Office of Lawyer Regulation v. James M. Schoenecker , 368 Wis. 2d 57 ( 2016 )

2016 WI 27
SUPREME COURT OF WISCONSIN
CASE NO.: 2015AP275-D
COMPLETE TITLE: In the Matter of Disciplinary Proceedings
Against James M. Schoenecker, Attorney at Law:
Office of Lawyer Regulation,
Complainant,
v.
James M. Schoenecker,
Respondent.
DISCIPLINARY PROCEEDINGS AGAINST SCHOENECKER
OPINION FILED: April 22, 2016
SUBMITTED ON BRIEFS:
ORAL ARGUMENT:
SOURCE OF APPEAL:
COURT:
COUNTY:
JUDGE:
JUSTICES:
CONCURRED:
CONCURRED/DISSENTED: ABRAHAMSON, J. concurs and dissents, joined by
BRADLEY, A. W., J.
DISSENTED:
NOT PARTICIPATING:
ATTORNEYS:
2016 WI 27
NOTICE
This opinion is subject to further
editing and modification. The final
version will appear in the bound
volume of the official reports.
No. 2015AP275-D
STATE OF WISCONSIN : IN SUPREME COURT
In the Matter of Disciplinary Proceedings
Against James M. Schoenecker, Attorney at Law:
Office of Lawyer Regulation, FILED
Complainant,
APR 22, 2016
v.
Diane M. Fremgen
Clerk of Supreme Court
James M. Schoenecker,
Respondent.
ATTORNEY disciplinary proceeding. Attorney's license
suspended.
¶1 PER CURIAM. We review the report of the referee,
Attorney Hannah C. Dugan, recommending that the court suspend
the Wisconsin law license of Attorney James M. Schoenecker for
professional misconduct for a period of one year, effective
February 10, 2015, which is the date the Office of Lawyer
Regulation (OLR) filed its complaint in this matter. The
No. 2015AP275-D
referee also recommended that the court order Attorney
Schoenecker to pay one-half of the costs of this disciplinary
proceeding. The referee wrote the report following the entry of
a stipulation between Attorney Schoenecker and the OLR
concerning Attorney Schoenecker's dishonest business activities
as a member of a limited liability company that he helped to
form. Neither party has appealed from the referee's report and
recommendation, and thus our review proceeds under Supreme Court
Rule (SCR) 22.17(2).1
¶2 We conclude that the referee's findings of fact are
supported by satisfactory and convincing evidence. We also
agree with the referee's conclusions of law that Attorney
Schoenecker engaged in professional misconduct, and that the
seriousness of this misconduct warrants a one-year suspension of
Attorney Schoenecker's law license. We part ways with the
referee in holding that, given the timing and seriousness of
Attorney Schoenecker's misconduct, the suspension of his law
license should not be retroactive, but rather should be made
effective as of the date of this order. Finally, we agree with
1
SCR 22.17(2) provides:
If no appeal is filed timely, the supreme court shall
review the referee's report; adopt, reject or modify
the referee's findings and conclusions or remand the
matter to the referee for additional findings; and
determine and impose appropriate discipline. The
court, on its own motion, may order the parties to
file briefs in the matter.
2
No. 2015AP275-D
the referee that Attorney Schoenecker should pay one-half of the
OLR's $8,500.59 in costs, for a total of $4,250.30.
¶3 Attorney Schoenecker was licensed to practice law in
Wisconsin in 2004. On July 15, 2011, we suspended Attorney
Schoenecker's law license for misconduct that included
attempting to defraud his client through law firm invoices;
engaging in a pattern of attempted and completed thefts from his
client's bank accounts, for which he pled guilty to one felony
count of identity theft; and failing to inform his law firm
employer that he had set up his own separate law firm on the
side. In re Disciplinary Proceedings Against Schoenecker, 2011
WI 76, 336 Wis. 2d 253, 804 N.W.2d 686. The three-year
suspension, which went into effect on August 15, 2011, would
have ended on August 15, 2014. Attorney Schoenecker's license
remains suspended.
¶4 On February 10, 2015, the OLR filed a two-count
complaint in this case, which alleged that Attorney Schoenecker
engaged in the unauthorized practice of law, contrary to SCR
10.03(4)(a)2 and SCR 22.26(2),3 as enforced via SCR 20:8.4(f),4
2
SCR 10.03(4)(a) provides: "No individual other than an
enrolled active member of the state bar may practice law in this
state or in any manner purported to be authorized or qualified
to practice law."
3
SCR 22.26(2) provides: "An attorney whose license to
practice law is suspended or revoked or who is suspended from
the practice of law may not engage in this state in the practice
of law or in any law work activity customarily done by law
students, law clerks, or other paralegal personnel, except that
the attorney may engage in law related work in this state for a
commercial employer itself not engaged in the practice of law."
3
No. 2015AP275-D
and engaged in conduct involving dishonesty, fraud, deceit, or
misrepresentation, in violation of SCR 2:8.4(c).5 Attorney
Schoenecker answered and denied all misconduct. In August 2015,
the OLR amended its complaint by dropping the unauthorized
practice of law charge, while maintaining the charge of engaging
in conduct involving dishonesty, fraud, deceit, or
misrepresentation. See SCR 20:8.4(c).
¶5 The OLR's amended complaint alleged, and the parties
ultimately stipulated, that the misconduct in this case concerns
Attorney Schoenecker's involvement in a business partnership
that he entered into in 2012 with two other individuals, M.M.
and T.H. Attorney Schoenecker, on behalf of himself and his
partners, established a limited liability company named
GameMaster, LLC. Attorney Schoenecker drafted and filed the
organizing documents, including the Articles of Organization and
the Limited Liability Company Operating Agreement.
¶6 In May 2012, T.H. gave Attorney Schoenecker $25,000 in
cash as his capital contribution. In August 2012, M.M. made a
$20,000 capital contribution.
4
SCR 20:8.4(f) provides: "It is professional misconduct
for a lawyer to: . . . . (f) violate a statute, supreme court
rule, supreme court order or supreme court decision regulating
the conduct of lawyers."
5
SCR 20:8.4(c) provides: "It is professional misconduct
for a lawyer to: . . . . (c) engage in conduct involving
dishonesty, fraud, deceit or misrepresentation."
4
No. 2015AP275-D
¶7 Attorney Schoenecker set up a business checking
account in the name of GameMaster, LLC. The bank issued Attorney
Schoenecker a bank card allowing him to charge to the account as
well as withdraw funds. Attorney Schoenecker also had the bank
issue him an American Express corporate card to use for business
expenses.
¶8 Attorney Schoenecker did not immediately deposit
T.H.'s $25,000 cash contribution into any GameMaster, LLC
account. Instead, Attorney Schoenecker deposited the bulk of
T.H.'s cash into his own personal checking account.
¶9 The OLR conducted an investigation of the GameMaster,
LLC business account statements for the period of May 30, 2012
through October 2013. The investigation revealed that:
(a) Attorney Schoenecker repeatedly charged personal
expenses to the company.
(b) Attorney Schoenecker repeatedly used company funds to
pay his own credit card bills.
(c) Attorney Schoenecker repeatedly wrote company checks to
pay his own personal expenses.
(d) Attorney Schoenecker used the company debit card to
make ATM withdrawals at Potawatomi Casino.
(e) Attorney Schoenecker repeatedly charged personal
expenses to the company American Express card.
(f) Attorney Schoenecker undertook use of company funds
without preapproval from either of his business partners.
(g) Attorney Schoenecker charged significant personal
expenses to the GameMaster, LLC business account. Included in
5
No. 2015AP275-D
those expenses were charges to Potawatomi Casino, Apple iTunes,
a cellular telephone company, and a variety of fast food,
gasoline, and other businesses, all without preapproval from his
partners.
¶10 On September 2, 2015, the OLR and Attorney Schoenecker
filed a stipulation whereby Attorney Schoenecker withdrew his
answer to the original complaint and pled no contest to the
single SCR 20:8.4(c) violation alleged in the OLR's amended
complaint. In so doing, Attorney Schoenecker agreed not to
dispute the OLR's charge that, as Chief Executive Manager of
GameMaster, LLC, he failed to account clearly or timely for
capital contributions made by other members, withdrew excessive
funds from GameMaster, LLC, and charged personal expenses to
GameMaster, LLC, all without preapproval from his business
partners, in violation of SCR 20:8.4(c). Attorney Schoenecker
and the OLR jointly recommended that the court order a one-year
license suspension imposed retroactively to the date he became
eligible for reinstatement from his earlier disciplinary
suspension, August 15, 2014, so that his earliest reinstatement
date would be in August 2015. The stipulation did not explain
the basis for the retroactive nature of the suspension.
¶11 The referee filed her report and recommendation on
December 3, 2015. The referee found that Attorney Schoenecker
had engaged in the one count of misconduct alleged in the OLR's
amended complaint. The referee agreed with the parties that a
one-year license suspension was of appropriate length, citing In
re Disciplinary Proceedings Against Cotter, 213 Wis. 2d 196, 570
6
No. 2015AP275-D
N.W.2d 248 (1997) as support. While both the OLR and Attorney
Schoenecker recommended a one-year suspension retroactive to
August 15, 2014, the referee recommended that the one-year
suspension should be retroactive to the filing date of the OLR's
original complaint, February 10, 2015, so that Attorney
Schoenecker's earliest reinstatement date would be in February
2016. The referee wrote that this court's most common
justification for ordering a suspension to run retroactively——
that the misconduct occurred before or during the previous
disciplinary proceeding——is not present here, as Attorney
Schoenecker committed the misconduct here well after he was
suspended in 2011. However, the referee still proposed a
retroactively imposed suspension on the ground that the OLR did
not act with sufficient promptness in pursuing and resolving
this matter, which in turn delayed Attorney Schoenecker from
filing for reinstatement from his previous suspension.
¶12 As stated earlier, no appeal has been filed, so this
matter is submitted to the court pursuant to SCR 22.17(2). A
referee's findings of fact are affirmed unless clearly
erroneous. Conclusions of law are reviewed de novo. See In re
Disciplinary Proceedings Against Eisenberg, 2004 WI 14, ¶5, 269
Wis. 2d 43, 675 N.W.2d 747. The court may impose whatever
sanction it sees fit 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.
¶13 There is no showing that any of the referee's findings
of fact are erroneous. Accordingly, we adopt them. We also
7
No. 2015AP275-D
agree with the referee's conclusion of law that Attorney
Schoenecker violated SCR 8.4(c). Attorney Schoenecker's
repeated misuse of GameMaster, LLC business funds clearly
involved deceit and misrepresentation in violation of that rule.
¶14 We further agree with the referee that the level of
discipline to which the parties stipulated, a one-year law
license suspension, is appropriate. We, like the referee, find
support for this length of suspension in the case of Cotter. In
1992, we suspended Attorney Cotter for two years for, among
other things, retaining client fees to which he was not
entitled, neglecting a client's legal matter and the client's
requests for information, and failing to file income tax returns
for several years. In re Disciplinary Proceedings Against
Cotter, 171 Wis. 2d 373, 491 N.W.2d 475 (1992). As of 1997,
Attorney Cotter's law license had not been reinstated. In a 1997
disciplinary decision, this court found that Attorney Cotter had
pled guilty to a criminal violation of the Motor Vehicle Code——
using a false name on an application for a license. Because this
was a criminal act that reflected adversely on Attorney Cotter's
honesty, trustworthiness, or fitness as a lawyer, this court
suspended him for one year, effective the date of the order.
See SCR 20:8.4(b);6 In re Disciplinary Proceedings Against
Cotter, 213 Wis. 2d 196, 570 N.W.2d 248 (1997).
6
SCR 20:8.4(b) provides: It is professional misconduct for
a lawyer to . . . . (b) commit a criminal act that reflects
adversely on the lawyer's honesty, trustworthiness or fitness as
a lawyer in other respects."
8
No. 2015AP275-D
¶15 The present case bears enough similarities to Cotter
that we find its principles should apply here. Both Attorney
Cotter and Attorney Schoenecker had previously received lengthy
suspensions related, at least in part, to dishonest behavior.
After receiving these suspensions, and before being reinstated
from these suspensions, both Attorney Cotter and Attorney
Schoenecker engaged in additional dishonest behavior unrelated
to the practice of law. Attorney Cotter used a false name on an
application for a driver's license; Attorney Schoenecker misused
the funds of a limited liability company that he helped to form.
By their actions, both lawyers displayed behaviors that
reflected poorly on their honesty and integrity. A one-year
suspension for such behavior was within the range of
reasonableness for Attorney Cotter, and the same holds true for
Attorney Schoenecker.
¶16 Notably, however, we imposed the one-year suspension
prospectively in Cotter, 213 Wis. 2d at 199, and we deem it
appropriate to do the same here. It is troubling to this court
that, under the slightly varying terms of the parties'
stipulation and the referee's recommendation, Attorney
Schoenecker's earliest reinstatement date (August 2015 and
February 2016, respectively) would precede the release date of
this decision. We are convinced that Attorney Schoenecker's
present misconduct, when viewed together with his previous
misconduct, warrants a sanction that does more than permit him
to petition to return to the practice of law the instant we
decide this case.
9
No. 2015AP275-D
¶17 More to the point, we have previously held that a
retroactive suspension is generally not favored in the absence
of some "compelling circumstance," and we find no such
compelling circumstance here. See In re Disciplinary
Proceedings Against Boyd, 2009 WI 59, ¶34, 318 Wis. 2d 281, 767
N.W.2d 226. Importantly, this is not a case where the present
misconduct occurred before or at the same time as the respondent
attorney's misconduct in a previous case, such that it might be
equitable for the new license suspension to be made retroactive
to the end of the prior suspension. See In re Disciplinary
Proceedings Against Cooper, 2013 WI 55, ¶25, 348 Wis. 2d 266,
833 N.W.2d 88; In re Disciplinary Proceedings Against and
Reinstatement of Mandelman, 182 Wis. 2d 583, 592, 514 N.W.2d 11
(1994).
¶18 Rather, Attorney Schoenecker dishonestly handled
business funds well after his 2011 suspension for what we
described as "a disturbing series of illegal and dishonest
actions, which were designed to benefit him financially to the
injury of his client, his law firm employer, and his creditors."
Schoenecker, 336 Wis. 2d 253, ¶27. In our previous decision, we
warned Attorney Schoenecker that, in order to practice law again
in this state, he needed to demonstrate that "he has a proper
understanding of and attitude toward the standards that are
imposed upon members of the bar in this state and that he will
act in conformity with those standards." Id. Attorney
Schoenecker's response to that warning was to engage in what the
referee here described as "serious and repeated violations" of
10
No. 2015AP275-D
SCR 20:8.4(c) which "mirrored, in part, . . . the misconduct
that resulted in Attorney Schoenecker's three year suspension."
¶19 In his filings with the referee, Attorney Schoenecker
argued that a one-year suspension "is only made reasonable as
'time served'" because he has postponed petitioning for
reinstatement while the OLR investigated and litigated this
matter. We are not convinced by this argument. We do not doubt
Attorney Schoenecker's assertion that the pendency of the
instant action led him to believe it would have been futile for
him to petition for reinstatement after his earlier suspension
ended. We also do not doubt Attorney Schoenecker's assertion
that the instant action took longer to resolve than he would
have preferred. But Attorney Schoenecker cannot properly demand
credit for the time it took his case to work its way through the
disciplinary process when: (1) there is no evidence that the
11
No. 2015AP275-D
OLR failed to diligently prosecute this matter;7 and (2) Attorney
Schoenecker's behavior post-dates and runs counter to the clear
warning we gave him in 2011 that he must live up to the ethical
standards of the profession. Thus, we conclude that Attorney
Schoenecker's one-year suspension should be prospective,
commencing from the date of this decision.
¶20 We next turn to the issue of costs. The referee
recommends that this court impose half of the OLR's $8,500.59 in
costs, primarily because the OLR dropped one of the two counts
stated in its original complaint and reduced the recommended
sanction from revocation to a one-year suspension. Both the OLR
and Attorney Schoenecker agree with this recommendation.
¶21 We agree with the referee and the parties that an
assessment of one-half of the costs in this matter is
appropriate. In exercising our discretion regarding the
7
The referee wrote in her report that the less-than-seven-
month span between the OLR's filing of the original complaint
(February 10, 2015) and the parties' entry into a stipulation
(September 2, 2015) was a "significant period[] of time for
[Attorney Schoenecker] to wait for OLR to 'make its case' or to
resolve a grievance." To the extent this statement can be
construed as a criticism of the pace of the prosecution, we do
not share the referee's view. The parties' filings with the
referee inform us that the OLR's retained counsel reviewed
GameMaster, LLC's financial records, interviewed witnesses,
consulted with an expert, and deposed Attorney Schoenecker.
Attorney Schoenecker's counsel took the depositions of Attorney
Schoenecker's two business partners. Based on the parties'
evolving understanding of the facts, the OLR amended its
complaint and the parties negotiated the stipulation that formed
the basis for the referee report now before us. A less-than-
seven-month period for accomplishing these tasks does not strike
us as dilatory.
12
No. 2015AP275-D
assessment of costs, we consider the following factors: (a) the
number of counts charged, contested, and proven; (b) the nature
of the misconduct; (c) the level of discipline sought by the
parties and recommended by the referee; (d) the respondent's
cooperation with the disciplinary process; (e) prior discipline,
if any; and (f) other relevant circumstances. See SCR
22.24(1m).8
¶22 Applying these factors, we observe that SCRs
22.24(1m)(a), (b), (c), and (d) weigh in favor of a reduction in
8
SCR 22.24(1m) provides as follows:
(1m) The court's general policy is that upon a
finding of misconduct it is appropriate to impose all
costs, including the expenses of counsel for the
office of lawyer regulation, upon the respondent. In
some cases the court may, in the exercise of its
discretion, reduce the amount of costs imposed upon a
respondent. In exercising its discretion regarding
the assessment of costs, the court will consider the
statement of costs, any objection and reply, the
recommendation of the referee, and all of the
following factors:
(a) the number of counts charged, contested, and
proven.
(b) The nature of the misconduct.
(c) The level of discipline sought by the parties
and recommended by the referee.
(d) The respondent's cooperation with the
disciplinary process.
(e) Prior discipline, if any.
(f) Other relevant circumstances.
13
No. 2015AP275-D
costs. The original complaint alleged two counts of misconduct
and sought revocation of Attorney Schoenecker's license to
practice law. Consistent with the parties' stipulation, the
referee concluded, and we agree, that Attorney Schoenecker
committed one count of misconduct, warranting a one-year
suspension. These facts suggest that Attorney Schoenecker's
misconduct, while serious, was of a lesser nature than
originally alleged. We note, too, that the OLR reports that
Attorney Schoenecker was cooperative with the disciplinary
process. SCR 22.24(1m)(d).
¶23 A few facts weigh against a reduction in costs. One
is that Attorney Schoenecker has once before received a lengthy
disciplinary suspension. Another is that there is no evidence
that the charges in the OLR's original complaint were wholly
without prosecutorial merit or that the OLR's costs in pursuing
those charges were unreasonable or unnecessary.
¶24 Ultimately, we agree with the referee and the parties
that a one-half reduction in costs is warranted. Our
determination is not the result of the application of a precise
mathematical formula, but is based on our thorough consideration
14
No. 2015AP275-D
of the record, the manner in which this case developed, and the
factors set forth in SCR 22.24(1m).9
¶25 The OLR does not seek restitution, so we award none.
¶26 IT IS ORDERED that the license of James M. Schoenecker
to practice law in Wisconsin is suspended for a period of one
year, effective the date of this order.
¶27 IT IS FURTHER ORDERED that within 60 days of the date
of this order, James M. Schoenecker shall pay to the Office of
Lawyer Regulation one-half of the costs of this proceeding.
¶28 IT IS FURTHER ORDERED that to the extent he has not
already done so, James M. Schoenecker 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.
9
We note that, on February 22, 2016, the referee filed a
"Supplementary Statement of Fees," in which she requested
$413.02 for her time spent preparing a "Report and
Recommendation on Costs," filed on February 18, 2016. We
decline this request. The referee's costs report, which
recommended a one-half costs assessment, was belated and
duplicative of both her December 3, 2015 report and the parties'
shared position on costs.
15
No. 2015AP275-D.ssa
¶29 SHIRLEY S. ABRAHAMSON, J. (concurring in part and
dissenting in part). I join all but footnote 9 of the opinion
of the court. I would grant the fees requested by the referee
in her "Supplementary Statement of Fees."
¶30 I am authorized to state that Justice ANN WALSH
BRADLEY joins this opinion.
1
No. 2015AP275-D.ssa
1