Iowa Supreme Court Attorney Disciplinary Board v. John Edward Netti, Jr. , 797 N.W.2d 591 ( 2011 )

IN THE SUPREME COURT OF IOWA
No. 10–1081
Filed May 13, 2011
IOWA SUPREME COURT ATTORNEY DISCIPLINARY BOARD,
Complainant,
vs.
JOHN EDWARD NETTI, JR.,
Respondent.
On review of the report of the Grievance Commission of the
Supreme Court of Iowa.
Grievance commission reports respondent has committed multiple
ethical infractions and recommends a two-year suspension of
respondent’s license to practice law. LICENSE SUSPENDED.
Charles L. Harrington and David J. Grace, Des Moines, for
complainant.
John E. Netti, Jr., Dubuque, pro se.
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WIGGINS, Justice.
The Iowa Supreme Court Attorney Disciplinary Board brought a
complaint against the respondent, John Edward Netti, Jr., alleging
multiple violations of the Iowa Rules of Professional Conduct as well as
the Iowa Court Rules, the Iowa Rules of Probate Procedure, and the Iowa
Code. A division of the Grievance Commission of the Supreme Court of
Iowa found the respondent’s conduct violated the rules and
recommended we suspend his license to practice law with no possibility
of reinstatement for a period of two years. Neither party appealed.
Therefore, we are required to review the report of the grievance
commission de novo. Iowa Ct. R. 35.10(1). On our de novo review, we
find respondent has violated numerous provisions of our rules and Code,
which require us to impose sanctions. Accordingly, we suspend
respondent’s license to practice law indefinitely with no possibility of
reinstatement for a period of two years from the date of filing this
decision.
I. Scope of Review.
We review attorney disciplinary proceedings de novo. Iowa
Supreme Ct. Att’y Disciplinary Bd. v. Keele, 795 N.W.2d 507, 509 (Iowa
2011). The board must prove an attorney’s ethical misconduct by a
convincing preponderance of the evidence. Id. A convincing
preponderance of the evidence is more than the preponderance standard
required in a typical civil case, but less than proof beyond a reasonable
doubt. Iowa Supreme Ct. Att’y Disciplinary Bd. v. Schmidt, 796 N.W.2d
33, 33 (Iowa 2011). Although the commission’s findings and
recommendations are not binding on us, we give them respectful
consideration. Id. at 33. “Upon proof of misconduct, we may impose a
greater or lesser sanction than the sanction recommended by the
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commission.” Iowa Supreme Ct. Att’y Disciplinary Bd. v. Templeton, 784
N.W.2d 761, 764 (Iowa 2010).
II. Findings of Fact.
In 1994 respondent, John Edward Netti, Jr., received his license to
practice law in the State of Kentucky. Sometime in 2002 or 2003, he
received a private reprimand with regard to a client-related matter in
Kentucky. In 2001 Netti obtained his license to practice law in Iowa. For
some period, his Iowa license to practice law was on inactive status. In
2006 his license was placed on active status. On October 17, 2008, we
issued an order suspending his license for failure to pay annual fees
and/or file the reports as required by our rules. His license remains
under suspension to this day.
The board’s complaint alleges Netti engaged in multiple violations
of the Iowa Rules of Professional Conduct, the Iowa Court Rules, the
Iowa Rules of Probate Procedure, and the Iowa Code relating to his
representation of four separate clients. The alleged misconduct primarily
concerns trust account violations, misconduct surrounding fee
agreements, the taking of fees, failure to satisfy a hospital lien with
settlement proceeds, conflict of interest, the unauthorized practice of law,
as well as dishonesty, incompetence, and neglect. Netti filed an answer,
denying the board’s allegations.
Netti, however, failed to answer the board’s interrogatories,
requests for production of documents, and requests for admission. As a
result, the commission deemed the board’s requests for admission
admitted. See, e.g., Iowa Ct. R. 35.6; Iowa R. Civ. P. 1.517(2)(b); Iowa
Supreme Ct. Att’y Disciplinary Bd. v. Moonen, 706 N.W.2d 391, 396 (Iowa
2005) (recognizing failure to respond to board’s discovery requests
requires court to consider all the matters stated in the requests as
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admitted). In addition, the commission sanctioned Netti for his failure to
respond to the board’s discovery requests by treating all the factual
allegations in the complaint as admitted for purposes of the disciplinary
proceeding. See, e.g., Moonen, 706 N.W.2d at 396 (recognizing this
sanction is consistent with the sanctions allowed under Iowa Rule of
Civil Procedure 1.517(2)(b)(1)). Based on our de novo review of the
record, we make the following findings of fact.
A. Sharon Matz Representation (Count I). In July 2005, Sharon
Matz retained Netti to represent her in a home construction dispute.
Between July and October 2005, Matz gave Netti three checks of $250,
$1160 or $1150, and $1500 as payment for his anticipated services. At
the times he received the checks, Netti had not yet earned these sums.
Netti failed to deposit the checks into a separate client trust account. He
also failed to provide Matz with statements or accountings of the services
he rendered and the fees and expenses he charged, although she
requested such statements and accountings. As a result, in 2007 Matz
terminated Netti’s representation and filed a complaint with the board.
As part of its investigation, the board requested that Netti provide
it with copies of his trust account records showing the handling of Matz’s
advance fee and expense payments and copies of the statements or
correspondence he sent to Matz, notifying her of his withdrawal of funds
from the trust account to apply toward the fees and expenses associated
with his representation. In response, Netti provided the board with a
time and billing statement for his representation of Matz. He also stated,
“I am still working on the trust account records and should have them to
you within the next 10 days.” However, Netti never provided copies of his
trust account records to the board.
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B. Estate of Jeremy Zimmerman (Count II). In 2006 and 2007,
Netti represented the Estate of Jeremy Zimmerman. The primary asset
of the estate was a wrongful death claim. Netti agreed to pursue this
claim and entered into a written contingent-fee agreement with Mary
Nauret, the decedent’s mother and administrator of the estate. The
contingent-fee agreement failed to state whether Netti’s litigation
expenses were to be deducted before or after the contingent fee is
calculated.
In November 2006, Netti settled the wrongful death claim for
$132,750 and deposited the settlement amount into his “escrow”
account, rather than a proper client trust account. A few days later,
Netti took $44,245 from the settlement amount as his fee and transferred
this amount to a different account. At the time he collected his fee, Netti
had not filed the affidavit required by Iowa Code section 633.202 (2005),
and the probate court had not issued an order allowing Netti to collect
any compensation for his services.
In addition to the wrongful death action, Netti also agreed to assist
Nauret in administering the estate and was designated as counsel for the
estate. His purpose in opening the estate was solely to pursue the
wrongful death claim. After a notice of delinquency, Netti filed an
inventory asserting the estate had no assets. This inventory
misrepresented the assets of the estate because Netti did not list any of
the wrongful death settlement proceeds as an asset. Netti also applied to
close the estate. After learning of his incompetence and neglect in
probating the estate, Nauret, as administrator of the estate, applied to
remove Netti as designated attorney. In seeking Netti’s removal, Nauret
cited Netti’s mishandling of the wrongful death settlement proceeds, his
improper collection of fees, incorrect inventory, failure to pay claims
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against the estate, and failure to distribute funds to the decedent’s legal
heir, as well as other problems. The court removed Netti as the attorney
for the estate. Netti returned $20,000 of the $44,245 in fees he collected,
and the court entered judgment against him for the remaining $24,245
he had taken. Netti has not yet fully satisfied this judgment. Finally,
after the court terminated his representation, Netti failed to promptly
deliver the estate’s file to his successor counsel.
C. Joshua Walker Representation (Count III). On January 1,
2005, Joshua Walker was injured in an automobile accident. From
August 9, 2005 through January 18, 2006, Walker received medical care
and treatment from Finley Hospital for the injuries he sustained during
the accident. In 2006 and 2007, Netti represented Walker with regard to
a personal-injury lawsuit stemming from the automobile accident. Netti
agreed to represent Walker on a contingent-fee basis but the two never
executed a written agreement. Finley Hospital asserted a $13,000
hospital lien on the proceeds of the personal-injury claim against the
tortfeasor’s insurer, Metropolitan Property and Casualty Insurance
Company. Netti was aware of the hospital lien.
Netti settled Walker’s personal-injury claim with the tortfeasor and
Metropolitan for $45,000. Metropolitan issued a settlement check for
$45,000, payable to Netti and Walker. Netti deposited the settlement
proceeds into his “escrow” account rather than a proper client trust
account. Subsequently, Netti took $23,296.02 as his fee and transferred
this amount to a different account. He then gave Walker a check for
$20,278.98. The settlement agreement and release obligated Walker to
pay from the settlement proceeds “all outstanding liens or claims for
reimbursement of medical subrogation claims.” Netti, however, failed to
take the appropriate steps to satisfy Finley Hospital’s hospital lien from
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the settlement proceeds. He also failed to provide Walker with an
accounting for the settlement proceeds.
Finley Hospital sued Metropolitan to satisfy its hospital lien.
Subsequently, Metropolitan filed a third-party petition against Netti and
Walker for indemnity. Without authority, Netti filed an answer for
himself and Walker. This prompted a letter from Metropolitan’s lawyer,
warning Netti of the conflict of interest and stating, “[I]t’s my belief that
you cannot ethically represent both yourself and Joshua Walker in this
lawsuit.” In response, while still purporting to represent Walker, Netti
moved to withdraw the previously filed answer, filed a new answer for
himself, and filed a cross-claim against Walker for indemnity. The cross-
claim alleged it was Walker’s obligation to satisfy Finley Hospital’s lien.
Netti apparently viewed his attempted withdrawal of the answer as a
withdrawal from his representation of Walker.
The district court granted summary judgment in favor of Finley
Hospital as to its hospital-lien claim against Metropolitan. The court also
granted summary judgment in favor of Metropolitan as to its third-party
indemnification claim against Walker. The court rejected Metropolitan’s
third-party indemnification claim against Netti because he was not a
party to the settlement agreement. After the court’s order, Netti filed a
motion for protective order asserting that, in seeking his deposition,
Metropolitan was harassing him and fishing for undiscoverable
information. The assertions in Netti’s motion were false.
D. Angela Mangeno Representation (Count IV). In 2008 Netti
was suspended from the practice of law in Iowa for failing to submit his
annual client security report. Nevertheless, believing Netti was a lawyer
in good standing, Angela Mangeno retained him to represent her in a
sales tax dispute with the Iowa Department of Revenue.
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Possibly believing he could represent Mangeno as a non-lawyer,
Netti convinced Mangeno to execute a power of attorney in his favor. In
addition, Mangeno gave Netti a $750 retainer as payment for his
anticipated services. Netti failed to deposit the $750 into a separate
client trust account. He also failed to regularly communicate with
Mangeno or do the work she hired him to do. As a result, Mangeno
terminated Netti’s representation and requested a refund of her retainer
and the return of her records. Netti failed to promptly return Mangeno’s
records and has not refunded her $750 retainer. Mangeno filed a
complaint with the board. Netti refused to send a copy of his file to the
board and asserted that the board “has no jurisdiction over this matter.”
III. Violations.1
A. Rule 32:1.1. Rule 32:1.1 provides, “A lawyer shall provide
competent representation to a client. Competent representation requires
the legal knowledge, skill, thoroughness, and preparation reasonably
necessary for the representation.” Iowa R. Prof’l Conduct 32:1.1.
“ ‘Competent handling of a particular matter includes inquiry into and
analysis of the factual and legal elements of the problem, and use of
methods and procedures meeting the standards of competent
practitioners.’ ” Iowa Supreme Ct. Att’y Disciplinary Bd. v. Tompkins, 733
N.W.2d 661, 668 (Iowa 2007) (quoting Iowa R. Prof’l Conduct 32:1.1 cmt.
5).
In the Zimmerman matter, Netti’s failure to administer the estate
properly constituted incompetent representation. In the Walker matter,
1In some of the complaint’s counts, the board alleged a violation of rule 32:8.4(a)
(“It is professional misconduct for a lawyer to . . . violate . . . the Iowa Rules of
Professional Conduct . . . .”). We have previously held that we do not consider a
violation of this rule as a separate ethical infraction, and so, we will give it no further
consideration. Iowa Supreme Ct. Att’y Disciplinary Bd. v. Templeton, 784 N.W.2d 761,
769 (Iowa 2010).
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his handling of the hospital lien also amounted to incompetent
representation. Finally, his failure to perform any services in the
Mangeno matter was incompetent representation. Accordingly, the board
has proved Netti violated rule 32:1.1.
B. Rule 32:1.3. Rule 32:1.3 states, “A lawyer shall act with
reasonable diligence and promptness in representing a client.” Iowa R.
Prof’l Conduct 32:1.3. This rule requires an attorney to handle a client’s
matter in a “reasonably timely manner.” Iowa Supreme Ct. Att’y
Disciplinary Bd. v. Johnson, 792 N.W.2d 674, 678 (Iowa 2010). Netti
failed to handle the estate proceedings in the Zimmerman matter and the
tax issues in the Mangeno matter in a reasonably timely manner. Thus,
we find the board proved Netti violated rule 32:1.3.
C. Rules 32:1.4(a)(3) and (4). Under our rules of professional
conduct:
(a) A lawyer shall:
....
(3) keep the client reasonably informed about the
status of the matter;
(4) promptly comply with reasonable requests for
information[.]
Iowa R. Prof’l Conduct 32:1.4(a)(3), (4). This rule requires an attorney to
stay in communication with his or her client so that the attorney can
inform the client of the status of the matter and promptly respond to
reasonable requests of the client. Id. In the Mangeno matter, Netti did
not keep his client informed or respond to her reasonable requests.
Accordingly, Netti violated rule 32:1.4.
D. Rule 32:1.5(c). Our rules of professional conduct allow
attorneys to enter into contingent-fee agreements under certain
10
circumstances. Id. r. 32:1.5. If an attorney agrees to perform his or her
services under a contingent-fee agreement, the fee agreement must be in
writing and contain certain provisions to comply with our rules. Id. r.
32:1.5(c). Our rules provide:
(c) A fee may be contingent on the outcome of the
matter for which the service is rendered, except in a matter
in which a contingent fee is prohibited by paragraph (d) or
other law. A contingent fee agreement shall be in a writing
signed by the client and shall state the method by which the
fee is to be determined, including the percentage or
percentages that shall accrue to the lawyer in the event of
settlement, trial, or appeal; litigation and other expenses to
be deducted from the recovery; and whether such expenses
are to be deducted before or after the contingent fee is
calculated. The agreement must clearly notify the client of
any expenses for which the client will be liable whether or
not the client is the prevailing party. Upon conclusion of a
contingent fee matter, the lawyer shall provide the client with
a written statement stating the outcome of the matter and, if
there is a recovery, showing the remittance to the client and
the method of its determination.
Id.
Netti violated this rule in the Zimmerman matter because the
contingent fee agreement failed to state whether Netti would deduct the
litigation expenses before or after the contingent fee is calculated. In the
Walker matter, Netti failed to execute a written contingent fee agreement
with Walker. For these reasons, Netti violated rule 32:1.5(c).
E. Rule 32:1.7(a). Rule 32:1.7(a)(2) requires:
(a) Except as provided in paragraph (b), a lawyer shall
not represent a client if the representation involves a
concurrent conflict of interest. A concurrent conflict of
interest exists if:
....
(2) there is a significant risk that the representation of
one or more clients will be materially limited by the lawyer’s
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responsibilities to another client, a former client, or a third
person or by a personal interest of the lawyer.
Id. r. 32:1.7(a)(2).
This rule applies to concurrent conflicts of interest with current
clients. Id. r. 32:1.7 cmt. 1. The first question then becomes, was
Walker Netti’s client at the time the hospital filed the lawsuit to satisfy its
hospital lien?
Consistent with section 14 of the Restatement (Third) of the Law
Governing Lawyers, we have formulated a three-part test to determine
the existence of an attorney-client relationship. State v. Parker, 747
N.W.2d 196, 203–04 (Iowa 2008). An attorney-client relationship exists
when:
(1) a person sought advice or assistance from an attorney, (2)
the advice or assistance sought pertained to matters within
the attorney’s professional competence, and (3) the attorney
expressly or impliedly agreed to give or actually gave the
desired advice or assistance.
Comm. on Prof’l Ethics & Conduct v. Wunschel, 461 N.W.2d 840, 845
(Iowa 1990). We also have a rule that presumes “an attorney-client
relationship exists between the attorney and the person on whose behalf
the attorney enters the appearance.” Brandon v. W. Bend Mut. Ins. Co.,
681 N.W.2d 633, 640 (Iowa 2004). Evidence that the client did not
assent to the filing of an appearance may rebut the presumption of an
attorney-client relationship. Id.
In determining when the attorney-client relationship ends, we have
said, “The point at which the attorney-client relationship . . . ends is
further defined by the rule that a lawyer bears responsibility for only
those legal matters he or she is engaged to discharge.” Wunschel, 461
N.W.2d at 845. Our formulation of when the attorney-client relationship
ends is consistent with the Restatement (Third) of the Law Governing
12
Lawyers. The Restatement states, “Subject to Subsection (1) and § 33, a
lawyer’s actual authority to represent a client ends when . . . the
representation ends as provided by contract or because the lawyer has
completed the contemplated services.” Restatement (Third) of the Law
Governing Lawyers § 31(2)(e), at 220 (2000). Moreover, section 33(2)(b)
provides,
(2) Following termination of a representation, a lawyer must:
....
(b) take no action on behalf of a former client without
new authorization and give reasonable notice, to those who
might otherwise be misled, that the lawyer lacks authority to
act for the client.
Id. § 33(2)(b), at 240. The determination as to when an attorney-client
relationship begins or ends is a question of fact. Kurtenbach v. TeKippe,
260 N.W.2d 53, 57 (Iowa 1977).
Applying these principles, the board has established an attorney-
client relationship existed during the prosecution and settlement of the
personal-injury suit. Although Netti and Walker did not enter into a
written contingent-fee agreement setting forth the scope of employment,
we believe Netti completed his service to Walker for the personal-injury
claim when he disbursed the settlement funds. However, the existence of
an attorney-client relationship for the personal-injury case does not
necessarily mean Netti and Walker had an attorney-client relationship
during the hospital’s action to satisfy its hospital lien.
When Netti filed an appearance on behalf of Walker in the hospital-
lien action, a presumption exists that Netti and Walker had an attorney-
client relationship. However, the undisputed evidence establishes Netti
filed the answer on Walker’s behalf without Walker’s authority to do so.
13
Thus, the presumption is rebutted. Accordingly, Netti and Walker did
not have an attorney client relationship at the time Netti filed the
appearance in the hospital lien action. Nevertheless, Walker was Netti’s
former client at that point in time.
At the time Netti filed the answer, Netti was representing his
personal interest. Netti’s interests conflicted with Walker’s interests, as
evidenced by the claim for indemnity Netti filed against Walker, when
Netti attempted to withdraw as Walker’s attorney. This conflict violates
rule 32:1.7(a)(2).
F. Rule 32:1.9(c). Rule 32:1.9(c) states:
(c) A lawyer who has formerly represented a client in a
matter or whose present or former firm has formerly
represented a client in a matter shall not thereafter:
(1) use information relating to the representation to
the disadvantage of the former client except as these rules
would permit or require with respect to a client, or when the
information has become generally known; or
(2) reveal information relating to the representation
except as these rules would permit or require with respect to
a client.
Iowa R. Prof’l Conduct 32:1.9(c). By its terms, this rule applies to former
clients. We have found that, at the time Netti filed the answer in the
hospital-lien case, Walker was a former client.
The record does not reveal Netti used or revealed any information
he may have obtained during his representation of Walker at the time he
filed the answer on behalf of Walker. Netti did reveal confidential
conversations between Walker and him concerning who would pay the
hospital lien in Netti’s cross-claim against Walker for indemnity. In the
cross-claim, Netti alleged that he and Walker discussed the lien and
Walker agreed he should pay it.
14
Rule 32:1.6 allows an attorney to reveal confidential information
under certain circumstances. The relevant part of the rule provides:
(a) A lawyer shall not reveal information relating to the
representation of a client unless the client gives informed
consent, the disclosure is impliedly authorized in order to
carry out the representation, or the disclosure is permitted
by paragraph (b) or required by paragraph (c).
(b) A lawyer may reveal information relating to the
representation of a client to the extent the lawyer reasonably
believes necessary:
....
(5) to establish a claim or defense on behalf of the
lawyer in a controversy between the lawyer and the client, to
establish a defense to a criminal charge or civil claim against
the lawyer based upon conduct in which the client was
involved, or to respond to allegations in any proceeding
concerning the lawyer’s representation of the client[.]
Id. r. 32:1.6(a), (b)(5). Comment 10 further elaborates on an attorney’s
right to disclose information. It states:
[10] Where a legal claim or disciplinary charge alleges
complicity of the lawyer in a client’s conduct or other
misconduct of the lawyer involving representation of the
client, the lawyer may respond to the extent the lawyer
reasonably believes necessary to establish a defense. The
same is true with respect to a claim involving the conduct or
representation of a former client. Such a charge can arise in
a civil, criminal, disciplinary, or other proceeding and can be
based on a wrong allegedly committed by the lawyer against
the client or on a wrong alleged by a third person, for
example, a person claiming to have been defrauded by the
lawyer and client acting together. The lawyer’s right to
respond arises when an assertion of such complicity has
been made. Paragraph (b)(5) does not require the lawyer to
await the commencement of an action or proceeding that
charges such complicity, so that the defense may be
established by responding directly to a third party who has
made such an assertion. The right to defend also applies, of
course, where a proceeding has been commenced.
Id. r. 32:1.6 cmt. 10.
15
Assuming Netti had the right to disclose this information in order
to protect himself from a judgment sought by the insurance company,
the information revealed by Netti in the cross-claim may have been
allowed under rule 32:1.6(b)(5). However, an attorney can only disclose
such information to the extent the attorney reasonably believes it
necessary to protect him from a claim. Id. r. 32:1.6(b). Thus, an
attorney does not have an unlimited right of disclosure. Comment 14
discusses the factors an attorney should consider before making such a
disclosure. The comment contains the following statement:
[14] Paragraph (b) permits disclosure only to the
extent the lawyer reasonably believes the disclosure is
necessary to accomplish one of the purposes specified.
Where practicable, the lawyer should first seek to persuade
the client to take suitable action to obviate the need for
disclosure. In any case, a disclosure adverse to the client’s
interest should be no greater than the lawyer reasonably
believes necessary to accomplish the purpose. If the
disclosure will be made in connection with a judicial
proceeding, the disclosure should be made in a manner that
limits access to the information to the tribunal or other
persons having a need to know it and appropriate protective
orders or other arrangements should be sought by the
lawyer to the fullest extent practicable.
Id. r. 32:1.6 cmt. 14.
The board has not produced any evidence regarding any
conversations between Netti and Walker before Netti disclosed the
information in his cross-claim. It did not offer any evidence under what
circumstances Netti made the disclosures. Although the board relied on
Netti’s failure to answer its discovery requests as admissions, it still
could have put Netti on the stand to establish whether the disclosures he
made were not reasonably necessary to establish a defense to the
hospital’s claim. Without such evidence, we are unable to determine if
16
Netti violated rule 32:1.9(c). Accordingly, the board has failed to prove
Netti violated rule 32:1.9(c).
G. Rule 32:1.15 and Iowa Court Rules 45.1, 45.2(2), 45.3,
45.4, and 45.7. We deal with these alleged rule violations together
because they all apply to the handling of clients’ funds.
Rule 32:1.15 governs the safeguarding of a client’s property. It
reads in relevant part:
(a) A lawyer shall hold property of clients or third
persons that is in a lawyer’s possession in connection with a
representation separate from the lawyer’s own property.
Funds shall be kept in a separate account. Other property
shall be identified as such and appropriately safeguarded.
Complete records of such account funds and other property
shall be kept by the lawyer and shall be preserved for a
period of six years after termination of the representation.
....
(c) A lawyer shall deposit into a client trust account
legal fees and expenses that have been paid in advance, to
be withdrawn by the lawyer only as fees are earned or
expenses incurred.
(d) Upon receiving funds or other property in which a
client or third person has an interest, a lawyer shall
promptly notify the client or third person. Except as stated
in this rule or otherwise permitted by law or by agreement
with the client, a lawyer shall promptly deliver to the client
or third person any funds or other property that the client or
third person is entitled to receive and, upon request by the
client or third person, shall promptly render a full
accounting regarding such property.
....
(f) All client trust accounts shall be governed by
chapter 45 of the Iowa Court Rules.
Id. r. 32:1.15. Iowa Court Rules 45.1, 45.2(2), 45.3, 45.4, and 45.7 set
forth the details a lawyer needs to know in administering his or her trust
accounts. These rules require a lawyer to place client funds, including a
17
retainer, in a trust account, account for those funds, and when
requested to do so, properly deliver a client’s funds to the client. Iowa
Supreme Ct. Att’y Disciplinary Bd. v. McCann, 712 N.W.2d 89, 95 (Iowa
2006).
By not having a trust account, Netti violated rules 32:1.15, 45.1,
45.2(2), 45.3, 45.4, and 45.7. He violated rule 32:1.15, which
incorporates chapter 45 of the Iowa Court Rules, by failing to deposit
Matz’s retainer in a trust account, taking fees in the Matz matter before
he earned the fees, and failing to give Matz contemporaneous notice of
his withdrawals.
Iowa Code sections 633.198 and 633.199 set forth the amount of
fees an attorney can be paid for representing an estate. Section 633.202
and Iowa Court Rule 7.2 establish when an attorney can take his or her
fee. Netti failed to comply with any of these Code provisions or rule 7.2
when he took his fee in the Zimmerman matter. Accordingly, he violated
rule 35:1.15 by taking his fee without court approval and failing to
deposit the proceeds of the wrongful death settlement in a trust account.
In the Walker matter, he also violated rule 32:1.15 by failing to
deposit the settlement in a trust account. Finally, he violated rule
32:1.15 in the Mangeno matter by failing to deposit the retainer in the
trust account, taking a fee before the work was completed, and his
failure to account for the retainer when asked to do so.
In short, Netti’s handling of his clients’ property is a textbook
example of how not to operate a law office. The proper way to operate a
law firm is to comply with rule 32:1.15 and chapter 45 of our court rules.
These rules require an attorney not to comingle a client’s funds with the
attorney’s funds. Iowa R. Prof’l Conduct 32:1.15(a); Iowa Ct. R. 45.1.
Moreover, an attorney should never withdraw any funds from a trust
18
account until the attorney earns the fee or uses the funds for an actual
expense. Iowa R. Prof’l Conduct 32:1.15(c); Iowa Ct. R. 45.7(3). When an
attorney withdraws funds from an account, the attorney should give
contemporaneous notice to the client. Iowa Ct. R. 45.7(4). Lastly, when
requested, the attorney should give his or her client an accounting of the
property the attorney is holding for the client. Iowa R. Prof’l Conduct
32:1.15(d); Iowa Ct. R. 45.2(2).
H. Rule 32:1.16(d). Rule 32:1.16(d) provides:
(d) Upon termination of representation, a lawyer shall
take steps to the extent reasonably practicable to protect a
client’s interests, such as giving reasonable notice to the
client, allowing time for employment of other counsel,
surrendering papers and property to which the client is
entitled, and refunding any advance payment of fee or
expense that has not been earned or incurred. The lawyer
may retain papers relating to the client to the extent
permitted by law.
Iowa R. Prof’l Conduct 32:1.16(d).
In the Zimmerman matter and the Mangeno matter, the admission
contained in the record is that Netti failed to promptly deliver the file to
successor counsel or to the client. Our rule requires a lawyer to “take
steps to the extent reasonably practicable to protect a client’s interests,”
including surrendering papers and property of the client. Id. The
admission of “promptly deliver” is not the same as “reasonably
practicable.” “Promptly” means immediately or quickly. Webster’s Third
New International Dictionary 1816 (unabr. ed. 2002). The “reasonably
practicable” standard in rule 32:1.16(d) injects the standard of
reasonableness when determining if an attorney took the proper steps to
protect the client’s interest. In other words, “promptly” and “reasonably
practicable” are not synonymous. Without any further evidence of the
circumstances surrounding Netti’s delivery of the file to successor
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counsel, we are unable to determine whether Netti’s conduct in the
Zimmerman matter or the Mangeno matter violates rule 32:1.16(d).
Thus, the board has failed to prove a violation of rule 32:1.16(d) in the
Zimmerman and Mangeno matters.
In the Walker matter, Netti withdrew from the hospital-lien
litigation without taking any steps to protect Walker’s interest. However,
as we have previously found, Walker was not Netti’s client at the time of
the hospital-lien action because Netti filed an answer without Walker’s
authorization. Thus, Netti did not violate section 32:1.16(d) in the
Walker matter.
I. Rule 32:3.3(a)(1). Rule 32:3.3(a)(1) prohibits an attorney from
knowingly making “a false statement of fact or law to a tribunal or
fail[ing] to correct a false statement of material fact or law previously
made to the tribunal by the lawyer.” Iowa R. Prof’l Conduct 32:3.3(a)(1).
In the Zimmerman matter, the admission is that Netti misrepresented
the assets of the estate. The rule requires this misrepresentation to be
made knowingly rather than negligently. The mere fact of a
misrepresentation does not allow us to infer the misrepresentation was
made knowingly. See id. r. 32:1.0(f) (defining “knowingly”). The
admission upon which the board relies fails to prove Netti knowingly
misrepresented the assets of the estate. Thus, the board has failed to
prove a violation of rule 32:3.3(a)(1) in the Zimmerman matter.
In the Walker matter, the admission the board relies on is that
Netti filed an answer for Walker in the hospital-lien action on behalf of
Walker, when he had no authority to do so. Additionally, in the Walker
matter, the admission relied on by the board is that Netti filed a motion
for a protective order containing false information. The false information
20
was that, in seeking his deposition, the insurance carrier was harassing
Netti and going on a fishing expedition.
An attorney knows whether he has authority to file a pleading on
behalf of a client. Therefore, from this record we can infer Netti
knowingly misrepresented to the court he had authority to represent
Walker when he filed an answer on Walker’s behalf. Id. (“A person’s
knowledge may be inferred from circumstances.”). We cannot infer,
however, Netti knowingly misrepresented to the court that, in seeking his
deposition, the insurance carrier was harassing him and going on a
fishing expedition at the time he filed the motion for protective order.
Consequently, we find the board has proven one instance where Netti
violated rule 32:3.3(a)(1) in the Walker matter.
J. Rule 32:5.5. Rule 32:5.5(a) states, “A lawyer shall not practice
law in a jurisdiction in violation of the regulation of the legal profession
in that jurisdiction, or assist another in doing so.” Id. r. 32:5.5(a). In the
order suspending Netti’s license to practice law, we ordered Netti
suspended as a member of the bar and this court. The issue we must
decide is whether his representation of Mangeno before the Iowa
Department of Revenue constituted the practice of law. Our ethical rules
do not define the practice of law. The rules leave the determination of
whether a person is practicing law to our court. Id. r. 32:5.5(a) cmt. 2.
Nonlawyers may do tax work because tax work is not necessarily
the practice of law. Comm. on Prof’l Ethics & Conduct v. Mahoney, 402
N.W.2d 434, 436 (Iowa 1987). However, over thirty-five years ago we
described actions this court would consider the practice of law if
performed by a suspended attorney. Comm. on Prof’l Ethics & Conduct v.
Toomey, 236 N.W.2d 39, 40 (Iowa 1975). The list of activities include but
are not limited to “the examination of abstracts, consummation of real
21
estate transactions, preparation of deeds, buy and sell agreements,
contracts, wills and tax returns as well as any court appearance or
counseling clients with regard to the same.” Id. Counseling Mangeno as
to her sales tax matter is an activity that we consider as the practice of
law. Thus, Netti has violated rule 32:5.5(a) by counseling Mangeno
regarding her sales tax problems.
K. Rule 32:8.1(b). Rule 32:8.1(b) prohibits an attorney from
knowingly failing “to respond to a lawful demand for information from
. . . disciplinary authority.” Iowa R. Prof’l Conduct 32:8.1(b). The
admissions in the record confirm that, in the Matz and Mangeno matters,
the board made requests of information from Netti in order to investigate
the complaints filed by his clients. The record further supports he
received these requests. In the Matz matter, Netti failed to provide trust
account records. When a person fails to respond to a request received
from the board, we can infer from the circumstances that the person
knowingly failed to respond. Id. r. 32:1.0(f). In the Mangeno matter, he
told the board it did not have jurisdiction over him and he was not going
to respond. Thus, he knowingly failed to respond in the Mangeno
matter. In both matters, we find the board has met its burden and
proved Netti violated rule 32:8.1(b).
L. Rule 32:8.4(c). Rule 32:8.4(c) states an attorney commits
professional misconduct by engaging “in conduct involving dishonesty,
fraud, deceit, or misrepresentation.” Id. r. 32:8.4(c). Rule 32:8.4 is a
general rule prohibiting conduct involving dishonesty, fraud, deceit, or
misrepresentation. The Iowa Rules of Professional Conduct contain
other, more specific, provisions dealing with the same concept. See, e.g.,
id. r. 32:3.3 (discussing candor towards the tribunal); r. 32:3.4
(discussing fairness to opposing party and counsel); r. 32:3.5 (discussing
22
impartiality and decorum of the tribunal); r. 32:4.1 (discussing
truthfulness in statements to others); r. 32:7.1 (discussing
communications concerning a lawyer’s services); r. 32:8.1 (discussing
bar admissions and disciplinary matters). We have already found Netti
violated rule 32:3.3(a)(1) by making false statements of material fact to a
tribunal. When we find conduct violates a specific provision involving
dishonesty, fraud, deceit, or misrepresentation, we will not find the same
conduct violates rule 32:8.4(c).
That being said, we still need to deal with the board’s allegation
that Netti violated rule 32:8.4(c) in the Mangeno matter when he told his
client he would return her retainer to her after he failed to do any work
on the file. Most courts require a reasonable level of scienter to find that
an attorney violated rule 32:8.4(c). 2 Geoffrey C. Hazard, Jr., et al., The
Law of Lawyering § 65.5, at 65-15 (3d ed. 2009 Supp.). In the legal
sense, a misrepresentation usually requires something more than
negligence. Black’s Law Dictionary 1091 (9th ed. 2009). We believe the
better view is to require some level of scienter that is greater than
negligence to find a violation of rule 32:8.4(c).
We have already found Netti’s failure to return the retainer as a
violation of rule 32:1.15(d). From the record presented, we are unable to
determine if Netti made a knowing misrepresentation of a material fact
when he made the representation to Mangeno. Accordingly, we cannot
find the board proved Netti violated rule 32:8.4(c).
M. Rule 32:8:4(d). This rule makes it professional misconduct to
“engage in conduct that is prejudicial to the administration of justice.”
Id. r. 32:8.4(d). In order for conduct to be prejudicial to the
administration of justice, the conduct must hamper “ ‘the efficient and
proper operation of the courts or of ancillary systems upon which the
23
courts rely’ ” by violating the well-understood norms and conventions of
the practice of law. Templeton, 784 N.W.2d at 768 (quoting Iowa
Supreme Ct. Att’y Disciplinary Bd. v. Howe, 706 N.W.2d 360, 373 (Iowa
2005)).
Netti’s failure to timely probate the Zimmerman estate, his filing of
the motion for protective order containing false statements, and his
failure to do any work in the Mangeno matter hampered the efficient
operation of the courts and an administrative agency, and was not the
type of conduct within the well-understood norms and conventions of the
practice of law. Accordingly, Netti’s conduct in these regards violated
rule 32:8.4(d).
IV. Sanction.
In determining the sanction a lawyer must face for misconduct, we
have stated:
The goal of the Code of Professional Responsibility is “to
maintain public confidence in the legal profession as well as
to provide a policing mechanism for poor lawyering.” When
deciding on an appropriate sanction for an attorney’s
misconduct, we consider “the nature of the violations,
protection of the public, deterrence of similar misconduct by
others, the lawyer’s fitness to practice, and [the court’s] duty
to uphold the integrity of the profession in the eyes of the
public.” We also consider aggravating and mitigating
circumstances present in the disciplinary action.
Iowa Supreme Ct. Bd. of Prof’l Ethics & Conduct v. Honken, 688 N.W.2d
812, 820 (Iowa 2004) (alteration in original) (quoting Comm. on Prof’l
Ethics & Conduct v. Gill, 479 N.W.2d 303, 306 (Iowa 1991) (first quote);
Iowa Supreme Ct. Bd. of Prof’l Ethics & Conduct v. D’Angelo, 619 N.W.2d
333, 338 (Iowa 2000) [hereinafter D’Angelo I] (second quote)).
A mitigating factor is that Netti has some short-term memory loss
stemming from treatment for a brain tumor. While personal illness will
24
not excuse an attorney’s misconduct, such illnesses may influence our
approach to discipline. Iowa Supreme Ct. Att’y Disciplinary Bd. v.
Frerichs, 718 N.W.2d 763, 768 (Iowa 2006) [hereinafter Frerichs II].
There are a number of aggravating factors in this case. First, we
cannot overlook the serious, egregious, and persistent nature of Netti’s
misconduct and the effect it had on his victims. See, e.g., Tompkins, 415
N.W.2d at 623 (stating, “the more egregious and persistent the conduct,
the more debased the character of the offender”). This was not one
isolated incident. Netti displayed a pattern of taking fees without doing
the work he was hired to do. His clients were forced to seek alternative
counsel to complete the work Netti failed to do.
Second, Netti’s trust account violations are a serious matter. See
Iowa Supreme Ct. Att’y Disciplinary Bd. v. Wagner, 768 N.W.2d 279, 287–
88 (Iowa 2009). In the past, sanctions for failure to properly deposit,
account for, and appropriately return unearned advance fees has ranged
from a public reprimand, to a suspension, to a revocation. See, e.g.,
Iowa Supreme Ct. Att’y Disciplinary Bd. v. Earley, 729 N.W.2d 437, 444
(Iowa 2007) [hereinafter Earley I]; Iowa Supreme Ct. Att’y Disciplinary Bd.
v. D’Angelo, 710 N.W.2d 226, 236–37 (Iowa 2006) [hereinafter D’Angelo
II]; Iowa Supreme Ct. Bd. of Prof’l Ethics & Conduct v. Herrera, 560
N.W.2d 592, 594–95 (Iowa 1997). In cases warranting a more severe
sanction, additional infractions or other aggravating circumstances were
present. See Earley I, 729 N.W.2d at 443–44 (relying on the aggravating
factors of neglect resulting in harm to clients, failure to return client’s
property, trust account violations, and prior reprimand when imposing a
four-month suspension); D’Angelo II, 710 N.W.2d at 236–37 (recognizing
multiple and serious violations, including deliberate conversion of client
funds, demands revocation of lawyer’s license); Iowa Supreme Ct. Bd. of
25
Prof’l Ethics & Conduct v. Frerichs, 671 N.W.2d 470, 477–78 (Iowa 2003)
[hereinafter Frerichs I] (relying on aggravating factors of illegal fee
contract, trust account violations, neglect of client matter, failure to
cooperate with board, and prior admonition, when imposing four-month
suspension).
Third, Netti’s knowing misrepresentations to the court is not only a
breach of professional ethics in itself but also serves to exacerbate his
other conduct. See Iowa Supreme Ct. Bd. of Prof’l Ethics & Conduct v.
Rauch, 650 N.W.2d 574, 578 (Iowa 2002) (finding a lawyer’s violation of a
disciplinary rule “is seriously aggravated by his misrepresentation to the
court”).
Fourth, it is significant that Netti’s actions caused harm to others,
in terms of cost to the clients in the Zimmerman matter and delay to the
clients in the Zimmerman and Mangeno matters. See Honken, 688
N.W.2d at 821.
The final aggravating factor is Netti’s prior discipline. Iowa
Supreme Ct. Att’y Disciplinary Bd. v. Gailey, 790 N.W.2d 801, 808 (Iowa
2010). Netti was privately reprimanded in Kentucky for conduct he did
not divulge to the commission. Additionally, Netti’s license is presently
under suspension for his failure to pay annual fees and/or file the
reports as required by our rules.
In similar cases, we have suspended an attorney’s license for as
short as six months to as long as three years. See, e.g., Iowa Supreme
Ct. Att’y Disciplinary Bd. v. Hauser, 782 N.W.2d 147, 154–55 (Iowa 2010)
(imposing six-month suspension for multiple ethical infractions involving
neglect and trust account violations); Wagner, 768 N.W.2d at 288–89
(imposing six-month suspension for neglect, trust account violations,
premature taking of probate fees, and failure to respond to board
26
inquiries); Iowa Supreme Ct. Att’y Disciplinary Bd. v. Plumb, 766 N.W.2d
626, 635 (Iowa 2009) (imposing eighteen-month suspension for trust
account violations in four separate matters); Moonen, 706 N.W.2d at 402
(imposing eighteen-month suspension for neglect of probate matters and
deliberately misleading or negligently failing to disclose information to
the court); D’Angelo I, 619 N.W.2d at 338–39 (imposing three-year
suspension for trust account violations, premature taking of probate
fees, and neglect).
In light of the multiple violations, his incompetent representation,
his conflict of interest, his failure to properly communicate with his
clients, his total failure to maintain a trust account, his taking of fees
without accounting for his time, his misrepresentations to the court, his
failure to cooperate with the board, his unauthorized practice of law, the
harm he caused his clients, the period of time over which these violations
occurred, the mitigating factors, and the aggravating factors, we
conclude a suspension of two years is warranted in this case.
V. Disposition.
We have carefully considered the respondent’s current violations,
his prior history of ethical infractions, and his current fitness to practice
law and conclude the respondent’s license to practice law should be
suspended indefinitely with no possibility of reinstatement for two years
from the date of this decision. Prior to any application for reinstatement,
the respondent must provide this court with verification of his fitness to
practice law. In addition, as a condition of reinstatement, the
respondent must satisfy the judgment in the Zimmerman matter and
return the fee in the Mangeno matter. See Hauser, 782 N.W.2d at 154–
55. Finally, he must do all acts necessary to reinstate his license for his
27
failure to pay annual fees and/or file the reports as required by our
rules.
This suspension applies to all facets of the practice of law. See
Iowa Ct. R. 35.12. Upon any application for reinstatement, the
respondent must establish that he has not practiced law during the
suspension period and that he has in all ways complied with the
requirements of Iowa Court Rule 35.13 and has provided the required
notification of clients as outlined in Iowa Court Rule 35.22. Prior to any
application for reinstatement, the respondent must provide the board
with an evaluation by a licensed health care professional verifying his
fitness to practice law. In addition, he must also submit documentation
to the board that he has refunded the fee to Mangeno and satisfied the
judgment in the Zimmerman matter. Costs are taxed to the respondent
pursuant to Iowa Court Rule 35.26.
LICENSE SUSPENDED.
All justices concur except Waterman, Mansfield, Zager, JJ., who
take no part.