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On review of the report of the Grievance Commission of the Supreme Court of Iowa. The grievance commission reports respondent committed ethical violations and recommends a six-month suspension of the attorney's license.
Charles L. Harrington, Wendell J. Harms, and David J. Grace, Des Moines, for complainant.
Sharon L. Soorholtz Greer and Thomas L. Hillers of Cartwright, Druker & Ryden, Marshalltown, for respondent.
WIGGINS, Justice. All justices concur except Appel, J., who takes no part.
This matter comes before us on a report of a division of the Grievance Commission of the Supreme Court of Iowa. The Iowa Supreme Court Attorney Disciplinary Board brought a complaint against the respondent, Kathryn Barnhill, alleging multiple violations of our ethics rules based on her actions in four separate legal matters. The commission found multiple violations occurred and recommended a six-month suspension of Barnhill's license to practice law. We are required to review the commission's report. See Iowa Ct. R. 35.11(1). Based on our de novo review, we agree with the commission that the Board established by a convincing preponderance of the evidence Barnhill violated our rules. However, we disagree with the recommended suspension and find a sixty-day suspension is the appropriate sanction.
I. Scope of Review.
We review attorney disciplinary proceedings de novo. Iowa Supreme Ct. Att'y Disciplinary Bd. v. Stowe, 830 N.W.2d 737, 739 (Iowa 2013). The Board must prove the attorney's ethical misconduct by a convincing preponderance of the evidence. Id. " A convincing preponderance of the evidence is more than a preponderance of the evidence, but less than proof beyond a reasonable doubt." Iowa Supreme Ct. Att'y Disciplinary Bd. v. McCarthy, 814 N.W.2d 596, 601 (Iowa 2012). This places a burden on the Board that is higher than the burden in civil cases but lower than the burden in criminal matters. Stowe, 830 N.W.2d at 739. We respectfully consider the commission's recommendations; however, they are not binding upon us. Id.
When the parties enter into a stipulation in a disciplinary case, we rely on the stipulation to determine facts.
Iowa Supreme Ct. Att'y Disciplinary Bd. v. Gailey, 790 N.W.2d 801, 804 (Iowa 2010). " Nowhere in our rules have we given the parties the authority to determine what conduct constitutes a violation of our ethical rules or what sanction an attorney should receive for such a violation." Id. Thus, we use the stipulation to determine the facts and then we determine whether the facts establish a violation of our rules. Id.
II. Findings of Fact.
Using the stipulation of the parties with our review of the record, we make the following findings of fact. We admitted Barnhill to practice law in Iowa in 1989. The ethical complaints against her arise out of four separate factual matters.
A. The Jerry's Homes Matter.
The Jerry's Homes matter involves claims Barnhill violated conflict of interest rules, made misrepresentations, and improperly included a defendant in the action to harass the defendant, among other allegations. In March 2001, Barnhill filed a class action lawsuit against a roofing company that manufactured shingles and an individual who served as the company's president and chief executive officer. The lawsuit class included a construction company, Jerry's Homes, as well as homeowners who lived in houses built by Jerry's Homes, among other plaintiffs. Barnhill had represented Jerry's Homes in prior small claims cases brought by other homeowners. Barnhill alleged she met with the homeowners in the class action lawsuit, explained the potential conflict of interest, and the homeowners signed written waivers of the potential conflict. The district court certified the class but certified a subclass of members, stating Barnhill could only represent class members who did not have shingles installed by Jerry's Homes.
Barnhill made statements to the district court and in her appeal brief that all members of the class actually reviewed the roofing company's promotional materials and acted in reliance on these materials when purchasing shingles. These statements were subsequently determined to be false.
Barnhill included the corporate officer as a defendant in the action. Barnhill pleaded causes of action sounding in breach of express warranty, breach of implied warranty, fraudulent misrepresentation, negligent misrepresentation, and rescission. The court of appeals ultimately granted summary judgment to the corporate officer on all claims. The corporate officer filed a motion for sanctions against Barnhill and the named plaintiffs. The district court awarded sanctions against Barnhill. See Barnhill v. Iowa Dist. Ct., 765 N.W.2d 267, 279-80 (Iowa 2009) (affirming the award of sanctions against Barnhill for $25,000).
B. The Williams Matter.
The Williams matter involves a claim of fraudulent misrepresentation and assorted trust account violation claims. Barnhill's law office manager worked for Barnhill for more than sixteen years. This employee had authority to sign Barnhill's name to the trust account checks and the business account checks. Prior to the Williams matter, the employee charged approximately $55,000 of personal expenses to the law firm's American Express account without authorization. Barnhill discovered the embezzlement in 2005 and agreed to settle the embezzlement debt. Barnhill was aware the employee continued to sign trust account checks, but believed the employee would never take client funds.
In the fall of 2005, the employee began a new embezzlement scheme. At around the same time, Barnhill took on a new client, Denise Williams. Barnhill began using the
trust account to collect Williams's income and to pay Williams's bills. Williams delivered her financial records, unpaid business and personal bills, business income, and some child support payments to Barnhill. Barnhill authorized the employee to pay Williams's business and personal bills from the money deposited in the trust account. Barnhill did not provide written receipts for these transactions prior to February 2007 and did not provide contemporaneous written notice or an account of disbursements.
The employee wrote at least one check payable to herself from the trust account during this time. Throughout the time Williams was Barnhill's client, there were discrepancies in the trust account regarding Williams's funds. Barnhill determined the employee had stolen money from Barnhill by forging checks and making unauthorized online transfers. Barnhill eventually informed Williams the employee had been stealing money, and Barnhill gave Williams the trust account records so that Williams could determine whether the employee took any of Williams's money from the trust account. Barnhill refunded $1363.50 to Williams when Williams terminated Barnhill as her attorney.
Williams filed a lawsuit against Barnhill, Barnhill's law firm, and the employee. Following trial, the jury determined Williams proved by a preponderance of clear, convincing, and satisfactory evidence that Williams proved her claim of fraud against Barnhill. The district court awarded a monetary loss to Williams against Barnhill for $53,895 in actual damages and $10,000 in punitive damages.
C. The Public Safety Group, Inc. Matter.
The Public Safety Group, Inc. (PSG) matter involves claims of knowingly disobeying the order of a tribunal and professional misconduct, among other allegations. In August 2005, Barnhill represented PSG as a defendant in a lawsuit. PSG filed a counterclaim in the action. PSG was successful in defending the suit and recovered a substantial sum on its counterclaim. The district court entered judgment in favor of PSG. PSG assigned its interest in the judgment to another person.
The plaintiffs in the original action alleged the IRS filed an action to levy upon the judgment, and the IRS levy motivated PSG to assign its interest in the judgment. The plaintiffs alleged Barnhill did not notify the district court of the IRS levy or the assignment of interest, and that neither the IRS nor the assignee had the opportunity to intervene in the appeal.
We issued an order on May 2, 2007, requiring Barnhill, counsel for PSG, to serve a copy of the order containing notification of the assignment on the assignee and the IRS and to provide proof of service to our clerk and opposing counsel. Barnhill did not comply with this order. Subsequently, Barnhill filed a motion to intervene in the appeal on behalf of another entity and claimed opposing counsel had not complied with the May 2, 2007 order to serve the assignee or the IRS. Opposing counsel filed a response, pointing out Barnhill's failure to comply with our court order.
We issued a second order in January 2008, ordering Barnhill to serve both the second order and the previous order on the assignee and the IRS. Barnhill did not comply with the second order. On June 30, we then authorized opposing counsel to serve the orders on the assignee and the IRS because Barnhill failed to do so. Barnhill served the orders on the assignee on July 2 and on the IRS on July 8.
D. The Everly Matter.
The Everly matter involves claims of failure to provide competent representation and alleges
Barnhill brought a frivolous claim, among other allegations. On May 26, 2006, Barnhill filed a petition and application for writ of certiorari on behalf of Steve Everly, a resident and taxpayer of a school district, against Musco Sports Lighting, Inc. (Musco), a school district, and the superintendent of the school district. Musco was a product supplier for the successful bidder in a construction project involving the school district. After numerous filings, Barnhill filed an amended petition. She did not name the school district or the superintendent of the school district as defendants in the amended petition, leaving Musco as the only defendant. The district court ultimately dismissed the petition, finding the taxpayer could not maintain suit against Musco alone and imposed sanctions against Barnhill. Barnhill appealed the ruling. Barnhill argued her client had standing, Musco was the proper party, and the district court erred in sanctioning her. The court of appeals affirmed the dismissal and sanctions, but disagreed the taxpayer did not have standing.
We granted further review and affirmed the dismissal of the petition. We determined the district court should not have sanctioned Barnhill for originally including Musco in the petition because a reasonably competent attorney could make a good faith argument Musco was a proper party to the original suit provided the school district and the superintendent were parties to the suit. However, we decided the district court did not abuse its discretion in sanctioning Barnhill for her actions in maintaining the suit against Musco after she dismissed the school district and the superintendent from the suit. See Everly v. Knoxville Cmty. Sch. Dist., 774 N.W.2d 488, 495 (Iowa 2009) (remanding the case to the district court to assess sanctions based upon the fact Barnhill continued the lawsuit after she dismissed the school district and the superintendent from the suit).
III. Disciplinary Proceedings.
Although Barnhill's alleged actions in these four legal matters occurred between 2001 and 2009, the Board did not file a complaint until June 8, 2012. The parties waived a formal hearing and agreed for the commission to decide the case based on the parties' stipulation. The parties stipulated to a nonbinding recommendation of a sixty-day suspension of Barnhill's law license. The commission determined Barnhill violated multiple ethics rules and recommended we suspend Barnhill's license with no possibility of reinstatement for six months.
IV. Ethical Violations.
The Board alleges Barnhill violated numerous rules under the Iowa Rules of Professional Conduct and the Iowa Code of Professional Responsibility for Lawyers. The Iowa Rules of Professional Conduct took effect on July 1, 2005, replacing the Iowa Code of Professional Responsibility for Lawyers. See Iowa Supreme Ct. Att'y Disciplinary Bd. v. Curtis, 749 N.W.2d 694, 696 n.1 (Iowa 2008). The Iowa Rules of Professional Conduct governs all conduct occurring after its effective date. The Iowa Code of Professional Responsibility for Lawyers governs the allegations regarding the Jerry's Homes matter because Barnhill's conduct in that matter occurred prior to July 1, 2005. In discussing the alleged rule violations, we will take each rule individually and apply it to the applicable matters.
A. Misrepresentation: DR 1-102(A)(4).
This rule states an attorney shall not " [e]ngage in conduct involving dishonesty, fraud, deceit, or misrepresentation." Iowa Code of Prof'l Responsibility DR 1-102(A)(4). To prove a violation of this rule, we have held the Board must
establish " (1) that [the attorney's] statement was not true, and (2) that [the attorney] made the statement with actual knowledge of falsity or in reckless disregard for whether the statement was true or not." Iowa Supreme Ct. Att'y Disciplinary Bd. v. Weaver, 750 N.W.2d 71, 84 (Iowa 2008). Negligent misrepresentation does not violate this rule. Iowa Supreme Ct. Bd. of Prof'l Ethics & Conduct v. Grotewold, 642 N.W.2d 288, 293 (Iowa 2002). A lawyer's honesty regarding purely personal matters may remain free from scrutiny. Iowa Supreme Ct. Bd. of Prof'l Ethics & Conduct v. Plumb, 546 N.W.2d 215, 217 (Iowa 1996).
We previously distinguished between an attorney's reckless disregard for the truth, which would violate this rule, and an attorney's negligent misrepresentation, which would not violate this rule. In Grotewold, an attorney represented to the district court he had filed tax returns on an estate. Grotewold, 642 N.W.2d at 291. When the district court questioned him on the absence of certain tax documents in the court file, the attorney admitted it was likely the IRS had not received one of the tax returns and stated that he had filed new tax returns. Id. This information was false. Id. We determined the attorney violated this rule. Id. at 293. We recognized " misstatements resulting from oversight or haste do not constitute misrepresentations" in violation of this rule, however misinformation to the court based on a hope or intention that tasks would eventually be completed showed a casual, reckless disregard for the truth. Id. We have frequently found violations of this rule for an attorney's misrepresentations to clients and the court about the status of certain activities the attorney is supposed to complete. See Iowa Supreme Ct. Att'y Disciplinary Bd. v. Joy, 728 N.W.2d 806, 814 (Iowa 2007) (finding an attorney violated this rule when he misrepresented to the court only minimal work needed to be completed on certain estates and misinformed his clients about the status of their tax returns); Iowa Supreme Ct. Att'y Disciplinary Bd. v. Bjorklund, 725 N.W.2d 1, 8 (Iowa 2006) (finding an attorney violated this rule when he misrepresented to the court that he had ordered a transcript); Iowa Supreme Ct. Bd. of Prof'l Ethics & Conduct v. Daggett, 653 N.W.2d 377, 380 (Iowa 2002) (finding an attorney violated this rule when he stated he had filed an application for reinstatement but had not in fact done so).
Barnhill repeatedly stated to opposing counsel and the district court the plaintiffs in the Jerry's Homes matter actually reviewed the roofing company's promotional materials and acted in reliance on these materials when purchasing shingles. However, the evidence shows the majority of class members did not see or rely on these materials. The district court noted even when it confronted Barnhill and asked for evidence of the class members' reliance on these representations, Barnhill made false statements. Barnhill's appeal brief in this matter also contained false statements. Barnhill concedes these representations were false, but argues she was being a zealous advocate.
Zealous advocacy does not justify violating our disciplinary rules. Rather, an attorney must confine her zeal within the boundaries of our disciplinary rules. Comm. on Prof'l Ethics & Conduct v. Hurd, 360 N.W.2d 96, 104 (Iowa 1984). Here, the facts do not indicate haste or oversight led to Barnhill's comments that would suggest mere negligent misrepresentations. Rather, Barnhill's conduct shows her hope the facts would be something other than what they were. Barnhill's actions show a reckless disregard for the truth of the statements she made;
thus, we find the Board proved Barnhill violated this rule.
B. Knowingly Making a False Statement: DR 7-102(A)(5).
This rule states an attorney shall not " [k]nowingly make a false statement of law or fact" in the representation of a client. Iowa Code of Prof'l Responsibility DR 7-102(A)(5). We have recognized the word " knowingly" in the context of this rule requires actual knowledge, and we may infer an attorney's knowledge from the circumstances. Iowa Supreme Ct. Att'y Disciplinary Bd. v. Ouderkirk, 845 N.W.2d 31, 45 (Iowa 2014). We have consistently found a violation of this rule when we have determined the attorney's actions could only have been done deliberately. See Iowa Supreme Ct. Att'y Disciplinary Bd. v. Nelsen, 807 N.W.2d 259, 266 (Iowa 2011) (finding a violation of this rule when an attorney stated he would deposit certain funds into his trust account, while knowing that not only had he sent these funds to other individuals, but that he would continue to do so with future checks); Iowa Supreme Ct. Bd. of Prof'l Ethics & Conduct v. Lesyshen, 585 N.W.2d 281, 286 (Iowa 1998) (finding a violation of this rule when an attorney forged her client's signature and falsely notarized the signature); Comm. on Prof'l Ethics & Conduct v. O'Donohoe, 426 N.W.2d 166, 168-69 (Iowa 1988) (finding a violation of this rule when an attorney deliberately backdated a deed).
We disagree the Board met its burden to prove Barnhill violated this rule. Barnhill's concession in her brief that she made false statements does not show Barnhill had actual knowledge her statements were false at the time. Rather, as the district court stated, " [I]t was as though Barnhill said whatever needed to be said at each step to just get past the moment, whether there was a legitimate basis for saying it or not." Barnhill, 765 N.W.2d at 278. This shows a reckless disregard for the truth, but does not show Barnhill could only have acted deliberately. Thus, we find the Board did not meet its burden to prove Barnhill violated this rule.
C. Other Conduct Adversely Reflecting on the Fitness to Practice Law: DR 1-102(A)(6).
This rule states an attorney shall not " [e]ngage in any other conduct that adversely reflects on the fitness to practice law." Iowa Code of Prof'l Responsibility DR 1-102(A)(6). We have previously recognized " [a]ny violation of the Code of Professional Responsibility necessarily reflects adversely on the fitness of an attorney to practice law " and have noted our own hesitancy to find a violation of this rule depending on the degree of the attorney's noncompliance with the rule. Comm. on Prof'l Ethics & Conduct v. Durham, 279 N.W.2d 280, 285 (Iowa 1979). We do not look to the attorney's intent for this rule, but rather we look to the attorney's conduct and the surrounding circumstances. Iowa Supreme Ct. Att'y Disciplinary Bd. v. Barry, 762 N.W.2d 129, 138 (Iowa 2009). Our primary concern is with attorney conduct that lessens the public confidence in the legal profession. Id. We have previously found an attorney violates this rule when he or she acts truly egregiously and those actions negatively affect the public's perception of our profession. See id. (finding an attorney violated this rule when, as county attorney, his actions in treating certain persons favorably caused persons to question his sense of justice and he was ultimately removed from office for breaching his duties); Weaver, 750 N.W.2d at 79 (finding an attorney violated this rule when the attorney was arrested for second-offense drunk driving, lied to the police officer, and attempted to get out of the arrest).
The Board alleges Barnhill's general handling of the Jerry's Homes matter showed her lack of fitness to practice law in violation of this rule. We find on our review of the facts Barnhill's conduct in the Jerry's Homes matter rises to the level of egregious behavior to support this rule violation. Her conduct was so egregious the district court sanctioned her conduct by imposing a $25,000 sanction. On appeal, we affirmed the sanction. See Barnhill, 765 N.W.2d at 279. Thus, we find the Board proved Barnhill violated this rule.
D. Acceptance of Employment: DR 2-109.
This rule states:
(A) A lawyer shall not accept employment on behalf of a person if it is known or it is obvious that such person wishes to:
(1) Bring a legal action, conduct a defense, or assert a position in litigation, or otherwise have steps taken merely for the purpose of ...