The Old Man and Rule 8.4(c): A Proposal for the Adoption of Maryland's Misappropriation Rule in Iowa

Author:Allison Schmidt
Position:J.D. Candidate, The University of Iowa College of Law, 2016
Pages:465-497
SUMMARY

Iowa's current approach to attorney misappropriation is inadequate. While the Iowa Supreme Court has identified attorney misappropriation of client funds as a grave violation of the Iowa Rules of Professional Conduct, it has a history of failing to define the precise metes and bounds of the violation's definition, the extent of its possible defenses, and what the complaint charging misappropriation... (see full summary)

 
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The Old Man and Rule 8.4(c): A Proposal
for the Adoption of Maryland’s
Misappropriation Rule in Iowa
Allison A. Schmidt
ABSTRACT: Iowa’s current approach to attorney misappropriation is
inadequate. While the Iowa Supreme Court has identified attorney
misappropriation of client funds as a grave violation of the Iowa Rules of
Professional Conduct, it has a history of failing to define the precise metes and
bounds of the violation’s definition, the extent of its possible defenses, and
what the complaint charging misappropriation must allege. This ambiguity
undermines the court’s self-proclaimed strict approach to misappropriation,
leaving the issue unsettled and raising due process concerns. Attorneys subject
to discipline for safekeeping violations, i.e. rules governing attorney
preservation of client funds and property, lack adequate notice of both (1) the
charges against them—whether the safekeeping charge is a trust-account
violation or the more serious charge of misappropriation—and (2) the
ultimate sanction they may face, ranging from reprimand to license
revocation. This Note proposes that the Iowa Supreme Court simplify its
distinction between misappropriation and lesser safekeeping violations to put
attorneys on better notice of the charges against them and to best comply with
the interests identified by the American Bar Association. It compares Iowa’s
approach to misappropriation with the approaches of two other jurisdictions
that have adopted judge-made rules related to misappropriation: New Jersey
and Maryland. New Jersey and Maryland provide paradigmatic examples of
how states are adding clarity to the scope of misappropriation, New Jersey by
adopting a clear, bright-line rule imposing automatic revocation on attorneys
who misappropriate and Maryland by clarifying the elements of
misappropriation while still treating misappropriation as a serious rule
violation deserving of revocation. This Note compares the three approaches
and proposes the adoption of the Maryland rule as a way for the court to
J.D. Candidate, The University of Iowa College of Law, 2016; M.M., Cleveland Institute
of Music, 2010; B.M., The University of Iowa, 2008. Thank you to the staff of Volumes 100 and
101 of the Iowa Law Review as well as Student Legal Services, particularly Dan Anderson and
Amanda Elkins. Their guidance and support were instrumental in the development this Note.
466 IOWA LAW REVIEW [Vol. 101:465
seriously address the problem of misappropriation while providing clearer
guidance to the legal profession.
I. INTRODUCTION ............................................................................. 467
II. THE DEVELOPMENT OF ATTORNEY DISCIPLINARY STANDARDS IN THE
UNITED STATES ............................................................................. 470
A. JUDICIAL STANDARDS FOR DISCIPLINARY PROCEEDINGS:
INCONSISTENT STANDARDS FOR PROFESSIONAL REGULATION
ACROSS THE COUNTRY LEAD STATES TO ADOPT THE MODEL RULES
OF PROFESSIONAL CONDUCT .................................................... 470
B. CONSTITUTIONAL STANDARDS FOR DISCIPLINARY PROCEEDINGS: IN
RE RUFFALO AND DUE PROCESS REQUIREMENTS IN ATTORNEY
DISCIPLINARY PROCEEDINGS .................................................... 474
C. A STUDY IN ONE STATES PROCEDURAL STANDARDS: THE
ATTORNEY DISCIPLINARY PROCESS IN IOWA .............................. 477
III. CLIENT-SAFEKEEPING RULES ......................................................... 478
A. CLIENT SAFEKEEPING UNDER THE ABA’S MODEL RULES ........... 478
1. Model Rule 1.15: Safekeeping Property ...................... 478
2. Interests Underlying the Rules ..................................... 480
B. CLIENT-SAFEKEEPING RULES IN THE STATES: IOWA, NEW JERSEY,
AND MARYLAND ...................................................................... 482
C. DISTINGUISHING THE STATES FROM THE ABA .......................... 483
1. Iowa ................................................................................ 483
2. New Jersey ...................................................................... 485
3. Maryland ........................................................................ 488
IV. THE SHORTCOMINGS OF IOWAS APPROACH TO
MISAPPROPRIATION ....................................................................... 491
A. IOWAS AMBIGUOUS STANDARDS AND PARTICULARIZED APPROACH
UNDERMINE THE PURPOSES OF ATTORNEY DISCIPLINARY RULES
ACCORDING TO THE ABA ........................................................ 491
B. IOWAS AMBIGUITY MAY DEPRIVE ATTORNEY–DEFENDANTS OF
SUFFICIENT NOTICE ................................................................. 493
V. A PROPOSAL FOR THE ADOPTION OF MARYLANDS APPROACH ..... 494
A. ABA INTERESTS IN MARYLAND AND NEW JERSEY ....................... 494
B. NOTICE IN MARYLAND AND NEW JERSEY ................................... 496
VI. CONCLUSION ................................................................................ 497
2015] THE OLD MAN AND RULE 8.4(C) 467
I. INTRODUCTION
In February 2012, David Kelsen, a 75-year-old Iowa attorney, was in
trouble both personally and financially.1 His wife was in poor health and had
recently lost her job.2 His stepson had stolen money from him.3 He owed his
landlord over $3000.4 And after his secretary left for a new job, he was unable
to replace her due to his poor financial situation.5
At the same time, Kelsen began representing a client for a potential
wrongful-discharge claim.6 Throughout the course of his representation,
Kelsen accepted multiple retainer payments from the client, including one
balloon payment of $7500, all before filing a lawsuit on the client’s behalf.7
With each of the payments, Kelsen violated a number of the Iowa Rules of
Professional Conduct’s safekeeping and trust account rules.8 The Iowa
Supreme Court Attorney Disciplinary Board (“Board”) filed a complaint
alleging Kelsen violated the following rules: improperly routing advanced
payments from the client, failing to notify the client when he made
withdrawals, and ultimately, failing to return unearned payments after the
client terminated his representation.9
Kelsen admitted all charges in the complaint.10 Sanctions for violating
safekeeping and trust account rules vary in Iowa from public reprimand to
revocation.11 Because of this variance, Kelsen might have been aware that he
was facing revocation. However, several circumstances suggest that not only
was Kelsen unaware of the severity of the potential sanction he was facing, but
a more lenient sanction was appropriate in his situation.
First, the Board’s approach indicated that it considered the offense to be
a lesser safekeeping violation rather than misappropriation. In Iowa, while
lawyers who misappropriate almost invariably face revocation, many other
safekeeping violations typically result in lesser sanctions, such as a public
1. Iowa Supreme Court Attorney Disciplinary Bd. v. Kelsen, 855 N.W.2d 175, 177, 179
(Iowa 2014).
2. Id. at 179.
3. Id.
4. Id. at 178.
5. Id. at 179.
6. Id. at 177.
7. Id. at 177–78.
8. Id. at 178–79.
9. Id. at 179; see also IOWA CT. R. 45.2, 45.7(3)–(4); IOWA R. OF PROFL CONDUCT r. 32:1.15,
32:1.16(d).
10. Kelsen, 855 N.W.2d at 179.
11. Compare id. at 186 (revoking an attorney’s license), with Iowa Supreme Court Attorney
Disciplinary Bd. v. Piazza, 756 N.W.2d 690, 699–700 (Iowa 2008) (per curiam) (imposing a
public reprimand and noting that “[i]n the past, the sanctions for similar violations have ranged
from a public reprimand to suspension [and] revocation” (citations omitt ed)).

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