Office of Lawyer Regulation v. Carter (In re Disciplinary Proceedings Against Carter)

• Decision Date: 12 December 2014
• Docket Number: No. 2012AP1827–D.,2012AP1827–D.
• Parties: In the Matter of DISCIPLINARY PROCEEDINGS AGAINST John J. CARTER, Attorney at Law. Office of Lawyer Regulation, Complainant–Respondent, v. John J. Carter, Respondent–Appellant.
• Court: Wisconsin Supreme Court

359 Wis.2d 70

856 N.W.2d 595

In the Matter of DISCIPLINARY PROCEEDINGS AGAINST John J. CARTER, Attorney at Law.

Office of Lawyer Regulation, Complainant–Respondent

v.John J. Carter, Respondent–Appellant.

No. 2012AP1827–D.

Supreme Court of Wisconsin.

Argued Sept. 10, 2014.

Decided Dec. 12, 2014.

For the respondent-appellant, there were briefs by Franklyn M. Gimbel, Kathryn A. Keppel, and Gimbel, Reilly, Guerin & Brown LLP, Milwaukee, and oral argument by Franklyn M. Gimbel.

For the complainant-respondent, there was a brief by Matthew J. Price, and Foley & Lardner LLP, Milwaukee, and oral argument by Matthew J. Price.

ORDER

ATTORNEY disciplinary proceeding. Attorney's license suspended.

PER CURIAM.

¶ We review a referee's report and recommendation concluding that Attorney John J. Carter violated the rules of professional conduct in connection with his representation of N.N. The referee recommended that this court impose a three-year suspension of Attorney Carter's law license and that it require Attorney Carter to pay full costs in connection with this matter, which total $6,680.62 as of September 24, 2014. We adopt the referee's findings of fact, conclusions of law, and recommendation regarding discipline and costs.

¶ 2 Attorney Carter was admitted to practice law in Wisconsin in 1974. He has no disciplinary history.

¶ 3 On August 16, 2012, the Office of Lawyer Regulation (OLR) filed a complaint against Attorney Carter alleging 11 counts of professional misconduct arising out of his representation of his former client, N.N. Attorney Carter filed an answer and Christine Harris Taylor was appointed as referee in the matter.

¶ 4 Attorney Carter later entered a stipulation by which he withdrew his answer; pled no contest to the 11 counts of misconduct charged in the OLR complaint; and agreed that the referee could use the allegations of the complaint as a factual basis for the referee's determination of misconduct. Attorney Carter reserved his right to argue the appropriate sanction. After a hearing, the referee filed a report recommending the above-stated discipline and finding the following facts.

¶ 5 Attorney Carter represented N.N. in the sale of her business. Attorney Carter and N.N. did not enter into any written fee agreement for this work. In January 2009, the buyer of N.N.'s business wired a significant portion of the sale price—$112,500—into Attorney Carter's trust account. Despite N.N.'s repeated requests, Attorney Carter did not release this amount to N.N. Over the course of the next few months, Attorney Carter converted a total of $72,053.59 of N.N.'s funds held in trust: $32,400 to his own purposes and $39,653.59 attributable to third party purposes.

¶ 6 In answer to N.N.'s repeated requests for her funds, Attorney Carter lied to N.N., telling her that he had placed her funds in various short-term investment instruments which had not yet matured. Attorney Carter maintained this lie for many months.

¶ 7 Occasionally, Attorney Carter made payments to N.N. of her funds held in trust. These periodic payments totaled just over $90,000 by September 2009.

¶ 8 During the first year of his work for N.N. related to the sale of her business, Attorney Carter did not send N.N. any bills for his work, despite N.N.'s several requests for a bill. Without informing N.N., Attorney Carter issued a $5,000 trust account check to himself. The check bore a notation that it was for a partial fee payment for the N.N. matter. Attorney Carter also requested and received from N.N. two checks totaling $7,000 as payment for fees.

¶ 9 In late October 2009, Attorney Carter sent N.N. a bill for his work. The bill listed a subtotal of $66,930 in fees, for 223.1 hours of work at $300 per hour. The bill then listed a 25% reduction in the number of hours worked, which reduced the total to $50,400. From that figure, Attorney Carter subtracted $7,000 for the two checks that N.N. had sent him for fees, for a total net due of $43,400. The bill was itemized by general categories of work (“Correspondence,” “Meetings,” “Telephone Conferences,” “Draft/Review Documents,” “Research”) rather than by specific entries. The billing statement made no reference to the $5,000 in fees that Attorney Carter had paid himself, without N.N.'s knowledge, out of his trust account.

¶ 10 N.N. was surprised to receive the $43,400 bill from Attorney Carter, as she believed the two had never agreed to the terms of Attorney Carter's fees, and his $300 hourly rate was considerably higher than the rates he had charged her in previous legal matters.

¶ 11 When N.N. objected to the bill, Attorney Carter became defensive and adversarial. He claimed that N.N. had strategically not insisted upon a written fee agreement so that she could later dispute his fees. He threatened to take the fee dispute to court. He refused to release the remainder of N.N.'s funds in his trust account until the fee dispute was resolved.

¶ 12 Ultimately, N.N. agreed to pay a total of $38,970 for Attorney Carter's work. N.N. and Attorney Carter agreed that Attorney Carter would offset that amount by the $7,000 in checks that N.N. had already sent him for fees, and by the amount of N.N.'s funds that remained in Attorney Carter's trust account. The amount of fees still owing after these offsets was $8,079.89. N.N. sent Attorney Carter a check for that amount. At the time she sent this check, N.N. was still unaware that Attorney Carter had unilaterally withdrawn $5,000 from his trust account as a partial fee payment. The record is unclear as to whether N.N. ever became aware of this withdrawal.¹

¶ 13 Based on the stipulated facts set forth above, Attorney Carter pled no contest to the following seven counts of misconduct:

• Count 1: By failing to enter into a written fee agreement with N.N. for his representation of her in the sale of her business and other matters, Attorney Carter violated Supreme Court Rule (SCR) 20:1.5(b)(1).²

• Count 2: By failing to promptly disburse N.N.'s $112,500 in sale proceeds pursuant to her requests, and by refusing to release the balance of such sale proceeds to her until they had resolved their fee dispute, Attorney Carter violated SCR 20:1.15(d)(1).³

• Count 3: By failing to respond to N.N.'s requests for the status of her funds, Attorney Carter violated SCR 20:1.4(a)(4).⁴

• Count 4: By failing to advise N.N. that he had withdrawn $5,000 in fees without providing her any notice whatsoever, Attorney Carter violated SCR 20:1.15(g)(1).⁵

• Count 5: By failing to hold at least $72,053.59 of N.N.'s funds in trust and converting them to his own purposes or for third party purposes without her knowledge or consent, Attorney Carter violated SCR 20:1.15(b)(1)⁶ and SCR 20:8.4(c).⁷

• Count 6: By engaging in an ongoing scheme for months of making repeated misrepresentations to N.N. that he had invested on her behalf the balance of her $112,500 in various investment instruments, when in fact he had never made any such investments and had already converted her funds for his own or third party purposes, Attorney Carter violated SCR 20:8.4(c).

• Count 7: By failing to respond to N.N.'s requests for a billing statement, Attorney Carter violated SCR 20:1.5(b)(3).⁸

¶ 14 During the course of the OLR's investigation into N.N.'s grievance, the OLR requested Attorney Carter's 2009 trust account records. The OLR's review of the records revealed deficiencies that led to the following four counts of misconduct, to which Attorney Carter also pled no contest:

• Count 8: In September 2009, Attorney Carter made an unidentified deposit to his trust account by telephone transfer in the amount of $2,500. Carter was unable to identify to the OLR the reason for this transfer, but his business account bank statements confirm the funds came from him. By making this telephone transfer to his trust account, Attorney Carter violated SCR 20:1.15(e)(4) b.⁹

• Count 9: Another of Attorney Carter's clients, K.S, received $2,000 monthly payments related to K.S.'s sale of a business interest. Attorney Carter represented K.S. with respect to this sale. Rather than depositing the monthly payments in his trust account and then disbursing the funds to K.S. by issuing checks from the trust account, Attorney Carter channeled the funds through his own business account on at least ten occasions, thereby violating SCR 20:1.15(b)(1).

• Count 10: By failing to maintain trust account records showing the required information, including a transaction register, subsidiary client ledgers, deposit records, canceled checks, and monthly account reconciliations, Attorney Carter violated SCR 20:1.15(f)(1).¹⁰

• Count 11: By issuing numerous trust account checks without including the client matter and purpose of such checks on the memo line, Attorney Carter violated SCR 20:l.15(f)(l )e.1.

¶ 15 The referee held a one-day hearing on sanctions. Several witnesses testified as to Attorney Carter's good character and reputation, as well as his long-time community involvement. Attorney Carter also testified. He admitted that he used funds from N.N.'s legal matter as a way to relieve significant financial pressures caused by a failed business investment. He admitted that he erred in managing his trust account. He admitted that his trust account records reflect that he converted to himself at least $32,400 of N.N.'s funds and converted for third party purposes approximately $39,600 of N.N.'s funds. He admitted that his claim that he had invested N.N.'s funds was a lie.

¶ 16 In her report, the referee recommended a three-year suspension of Attorney Carter's license. The referee wrote that Attorney Carter's misconduct ranged from trust account recordkeeping violations “to the most fundamental betrayals of the attorney-client relationship”—conversion of client trust funds. The referee noted that Attorney Carter covered up his conversion of N.N.'s funds by perpetuating a “phony story about his investment of those funds,” and that “[o]nce exposed, Carter proceeded to hold...