Office of Lawyer Regulation v. Erhard (In re Erhard)
| Decision Date | 12 September 2018 |
| Docket Number | No. 2017AP1275-D,2017AP1275-D |
| Citation | 383 Wis.2d 628,2018 WI 95,917 N.W.2d 535 |
| Parties | In the Matter of DISCIPLINARY PROCEEDINGS AGAINST Michael P. ERHARD, Attorney at Law Office of Lawyer Regulation, Complainant, v. Michael P. Erhard, Respondent. |
| Court | Wisconsin Supreme Court |
ATTORNEY disciplinary proceeding. Attorney's license suspended.
¶ 1 We review the report of Referee William Eich, in which he found, based on the admissions of Attorney Michael P. Erhard, that Attorney Erhard had committed 11 counts of professional misconduct, and in which he recommended that Attorney Erhard's license to practice law in this state be suspended for a period of six months. After carefully reviewing the matter, we accept Attorney Erhard's admission that he committed the first ten counts of misconduct alleged in the complaint filed by the Office of Lawyer Regulation (OLR). We do not decide whether Attorney Erhard's conduct in obtaining a cashier's check made payable to a third party constitutes a violation of former Supreme Court Rule (SCR) 20:1.15(e)(4)a, as alleged in Count 11, because that determination would not change the level of discipline we impose. We conclude that a suspension of three months is the appropriate level of discipline to be imposed under the particular facts of this case. As the OLR advises that there are no client funds to restore, we do not impose any restitution award. We do require Attorney Erhard to pay the costs of this disciplinary proceeding, which were $3,190.26 as of April 17, 2018.
¶ 2 Attorney Erhard has been admitted to the practice of law in Wisconsin since August 1973. He has practiced in a number of private law firms since his admission. At the time of the events underlying this disciplinary proceeding, Attorney Erhard was a member of Erhard and Payette, LLC in Madison. That firm is no longer in existence.
¶ 3 Attorney Erhard has been the subject of professional discipline on one prior occasion. In 2002 he was privately reprimanded for professional misconduct that consisted of acquiring a proprietary interest in a client matter, making misrepresentations in a complaint filed in connection with the client matter, and failing to notify the client when the civil action had been dismissed. Private Reprimand 2002-3.1
¶ 4 The OLR filed its complaint alleging 11 counts of misconduct in July 2017. Attorney Erhard's answer and affirmative defenses admitted most of the allegations of the complaint, but did object to a number of factual allegations and did provide some additional explanatory information. Despite those objections, Attorney Erhard's answer admitted all 11 counts of misconduct.
¶ 5 All of the allegations of misconduct in this matter arise out of Attorney Erhard's handling of his firm's client trust account. The Erhard and Payette firm maintained both a client trust account and an operating account for the business of the firm. Initially, those accounts were maintained at Chase Bank. On May 16, 2014, Attorney Erhard opened a new client trust account at Johnson Bank. For a few months, both trust accounts were in existence.2 On August 14, 2014, the law firm closed the Chase Trust Account.
¶ 6 It appears that Attorney Erhard was the person at the firm primarily in charge of the client trust account. He signed checks drawn on the account and made the electronic transfers to and from the account that are the subject of this proceeding. The firm employed a paralegal, who was responsible for providing an accounting firm with the necessary information so that the accountants could prepare checks for Attorney Erhard's signature. The accounting firm also maintained the trust account records for the firm.
¶ 7 Most of the allegations in the OLR's complaint relate to Attorney Erhard's handling of trust account funds connected to two client matters involving civil actions—one on behalf of E.A. and one on behalf of J.O. We will divide the allegations between the periods prior to and after the switch of the client trust accounts from Chase Bank to Johnson Bank.
¶ 8 With respect to the E.A. matter during the time period in which the Chase Trust Account was being used, between May 2, 2014, and May 29, 2014, Attorney Erhard made seven disbursements in the total amount of $200,000 from the Chase Trust Account to E.A., M.A., S.A., and the law firm's operating account. The four disbursements to the operating account were made by electronic transfers. These seven disbursements exceeded the amount in the Chase Trust Account for the E.A. matter by $100,000, which resulted in funds from other clients covering these disbursements.
¶ 9 On May 30, 2014, a deposit of $537,000 for E.A. was wired into the Chase Trust Account. This repaid the $100,000 that had been taken from other client accounts and left a positive balance of $437,000 for E.A. On that same date Attorney Erhard made two additional electronic transfers totaling $125,000 from the Chase Trust Account to the firm's operating account. In June 2014, Attorney Erhard issued three checks to E.A., M.A., and S.A. in the total amount of $267,315 and made two electronic transfers in the total amount of $2,673.38 from the Chase Trust Account to the firm's operating account. Thus, at the end of these transactions, there was a balance of $42,011.62 in funds belonging to E.A. in the Chase Trust Account.
¶ 10 With respect to the J.O. matter specifically, there were three particular transactions that formed the basis for allegations of misconduct. First, on June 25, 2014, Attorney Erhard purchased two cashier's checks out of the Chase Trust Account with funds belonging to J.O. The two cashier's checks, totaling $68,256.75, were made payable to the Wisconsin Department of Revenue (DOR). Attorney Erhard caused those two cashier's checks to be sent to the DOR in payment of the income tax liability for J.O. and his wife. On July 1, 2014, Attorney Erhard electronically transferred $178,125 from the Chase Trust Account to the law firm's operating account as payment for legal fees. On that same date he also electronically transferred $211,590.15 to J.O.'s checking account.
¶ 11 The OLR's complaint also contains allegations regarding the transfer of funds from the Chase Trust Account to the Johnson Trust Account. On July 2, 2014, the firm's operating account had a balance of $167,135.33. On that date Attorney Erhard signed a hand-written check for $400,000 drawn on the operating account and payable to the Johnson Trust Account. The check was deposited with Johnson Bank on that same date. On July 3, 2014, Attorney Erhard electronically transferred $400,000 from the Chase Trust Account to the firm's operating account to cover the check he had deposited the day before. Nearly all of that $400,000 belonged to nine clients. After this transfer there remained a balance of $17,986.86 in the Chase Trust Account.
¶ 12 On August 1, 2014, Attorney Erhard electronically transferred $17,000 from the Chase Trust Account to the operating account. These funds were used to cover a number of checks and electronic withdrawals from the operating account that were used to pay business expenses and to pay a $5,000 draw to Attorney Erhard. On that same date, however, Attorney Erhard deposited $17,000 from another source to the Johnson Trust Account to replenish the trust account funds.
¶ 13 On August 14, 2014, Attorney Erhard transferred the remaining $986.86 in the Chase Trust Account into the firm's operating account. As with the earlier movement of the $17,000, on that same date Attorney Erhard deposited a check from the operating account into the Johnson Trust Account. With the transactions on both August 1 and August 14, 2014, Attorney Erhard effectively moved client funds from one trust account to the other, but for some reason he routed them through the firm's operating account.
¶ 14 The OLR's complaint also contains some allegations regarding the disbursement of funds for E.A. after the firm's switch to the Johnson Trust Account. After Attorney Erhard moved the firm's client trust funds to the Johnson Trust Account, the balance of trust account funds for E.A. was $42,011.62. From September 15, 2014, to December 12, 2014, Attorney Erhard made four disbursements totaling $124,573.62 related to the E.A. matter. One of the four disbursements was a $10,000 check from the Johnson Trust Account to the firm's operating account in payment of legal fees. The first of these four disbursements created a negative balance of nearly $27,000 for the E.A. matter in the Johnson Trust Account. After the last of the four disbursements, the negative balance had grown to $82,562. This meant that funds from other clients were used to cover the four disbursements. Approximately six months after the last of these four disbursements, Attorney Erhard deposited $82,562 into the Johnson Trust Account to replenish the funds belonging to the other clients and eliminate the negative balance for E.A.
¶ 15 The OLR's complaint charged Attorney Erhard with committing 11 separate counts of professional misconduct arising out of the facts described above. The complaint, however, alleged multiple counts for the same conduct. For example, Counts 1, 2, and 3 all alleged that over a roughly three-week period in May 2014 Attorney Erhard had improperly disbursed from the Chase Trust Account $100,000 more in connection with E.A.'s matter than was in the trust account for that client. Count 1 alleged that this conduct had violated former SCR 20:1.15(f)(1)b.3 Count 2 alleged that this same conduct had violated SCR 20:1.15(b)(1).4 Count 3 alleged that this same conduct had violated SCR 20:8.4(c).5
¶ 16 Counts 4, 5, and 6 repeated this pattern with respect to Attorney Erhard's excessive disbursements in connection with the E.A. matter over the period of September to December 2014. Count 4 alleged that this conduct had violated former SCR 20:1.15(f)(1)b. Count 5 alleged that this same conduct had violated SCR 20:1.15(b)(1). Count 6 alleged...
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