|
ATTORNEY disciplinary
proceeding. Attorney's license
suspended.
¶1 PER CURIAM. We review the
referee's report and recommendation that the
license of Attorney Phaidra S. Knight to
practice law in Wisconsin be suspended for a
period of 90 days, and that Attorney Knight
be required to pay the costs of this
disciplinary proceeding, which were
$1,524.29 as of August 22, 2007. After
independently reviewing the matter, we agree
with and adopt the referee's findings of
fact and conclusions of law, which were made
after entering a default judgment against
Attorney Knight. We determine that Attorney
Knight's professional misconduct requires
that her license to practice law in
Wisconsin be suspended for a period of four
months. In addition, we conclude that the
reinstatement of Attorney Knight's license
should be conditioned upon providing proof
that she paid the appropriate funds to
clients G.F. and E.C. Finally, we decide
that Attorney Knight should pay the costs of
this disciplinary proceeding.
¶2 Attorney Knight was admitted to the
practice of law in Wisconsin in August
1999. She has not been the subject of prior
discipline, but her license to practice law
in this state was administratively suspended
in June 2006 due to her failure to comply
with the mandatory reporting requirements
for continuing legal education. Her license
remains suspended as of the date of this
opinion.
|
|
¶3 On October 9, 2006, the Office of
Lawyer Regulation (OLR) filed a complaint
against Attorney Knight alleging seven
separate counts of professional misconduct
arising out of Attorney Knight's
solicitations and representations of
individuals that might have claims to funds
that had escheated to the state and were
being held by the Wisconsin State
Treasurer. The OLR made multiple attempts
to serve Attorney Knight personally with
authenticated copies of the complaint and
order to answer, but the attempts were
unsuccessful. Ultimately, the OLR served
Attorney Knight pursuant to SCR 22.13(1) by
sending an authenticated copy of the
complaint and order to answer to Attorney
Knight at the most recent address she had
furnished to the State Bar of Wisconsin.
|
|
¶4 After Attorney Knight failed to file
an answer to the complaint, an OLR
representative was able to contact her by
telephone, at which time Attorney Knight
provided a new current mailing address. The
OLR then filed and served a notice of motion
and motion for default. At the time and
place set forth in the notice of motion, the
OLR appeared but Attorney Knight did not
appear. The referee adjourned the default
hearing for a short time and instructed the
OLR counsel to attempt one more time to
contact Attorney Knight. Although the OLR
counsel left a voice-mail message
instructing Attorney Knight to contact the
OLR immediately, Attorney Knight did not
respond. When the hearing reconvened, the
referee granted the OLR's motion for default.
¶5 By virtue of Attorney Knight's
default, the allegations contained in the
OLR's complaint were deemed admitted. The
referee subsequently filed a report that
contained factual findings in accord with
the allegations of the complaint. The
referee also concluded that those factual
findings proved that Attorney Knight had
committed the seven counts of professional
misconduct alleged by the OLR.
¶6 Because no appeal has been filed
from the referee's report, we proceed with
our review of the matter pursuant to SCR
22.17(2). In conducting our review, we
uphold a referee's findings of fact unless
they are shown to be clearly erroneous.
See
In re Disciplinary Proceedings Against
Sosnay, 209 Wis. 2d 241, 243, 562 N.W.2d
137
(1997). We review the referee's conclusions
of law, however, on a de novo basis.
See In
re Disciplinary Proceedings Against
Carroll,
2001 WI 130, ¶29, 248 Wis. 2d 662, 636
N.W.2d 718. Pursuant to our obligation to
supervise and regulate the practice of law
in this state, we determine the appropriate
level of discipline independently,
regardless of the referee's recommendation.
See In re Disciplinary Proceedings
Against
Widule, 2003 WI 34, ¶44, 261 Wis. 2d 45,
660
N.W.2d 686.
¶7 The factual findings in this case
state that while Attorney Knight was working
in the office of former Wisconsin State
Senator Gary George, she met an individual
by the name of Calvin Eleby, Jr. (Eleby).
Eleby operated a governmental affairs
consulting business in Michigan. He was
also an attorney, but was licensed to
practice only in the state of New York. One
of Eleby's business interests was to attempt
to locate missing heirs and represent them
as an attorney in probate court proceedings
to retrieve funds that had escheated to the
State of Wisconsin and were being held by
the Office of the Wisconsin State Treasurer.
¶8 Attorney Knight knew that Eleby did
not hold a license to practice law in
Wisconsin. Nonetheless, on multiple
occasions she gave Eleby permission to file
Wisconsin probate court pleadings under her
name and State Bar of Wisconsin attorney
number as part of his process of claiming
escheated funds in Wisconsin.
¶9 For example, in March 2000 Eleby
used Attorney Knight's name and attorney
number to file a petition in the Polk County
circuit court for the release of escheated
funds to Eleby's client, M.E. The court
granted the petition and ordered the state
to release $30,695.33 to M.E. Eleby
convinced the treasurer's office to issue
the check in the name of his trust account.
In addition to receiving the agreed-upon
attorney fee, Eleby improperly
misappropriated an additional $10,236.90 for
his own purposes, falsely telling M.E.'s
family that he was required to pay those
funds to the other side of the decedent's
family. Eleby was later charged criminally
for this theft and admitted his wrongdoing.
Although Attorney Knight had allowed Eleby
to use her name and attorney number on the
probate petition, which ultimately led to
the conversion of funds, Attorney Knight had
no contact with M.E. and received no part of
the attorney fee arising out of Eleby's
representation of M.E.
¶10 In October 2001 Eleby signed
Attorney Knight's name to a petition he
filed in the Barron County circuit court on
behalf of client J.W. seeking the release of
escheated funds. Although Attorney Knight
never practiced law in Michigan or shared an
office with Eleby, in November 2001 Eleby
sent a letter to the court under letterhead
for the purported law firm of "Eleby and
Knight" in Birmingham, Michigan. The court
ultimately granted the petition and ordered
the state treasurer to release $44,124.59 to
J.W. On the same date as the court's order,
the treasurer's office received a letter
again written on "Eleby and Knight"
letterhead and purportedly bearing Attorney
Knight's signature. The letter authorized
Eleby to pick up on behalf of J.W. a check
for the released funds that was to be made
payable to Attorney Knight's trust account.
Eleby subsequently picked up the check and
endorsed it as "Phaidra Knight by Calvin
Eleby."
¶11 In February 2002 Eleby was hired by
J.M. to recover escheated funds. Eleby
filed a petition to that effect in the
Milwaukee County circuit court, again
signing Attorney Knight's name and using her
attorney number. When the court scheduled a
hearing on the petition, both Attorney
Knight and Eleby appeared on behalf of J.M.
Because the court was concerned about the
sufficiency of the documentation to support
J.M.'s claim to the escheated funds, it
scheduled another hearing and required J.M.
to appear personally. Prior to the second
hearing, Eleby sent a letter to the court
under Attorney Knight's name that provided
additional documentation to support J.M.'s
claim. At the second hearing, J.M.
personally appeared along with Eleby and
Attorney Knight. This was the only contact
that J.M. ever had with Attorney Knight.
After the court granted the petition, the
treasurer's office issued a check in the
amount of $41,514.95 made payable
to "Phaidre [sic] Knight Atty. Trust FBO
[J.M.]." (FBO is an abbreviation of the
term "for the benefit of.)
¶12 Attorney Knight authorized Eleby to
pick up the check and to send the
appropriate funds to J.M. Eleby endorsed
the check on behalf of Attorney Knight and
paid her a few hundred dollars for her time
and gas expenses. Eleby did not pay any of
the funds to J.M., but instead
misappropriated all of the remaining funds
for his own benefit. When the OLR later
questioned Attorney Knight about whether she
had taken any actions to ensure that J.M.
had received his funds, she indicated that
she had asked Eleby about the matter only a
couple of times shortly after he had
endorsed the state treasurer's check.
Attorney Knight stated that Eleby had told
her on the second occasion that he had
delivered a check to his client. Because
Attorney Knight had no contact information
for J.M., she could not directly inquire of
J.M. whether he had received his funds.
Attorney Knight simply assumed that Eleby
had distributed them properly.
¶13 In July 2002 Eleby again signed
Attorney Knight's name to a petition in the
Racine County circuit court seeking to claim
escheated funds from the estate of E.S.
Eleby mailed these documents to the circuit
court under cover of a letter that bore the
heading "Phaidra S. Knight, Eleby
Governmental Affairs." As noted above,
Attorney Knight and Eleby never practiced
together in the same law firm or even shared
office space. In a subsequent letter, Eleby
informed the court that he was working "on
behalf of Attorney Phadria [sic] S.
Knight." In August 2002 Eleby signed
Attorney Knight's name to a motion
requesting the court to allow Eleby to
appear pro hac vice in the estate of E.S.
matter. The court granted the motion and
subsequently granted the petition,
authorizing the release of $43,068.97 to the
heirs of E.S. that Eleby was representing.
Shortly thereafter, Attorney Knight sent an
e-mail message to the treasurer's office
stating that because she would be
unavailable for the next three weeks, the
treasurer's office should send the check to
her in care of Eleby at Eleby Governmental
Affairs. The treasurer's office complied,
sending to Eleby the check for $43,068.97
made payable to "Phaidra Knight Trust FBO
Heir c/o Calvin Eleby." Although Eleby
properly distributed some of the funds, he
illegally converted $10,165.56 for his own
use.
¶14 In March 2003 J.A. and P.G. retained
Eleby to recover certain escheated funds
from a Wood County estate. Eleby again
signed Attorney Knight's name to the
petition and to subsequent pleadings. J.A.
and P.G. were unaware of Attorney Knight,
having never heard of her or met her. They
believed that Eleby alone was representing
them. After the state initially opposed the
petition, Attorney Knight and Eleby both
appeared on behalf of J.A. and P.G. in two
teleconferences with the circuit court.
Ultimately, the court granted the petition
and ordered the state treasurer to disburse
$16,500 to Attorney Knight for the benefit
of J.A. and P.G. On June 16, 2003, the
treasurer's office issued the check in that
amount made payable to "Phaidra Knight Atty.
Trust Acct. FBO [P.G.] & [J.A.]." Eleby
cashed the check, but failed to forward any
funds to either J.A. or P.G.
¶15 J.A. and a representative of P.G.
subsequently contacted Eleby several times
about receiving the funds that belonged to
them. The representative of P.G. told Eleby
that she would soon report to the state
authorities Eleby's failure to distribute
the funds. On August 30, 2003, Eleby sent a
check for $3,250 to P.G. He deducted from
this check his total fees, including those
fees that were the responsibility of J.A.
Eleby never sent any payment to J.A.
¶16 In addition to cases in which
Attorney Knight allowed Eleby to use her
name and attorney number to practice law in
Wisconsin, Attorney Knight also handled some
escheated funds cases on her own. In June
2000 she mailed form solicitation letters
and proposed fee agreements to individuals
that potentially could have been heirs to
escheated funds. Her form letter contained
the following language:
I have located your unclaimed share of
the escheated estate of [decedent] in the
amount of $[xxx]. In accordance with the
Chapter 863 of the Wisconsin statutes, you
are entitled to petition for your unclaimed
portion. Be aware, however, that there is a
statute of limitations for a petition to be
submitted. If you do not file a timely
petition, you will waive your rights to make
a claim.
¶17 Attorney Knight sent these letters
to individuals without being sure that she
was in fact contacting the person with a
legitimate claim to the escheated money and
without asking for confirmation of the
recipient's identity. In addition, she sent
some of these form letters to more than one
individual with the same name. Further, her
letter did not contain any qualification as
to whether the recipient was in fact
entitled to claim the escheated funds. None
of the form letters Attorney Knight sent
were labeled as an advertisement, and
Attorney Knight did not file a copy of those
letters with the OLR.
¶18 Attorney Knight opened a client
trust account in June 2000, but maintained
it for less than two months. She did not
deposit any funds into the account or
withdraw any funds from the account while it
was open. Instead of using a trust account,
on some occasions when she received a check
on behalf of a client in an escheated funds
matter, she would cash the check from the
state treasurer and obtain a cashier's check
or money order for the amount she calculated
was owed to the client under her retainer
agreement. She would send the cashier's
check or money order to the client and would
retain the remaining amount of the original
check as payment for her attorney fee and
expenses.
¶19 One case in which Attorney Knight
pursued escheated funds by herself was her
representation of G.F. Attorney Knight
filed a petition to recover escheated funds
on behalf of G.F. in June 2000. Within a
few weeks the petition was granted and the
state treasurer issued a check in the amount
of $5,708.19 to "Knight, Phaidra Trust FBO
[G.F.]." In the course of its later
investigation, the OLR repeatedly requested
proof that Attorney Knight had disbursed the
proper amount of funds to G.F. Although
Attorney Knight promised to provide a
receipt confirming G.F.'s receipt of the
funds, she never produced any such receipt.
¶20 Similarly, in November 2000 Attorney
Knight received a check on behalf of client
E.C. for $10,945.07 due to a successful
claim for recovery of escheated funds. The
check was made payable to "Trust Acct Atty.
Phaidre [sic] Knight FBO [E.C.]." As was
the case with G.F., the OLR later requested
proof that E.C. had received her proper
share of these funds. Although Attorney
Knight again claimed that she had a receipt
confirming payment to E.C. and promised to
send it to the OLR "right away," she never
produced any such receipt.
¶21 The various situations involving
Eleby's pattern of illegal conduct began to
come to light in the summer and fall of
2003. In July 2003 J.M. consulted an
attorney, who contacted Eleby about the
funds due to J.M. Eleby replied that he
could not disburse the funds to J.M. at that
time because they were in Attorney Knight's
account and she was out of the country for
several weeks. In September the attorney
contacted Attorney Knight directly and
raised the possibility of contacting the
police and lawyer regulation authorities.
Attorney Knight then spoke with Eleby, who
admitted that he had spent J.M.'s money.
Attorney Knight informed J.M.'s current
attorney of Eleby's confession. That
attorney contacted the Milwaukee County
district attorney's office and the OLR to
inform them that Eleby and Attorney Knight
had stolen approximately $30,000 that
rightfully belonged to J.M.
¶22 The district attorney's office
investigated the matter and ultimately
obtained an admission from Eleby that he had
converted funds in four cases. In two of
the matters, which formed the basis of
criminal charges against Eleby, the funds
that Eleby stole came from checks that had
been made payable to Attorney Knight's trust
account. Also, Attorney Knight had
personally appeared at hearings in two of
the cases with Eleby. In another matter,
Attorney Knight had personally sent an e-
mail to the state treasurer's office to
request that the check be sent to her at
Eleby's address. Eleby ultimately pled
guilty to two felony counts of theft in a
business setting. Although Attorney Knight
was interviewed as part of the criminal
investigation, she was not charged with any
criminal offenses.
|
|
¶23 On the basis of these factual
findings, the referee concluded that the OLR
had properly proven each of the seven counts
of professional misconduct alleged in the
OLR's complaint. First, by agreeing to
allow Eleby, who was not licensed to
practice law in Wisconsin, to use her name
and attorney number to represent clients in
Wisconsin courts, Attorney Knight assisted
an unlicensed person in conduct that
constitutes the unauthorized practice of law
in this state, in violation of former SCR
20:5.5(b). Attorney Knight also knowingly
made a false statement of fact to a tribunal
in violation of SCR 20:3.3(a)(1) and SCR
20:8.4(a) when she allowed Eleby to sign her
name to correspondence and pleadings that
she had never seen, thereby misrepresenting
to the court that a Wisconsin-licensed
attorney was involved in the representation.
|
|
¶24 Third, by failing to deposit checks
she received from the state treasurer's
office for the benefit of her own personal
clients into one or more identifiable client
trust accounts, Attorney Knight violated SCR
20:1.15(a). Attorney Knight also violated
former SCR 20:1.15(e) by failing to prepare
complete records of trust account funds or
other trust property, including records
documenting the disposition of client funds,
and to preserve such records for at least
six years after termination of the
representation. (Footnote: The OLR's
complaint and the referee's report
mistakenly list the appropriate rule in this
violation as "SCR 20:1.15(3)," which does
not exist. It is clear from the description
of the violation in the complaint and
report, however, that the OLR and the
referee intended to refer to former SCR
20:1.15(e), in effect prior to July 1,
2004.)
|
|
¶25 Counts five and six relate to the
solicitation letters that Attorney Knight
sent to potential clients in escheated funds
matters. The referee concluded that by
failing to conspicuously label such letters
with the word "Advertisement," and by
failing to file a copy of those letters with
the OLR within five days of their
dissemination, Attorney Knight had violated
SCR 20:7.3(b). In addition, Attorney
Knight's solicitation letters stated without
qualification that she had located the
addressee's unclaimed share of escheated
funds when in fact she did not know if she
was contacting the correct person. In so
doing, the referee concluded that Attorney
Knight had made false and misleading
statements to potential clients by omitting
a fact necessary to make the statement
considered as a whole not materially
misleading and by creating a false
expectation about the results she could
achieve, in violation of SCR 20:7.1(a).
|
|
¶26 Finally, because Attorney Knight had
failed to provide the OLR with documents
evidencing payments to certain of her
clients after she had asserted that she had
located such documents and had promised to
provide them to the OLR immediately, the
referee concluded that Attorney Knight had
violated SCR 22.03(6).
¶27 After independently reviewing the
matter, we adopt the referee's findings of
fact. We also agree that those facts
demonstrate that Attorney Knight committed
each of the seven counts of professional
misconduct alleged against her.
¶28 With respect to the level of
discipline, the referee recommended that
Attorney Knight's license to practice law in
Wisconsin be suspended for a period of 90
days and that she be required to pay the
costs of this disciplinary proceeding.
|
|
¶29 Concerned that the recommended
discipline may not be adequate for the
seriousness of the professional misconduct,
we directed both Attorney Knight and the OLR
to show cause why the discipline should not
be a six-month suspension. Attorney Knight
failed to file a response to the order to
show cause.
¶30 The OLR filed a response that
continued to request a 90-day suspension.
The OLR acknowledged that whether Attorney
Knight's suspension should be for 90 days or
for a period of six months or more, which
would require a formal petition and hearing
for reinstatement, was a close call. It
stated that it had considered Attorney
Knight's conduct to fall between two cases.
Compare In re Disciplinary Proceedings
Against Fischer, 176 Wis. 2d 145, 499
N.W.2d
677 (1993) (60-day suspension imposed where
attorney signed and filed pleadings and
briefs without adequately reviewing them and
ensuring the accuracy of the factual
assertions and the validity of the legal
positions) with In re Disciplinary
Proceedings Against Ness, 2002 WI 114, 256
Wis. 2d 33, 651 N.W.2d 724 (nine-month
suspension imposed where Wisconsin attorney
misrepresented his license status and
authority to appear pro hac vice in several
Minnesota courts and made misrepresentations
in advertising his Minnesota-based law firm
with little or no acknowledgement of
wrongdoing).
¶31 The OLR also stated that the default
nature of the disciplinary proceeding may
have kept some mitigating factors from being
fully disclosed. First, it noted that, with
the exception of providing certain documents
as discussed below, Attorney Knight had
cooperated with the vast majority of the
OLR's investigation, including providing a
personal interview with the OLR
investigators, and had expressed "some
remorse." Second, the OLR discovered
through its investigation that after
learning of Eleby's wrongdoing, Attorney
Knight followed up on some cases, cooperated
with law enforcement, and personally made
payments to clients who had not received the
monies that were due to them. The OLR also
emphasized that it had uncovered no evidence
that Attorney Knight had personally obtained
any improper profits from Eleby's misconduct
or her own. Indeed, the OLR indicated that
because of Attorney Knight's limited
experience as a lawyer, it felt that
Attorney Knight had looked to Eleby as a
mentor, "and therein became somewhat of a
victim herself."
¶32 In addition to explaining the basis
for its request for a 90-day suspension, the
OLR also reiterated a request that the
reinstatement of Attorney Knight's license
to practice law in Wisconsin be conditioned
upon providing proof that she has made the
appropriate payments to clients E.C. and
G.F. See, e.g., In re
Disciplinary
Proceedings Against Pitts, 2007 WI 112,
_
Wis. 2d _, 735 N.W.2d 917 (attorney's
reinstatement following 60-day suspension
conditioned on creation of office management
and business plan and quarterly furnishing
of client trust account records); In re
Disciplinary Proceedings Against Kitchen,
2004 WI 83, 273 Wis. 2d 279, 682 N.W.2d 780
(attorney's reinstatement following 60-day
suspension conditioned on providing certain
records to OLR). Although the OLR did not
indicate that it believed Attorney Knight
had converted any of those clients' funds,
Attorney Knight failed to submit the
receipts to verify her assurances that the
proper payments had been made.
|
|
¶33 While we acknowledge Attorney
Knight's inexperience, her expression of
remorse, her attempts to rectify some of the
harm to clients, and the lack of evidence
that she explicitly knew of Eleby's
conversion of funds, we cannot agree with a
characterization of Attorney Knight as
a "victim." She knowingly allowed an
individual who was not licensed in Wisconsin
to use her name and attorney number to
represent clients in the courts of this
state. Moreover, she allowed Eleby to cash
and disburse checks that were made out to
her and to her trust account apparently
without any effort to ensure that the
clients received the funds to which they
were entitled. These actions ultimately led
to the theft of funds that belonged to
clients for whom Attorney Knight was
responsible. Further, Attorney Knight's
failure to maintain and utilize an
appropriate client trust account
demonstrates an alarming lack of
understanding or a disregard of one of a
lawyer's core duties——protecting the
interests of clients and their property.
¶34 We view Attorney Knight's repeated
acts of professional misconduct as serious
breaches of her obligations as an attorney
in this state. Based on the totality of the
facts before us, we conclude that Attorney
Knight's license to practice law in
Wisconsin must be suspended for a period of
four months. In addition, we adopt the
OLR's request that the reinstatement of her
license to practice law in this state be
conditioned upon providing acceptable proof
to the OLR that Attorney Knight has paid all
of the necessary amounts to clients E.C. and
G.F.
¶35 IT IS ORDERED that the license of
Attorney Phaidra S. Knight to practice law
in Wisconsin is suspended for a period of
four months, effective as of the date of
this order.
¶36 IT IS FURTHER ORDERED that
reinstatement of Attorney Phaidra S.
Knight's license to practice law in
Wisconsin is conditioned on providing
written documentation, in a form reasonably
acceptable to the Office of Lawyer
Regulation, that Attorney Knight has paid to
clients E.C. and G.F. all funds to which
they are entitled.
¶37 IT IS FURTHER ORDERED that within 60
days of the date of this order, Attorney
Phaidra S. Knight shall pay to the Office of
Lawyer Regulation the costs of this
proceeding. If the costs are not paid
within the time specified and absent a
showing to this court of her inability to
pay those costs within that time, the
license of Attorney Knight to practice law
in Wisconsin shall remain suspended until
further order of this court.
¶38 IT IS FURTHER ORDERED that if she
has not already done so, Attorney Phaidra S.
Knight shall comply with the provisions of
SCR 22.26 concerning the duties of a person
whose license to practice law in Wisconsin
has been suspended.
|