Opinions and Orders

STATE OF MICHIGAN Attorney Discipline Board Grievance Administrator, Petitioner/A ppellee/Cross-Appellant, v Robin H. Kyle, P 33330, Respondent!A ppellant!Cross-Appellee, Case No. 13-14-GA Decided: April 6, 2016

16 APR -6 AM II: 54

Appearances: Rhonda Spencer Pozehl, for the Grievance Administrator, Petitioner/Appellee/Cross-Appellant Michael Alan Schwartz, for the Respondent!A ppellant!Cross-Appellee

BOARD OPINION Tri-County Hearing Panel #28 issued an order on October 7, 2014, suspending respondent Robin H. Kyle's license to practice law for 60 days. Respondent filed a petition for review and the Grievance Administrator filed a cross-petition. The Attorney Discipline Board has conducted review proceedings in accordance with MCR 9.118, including review oft he record before the hearing panel and consideration of the briefs and arguments presented to the Board at a review hearing. For the reasons discussed below, the hearing panel's order of suspension is affirmed. I. Hearing Panel Proceedings The Grievance Administrator filed a formal complaint against respondent on January 25, 2013, after receiving three overdraft notifications from PNC Bank that indicated that there were insufficient funds in respondent's IOLTA account to cover a $99.90 electronic debit. Specifically, the formal complaint alleged that respondent routinely used his IOLT A account to pay business debts that were unrelated to any specific client matter, and that he regularly deposited and maintained personal funds in his IOLTA account. The complaint further alleged that respondent intentionally misused the IOLTA account in order to avoid garnishments or levies by his creditors, and to shield

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his personal funds from the State of Michigan and IRS for payment of outstanding state and federal tax liens. Respondent was charged with violations ofMRPC 1.15(a)(3) and (t); 8.4(b); and MCR 9.104(2)-{4). Respondent filed an answer to the formal complaint, admitting to the IOLTA account overdraft charges. He further admitted that he routinely paid his office telephone bill out of his IOLTA account, and that he had pending tax liens. However, respondent denied that he maintained any personal funds in his IOLTA account or that he placed personal funds into the IOLTA account to avoid paying his tax liens. Five misconduct hearings were held before the panel from September 2013 through April 2014. Respondent was the only witness called to testify during the misconduct phase of the proceedings. Following the hearings, the panel found that respondent committed professional misconduct by holding funds other than client funds in his IOLTA account, in violation ofMRPC 1.15(a)(3); depositing his own funds into his IOLTA account in excess of the amount reasonably necessary to pay service charges or fees, in violation ofMRPC 1.5(t).1 The panel ruled that there was insufficient evidence admitted to support a rmding that respondent violated MRPC 8.4(b)2 and MCR 9.104(3V The Grievance Administrator had argued that, based on a preponderance of the evidence, one could conclude that respondent misused his IOLTA account in order to shelter funds from the IRS and other creditors. However, no evidence was presented in support oft his claim, aside from the fact that respondent had "ongoing tax issues," and that he had suffered various financial hardships over the past two decades. (Petitioner's Proposed Findings of Fact and Conclusions of Law, pp 8, 11-12, 18.) Respondent maintained that he only used his IOLTA account as a general operating account to avoid paying the cumbersome service charges and fees associated with his business accouilt. (Tr 9/11/13, pp 69-70.) The

1 The panel also found that respondent engaged in conduct that exposes the legal profession or the courts to obloquy, contempt, censure, or reproach, in violation ofMCR 9.104(2); and engaged in conduct that violates the standards or rules of professional conduct adopted by the Supreme Court, in violation ofMCR 9.104(4).

2 MRPC 8.4(b): "It is professional misconduct for a lawyer to: (b) engage in conduct involving dishonesty, fraud, deceit, misrepresentation, or violation oft he criminal law, where such conduct reflects adversely on the lawyer's honesty, trustworthiness, or fitness as a lawyer."

3 MCR 9.104(3): "The following acts or omissions by an attorney, individually or in concert with another person, are misconduct and grounds for discipline, whether or not occurring in the course of an attorney-client relationship: (3) conduct that is contrary to justice, ethics, honesty, or good morals."

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Grievance Administrator's counsel did not submit any additional evidence to refute this testimony. Instead, she urged the panel to conclude that respondent misused his IOLTA account to intentionally defraud the government and his other creditors without offering any additional substantiating evidence. The panel found that the Grievance Administrator failed to satisfy his burden of proof in this regard, thus finding that respondent did not violate MRPC 8.4(b) and MCR 9.104(3). A sanction hearing was held on May 27,2014 to determine discipline in accordance with MCR 9.115(1)(2). The parties submitted sanction briefs prior to the hearing. The Grievance Administrator argued for the imposition of a 90-day suspension. Respondent advocated for the imposition of an order imposing "no discipline" or a sanction that would not prohibit him from practicing law for any period of time. Employing the American Bar Association Standards for Imposing Lawyer Sanctions (ABA Standards), pursuant to the Court's directive in Grievance Administrator v Albert Lopatin, 462 Mich 235 (2000), the hearing panel imposed a 60-day suspension. Respondent filed a timely petition for review of the hearing panel's order of suspension, arguing that the discipline imposed by the panel was excessive and not supported by the record. The Grievance Administrator subsequently filed a cross-petition for review contending that the panel erred in not imposing a greater sanction. II. Discussion A. The hearing panel did not err in relying, in part, on Standard 4.12. Respondent argues that the panel inappropriately applied ABA Standard 4.124 because "what was found by the hearing panel was that respondent placed his own money in the IOLTA account, and nothing more." While it is true that the crux of this case involves violations of MRPC 1.1S(f) (prohibiting the deposit of lawyer funds in a trust account beyond what is reasonably necessary to payor avoid financial institution charges), and that Standard 4.1 is primarily directed toward proposing sanctions generally appropriate for "Failure to Preserve the Client's Property,"5 and,

4 Standard 4.12 provides that suspension is generally appropriate when a lawyer knows or should know that he is dealing improperly with client property and causes injury or potential injury to a client.

5 See Standard 4.1 's heading, and Standards 4.12-4.14, all of which reference "dealing with" client property.

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further, that a violation ofMRPC 1.15(d t was not proven, or even alleged in the formal complaint, the panel's partial reliance on Standard 4.12 was clearly appropriate. A brief review of MRPC 1. IS's key provisions and concepts may be helpful to place the violation established here in context. Like its predecessor, DR 9-102 of the Code of Professional Responsibility, MRPC 1.15 is concerned with the fundamental "obligations of safekeeping, accounting, and delivery when a lawyer comes into possession of someone else's money or property.,,7 One of the most significant requirements of the rule, that a lawyer's money be held separate from that of clients or third persons, is now found in paragraph (d): A lawyer shall hold property of clients or third persons in connection with a representation separate from the lawyer's own property. All client or third person funds shall be deposited in an IOLTA or non-IOLTA account. Other property shall be identified as such and appropriately safeguarded.8

Nowhere in the text of MRPC 1.15 will one fmd the words "misappropriation" or "commingling," but parties, hearing panels, this Board, and others have traditionally used the terms to describe conduct prohibited by MRPC 1.15(d ). Many disciplinary bodies have used the word "misappropriation" as a synonym for theft, or, at times, for any unauthorized taking or use of the funds not belonging to a lawyer, whether accompanied by bad intent or no intent at all. In other words, we have said that misappropriation is a "per seoffense," meaning that "'once the running balance of the [trust] account fell below the amount [required to be] held in trust for the client, misappropriation had occurred.'" Grievance Administrator v Deborah C. Lynch, 96-96-GA (ADB 1997) (discussing cases involving "inadvertent misuse" of client funds), pp 5-6. Often, the modifier "intentional" or "knowing" is attached to the word "misappropriation" to signal the some oft he most serious conduct prohibited by MRPC 1.15(d ). With the increased use

6 MRPC 1.15(d ) provides: "A lawyer shall hold property of clients or third persons in connection with a representation separate from the lawyer's own property. All client or third person funds shall be deposited in

an IOLTA or non-IOLTA account. Other property shall be identified as such and appropriately safeguarded."

7 Annotated Model Ru1es of Professional Conduct (8th

8 paragraph.

ed, ABA 2015), P 261.

MRPC 1.15(d). Prior to amendments in 2005, this requirement was set forth in the rule's first

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of the ABA Standards since the Court's Lopatin decision adopting them in 2000, the word "conversion" has been used much more frequently to refer to knowing misuse of client funds.9 A lawyer who knowingly takes money belonging to others has failed to keep it separate from his own in the most flagrant way. Thus, this kind of "[m ]isappropriation of client funds ... is an obvious violation of the rule.,,10 The lawyer has failed to keep funds safe and separate from his own by appropriating them to his or her own use. Various formal complaints, panel reports and orders, and opinions and orders of this Board dealing with claims of misappropriation also recite violations of MRPC 1.15(b)(3) (failure to promptly payor deliver and account for funds or property in possession ofa n attorney and belonging to another). "Commingling" often means, simply, the failure to hold separate lawyer and client or third party funds, as required by MRPC 1.15(d ). When used by itselft he term gener8.Ily suggests that the balance in the trust account has not fallen below the sum(s) required to be held on behalf of the lawyer's client(s), i.e., that the funds of the lawyer and others have been mixed together but no misuse or expenditure of client or third party funds (be it knowing, reckless, or negligent) has occurred. Like misappropriation, commingling may be accompanied by different mental states. Nothing in this opinion's review of concepts and terminology should be considered to alter existing law or set forth new requirements of pleading or analysis. And the prohibition against "misappropriation" and "commingling" may be found in other parts of the rule. See, e.g., MRPC 1.15(g) ("Legal fees and expenses that have been paid in advance shall be deposited in a client trust account and may be withdrawn only as fees are earned or expenses incurred. ").11 We discuss these terms, in part, because the use of the term "commingling" figured prominently below. We do not seek to encourage the use of labels to the exclusion of an analysis under the rules. MRPC 1.15 is focused on protection of the property and funds of clients and third persons in the possession ofa lawyer. As we have seen, this inCludes a prohibition against conversion or

9 See Standard 4.11. 10 Annotated Model Rules of Professional Conduct (8th ed, ABA 2015), P 262. 11 Cases citing MRPC 1.15(g) in connection with knowing conversion or misappropriation include Grievance Administrator v William L. Fette, 1O-70-GA (ADB 2011) and Grievance Administrator v DavidA. Monroe, 12-20-GA (ADB 2012).

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taking that is well-established, even if it must be teased out of the requirements that the money or property of others be kept separate from the lawyer's and turned over promptly and accounted for upon request. We have also discussed the fact that MRPC 1.15 prohibits the failure to keep funds separate, which is sometimes referred to as "commingling." However, MRPC 1.15 contains other provisions to implement the central mission of the rule and essentially require the proper maintenance of a trust account. For example, it is misconduct for a lawyer to fail to promptly notify a person that funds belonging to that person have been received, or for a lawyer to fail to maintain trust account records for five years after termination of the representation. MRPC 1.15(b)(1)-(2). Also, MRPC 1.15 has, over the years, accumulated increasingly detailed provisions regarding the two types of trust accounts into which all client or third person funds "shall be deposited." MRPC 1.15(d). The first, and probably most common, type of trust account is definedinMRPC 1.15(a)(3): "IOLTA account" refers to an interest- or dividend-bearing account, as defined by the Michigan State Bar Foundation, at an eligible institution from which funds may be withdrawn upon request as soon as permitted by law. An IOLTA account shall include only client or third person funds that cannot earn income for the client or third person in excess oft he costs incurred to secure such income while the funds are held.

If the funds held by the lawyer could earn a net return for the client, after considering fees and other expenses, the lawyer should place them in a "non-IOLTA account,"12 which is defmed in MRPC 1. 15(a)(4). hi addition to the defmitions set forth in the first paragraph ofMRPC 1.15, various provisions regarding IOLTA and non-IOLT A accounts, and their selection and maintenance, are peppered throughout the rule. See MRPC 1.15(a), (e), (h), (i), and 0). A lawyer's good-faith decision regarding the deposit or holding of funds in an IOLTA account versus a non-IOLTA account is not reviewable by a disciplinary body. MRPC 1.150). We now turn, at last, to the provision of the rule found to have been violated in this case. The panel found that respondent deposited personal funds into the trust account in sums greater than "reasonably necessary to pay financial institution service charges or fees or to obtain a waiver of

12 See MRPC l.IS(e). See also MRPC l.IS(a)(3)

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service charges or fees." MRPC 1.15(f)Y Some view this type of rule as an "exception" to the anticommingling rule.14 While this may be seen as true in some circumstances, the respondent's contentions in this case illustrate that it may not always be an accurate description. In other words, our rule's prohibition does not depend upon whether or not client funds are actually in the trust account. Even ifno client funds are in the account, MRPC 1.15(f) prohibits the deposit of lawyer funds in an amount beyond that "reasonably necessary" to payor avoid the charges or fees referenced in the rule. Respondent argues that there was no commingling because there were no client funds in the account. After receiving evidence, including generalized testimony from respondent that he placed some unearned fees in the account, the panel concluded that the ''the proofs are not clear with respect to the actual mixing of client and attorney funds here." In any event, the formal complaint did not allege a violation of MRPC 1.15(d ), and the Administrator disavowed such a charge. 15 Understandably, this informed much of respondent's argument, as he sought to make it clear that client funds were not invaded and that the absence of a Rule 1.15(d ) charge took commingling off the table. The panel agreed, and so do we. However, we are not persuaded by respondent that it is error for the panel to cite Standard 4.12 in determining the appropriate discipline simply because a violation ofMRPC 1.15(d ) was not alleged. First, Standard 4.1 itself is not so narrowly circumscribed. It is true that, "[t]he most common cases under Standard 4.12 involve lawyers who commingle client funds with their own or

13 The panel also found that respondent violated MRPC(a )(3), quoted above, which contains the definition ofa n "IOLTA Account." The formal complaint references the first part oft he rule's second sentence, which reads: "An IOLTA account shall include only client or third person fonds that cannot earn income for the client or third person in excess of the costs incurred to secure such income while the funds are held." (Emphasis added.) Assuming this definitional section oft he rule contains a ground for discipline, which we seriously question, it must be read in conjunction with MRPC 1.15(f), which expressly permits some lawyer funds to be deposited. The violation ofMRPC 1.15(f) is the critical one we consider here.

14 See, e.g., lllinois State Bar Association Professional Conduct Advisory Opinion No. 15-02 (May 20 15), p 2, discussing Illinois Rule ofP rofessional Conduct 1.15(b) which states: "A lawyer may deposit the lawyer's own funds in a client trust account for the sole purpose of paying bank service charges on that account, but only in an amount necessary for that purpose."

15 See HP Report 10/7/14, P 8 ("the Grievance Administrator has disavowed a commingling claim here").

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fail to remit client funds promptly.,,16 However, in addition to harsher sanctions for conversion or commingling, an admonition may be appropriate ''when a lawyer's sloppy bookkeeping practices make it difficult to determine the state of a client trust account, but where all the client funds are actually properly maintained. ,,17 Thus, although a hyper-technical reading ofS tandard 4.1 might lend support to an argument that it does not "apply" here, the Standard actually provides assistance in gauging proportional sanctions to parties and adjudicators dealing with factual circumstances closely related to those more often treated in the Standard. Our second reason for concluding that Standard 4.12 affords guidance here, and was appropriate for the panel to consider, is related to the first. Certainly, the application ofo ne Standard as opposed to another, depending upon particular factors in the Standards and the case at hand, may be a basis for argument or inquiry before panels or the Board. In such instances, it may be reasonable to assert that it is error to apply a particular Standard. However, where, as here, it is acknowledged that no other Standard comes closer to the facts than one under consideration,18 it is not improper to consider an analogous or nearly-applicable standard as one authority, adjusted as necessary, for a possibly proper range of sanctions. As we have said on several occasions, the Standards "do not provide rigid guidelines for a level of discipline to be imposed in every conceivable factual situation." Grievance Administrator v Harvey J. Zamek, 98-114-GA; 93-133-FA (ADB 1999). They are "not designed to propose a specific sanction for each of the myriad of fact patterns in cases oflawyer misconduct." ABA Standards, p 6. Nonetheless, under Grievance Administrator v Lopatin, 462 Mich 235; 612 NW2d 120 (2000), they are the starting point for -the discharge of "our responsibility on review . . . to examine the factors affecting the assessment of the appropriate level of discipline in light of the ABA Standards and applicable Michigan

16 Annotated Standards for Imposing Lawyer Sanctions, Standard 4.12, Annotation, p 141 (2015); Standard 4.12, commentary, p 27 (1986).

17 Annotated Standards for Imposing Lawyer Sanctions, Standard 4.14, Annotation, p 147 (2015); Standard 4.12, commentary, p 28 (1986).

18 Respondent's Sanction Memorandum asserted, at page 2, that "[hl ad Respondent been found to have failed to preserve client property . . . the appropriate sanction under the Standards would have been an admonition," and that '[r]eview of the Standards fails to disclose any other Standards which arguably could be applicable. "

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precedents and attempt to ensure continuity and proportionality in discipline." Grievance Administrator v Kathy Lynn Henry, 09-107-JC (ADB 2010). [Grievance Administrator v Michael L. Stefani, lO-I13-GA (ADB 2013), p 14, citing Grievance Administrator v Valerie Colbert-Osemuede, 09-46-GA (ADB 2012), pp 13-14.]

In conclusion, the hearing panel did not err in relying, in part, on Standard 4.12. B. The hearing panel did not err in imposing a 60-day suspension. In reviewing the sanctions imposed we "review and, if necessary, modify a hearing panel's decision as to the level ofd iscipline" in light oft he our "responsibility to ensure a level ofu niformity and continuity" in disciplinary matters. Grievance Administrator v Brent S. Hunt, 12-1 O-GA (ADB 2012), p 7, citing Grievance Administrator v August, 438 Mich296, 304; 475 NW2d 256 (1991). Here, in accordance with the dictates of Lopatin, the panel began its inquiry with the ABA Standards for Imposing Lawyer Sanctions, identified the duty violated, the lawyer's mental state and the potential or actual injury caused by the lawyer's misconduct under ABA Standard 3.0, and thoroughly considered potentially applicable Standards. The panel also considered precedent and the existence of aggravating and mitigating factors. Finally, the panel carefully and aptly articulated its rationale for imposing a 60-day suspension: Respondent's testimony establishes that he was aware oft hose specific limitations proscribed by the court rules. By his own admissions, respondent chose to eliminate his separate business/operating account in order to treat his IOLT A account as his office operating account, in direct contravention of the proscriptions of MRPC 1. 15(a)(3) and (t).

MRPC 1.15(d ) addresses the prohibition of commingling by lawyers by specifically declaring that "a lawyer shall hold property of clients or third persons in connection with a representation separate from the lawyer's own property." However, the formal complaint in this matter did not charge a violation oft his specific subparagraph of MRPC 1.15. Although Standard 4.12 deals with the mishandling of client funds, most often commingling, and counsel for the Grievance Administrator has disavowed a commingling claim here, the gist of the anti-commingling rule, MRPC 1.15~ is aimed at the protection of client funds against intentional or unintentional dissipation or levy by a creditor or other such risk. Although the proofs are not clear with respect to the actual mixing of client and attorney funds here, it is

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clear that respondent's misconduct put any client funds he might receive at risk of commingling if not actual loss. Again, respondent admitted that he purposely closed his business/operating account in order to exclusively use his IOLTA account. That action is only compounded by his failure to produce records in response to a subpoena, to confIrm his testimony about how he managed the funds in his IOLTA account or how he insured that no client funds would be jeopardized. Finally, respondent was cognizant, based on his own testimony, of the existence of both his ex-wife's potential rights and claims as well as the IRS liens when he made the decision to proceed in that fashion. Respondent should have been aware that to the extent he used his IOLTA account as his sole personal account, he potentially exposed that account to adverse action by known creditors with established rights against him.