N.C. State Bar v. Simmons

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NO. COA13-1140 NORTH CAROLINA COURT OF APPEALS Filed: 6 May 2014 THE NORTH CAROLINA STATE BAR, Plaintiff, v. Disciplinary Hearing Commission of the North Carolina State Bar No. 12 DHC 38 GEOFFREY H. SIMMONS, Attorney, Defendant. Appeal by defendant from order of discipline entered 19 April 2013 by the Disciplinary Hearing Commission of the North Carolina State Bar. Heard in the Court of Appeals 17 February 2014. The North Carolina State Bar, by Deputy Counsel David R. Johnson and Counsel Katherine Jean, for plaintiff-appellee. Poyner Spruill LLP, by M. Jillian DeCamp and Carrie V. McMillan, for defendant-appellant. HUNTER, JR., Robert N., Judge. Geoffrey H. Simmons ( Defendant ) appeals from a final order of the Disciplinary Hearing Commission ( DHC ) disbarring him from Defendant the practice contends (1) of law that for there embezzling was client insufficient funds. evidence before the DHC that he intended to embezzle client funds, (2) that the DHC could not impose discipline based on embezzlement -2without a criminal conviction, and (3) failed to conform to the requirements that the DHC s order of N.C. State Bar v. Talford, 356 N.C. 626, 576 S.E.2d 305 (2003), for disbarring attorneys. For the following reasons, we disagree and affirm the DHC s order. I. was Defendant Factual & Procedural History licensed to practice law by the North Carolina State Bar in 1977 and practiced law for over thirty years. one. Defendant s career was, in many respects, a decorated After Defendant graduating worked administration of for from Duke the General former Governor University School Assembly James B. and Hunt. of Law, in the Defendant engaged in significant pro bono work during his career. In 1987, the North Carolina Bar Association named Defendant the Pro Bono Lawyer of the year. In 1990, Defendant was elected the first black President of the Wake County Bar Association and the Tenth Judicial established a truthfulness Notwithstanding District Bar. During reputation for in social both Defendant s good his career, character, and legal accomplishments, Defendant veracity, and communities. however, the allegations in the State Bar s complaint against Defendant are -3serious, and are based on the following facts gleaned from the record. From 1985 until his disbarment, Defendant was a solo- practitioner focusing on criminal and personal injury work, with an office in Raleigh. The record reflects that Defendant had an assistant on his payroll, who performed paralegal work. During the course of his law practice, Defendant maintained a trust account on behalf of his clients. In March 2012, a medical provider filed a complaint with the State Bar alleging that Defendant had not paid one of his client s bills. A subsequent audit of Defendant s trust account by the State Bar revealed disbursements made by Defendant from 2010 2012 to himself and his assistant for which Defendant had no supporting documentation. The investigation also revealed instances of insufficient client funds to cover disbursements to those clients and their medical providers. As a result of the investigation, the State Bar filed a complaint alleging, inter alia, misappropriation funds with respect to eight of Defendant s clients. of entrusted On 15 March 2013, the DHC held a hearing to determine if Defendant s alleged misconduct warranted disciplinary action. At the hearing, documentary exhibits were received into evidence and testimony -4was heard from, among others, the State Bar s investigator, two of the eight clients who were named in the complaint, and Defendant. The State Bar s investigator testified concerning Defendant s trust account activity and bookkeeping for the eight clients. His exhibits, and testimony, established Defendant s disbursements along undocumented assistant, were with made as from accompanying disbursements well as insufficient documentary to Defendant occasions client where funds. In those instances where Defendant disbursed funds from the trust account to himself and/or his assistant, a pattern was observed. Once Defendant received personal injury settlement proceeds on behalf of a client, Defendant deposited those proceeds into his trust account. Afterwards, Defendant withdrew his one-third contingency fee and paid the client a one-third share. The remaining and funds obligations. liens, client intended to wrote additional in varying amounts some medical providers funds recovery. satisfy medical However, in addition to paying Defendant assistant result, were were not paid checks between in to $200 liens on the himself medical and his and $600. As with statutory liens against full for share of their a the To cover shortfalls, Defendant used trust account -5funds belonging to others and not identified to the client to cover checks written to that client or the client s medical providers. In his defense, Defendant admitted to poor record keeping practices but denied misappropriating client funds. Defendant attributed expenses, the undocumented disbursements to additional legal work, accounting mistakes, and, in some cases, Defendant claimed the disbursements were at the behest of his clients. that Both clients who testified at the hearing indicated Defendant did not tell them about disbursements made from their account. any additional One of the clients, after being contacted by the State Bar, filed a Client Security Fund Application against Defendant claiming he took an order of additional disbursement dishonestly.1 On 19 April discipline. The 2013, the order s DHC entered findings a of written fact recite the transactions made for each of the eight clients, including the disbursements at issue. After reciting each undocumented disbursement made to Defendant and his assistant, the DHC found that Defendant and his assistant were not entitled to the additional 1 disbursements and concluded that Defendant Defendant reimbursed the client during the pendency of the State Bar s investigation. -6 misappropriated these funds. that Defendant The DHC s order also concludes misappropriated each disbursement made from insufficient funds and each disbursement made from funds owed to medical providers with statutory liens. Furthermore, the order states: 91. The misappropriations . . committed knowingly and willfully. . were 92. The misappropriations . . . were not authorized by the parties for whom [Defendant] was holding the funds in trust. 93. The Hearing Panel specifically finds that [Defendant s] testimony at this hearing was not credible. [Defendant s] testimony was inconsistent with other testimony of his at the hearing and at his deposition. [Defendant s] testimony was also inconsistent with the documentation and with the testimony given by the other witnesses at the hearing. Based on its findings, the DHC concluded, inter alia, that Defendant committed the crime of embezzlement and was subject to discipline pursuant to N.C. Gen. Stat. § 84-28(b)(2) (2013). After making additional findings of fact and conclusions of law regarding discipline, the DHC ordered Defendant disbarred from the practice of law. Defendant filed timely notice of appeal. II. Jurisdiction There shall be an appeal of right by either party from any final order of the Disciplinary Hearing Commission to the North -7Carolina Court of Appeals. N.C. Gen. Stat. § 84-28(h) (2013); accord N.C. Gen. Stat. § 7A-29(a) (2013). Thus, Defendant s appeal is properly before this Court. III. Analysis Defendant s appeal presents three questions for our review: (1) whether there was sufficient evidence upon which the DHC could find that Defendant intended to embezzle client funds; (2) whether the DHC could impose discipline based on the embezzlement of client funds without a criminal conviction; and (3) whether the DHC s order conforms to the requirements of Talford for misconduct. imposing disbarment as a sanction for attorney the evidence We address each in turn. A. Sufficiency of the Evidence Regarding Intent Defendant challenges the sufficiency of regarding his intent to embezzle client funds. Specifically, Defendant contends that the State Bar failed to present clear, cogent, and convincing evidence that Defendant knowingly and willfully misappropriated or embezzled client funds. By statute, our review of the DHC s disciplinary order is limited to matters of law or legal inference. § 84-28(h). test. N.C. Gen. Stat. In examining the record, we apply the whole record N.C. State Bar v. Hunter, ___ N.C. App. ___, ___, 719 -8S.E.2d 182, 188 (2011). Under the whole record test there must be substantial evidence to support the findings, conclusions, and result. The evidence is substantial if, when considered as a whole, it is such that a reasonable person might accept as adequate to support a conclusion. Id. (quotation marks, citations, and alteration omitted); see also Talford, 356 N.C. at 632, 576 S.E.2d at 309 10 (describing this task as determining whether the DHC s decision has a rational basis in the evidence (quotation marks and citations omitted)). In engaging in this inquiry, we consider the evidence supporting the DHC s findings as well as evidence tending to contradict those findings. 188. Hunter, ___ N.C. App. at ___, 719 S.E.2d at However, the mere presence of contradictory evidence does not eviscerate challenged findings, and [this Court] may not substitute its judgment for that of the [DHC]. Id. Moreover, the evidence used by the DHC to support its findings must rise to the standard of clear, cogent, and convincing. Talford, 356 N.C. at 632, 576 S.E.2d at 310. In Talford, our Supreme Court set forth a three-step process to determine if the DHC s decision has a rational basis in the evidence: (1) Is there adequate evidence to support the order s expressed finding(s) of fact? -9(2) Do the order s expressed finding(s) of fact adequately support the order s subsequent conclusion(s) of law? and (3) Do the expressed findings and/or conclusions adequately support the lower body s ultimate decision? Id. at 634, 576 S.E.2d at 311. This three-step process must be applied separately to both the adjudicatory phase of the DHC s proceedings ( Did misconduct? ) and the to defendant the commit dispositional the phase offense of the or DHC s proceedings ( What is the appropriate sanction for committing the offense or misconduct? ). With our standard of Id. review precisely defined, we now consider Defendant s first argument on appeal. As an initial matter, we note that in Defendant s principal brief to this referenced as Court, being in no specific error. findings of fact were Nevertheless, we agree with Defendant that assignments of error to specific findings of fact are not required to properly challenge those findings. The scope of review on appeal is limited to issues so presented in the several briefs. N.C. R. App. P. 28(a). Accordingly, because Defendant s arguments concerning the sufficiency of the evidence address, in substance, the DHC s finding that Defendant knowingly and willfully misappropriated or embezzled client -10funds, we review the DHC s findings related to Defendant s intent. The crime of embezzlement is defined by N.C. Gen. Stat. § 14-90 (2013) and requires a showing of the following four elements: (1) the defendant was the fiduciary of the complainant; agent or (2) pursuant to the terms of the defendant s engagement, he was to receive property of the complainant; (3) he did receive such property course of his engagement; and in the (4) knowing the property was not his, the defendant either converted it to his own use or fraudulently misapplied it. State v. Tucker, ___ N.C. App. ___, ___, 743 S.E.2d 55, 59 (2013) (emphasis added). The intent necessary to convict on a charge of embezzlement is an intent of the agent to embezzle or otherwise willfully and corruptly use or misapply the property of the principal for purposes for which the property is not held. State v. Britt, 87 N.C. App. 152, 153, 360 S.E.2d 291, 292 (1987). Such intent may be shown by direct evidence, or by evidence of facts and circumstances from which it may reasonably be inferred. State v. McLean, 209 N.C. 38, 40, 182 S.E. 700, 702 (1935); N.C. State Bar v. Ethridge, 188 N.C. App. 653, 660, -11657 S.E.2d 378, 383 (2008). In addition, a person who deposits funds into a personal account knowing that the money belongs to others is sufficient evidence to show embezzlement. 188 N.C. App. at 660, 657 S.E.2d at 383. Ethridge, Furthermore, [t]he intent element for misappropriation is essentially the same as the crime of embezzlement. Id. synonym Id. for embezzlement. Indeed, misappropriation is a Thus, we examine the whole record to determine whether there is substantial or clear, cogent, and convincing evidence to support the finding that Defendant knowingly and willfully misappropriated client funds. Our review of the record in this case reveals substantial evidence from which Defendant s intent to misappropriate client funds can be reasonably inferred. First, maintain Defendant his trust testified that he Committee of Education workshops the knew the correct account yet failed had State previously Bar, regarding been had trust way to to do on the attended document so. Defendant Trust Account Continuing accounting, and and had Legal been audited by the State Bar on prior occasions.2 2 The State Bar provides resources and support to ensure that lawyers manage trusts accounts properly. The Lawyer s Trust Account Handbook examines the Rules of Professional Conduct pertinent to trust accounting and contains best practices for North Carolina attorneys. See Lawyer s Trust Account Handbook, -12Second, Defendant made numerous disbursements from his trust account for which he had no supporting documentation.3 Third, both clients who testified at the hearing indicated that Defendant did not tell them disbursement informed from their concerning the account, amount about taking an additional and of the the clients were disbursement or never its purpose. Fourth, one of these clients filed a Client Security Fund Application with the State Bar alleging that Defendant took an additional disbursement from his account dishonestly. Testimony revealed that Defendant reimbursed the client in question after learning that the client was going to be deposed in the State Bar s investigation so that [the client] would have good feelings towards [him]. Fifth, the additional disbursements were often made when Defendant was in financial need. The North Carolina State Bar (Revised May 2011), http://www.ncbar.com/PDFs/Trust%20Account%20Handbook.pdf. 3 The Lawyer s Trust Account Handbook indicates that a client s file should contain documentation supporting disbursements and identifies poor bookkeeping as a means of concealing embezzlement of client funds. Id. at 48. As a best practice for bookkeeping, [a] copy of the client s ledger card may be provided to the client as a written accounting of the receipt and disbursement of funds. When this is done, the client should sign and date the original to show that the client was given a written accounting of his or her funds . . . . Id. at 30. -13Sixth, disbursements Defendant s to attribution expenses, of additional legal the additional work, accounting mistakes, and compliance with client requests is inconsistent with the other record evidence. For example, for the first client named in the State Bar s complaint, Defendant took an additional disbursement of $250 on 12 March 2010. Defendant testified that this additional disbursement was for additional legal services, namely, drafting a complaint. However, the client testified that she was unaware of this additional fee and the memo line of the check indicated that the disbursement was for Office Expenses Reimbursement. Likewise, for the second client named in the State Bar s complaint, Defendant took an additional disbursement of $250 for himself and another $200 for his assistant on 14 and 19 January 2011, respectively. Defendant testified that his disbursement was for work on an unrelated criminal case the client asked Defendant to handle and that the disbursement to his assistant was made at the client s request. However, there was no evidence of the other criminal case in the record and the memo line on MedPay. Defendant s disbursement check read fee to collect The memo line on the check to Defendant s assistant indicated that the check was for office expenses. -14As a final example, for the third client named in the State Bar s complaint, Defendant took an additional disbursement of $500 on 20 June 2011. Defendant disbursement was for travel expenses. testified that this Defendant also testified that the client consented to the payment. However, the client denied consenting to the payment and the memo line of the check indicates the additional disbursement was for legal fees. Based on the foregoing evidence, as well as the other record evidence presented to this Court, we hold that there was substantial or clear, cogent, and convincing evidence to support the DHC s finding that Defendant knowingly and willfully misappropriated client funds. While Defendant points to his own testimony to negate this inference of intent, the DHC found that Defendant s testimony was not credible based on inconsistency with other evidence presented at the hearing. review has confirmed those inconsistencies. its Our Accordingly, Defendant s argument regarding the sufficiency of the evidence, on balance, lacks credibility. B. The Absence of a Criminal Conviction Defendant s second argument on appeal challenges the DHC s decision sanction to discipline for Defendant Defendant s and misconduct impose disbarment without a as a criminal -15embezzlement conviction. Bar s forbid rules the Defendant DHC from contends that concluding the that State Defendant committed a felony without first being charged and convicted of a felony in criminal court. Questions concerning the construction and interpretation of the State Bar s rules are questions of law that are reviewed de novo on appeal. N.C. State Bar v. Brewer, 183 N.C. App. 229, 233, 644 S.E.2d 573, 576 (2007). Under a de novo review, the court considers the matter anew and freely substitutes its own judgment for that of the lower tribunal. Craig v. New Hanover Cnty. Bd. of Educ., 363 N.C. 334, 337, 678 S.E.2d 351, 354 (2009) (quotation marks and citation omitted). Here, the DHC s order concludes as a matter of law that [Defendant] committed the crime of embezzlement. As a result of this conduct, the DHC concluded that Defendant was subject to discipline provides violation pursuant for of to attorney the Rules N.C. Gen. discipline of Stat. when Professional § 84-28(b)(2), there Conduct has which been adopted a and promulgated by the [State Bar] Council in effect at the time of the act. One of those rules, found to have been violated here, states [i]t is professional misconduct for a lawyer to . . . commit a criminal act that reflects adversely on the lawyer s -16honesty, trustworthiness respects. N.C. R. or Prof l fitness as Conduct a lawyer 8.4(b). in The other official commentary to the rule states: The purpose of professional discipline for misconduct is not punishment, but to protect the public, the courts, and the legal profession. Lawyer discipline affects only the lawyer s license to practice law. It does not result in incarceration. For this reason, to establish a violation of paragraph (b), the burden of proof is the same as for any other violation of the Rules of Professional Conduct: it must be shown by clear, cogent, and convincing evidence that the lawyer committed a criminal act that reflects adversely on the lawyer s honesty, trustworthiness, or fitness as a lawyer. Conviction of a crime is conclusive evidence that the lawyer committed a criminal act although, to establish a violation of paragraph (b), it must be shown that the criminal act reflects adversely on the lawyer s honesty, trustworthiness, or fitness as a lawyer. If it is established by clear, cogent, and convincing evidence that a lawyer committed a criminal act that reflects adversely on the lawyer s honesty, trustworthiness, or fitness as a lawyer, the lawyer may be disciplined for a violation of paragraph (b) although the lawyer is never prosecuted or is acquitted or pardoned for the underlying criminal act. Id. cmt. 3; see also N.C. State Bar v. Rush, 121 N.C. App. 488, 490, 466 S.E.2d 340, 341 42 (1996) ( The rule does not require a conviction, only that a criminal act be committed. . . . -17Therefore, conviction of a crime is not a necessary element in a disciplinary proceeding. ). Defendant does not call our attention to this rule, rather, Defendant cites 27 N.C. Admin. Code 1B.0114(w)(2)(D) (2012) to support his claim that a criminal conviction is required. rule requires the DHC to consider disbarment as a That possible sanction if the defendant is found to engage in the commission of a felony. the State Id. Defendant argues that the plain language of Bar s Rule contemplates a felony conviction. However, we cannot agree with Defendant s interpretation given the fact that conviction the rule and given uses commission rather than the clear mandate found in the State Bar s commentary and our caselaw interpreting N.C. R. Prof l Conduct 8.4(b). The rationale for not requiring a criminal conviction N.C. under persuasive when R. Prof l interpreting 1B.0114(w)(2)(D). Conduct 27 8.4(b) N.C. is Admin. equally Code Thus, because clear, cogent, and convincing evidence supports the DHC s conclusion that Defendant committed the crime of embezzlement in violation of N.C. R. Prof l Conduct 8.4(b), possible the DHC was sanction required pursuant to to consider 27 disbarment N.C. Admin. as a Code -181B.0114(w)(2)(D).4 Defendant s second argument on appeal is without merit. C. The DHC s Order and Talford Defendant s order failed to third argument conform to the on appeal is requirements that of the DHC s Talford for imposing disbarment as a sanction for attorney misconduct. In Talford, our Supreme Court held that in order to merit the imposition of suspension or disbarment, there must be a clear showing of how the attorney s actions resulted in significant harm or potential significant harm to [a client, the administration of justice, the profession, or members of the public], and there must be a clear showing of why suspension and disbarment are the only sanction options that can adequately serve to protect the public from future transgressions by the attorney in question. Talford, 356 N.C. at 638, 576 S.E.2d at 313. Thus, upon imposing a given sanction against an offending attorney, the DHC must provide support for its decision by including adequate and 4 Notably, the DHC also considered disbarment as a possible sanction pursuant to 27 N.C. Admin. Code 1B.0114(w)(2)(C), which states that [d]isbarment shall be considered where the defendant is found to engage in: . . . (C) misappropriation or conversion of assets of any kind to which the defendant or recipient is not entitled, whether from a client or any other source. Like 27 N.C. Admin. Code 1B.0114(w)(2)(D), the plain language of this provision does not suggest that a criminal conviction is required. -19specific findings considerations. that address these two key statutory Id. Here, after concluding that Defendant s conduct warranted discipline in the reincorporated its adjudicative previous part of findings the of order, fact additional findings of fact regarding discipline. not challenged these additional findings with the made and DHC 16 Defendant has argument on appeal, we therefore consider them binding before this Court. Hunter, ___ N.C. App. at ___, 719 S.E.2d at 188 89. Moreover, because we have determined that the DHC s finding concerning Defendant s intent to misappropriate client funds is supported by substantial evidence, we consider that fact established as well. With respect to the first inquiry, i.e., whether the order clearly shows how Defendant s actions resulted in significant harm or potential significant harm, we hold that the DHC s order is sufficient. Implicit in the DHC s conclusion that Defendant violated R. N.C. Prof l Conduct 8.4(b) and (c) is a determination that his misconduct poses a significant potential harm to clients. 446, 632 S.E.2d N.C. State Bar v. Leonard, 178 N.C. App. 432, 183, 191 (2006). Furthermore, we find the -20following findings of fact in the DHC s disciplinary compelling: 2. Defendant put his own personal interests ahead of his clients interests. . . . . 7. Defendant, by engaging in conduct involving misappropriation, misrepresentation and deceit over a number of years and by making false statements about his conduct, has shown himself to be untrustworthy. 8. Defendant, through his misappropriation, misrepresentation, and deceit, has caused harm to the standing of the legal profession, by undermining trust and confidence in lawyers and the legal system. 9. Defendant s misappropriation has caused significant harm to his clients and to third parties, namely the medical providers of his clients. 10. Defendant misappropriated funds for his own benefit that should have been used for the benefit of his clients, either by payment to the client or payment to the client s medical provider(s). . . . . 13. . . . [Defendant] has not otherwise made any restitution for amounts misappropriated from clients. [Defendant] has not rectified the deficit in his trust account. . . . . 15. Defendant has failed to acknowledge that he misappropriated client funds. Defendant order -21has provided explanations that are not consistent with the evidence received at the hearing in this matter. Based on these and other findings, the DHC concluded: 3. Defendant caused significant harm to his clients by misappropriating their funds. 4. Defendant caused significant harm to medical providers who should have received payments from funds Defendant misappropriated. 5. Defendant has caused significant harm and potential harm to clients whose funds he should have in his trust account but for whom he has insufficient funds in his trust account. 6. Defendant s repeated commission of criminal acts reflecting adversely on his honesty, trustworthiness or fitness as a lawyer, his dishonest and deceitful conduct in placing false information on trust account checks to disguise his misappropriation, and the presentation of testimony that conflicted with the credible evidence received in the case caused significant harm to the legal profession by undermining trust and confidence in lawyers and the legal system. We believe that in light of these findings and conclusions, the DHC s order clearly shows how Defendant s actions resulted in significant harm to his clients, the administration of justice, the profession, and members of the general public. Likewise, with respect to the second inquiry, i.e., whether the order contains a clear showing of why disbarment is the only -22sanction option that can adequately serve to protect the public, we hold that the DHC s order is sufficient. considering and reciting all applicable In addition to factors relevant to attorney discipline found in 27 N.C. Admin. Code 1B.0114(w)(1), (2), and (3), the DHC s order stated: 7. The Hearing Panel has considered lesser alternatives and finds that disbarment is the only sanction that can adequately protect the public. An attorney s duty to preserve funds entrusted to the attorney is one of the most sacred that an attorney undertakes. The attorney should never violate that duty of trust. 8. The Hearing Panel considered lesser alternatives and finds that suspension of Defendant s license or a public censure, reprimand, or admonition would not be sufficient discipline because of the gravity of the actual and potential harm to his clients, the public, and the legal profession caused by Defendant s conduct, and the threat of potential significant harm Defendant poses to the public. The Hearing Panel has considered the evidence of Defendant s good character and pro bono service. However, given the repeated acts of dishonesty, misrepresentation, and deceit by [Defendant] established by the evidence presented at hearing and the significant harm and potential harm caused by [Defendant] established by the evidence . . . , the evidence of Defendant s good character and pro bono service does not warrant imposition of a lesser discipline. 9. The Hearing Panel has considered all lesser sanctions and finds that discipline short of disbarment would not adequately -23protect reasons: the public for the following a. b. We Defendant engaged in misconduct constituting felonies and violations of the trust of his clients and the public; Entry of an order imposing less serious discipline would fail to acknowledge the seriousness of the offenses Defendant committed and would send the wrong message to attorneys and the public regarding the conduct expected of members of the Bar of this State[.] believe these entries clearly establish that the DHC considered all lesser sanctions and explain why the DHC felt disbarment was the only adequate sanction in this case. Accordingly, we hold that the DHC s ultimate decision to disbar Defendant has a rational basis in the evidence and is consistent with our Supreme Court s decision in Talford. IV. For the foregoing Conclusion reasons, we affirm the order discipline disbarring Defendant from the practice of law. AFFIRMED. Chief Judge MARTIN and Judge ELMORE concur. of

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