Disciplinary Counsel v. Shaw

[Cite as Disciplinary Counsel v. Shaw, 126 Ohio St.3d 494, 2010-Ohio-4412.]

DISCIPLINARY COUNSEL v. SHAW.

[Cite as Disciplinary Counsel v. Shaw, 126 Ohio St.3d 494, 2010-Ohio-4412.]

Attorney misconduct — Naming the attorney’s children as beneficiaries of a trust

he prepared for an elderly client and borrowing money from the elderly

client without advising the client of the risks of making the unsecured loan

and then failing to repay the loan — Two-year suspension with one year

stayed on conditions.

(No. 2010-0316 — Submitted May 26, 2010 — Decided September 23, 2010.)

ON CERTIFIED REPORT by the Board of Commissioners on Grievances and

Discipline of the Supreme Court, No. 08-091.

__________________

Per Curiam.

{¶ 1} Respondent, Kenneth Norman Shaw of Warren, Ohio, Attorney

Registration No. 0005525, was admitted to the practice of law in Ohio in 1980. In

a four-count amended complaint, relator, Disciplinary Counsel, has charged him

with violations of the Code of Professional Responsibility, the Ohio Rules of

Professional Conduct, and the Rules for the Government of the Bar in Ohio for

conduct occurring both before and after February 1, 2007.1 A panel of the Board

of Commissioners on Grievances and Discipline conducted a hearing on

September 29, 2009, but respondent did not appear. The panel, however,

reconvened on December 3, 2009, and respondent appeared to present his case,

pro se. Based upon findings that respondent named his five children as

beneficiaries in a trust he prepared for a client, borrowed $13,000 from the same

client without advising her of the inherent conflict of interest and then failed to

1. February 1, 2007, is the effective date of the Rules of Professional Conduct.

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repay the loan as agreed, and accepted attorney fees for a guardianship without

obtaining prior approval from the probate court, the panel recommended that

respondent be suspended from the practice of law for two years with one year

stayed on the condition that he pay restitution.

{¶ 2} The board adopted the panel’s findings of fact and misconduct, but

citing respondent’s “serious acts of fraud and misconduct,” recommends that we

suspend respondent’s license to practice law in Ohio for two years, with no stay.

Respondent objects, arguing that the recommended sanction is too harsh. He asks

us to remand this case to the board for the presentation of additional mitigating

evidence. Alternatively, he urges us to impose a one-year suspension with six

months stayed on the condition that he remain in compliance with the terms of his

contract with the Ohio Lawyers Assistance Program (“OLAP”).

{¶ 3} For the reasons that follow, we decline respondent’s request to

remand this cause to the board but sustain his objection to the board’s

recommended sanction. We conclude that a two-year suspension with one year

stayed upon conditions is the appropriate sanction for his misconduct.

Misconduct

Count One

{¶ 4} Counts One, Two, and Three of the complaint arise from

respondent’s representation of an elderly client. In September 1999, the client

asked him to draft a power of attorney and revocable living trust. Respondent

prepared those documents, naming himself as the client’s attorney-in-fact,

cotrustee, and first successor trustee for the trust. And, purportedly at the client’s

behest, he included a provision designating each of his five children as a

beneficiary of the trust, with each child entitled to receive $5,000 upon the

client’s death. At the panel hearing, respondent admitted that he had not advised

his client, who was unrelated to him by blood or marriage, of the inherent conflict

of interest in naming his children as beneficiaries of a document he had prepared.

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He also admitted that he had never suggested that she obtain advice from a

disinterested person or have another attorney prepare the trust documents.

{¶ 5} The panel and board found, and we agree, that respondent’s

conduct in preparing a trust document that named his own children as

beneficiaries violates DR 1-102(A)(5) (prohibiting a lawyer from engaging in

conduct that is prejudicial to the administration of justice), 1-102(A)(6)

(prohibiting conduct that adversely reflects upon the lawyer’s fitness to practice

law), 5-101(A)(1) (prohibiting, except with consent of a client after full

disclosure, a lawyer from accepting employment if the exercise of the lawyer’s

professional judgment on behalf the client will be or reasonably may be affected

by the lawyer’s financial and personal interests), and 5-101(A)(2) (prohibiting a

lawyer from preparing, drafting, or supervising the preparation or execution of a

will, codicil, or inter vivos trust for a client in which the children of the lawyer are

named as beneficiaries).

Count Two

{¶ 6} In August 2000, respondent requested and obtained a $13,000 loan

from his client to be used as a down payment for a building to house his law

practice. Pursuant to the terms of the note, respondent was to repay the loan in six

months, at six percent interest. He failed to pay the client as agreed. Although he

later agreed to make payments of $250 per month, he made only three payments

before defaulting. In 2002, the client filed suit and obtained a default judgment

against respondent for $13,000 plus interest and court costs. Blackburn v. Shaw

(Sept. 23, 2003), Warren M.C. No. 2002 CV F 03134.

{¶ 7} At his disciplinary hearing, respondent admitted that he had not

advised his client that she should obtain independent advice before making the

loan, had not advised her of the risks of making the unsecured loan, and had not

discussed the inherent conflict of interest in the loan arrangement. Based upon

these facts, the panel and board found, and we agree, that respondent’s conduct

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with respect to Count Two violates DR 1-102(A)(5), 1-102(A)(6), 5-101(A)(1),

and 5-104(A) (prohibiting a lawyer from entering into a business transaction with

a client if they have differing interests therein).

{¶ 8} Although the board found that respondent’s debt to this client was

discharged in bankruptcy, we note that there is no evidence in the record to

support respondent’s testimony regarding the bankruptcy discharge. On the

contrary, the record demonstrates that the administrator of the client’s estate filed

a concealment-of-assets claim and a declaratory judgment against several parties,

including respondent. Miller v. Lagos (Feb. 8, 2008), Trumbull C.P. No. 2007

CVA 0045. The probate court found that respondent had “unduly influenced” the

client to make the loan, that the loan constituted “self-dealing,” and that it was

“detrimental” to the trust. Id. at 11. While noting that respondent had alleged that

the debt had been discharged in bankruptcy, the probate court concluded that

pursuant to Section 523(a)(4), Title 11, U.S.Code, the debt was nondischargeable

because it “arose from the debtor’s defalcation while acting in a fiduciary

capacity.” Id. at 6, 10. Consequently, that court ordered respondent to pay

$12,250 to the trust. Id. at 12.

{¶ 9} Noting the lack of evidence to demonstrate that the debt had been

discharged in bankruptcy, the Eleventh District Court of Appeals affirmed the

probate court’s judgment against respondent. Miller v. Lagos, Trumbull App. No.

2008-T-0014, 2008-Ohio-5863, ¶ 12, 17. Therefore, based upon the probate

court’s judgment against respondent and the lack of sufficient documentary

evidence of the discharge, we reject the board’s finding that the debt was

discharged in bankruptcy.

Count Three

{¶ 10} In Count Three, relator charged respondent with violating

Prof.Cond.R. 8.4(h) (prohibiting conduct that adversely reflects on a lawyer’s

fitness to practice law) and Gov.Bar R. V(4)(G) (requiring a lawyer to cooperate

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with a disciplinary investigation) based upon his failure to respond to two separate

letters of inquiry regarding the allegations in Counts One and Two. While

acknowledging respondent’s neglect of the two letters, the panel found that he

subsequently (1) responded to relator’s request for information, (2) appeared for

deposition, and (3) fully cooperated with Disciplinary Counsel. Therefore, the

panel recommended that the board dismiss Count Three. Although the board did

not expressly dismiss this count, we note that it did adopt the panel’s findings of

fact and conclusions of law and did not make any findings of misconduct with

respect to Count Three. Because we accept these findings of fact, we conclude

that relator did not prove by clear and convincing evidence that respondent’s

conduct violated Prof.Cond.R. 8.4(h) or Gov.Bar R. V(4)(G). Accordingly, we

dismiss Count Three of relator’s amended complaint.

Count Four

{¶ 11} The panel and board found that respondent’s conduct with respect

to Count Four arose out of his representation of two clients who sought

guardianship of their grandmother in January 2007. She died in the latter part of

May 2007, just days after they had obtained the guardianship. On May 22, 2007,

respondent accepted an $800 check for “attorney fees” and a $1,200 check for

“legal fees: expenses” from his clients without first obtaining the probate court’s

approval.2

{¶ 12} On October 29, 2007, respondent filed his first application for

attorney fees in the probate court, seeking $4,668.75 for legal work, in addition to

the $2,000 his clients had already paid. And in December 2008, the probate court

found respondent “guilty of concealment of assets” of the estate for receiving the

2. Trumbull County Probate Court Local Rule 71.3(A) provides: “Counsel fees shall not be paid

by the fiduciary until a written application has been approved by judgment entry.”

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$800 and $1,200 checks from the guardianship account belonging to the ward.3

Smith v. Thornton (Dec. 8, 2008), Trumbull P.C. No. 2008-CVA-38, at 2.

Because the court approved only $800 of respondent’s attorney-fee request, it

ordered him to reimburse $1,200 to the ward’s estate. At the December 2009

disciplinary hearing, respondent admitted that he had not complied with the

court’s order.

{¶ 13} Based upon respondent’s failure to obtain probate-court approval

for his fees before accepting payment, the panel and board found that respondent

violated Prof.Cond.R. 3.4(c) (prohibiting a lawyer from knowingly disobeying an

obligation under the rules of a tribunal), 8.4(d) (prohibiting conduct that is

prejudicial to the administration of justice), and 8.4(h) (prohibiting conduct that

adversely reflects upon the lawyer’s fitness to practice law). We accept these

findings of fact and misconduct.

Sanction

{¶ 14} When imposing sanctions for attorney misconduct, we consider

relevant factors, including the ethical duties that the lawyer violated and the

sanctions imposed in similar cases. Stark Cty. Bar Assn. v. Buttacavoli, 96 Ohio

St.3d 424, 2002-Ohio-4743, 775 N.E.2d 818, ¶ 16. In making a final

determination, we also weigh the evidence of the aggravating and mitigating

factors listed in Section 10(B) of the Rules and Regulations Governing Procedure

on Complaints and Hearings Before the Board of Commissioners on Grievances

and Discipline (“BCGD Proc.Reg.”). Disciplinary Counsel v. Broeren, 115 Ohio

St.3d 473, 2007-Ohio-5251, 875 N.E.2d 935, ¶ 21.

3. R.C. 2109.50 permits the filing of a complaint in the probate court of the county having

jurisdiction of the administration of a trust estate “against any person suspected of having

concealed, embezzled, or conveyed away or of being or having been in the possession of any

moneys, chattels, or choses in action of such estate,” to aid in the discovery and recovery of assets.

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{¶ 15} The board found that four of the nine aggravating factors set forth

in BCGD Proc.Reg. 10(B)(1) are present, including a pattern of misconduct,

multiple offenses, vulnerability of and resulting harm to victims of the

misconduct, and failure to make restitution. BCGD Proc.Reg. 10(B)(1)(c), (d),

(h), and (i). Additionally, the board found that respondent attempted to minimize

his misconduct by claiming to have had a “close personal relationship” with the

client. Although he claimed that she was “very sharp mentally” and that he was

not trying to take advantage of her, respondent also acknowledged that his client

was vulnerable and that he was trying to protect her from others who were trying

to take advantage of her. In mitigation, the board found only that respondent has

no prior disciplinary record in his 30 years of practice. BCGD Proc.Reg.

10(B)(2)(a).

{¶ 16} Relator argued that respondent should be suspended from the

practice of law for two years with one year stayed on conditions, including the

payment of restitution and the completion of a three-year OLAP contract. In

support of its recommended sanction, relator cited our decisions in Toledo Bar

Assn. v. Cook, 97 Ohio St.3d 225, 2002-Ohio-5787, 778 N.E.2d 40, imposing a

one-year suspension with six months stayed on an attorney who prepared a will

naming the attorney’s siblings’ corporation as a beneficiary, when the testator was

not related to the attorney’s siblings, and Disciplinary Counsel v. Kelleher, 102

Ohio St.3d 105, 2004-Ohio-1802, 807 N.E.2d 310, imposing the same sanction on

an attorney who prepared an inter vivos trust for an unrelated client, naming the

attorney’s wife, children, and grandchildren as beneficiaries. Relator also cited

our decision in Disciplinary Counsel v. Dettinger, 121 Ohio St.3d 400, 2009-

Ohio-1429, 904 N.E.2d 890, imposing a six-month stayed suspension on an

attorney who accepted a loan from a client without disclosing the attendant risks

created by their conflicting interests, and failed to advise the executor of the

client’s estate of the potential conflict the loan caused before he assumed

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representation of the estate. Mitigating factors in Dettinger included the

respondent’s cooperative attitude throughout the disciplinary proceedings and his

lack of a prior disciplinary record, while the sole aggravating factor was the

respondent’s commission of multiple offenses. Id. at ¶ 9.

{¶ 17} After weighing respondent’s three incidents of misconduct in this

case, the aggravating and mitigating factors, and our precedent, the panel

recommended that respondent be suspended from the practice of law for two

years, with one year stayed on the condition that he pay restitution to the party

harmed by the misconduct in Count Four. The panel expressly refused to

recommend that we impose the conditions that respondent (1) pay restitution to

the first client, based upon his claimed bankruptcy discharge, or (2) complete his

OLAP contract, because it was not clear from the record which issues that

contract was intended to address.

{¶ 18} The board adopted the panel’s findings of fact and conclusions of

law, but, citing respondent’s “serious acts of fraud and misconduct,” it

recommends that we suspend respondent for two years with no stay and that we

condition his reinstatement upon the payment of restitution to the party harmed by

his misconduct in Count Four.

Request for Remand

{¶ 19} Respondent contends that he was not capable of either obtaining

counsel to represent him or presenting mitigating evidence in this proceeding due

to his emotional distress, extreme financial difficulties, and inexperience in

dealing with disciplinary matters. Now that he has obtained counsel, he seeks

another opportunity to present evidence of his character and reputation,

community involvement, payment of restitution with respect to Count Four, and

recent activities in furtherance of his OLAP contract. He offers no authority to

support this request.

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{¶ 20} In a few cases, we have permitted respondents to supplement

records before this court or have remanded cases to the board for the presentation

of mitigating evidence. For example, we remanded a default proceeding after the

respondent entered an appearance and moved to supplement the record before this

court. Butler Cty. Bar Assn. v. Portman, 121 Ohio St.3d 518, 2009-Ohio-1705,

905 N.E.2d 1203, ¶ 2-5. Similarly, we remanded a case for the board’s

consideration of mitigating evidence when the respondent in a default proceeding

answered our motion to show cause with a motion to supplement or remand,

proffering “compelling evidence of a mental disability” in explanation for his

failure to answer the complaint. Disciplinary Counsel v. McShane, 121 Ohio

St.3d 169, 2009-Ohio-746, 902 N.E.2d 980, ¶ 2-3. We have emphasized that

“attorneys have an obligation to assist in disciplinary matters and that the record

should be developed in the answers and hearings prior to reaching this court.”

Dayton Bar Assn. v. Stephan, 108 Ohio St.3d 327, 2006-Ohio-1063, 843 N.E.2d

771, ¶ 5, citing Cleveland Bar Assn. v. Witt (1999), 85 Ohio St.3d 9, 11, 706

N.E.2d 763. Therefore, we have stated that we will consider supplements to the

record, “only under the most exceptional circumstances.” Stephan at ¶ 5.

{¶ 21} In this case, despite having received notice of the date and time of

the panel hearing, respondent failed to appear. Nevertheless, the panel opted to

delay its ruling on the matter and gave respondent a second chance to present his

case. Although an OLAP employee had advised him to obtain counsel in this

disciplinary matter, respondent appeared pro se. Because he has had two

opportunities to present mitigating evidence and has failed to demonstrate any

exceptional circumstances warranting a remand, we will not grant respondent a

third opportunity to present evidence in mitigation.

Severity of Sanction

{¶ 22} Respondent agrees that Cook, 97 Ohio St.3d 225, 2002-Ohio-5787,

778 N.E.2d 40, and Kelleher, 102 Ohio St.3d 105, 2004-Ohio-1802, 807 N.E.2d

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310, set forth an appropriate sanction for violations of DR 5-101(A)(2) (one-year

suspension with six months stayed) and that Dettinger, 121 Ohio St.3d 400, 2009-

Ohio-1429, 904 N.E.2d 890, sets forth an appropriate sanction for violations of

DR 5-101(A)(1) and 5-101(A)(4) (a lawyer shall not enter into a business

transaction with a client without full disclosure of potential conflict of interest)

(six-month stayed suspension). He contends, however, that the board’s

recommended sanction of a two-year suspension with no stay is too harsh for his

misconduct.

{¶ 23} First, he contends that the board’s recommended sanction is

“contrary to precedent.” In support of this argument, respondent cites Cincinnati

Bar Assn. v. Hovey (1997), 78 Ohio St.3d 495, 678 N.E.2d 1369; Disciplinary

Counsel v. Baldwin (1996), 74 Ohio St.3d 592, 660 N.E.2d 1145; and Akron Bar

Assn. v. Markovich, 117 Ohio St.3d 313, 2008-Ohio-862, 883 N.E.2d 1046.

{¶ 24} In Hovey, we imposed a six-month stayed suspension on an

attorney who (1) mortgaged her residence to a client in exchange for a $10,000

loan without disclosing all of the transaction details to the client, (2) failed to

record the mortgage, and (3) failed to disclose the existence of the loan on a

subsequent residential-loan application. And in Baldwin, we imposed a public

reprimand on an attorney who purchased a client’s property at the fourth

attempted auction of the property. Id. at 592-593. The attorneys in Hovey and

Baldwin, however, did not place their clients in jeopardy of substantial financial

loss and their cases did not present any other aggravating factors. Indeed, the

client in Baldwin ultimately benefitted from the misconduct when the attorney

deeded the auctioned property back to the client along with the lucrative lease he

had obtained for the property. Baldwin at 593.

{¶ 25} In Markovich, we imposed a one-year suspension with six months

stayed on an attorney who engaged in multiple acts of misconduct, including

neglect of entrusted legal matters, abandonment of a client’s case, disobedience of

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court orders, inappropriate and discourteous behavior in court, and commingling

of personal and client funds. Although that attorney committed multiple acts of

misconduct, we note that several mitigating factors were present, including the

respondent’s lack of a prior disciplinary record, his payment of restitution, and his

otherwise good character and reputation. Id. at ¶ 21.

{¶ 26} In contrast, the aggravating factors here outweigh the sole

mitigating factor — respondent’s lack of a prior disciplinary record. Specifically,

respondent has engaged in a pattern of misconduct involving multiple offenses of

taking advantage of an elderly and vulnerable client for his own personal gain.

Although the client successfully amended the trust, revoking the $25,000

aggregate bequest to respondent’s children before her death, her estate will never

recover the $12,250 balance of the loan to respondent if, as respondent now

claims, the debt was discharged in bankruptcy. Respondent also took fees from

other clients in a separate case without obtaining the requisite approval from the

probate court and then failed to pay court-ordered restitution to those clients. In

light of these facts, respondent’s conduct is more serious than that of the attorney

in Markovich.

{¶ 27} Next, respondent contends that the board erroneously departed

from the panel’s recommended sanction based upon its finding that he had

committed “serious acts of fraud.” He notes that (1) relator made no allegations

of fraud in his complaint or his amended complaint, (2) the panel made no

findings of fact or conclusions of law regarding fraudulent misconduct, and (3)

the record is devoid of any evidence of fraud.

{¶ 28} While respondent’s conduct toward each of these clients was

unethical and his concealment of assets in Count Four was “quasi criminal in

nature,” see In re Estate of Fife (1956), 164 Ohio St. 449, 58 O.O. 293, 132

N.E.2d 185, paragraph one of the syllabus, relator has neither alleged nor proven

that respondent has committed a fraud upon the clients in these counts.

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Therefore, the board’s finding of “serious acts of fraud” is not supported by the

record and thus cannot support its upward deviation from the panel’s

recommended sanction.

{¶ 29} Having examined the respondent’s conduct, reviewed our

decisions in Cook, Kelleher, and Dettinger, and weighed the aggravating and

mitigating factors discussed above, we agree with the panel’s conclusion that the

appropriate sanction for respondent’s multiple acts of misconduct is a two-year

suspension, with one year stayed on conditions.

{¶ 30} Accordingly, Kenneth Norman Shaw is suspended from the

practice of law in the state of Ohio for two years, with one year stayed on the

conditions that he (1) commit no further acts of misconduct, (2) pay restitution of

$1,200 to the party harmed by the misconduct in Count Four, and (3) either pay

restitution of $12,250 to the estate of the client affected by his misconduct in

Count Two or submit documentary evidence to the court to prove that the

financial obligation was discharged in bankruptcy. If respondent fails to meet the

stated conditions, the stay of his suspension will be lifted, and respondent will

serve the entire two-year suspension from the practice of law. Moreover,

respondent will not be reinstated to the practice of law until he submits

documentary evidence to the court to prove that he has made restitution or that his

debt was discharged in bankruptcy. Costs are taxed to respondent.

Judgment accordingly.

BROWN, C.J., and PFEIFER, LUNDBERG STRATTON, O’DONNELL,

LANZINGER, and CUPP, JJ., concur.

O’CONNOR, J., dissents and would suspend respondent from the practice

of law in Ohio for two years.

__________________

Jonathan E. Coughlan, Disciplinary Counsel, and Robert R. Berger, Senior

Assistant Disciplinary Counsel, for relator.

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Koblentz & Penvose, L.L.C., Richard S. Koblentz, and Bryan L. Penvose,

for respondent.

______________________

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