Office of Lawyer Regulation v. James E. Gatzke , 368 Wis. 2d 422 ( 2016 )

2016 WI 37
SUPREME COURT OF WISCONSIN
CASE NO.: 2013AP1918-D
COMPLETE TITLE: In the Matter of Disciplinary Proceedings
Against James E. Gatzke, Attorney at Law:
Office of Lawyer Regulation,
Complainant-Respondent,
v.
James E. Gatzke,
Respondent-Appellant.
DISCIPLINARY PROCEEDINGS AGAINST GATZKE
OPINION FILED: May 17, 2016
SUBMITTED ON BRIEFS:
ORAL ARGUMENT: February 4, 2016
SOURCE OF APPEAL:
COURT:
COUNTY:
JUDGE:
JUSTICES:
CONCURRED:
CONCURRED/DISSENTED: GABLEMAN, J. concurs and dissents, joined by
DISSENTED: BRADLEY, R.G., J.
NOT PARTICIPATING:
ATTORNEYS:
For the respondent-appellant there were briefs filed by
Terry E. Johnson and Peterson, Johnson & Murray, S.C.,
Milwaukee, and oral argument by Terry E. Johnson.
For the Office of Lawyer Regulation, there were briefs
filed by Paul W. Schwarzenbart. Oral argument by Paul W.
Schwarzenbart.
2016 WI 37
NOTICE
This opinion is subject to further
editing and modification. The final
version will appear in the bound
volume of the official reports.
No. 2013AP1918-D
STATE OF WISCONSIN : IN SUPREME COURT
In the Matter of Disciplinary Proceedings
Against James E. Gatzke, Attorney at Law:
Office of Lawyer Regulation, FILED
Complainant-Respondent,
MAY 17, 2016
v.
Diane M. Fremgen
Clerk of Supreme Court
James E. Gatzke,
Respondent-Appellant.
ATTORNEY disciplinary proceeding. Attorney's license
suspended.
¶1 PER CURIAM. Attorney James E. Gatzke appeals a
report filed by Referee Christine Harris Taylor, concluding that
Attorney Gatzke committed 45 counts of professional misconduct
and recommending that this court revoke his license to practice
law in Wisconsin. The referee further recommended that Attorney
Gatzke make restitution totaling $551,128.32, and that he be
No. 2013AP1918-D
required to pay the full costs of this proceeding, which are
$56,879.77, as of February 24, 2016. Attorney Gatzke asserts
that many of the referee's findings of fact are clearly
erroneous. He also argues that, even assuming that this court
finds that he committed some or all of the counts of misconduct
found by the referee, a license suspension of less than five
months would be an appropriate level of discipline.
¶2 Upon careful review of this matter, we uphold all of
the referee's findings of fact and conclusions of law and
conclude that a three-year suspension of Attorney Gatzke's
license to practice law is an appropriate sanction for his
misconduct. We agree with the referee that Attorney Gatzke
should be required to make restitution and that he be required
to pay the full costs of this proceeding.
¶3 Attorney Gatzke was admitted to practice law in
Wisconsin in 1994 and practices in New Berlin. For a time he
served as the mayor of New Berlin. He has also been licensed as
a real estate broker since 1981. He has no prior disciplinary
history.
¶4 On August 22, 2013, the Office of Lawyer Regulation
(OLR) filed a complaint against Attorney Gatzke. The referee
was appointed on November 5, 2013. The OLR filed an amended
complaint on March 11, 2014, and on May 19, 2014, it filed a
second amended complaint.
¶5 The bulk of the allegations in the second amended
complaint arise out of Attorney Gatzke's representation of P.S.
P.S.'s husband, S.W., was an investment advisor who owned a
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No. 2013AP1918-D
number of businesses. In late 2004, S.W.'s business partner
filed a lawsuit alleging that S.W. had stolen $3.5 million from
him. In June 2005, with the litigation and criminal
investigations pending, S.W. committed suicide.
¶6 P.S.'s niece, N.S., worked for Attorney Gatzke between
2003 and 2007. Soon after S.W.'s death, P.S. executed an
agreement retaining Attorney Gatzke's law firm to represent her.
P.S. executed a specific durable power of attorney (POA) naming
Attorney Gatzke as her attorney in fact. In the course of
representing P.S., Attorney Gatzke learned there were four life
insurance policies issued by the Northwestern Mutual Life
Insurance Company (NML) insuring S.W., with combined proceeds of
$8.5 million, payable on his death.
¶7 In September 2005, following a partial settlement of
the litigation involving S.W.'s business partner, NML wired
$8,542,230.50 in life insurance proceeds and interest. Over
$2.5 million was wired to P.S. via Attorney Gatzke's trust
account. The remaining funds went to two of S.W.'s former
business partners.
¶8 The OLR's second amended complaint alleged that
Attorney Gatzke invested P.S.'s funds in businesses in which he
was an investor, primarily real estate developments, without
obtaining P.S.'s written consent to the investments after giving
her a reasonable opportunity to seek the advice of independent
counsel. The second amended complaint also alleged that
Attorney Gatzke converted P.S.'s funds, and it alleged that
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No. 2013AP1918-D
Attorney Gatzke failed to provide P.S. with written accountings
or invoices relating to legal work he performed for her.
¶9 In addition, the second amended complaint alleged that
at the time of his death, S.W. had a $500,000 life insurance
policy with the Jackson National Life Insurance Company (Jackson
National). Between 2001 and 2004, the beneficiary of that
policy changed from N.K., another business partner of S.W., to
A.S., the minor daughter of S.W. and P.S. In December 2004,
S.W. had requested Jackson National to change the beneficiary
back to N.K., but Jackson National never processed the request
because certain forms were not properly completed.
¶10 In July 2005, an attorney representing N.K. wrote to
Jackson National claiming entitlement to the full amount of the
policy proceeds. Attorney Gatzke wrote to N.K.'s attorney
asserting that he represented both P.S. and A.S. The second
amended complaint alleged that both P.S. and A.S. had an
interest in the prospective settlement of the matter but that
Attorney Gatzke did not discuss their individual and potentially
differing interests in such a settlement with them, nor did he
obtain P.S.'s and A.S.'s written consent to continue the
representation following a consultation regarding the conflict.
¶11 In April 2006, Jackson National filed an action in
Waukesha County circuit court seeking a court order as to
payment of the $500,000. The litigation was resolved by a
stipulation in April 2007. The stipulation, which was signed by
Attorney Gatzke as attorney for P.S. and A.S., divided the
proceeds between N.K., A.S., and P.S. Attorney Gatzke did not
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No. 2013AP1918-D
seek court approval for the settlement, despite the fact that
A.S. was a minor. The Waukesha County clerk of courts disbursed
a check in the amount of $325,446.25 to Attorney Gatzke's trust
account. Attorney Gatzke issued a $50,000 trust account check
payable to his firm for attorney's fees. The remaining funds
were deposited to a preexisting brokerage account at
Northwestern Mutual Investment Services entitled "Attorney James
E. Gatzke, Conservator for P.S." The second amended complaint
alleged that Attorney Gatzke did not provide either P.S. or A.S.
with written notice of his receipt of the funds.
¶12 The second amended complaint also alleged that
Attorney Gatzke engaged in multiple counts of professional
misconduct with respect to his recordkeeping and handling of his
trust account. The second amended complaint alleged that
Attorney Gatzke failed to hold client funds in trust and
converted those funds to his own purposes. The second amended
complaint also alleged that Attorney Gatzke allowed his trust
account to become overdrawn and as a result of those overdrafts,
client funds were converted.
¶13 Specifically, the second amended complaint alleged
that Attorney Gatzke violated the following supreme court rules:
¶14 Former SCR 20:1.7(b) (effective through July 1, 2007)
(count twenty):
A lawyer shall not represent a client if the
representation of that client may be materially
limited by the lawyer's responsibilities to another
client or to a third person, or by the lawyer's own
interests, unless: (1) the lawyer reasonably believes
the representation will not be adversely affected; and
(2) the client consents in writing after consultation.
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No. 2013AP1918-D
When representation of multiple clients in a single
matter is undertaken, the consultation shall include
explanation of the implications of the common
representation and the advantages and risks involved.
¶15 Former SCR 20:1.8(a) (effective through July 1, 2007)
(counts four, five, nine, fourteen and twenty-four):
A lawyer shall not enter into a business transaction
with a client or knowingly acquire an ownership,
possessory, security or other pecuniary interest
adverse to a client unless: (1) the transaction and
terms on which the lawyer acquires the interest are
fair and reasonable to the client and are fully
disclosed and transmitted in writing to the client in
a manner which can be reasonably understood by the
client; (2) the client is given a reasonable
opportunity to seek the advice of independent counsel
in the transaction; and (2) the client consents in
writing thereto.
¶16 SCR 20:1.15(b)(3) (effective July 1, 2004) (counts
thirty-one, thirty-five, and thirty-eight):
No funds belonging to the lawyer or law firm, except
funds reasonably sufficient to pay monthly account
service charges, may be deposited or retained in a
trust account.
¶17 SCR 20:1.15(b)(4) (effective July 1, 2004) (count
one):
Unearned fees and advanced payments of fees shall be
held in trust until learned by the lawyer, and
withdrawn pursuant to SCR 20:1.16(g). Funds advanced
by a client or 3rd party for payment of costs shall be
held in trust until the costs are incurred.
¶18 SCRs 20:1.1.15(f)(1)a.4 and b. (effective July 1,
2004) (count forty-five):
(1) Demand accounts. Complete records of a trust
account that is a demand account shall include a
transaction register; individual client ledgers; a
ledger for account fees and charges, if law firm funds
are held in the account pursuant to sub. (b)3; deposit
records; disbursement records; monthly statements; and
reconciliation reports, subject to all of the
following:
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No. 2013AP1918-D
a. Transaction register. The transaction register
shall contain a chronological record of all account
transactions and shall include all of the following:
. . . .
4. the identity of the client for whom funds were
deposited or disbursed;
b. A subsidiary ledger shall be maintained for
each client or matter for which the lawyer receives
trust funds, and the lawyer shall record each receipt
and disbursement of that client's funds and the balance
following each transaction. A lawyer shall not disburse
funds form the trust account that would create a
negative balance with respect to any individual client
or matter.
¶19 SCR 20:1.15(f)(1)b (effective July 1, 2004) (counts
thirty-nine, forty and forty-one):
A subsidiary ledger shall be maintained for each
client or matter for which the lawyer receives trust
funds, and the lawyer shall record each receipt and
disbursement of that client's funds and the balance
following each transaction. A lawyer shall not
disburse funds from the trust account that would
create a negative balance with respect to any
individual client or matter.
¶20 SCR 20:1.15(f)(1)(e)(4)b (effective July 1, 2004)
(count forty-five):
No deposits or disbursements shall be made to or from
a trust account by a telephone transfer of funds. This
section does not prohibit wire transfers.
¶21 SCR 20:1.15(g)(1) (effective July 1, 2004) (counts two
and twenty-two):
At least 5 business days before the date on which a
disbursement is made from a trust account for the
purpose of paying fees, with the exception of
contingent fees, the lawyer shall deliver to the
client in writing all of the following: a. an itemized
bill or other accounting showing the services
rendered; b. notice of the amount owed and the
anticipated date of the withdrawal; and c. a statement
of the balance of the client's funds in the lawyer
trust account after the withdrawal.
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No. 2013AP1918-D
¶22 SCR 20:1.15(j)(1) (effective July 1, 2004) (counts
seven, twelve and fifteen):
A lawyer shall hold in trust, separate from the
lawyer's own funds or property, those funds or that
property of clients or 3rd parties that are in the
lawyer's possession when acting in a fiduciary
capacity that directly arises in the course of or as a
result of a lawyer-client relationship. When a lawyer
is in possession of fiduciary property of a probate
estate, the lawyer shall maintain the property in a
separate account subject to the requirements of SCR
10:1.15(j).
¶23 SCR 20:8.4(c) (counts one, four, six, eight, nine,
ten, eleven, thirteen, sixteen, seventeen, twenty-three, twenty-
four, twenty-five, twenty-nine, thirty-two, thirty-three,
thirty-four, thirty-five, thirty-six, thirty-seven, forty,
forty-one, forty-three, and forty-four):
It is professional misconduct for a lawyer to engage
in conduct involving dishonesty, fraud, deceit or
misrepresentation.
¶24 SCR 20:8.4(f) (count twenty-one):
It is professional misconduct for a lawyer to violate
a statute, supreme court rule, supreme court order or
supreme court decision regulating the conduct of
lawyers.
¶25 SCR 22.03(6) as enforced by 20:8.4(h) (counts twenty-
six, twenty-seven and twenty-eight):
SCR 22.03(6): In the course of the investigation, the
respondent's wilful failure to provide relevant
information, to answer questions fully, or to furnish
documents and the respondent's misrepresentation in a
disclosure are misconduct, regardless of the merits of
the matters asserted in the grievance.
SCR 20:8.4(h): It is professional misconduct for a
lawyer to . . . . fail to cooperate in the
investigation of a grievance filed with the office of
lawyer regulation as required by SCR 21.15(4), SCR
22.001(9)(b), SCR 22.03(2), SCR 22.03(6), or SCR
22.04(1) . . .
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No. 2013AP1918-D
¶26 SCR 20:1.15(b)(1) (effective July 1, 2004) (counts
sixteen, seventeen, nineteen, twenty-nine, thirty-two, thirty-
three, thirty-four, thirty-five, thirty-six, thirty-seven,
thirty-nine, forty, forty-one, forty-three, and forty-four):
A lawyer shall hold in trust, separate from the
lawyer's own property, that property of clients and
3rd parties that is in the lawyer's possession in
connection with a representation. All funds of clients
and 3rd parties paid to a lawyer or law firm in
connection with a representation shall be deposited in
one or more identifiable trust accounts.
¶27 SCR 20:1.15(d)(1) (effective July 1, 2004) (counts
eighteen, thirty, and forty-two):
Upon receiving funds or other property in which a
client has an interest, or in which the lawyer has
received notice that a 3rd party has an interest
identified by a client, court order, judgment, or
contract, the lawyer shall promptly notify the client
or 3rd party in writing. Except as stated in this rule
or otherwise permitted by law or by agreement with the
client, the lawyer shall promptly deliver to the
client or 3rd party any funds or other property that
the client or 3rd party is entitled to receive.
¶28 In March 2015, the parties filed a partial stipulation
of facts. A four-day evidentiary hearing was held before the
referee in April 2015. Attorney Gatzke testified that he
recommended that P.S. invest the proceeds from her late
husband's life insurance policies in investments at NML, such as
mutual funds, but that P.S. told him she was skeptical of
investments in the stock market because she had seen what
happened to similar investments that her husband handled.
Attorney Gatzke testified P.S. told him she felt confident
having tangible investments such as real estate and that she did
not like paper investments such as mutual funds. He said P.S.
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No. 2013AP1918-D
knew of his prior successful experience with real estate
investments and wanted to be part of it. Attorney Gatzke said
P.S. told him she did not want to be publicly listed as the
owner of the investments because she was concerned that her late
husband's creditors would find out what she owned and try to
take it.
¶29 Attorney Gatzke testified there were net profits from
the real estate properties in 2007 and 2008 and those went back
into the projects. He said as he would sell condominium units
and deposit the money back into his trust account, funds would
be made available for P.S. and he would write her checks.
¶30 With respect to the Jackson National insurance policy,
Attorney Gatzke said he did not obtain a written consent from
P.S. and A.S. to represent both of them and he took no steps to
have a guardian ad litem appointed for A.S. He noted that the
circuit court approved the settlement in the Jackson National
case and the court never suggested there was a need for a
guardian ad litem.
¶31 Attorney Gatzke said he provided P.S. with transaction
logs that described her investments and that he would typically
meet with her once a week between 2006 and 2010. He said P.S.
moved to Arizona and after the move he would talk to her on the
phone about her investments. Attorney Gatzke acknowledged that
in late 2009 his trust account ran a deficit because he had
overpaid expenses on behalf of P.S. He said in order to bring
the trust account back into balance, he had someone loan P.S.
$140,000 and put that money back into the trust account.
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No. 2013AP1918-D
¶32 P.S. testified she never asked that the $2.5 million
initially on deposit at NML be removed from NML. She denied
telling Attorney Gatzke she was concerned about investing in the
stock market because of how her late husband had dealt with his
investment clients.
¶33 Mary Hoeft Smith, the OLR's trust account program
administrator, testified at length about her review of Attorney
Gatzke's records, and she explained how she calculated the
amounts of restitution due to P.S. and A.S.
¶34 P.S's niece testified that after P.S.'s husband died,
P.S. seemed to need a lot of help with her financial affairs and
paying bills. P.S.'s niece testified that Attorney Gatzke would
write P.S. a trust account check every month for her living
expenses. P.S.'s niece said she recalled sitting in on meetings
where P.S.'s legal business was discussed and in the course of
those meetings there was discussion about the real estate
investments P.S. was involved in with Attorney Gatzke.
¶35 Attorney Gatzke's office manager testified that she
would make deposits into the firm's trust account and would
prepare checks as directed by Attorney Gatzke. She said on two
occasions she warned Attorney Gatzke that funds in P.S.'s
account were getting low and there would not be sufficient funds
to make more disbursements to P.S. Attorney
Gatzke's response was that he did not think the office manager's
numbers were accurate. The office manager said P.S. would
usually come to the office to pick up a $15,000 check for her
monthly expenses written from the firm's trust account.
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No. 2013AP1918-D
¶36 The referee issued her report and recommendation on
August 27, 2015. The referee found that the OLR had met its
burden of proof with respect to all 45 counts of misconduct
alleged in the second amended complaint. The referee concluded
that revocation of Attorney Gatzke's license to practice law was
warranted because the misconduct was serious and there was a
clear need to impress upon him the seriousness of his misconduct
and to protect the public. The referee found that Attorney
Gatzke converted a significant amount of funds belonging to
multiple clients over a period of years. The referee said
Attorney Gatzke claimed ignorance of trust account rules, but
ignorance of an attorney's duties as a trustee of client funds
is not a defense. The referee found that Attorney Gatzke failed
to document his business transactions with P.S. and failed to
obtain her written, informed consent to his personal conflict of
interest in investing with a client in complex and speculative
transactions.
¶37 The referee also found that Attorney Gatzke
disregarded the conflict of interest in representing both P.S.
and A.S. in the Jackson National lawsuit. The referee said
Attorney Gatzke's misconduct evinces a disregard for the rules
of conduct and a disregard for client welfare. The referee
noted that Attorney Gatzke acknowledged that he failed to comply
with the technical procedural rules regarding his firm's trust
account. The referee said Attorney Gatzke's behavior far
exceeded mere sloppiness. The referee said Attorney Gatzke's
trust account records were in a serious state of disarray and
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No. 2013AP1918-D
the factual findings detailed numerous discrepancies and
negative balances. The referee found that Attorney Gatzke used
client funds to pay personal and firm obligations. The referee
said, "he took advantage of unsophisticated clients,
particularly [P.S.], and used her money as his personal
checkbook and to support his interests in commercial real
estate. These are not slight miscalculations or technical
errors, but egregious violations of supreme court rules. This
behavior is misleading and harmful." The referee concluded that
Attorney Gatzke's intentional and reckless disregard of supreme
court rules necessitated revocation of his license to practice
law.
¶38 The referee also adopted the OLR's computation of the
amount of restitution due to P.S. and A.S., and found that
Attorney Gatzke should be responsible for the full costs of the
proceeding. The referee said in the event Attorney Gatzke is
reinstated to the practice of law, the OLR should monitor all
trust account activity under Attorney Gatzke's control for a
period of three years.
¶39 Attorney Gatzke has appealed. He admits that he made
mistakes in recordkeeping and the handling of his trust account,
but he characterizes these failings as largely technical in
nature. He strenuously argues that the OLR failed to meet its
burden of proof that he converted any of P.S.'s funds or any
other client's funds. He says to the extent that P.S. lost any
money associated with her investment relationship with him, that
was a result of the risk inherent in her real estate investments
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No. 2013AP1918-D
with Attorney Gatzke, a risk which caused losses to both of them
because of the downturn in the economy. He argues that P.S. is
not a reliable witness and, by contrast, he was a very reliable
witness. He complains that the OLR failed to call several
witnesses at the evidentiary hearing, including P.S.'s
daughters, who were present for some meetings P.S. had with
Attorney Gatzke and who presumably could have shed light on the
inconsistencies between P.S.'s deposition and hearing testimony
and P.S.'s failure to recall the facts and circumstances of
Attorney Gatzke's representation and her involvement with
Attorney Gatzke in investments. Attorney Gatzke argues the
referee should have concluded that if P.S.'s daughters had
testified, their testimony would have been adverse to the OLR.
¶40 Attorney Gatzke also argues that he and independent
witnesses confirmed he gave P.S. several banker's boxes of
documents near the end of his representation of her but P.S.
produced only one banker's box of materials as part of these
proceedings. Attorney Gatzke says that records contained in the
materials he produced to P.S. were no longer available to be
used in his defense because she failed to produce them. He
argues the referee should have concluded that those materials
existed and would not have supported P.S.'s accusations against
him.
¶41 Attorney Gatzke argues that because the OLR failed to
meet its burden of proving that he converted any of P.S.'s
funds, he should not be responsible for restitution to P.S.
Attorney Gatzke argues that he credibly testified that he was
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No. 2013AP1918-D
authorized to make payments to invest in real estate holdings on
behalf of P.S., that he explained everything about the
investments to P.S., and P.S. was fully aware that the payments
were being made on her behalf for investments she approved and
wanted to have made. He argues the referee's conclusion that he
should pay restitution to P.S. relies solely on P.S.'s
credibility, and he asserts P.S.'s position that she was unaware
of the investments simply cannot be believed. Attorney Gatzke
argues once the investments are properly understood, it is
apparent there is no basis for a restitution award to P.S. and
in fact, P.S. was overpaid some $76,000.
¶42 Attorney Gatzke also argues that he should not be
responsible to A.S. for any restitution stemming from the
Jackson National proceeds. He says the proceeds obtained from
Jackson National were ultimately disbursed to P.S. and she
subsequently used that money for her own personal expenses and
benefit. Attorney Gatzke argues in the event those proceeds
belonged to A.S., P.S. was unjustly enriched by receiving and
using them for her own benefit. Attorney Gatzke also argues
that there is a dispute as to whether P.S. or A.S. would be
entitled to the proceeds and there is a question of who should
be responsible to pay A.S. in the event she is entitled to some
of the proceeds. Attorney Gatzke says even if he bears some
responsibility to pay A.S., P.S. certainly bears responsibility
as well. He suggests that the complete picture of who bears
such responsibility should be addressed in a separate civil
proceeding in which all parties interested can be joined and the
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No. 2013AP1918-D
extent of their liability and entitlement to any proceeds can be
adjudicated.
¶43 Attorney Gatzke strenuously argues that the referee's
recommendation for license revocation is wholly unwarranted. He
points out that none of the counts asserted by the OLR allege
that Attorney Gatzke's legal representation was deficient in any
matter. He asserts the fact that he has not been previously
disciplined, that his entire career has been an effort to
benefit his community, and that he has been extremely
cooperative with the OLR throughout the disciplinary process are
significant mitigating factors that the referee should have
weighed in determining what discipline is appropriate. He
suggests that a suspension of less than five months is the
maximum discipline warranted. He agrees that it would be
appropriate for the court to require him to have his trust
account reviewed by an accountant on a quarterly basis for a
period of one year.
¶44 The OLR argues that Attorney Gatzke has failed to show
that any of the referee's findings of fact are clearly
erroneous. The OLR also notes that where testimony is
conflicting, the referee is the ultimate arbiter of credibility.
See In re Disciplinary Proceedings Against Lister, 2010 WI 108,
¶32, 329 Wis. 2d 289, 787 N.W.2d 820. The OLR asserts that
Attorney Gatzke's attack on P.S.'s credibility does not show
that any of the referee's findings of fact are clearly
erroneous, and it says an assessment of Attorney Gatzke's
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No. 2013AP1918-D
credibility also does not show that any of the findings are
clearly erroneous.
¶45 While Attorney Gatzke argues that the referee should
have drawn a negative inference from the fact that important
witnesses, such as P.S.'s daughters, were not called at the
evidentiary hearing, the OLR says Attorney Gatzke waived this
issue by failing to raise it at trial. The OLR also asserts
Attorney Gatzke failed to show that OLR controlled those
witnesses, and it says if Attorney Gatzke seriously believed
P.S.'s daughters had information material to his defense, he had
every opportunity to conduct discovery and depose them. The OLR
points out that in fact Attorney Gatzke did depose one of P.S.'s
daughters. It says because the daughter is a resident of
Arizona, Attorney Gatzke could have used that deposition at
trial, but chose not to do so.
¶46 The OLR also says that Attorney Gatzke's claims about
the alleged missing boxes of documents is nothing more than
another diversionary "straw man" argument. The OLR says
Attorney Gatzke makes no showing, beyond mere speculation, that
P.S. received and destroyed any records and more importantly,
Attorney Gatzke fails to show that the materials he speculates
were in the "missing boxes" have any bearing on the conversion
claims alleged in the second amended complaint. The OLR goes on
to argue that there was ample evidence before the referee to
support the referee's findings of conversion. The OLR notes
that this court has described conversion as:
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No. 2013AP1918-D
The unauthorized use of a client's funds for the
lawyer's own purpose. It includes temporary use, and
it extends to use that does not result in personal
gain or benefit to the lawyer. Paying one client out
of money due another, keeping an unearned advanced
fee, holding onto unused escrow funds, and applying
client funds to the client's bill are all examples of
conversion.
In re Disciplinary Proceedings Against Mulligan, 2015 WI 96,
¶36, 365 Wis. 2d 43, 870 N.W.2d 233.
¶47 The OLR asserts there is overwhelming evidence in this
case that Attorney Gatzke converted client funds systematically
over a period of years and the misconduct cannot be explained
away by ignorance or sloppy recordkeeping. The OLR says the
referee appropriately noted that the ABA standards for imposing
lawyer sanctions provide that "disbarment is generally
appropriate when a lawyer knowingly converts client property and
causes injury or potential injury to a client," and where "a
lawyer engages in any other intentional conduct involving
dishonesty, fraud, deceit, or misrepresentation that seriously
adversely reflects on the lawyer's fitness to practice." ABA
Standards, §§ III.C.4.11 and III.C.5.11(b). The OLR says in
concluding that the multiple instances of conversion of client
funds required revocation, the referee pointed to aggravating
factors, including a pattern of misconduct, multiple offenses,
refusal to acknowledge wrongdoing, the vulnerability of the
victims, together with Attorney Gatzke's substantial experience
in the practice of law and his indifference to making
restitution. Thus, the OLR argues that revocation is an
appropriate sanction.
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No. 2013AP1918-D
¶48 The OLR also asserts that this court should adopt the
referee's recommendation as to restitution. It notes that in In
re Disciplinary Proceedings Against Nussberger, 2009 WI 103,
¶20, 321 Wis. 2d 576, 775 N.W.2d 525, this court acknowledged
the OLR's policy to seek restitution where the grievant's or
respondent's rights in a collateral proceeding will not likely
be prejudiced; the funds to be restored do not constitute
incidental or consequential damages; the funds to be restored
were in the respondent lawyer's direct control; and there is a
reasonably ascertainable amount. The OLR argues that these
factors are satisfied both as to P.S. and as to A.S.
¶49 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.
¶50 After careful review of this matter, we conclude that
there has been no showing that any of the referee's findings of
fact are clearly erroneous. Accordingly, we adopt them. We
also agree with the referee's conclusions of law that Attorney
Gatzke violated all of the supreme court rules set forth above.
¶51 Turning to the appropriate level of discipline,
although Attorney Gatzke's misconduct is serious, we do not find
that it rises to the level of requiring revocation of his
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license to practice law in Wisconsin. Instead, we conclude that
a lengthy suspension is an appropriate sanction.
¶52 Attorney Gatzke's recordkeeping and his cavalier
handling of his trust account, which included overdrafts and
comingling non trust account funds to bring it back into
balance, are serious deficiencies. The recordkeeping and trust
account violations were not mere technical problems, as Attorney
Gatzke has tried to portray them.
¶53 Much more troubling than the recordkeeping and trust
account deficiencies are Attorney Gatzke's failure to obtain
written conflict waivers before entering into business
transactions with P.S. and his conversion of P.S.'s funds. We
acknowledge that Attorney Gatzke's lack of previous disciplinary
history warrants some consideration. However, the number of
counts of misconduct at issue in this case requires a serious
sanction. We find this case somewhat analogous to In re
Disciplinary Proceedings Against Cooper, 2007 WI 37, 300
Wis. 2d 61, 729 N.W.2d 206. In Cooper, an attorney who was
found to have committed multiple violations of SCR 20:8.4(c) as
well as multiple trust account violations received a three-year
suspension. We find a three-year suspension to be an
appropriate sanction in this case as well.
¶54 Upon careful consideration, we agree with the referee
that Attorney Gatzke should be required to make restitution, in
the amounts sought by the OLR, to both P.S. and A.S. We note
again that we will affirm the referee's findings of fact unless
they are clearly erroneous on the basis of the record before us.
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No. 2013AP1918-D
The referee's findings of fact as to restitution have not been
shown to be clearly erroneous. We recognize that Attorney
Gatzke disputes the referee's restitution award, particularly
the amount owed to A.S. We emphasize that our holding as to
restitution is not intended to preclude a future civil suit to
determine if someone other than Attorney Gatzke should be
responsible for the restitution awarded to A.S. However, the
only parties before us in this proceeding are the OLR and
Attorney Gatzke, and given the applicable standard of review, we
cannot resolve the potential claims between any other parties.
We also agree that Attorney Gatzke should be required to pay the
full costs of this disciplinary proceeding, as is the court's
general practice.
¶55 Finally, we agree that in the event his license to
practice law is reinstated, Attorney Gatzke should be required
to submit to trust account monitoring by the OLR for a period of
three years.
¶56 IT IS ORDERED that the license of James E. Gatzke to
practice law in Wisconsin is suspended for a period of three
years, effective June 20, 2016.
¶57 It IS FURTHER ORDERED that James E. Gatzke comply with
the provisions of SCR 22.26 concerning the duties of a person
whose license to practice law in Wisconsin has been suspended.
¶58 IT IS FURTHER ORDERED that within 60 days of the date
of this order, James E. Gatzke shall make restitution to P.S. in
the amount of $275,682.07 and to A.S. in the amount of
$275,446.25.
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No. 2013AP1918-D
¶59 IT IS FURTHER ORDERED that within 60 days of the date
of this order, James E. Gatzke pay to the Office of Lawyer
Regulation the costs of this proceeding, which are $56,879.77.
If the costs are not paid within the time specified, and absent
a showing to this court of his inability to pay the costs within
that time, the license of James E. Gatzke to practice law in
Wisconsin shall remain suspended until further order of the
court.
¶60 IT IS FURTHER ORDERED that the restitution specified
above is to be completed prior to paying costs to the Office of
Lawyer Regulation.
¶61 IT IS FURTHER ORDERED that in the event James E.
Gatzke's license to practice law is reinstated, he should be
required to submit to trust account monitoring by the Office of
Lawyer Regulation for a period of three years.
¶62 IT IS FURTHER ORDERED that compliance with all
conditions of this order is required for reinstatement. See SCR
22.29(4)(c).
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No. 2013AP1918-D.mjg
¶63 MICHAEL J. GABLEMAN, J. (concurring in part,
dissenting in part). I concur in the portion of the opinion
suspending Attorney Gatzke's license to practice law for three
years, imposing full costs, and requiring him, upon
reinstatement, to submit to trust account monitoring. I dissent
from the portion of the opinion ordering Attorney Gatzke to make
restitution to P.S. and A.S. I believe the issue of restitution
should be addressed in a separate civil proceeding.
¶64 I am authorized to state that Justice REBECCA G.
BRADLEY joins this concurrence/dissent.
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