept a portion of his settlement funds --

A. As the --

Q. -- for your own attorney fees?

A. Yes, ma'am, as the fee for RB Homes, that's correct.

Q. But you didn't have Josh's permission for that, right?

A. No. No, I was mad.

Q. And so you knew that that wasn't your money, right?

A. I knew that it was not in accordance with what he had directed me to do.....

....

[Q.] Did you have any agreement or contract in place with Josh Osborn that he would be responsible for paying his brother's --

[A.] No.

[Q.] -- attorney's fees?

[A.] No, that was my fault, because I was un -- I was mad.

James's wife testified the parties never had an understanding that Josh would pay James's share. She testified she paid James's part of the settlement and attorney fees in cash. Fischer denies receiving full payment from James's wife for the Osborn matter. The commission did not find her testimony credible.

In May of 2016, Travelers filed a motion to enforce the settlement. Fischer personally appeared on July 22 at a hearing on the motion. The district court granted the motion and ordered the defendants to pay $15,000 before August 31. Fischer also did not oppose Travelers’ request for final judgment. Fischer did not inform his clients of the motion, hearing, or judgment. Nearly four years later, in early 2020, James sold his home and was surprised to learn of the judgment lien against his property for the $15,000 judgment plus interest and fees. James paid the $17,990 balance at closing: $2,990 more than the original settlement amount.

When Josh confronted Fischer about the judgment, Fischer repaid Josh the $6,198 in several installments. In his letter to Josh enclosed with the last installment check, Fischer wrote: "This final installment constitutes the full payment of the insurance check misplaced or allegedly uncashed by the insurance company sometime between 2014 and 2019. Sorry for any time delay – still have not received any photocopy of ‘uncashed’ check." An attorney for Travelers testified at the grievance commission hearing that his office shredded the check and it was never cashed. Fischer testified that he did not resist the entry of judgment for $15,000 because the fact Travelers had not cashed the check was "evidently" told to him. But "[w]hether [he] was mindful of that is a different subject." Fischer never repaid Josh for the $1,302 he used to cover James's attorney fees.

The Osborn matter was not included in the records reviewed by the auditor in 2019. Thus, Fischer's client trust account was underfunded by over $16,000. Fischer testified he has no colorable future claim to the $7,500, which includes the $6,198 for the uncashed check to Travelers and the $1,302 he used to cover James's attorney fees. Fischer acknowledged: "That was [Josh's] money, because [Travelers] didn't cash the check. I have no colorable claim, but I did not intentionally convert that to my own use." Fisher admitted to "taking over $6,000 out from [his] trust account that rightfully belonged to Josh Osborn."

D. Disciplinary Proceedings. The Board filed a complaint against Fischer on June 5, 2020. The Board amended the complaint on September 23 to include the Osborn matter. Fischer admitted most of the factual allegations. The Board alleged that Fischer's conduct in the AlphaGen matter violated Iowa Rules of Professional Conduct 32:3.2 (duty to expedite litigation), 32:3.4(c) (disobeying rules of tribunal), 32:3.4(d) (frivolous positions on discovery), and 32:8.4(d) (conduct prejudicial to the administration of justice); his conduct managing his trust account violated rules 32:1.15(a), 32:1.15(c), 32:1.15(f), 32:5.3(a), 32:5.3(b), 32:5.3(c)(2), and 32:8.4(c), and Client Trust Account Rules 45.2(3)(a )(9), and 45.7(3); and his conduct in the Osborn matter violated Iowa Rules of Professional Conduct 32:1.4(a)(3) (duty to keep client reasonably informed), 32:1.15(c) (withdrawal of unearned fees), 32:8.4(b) (criminal act reflecting on lawyer's honesty,...