Tuesday, July 15, 2008

In Re: Mark Belz[1]

Opinion handed down July 15, 2008
Link to Mo. Sup. Ct. Opinion

The Missouri Supreme Court held that with significant mitigating factors a lawyer who intentionally misappropriates client funds may be sanctioned by indefinite suspension instead of automatic disbarment.[1] The Office of the Chief Disciplinary Council (OCDC) argued that Missouri precedent held that disbarment was the only sanction justified in a misappropriation case. The Court rejected the argument, reasoning that mitigating factors may be considered in determining appropriate punishment.[2]

I. Facts & Holding[3]

Prior to beginning to practice law in 1975, Mr. Belz had been diagnosed with bipolar disorder, a disease that causes the sufferer to experience extreme emotional highs and lows. Belz received successful medical treatment for the condition, and in 1981 Dr. Holemon, the treating psychiatrist, felt that Belz had fully recovered and no longer required medication. For seventeen years Belz practiced law symptom free and was involved in his community and the legal profession.

In 1998 Belz suffered a relapse of his manic episodes. They continued until 2003 when Dr. Holemon resumed medication. Belz admitted to borrowing funds out of his firm’s trust account. He had kept accurate records of each withdrawal and paid back the money. Belz self-reported the infractions to the OCDC.

The administrative panel found that Belz’s mental illness and self-reporting were significant mitigating factors but declined to weigh those factors against the sanction of disbarment. The panel reasoned that Missouri case law created a “hard and fast rule” that disbarment was the only appropriate penalty for misappropriation of client funds.

On appeal, a majority of the Missouri Supreme Court rejected this analysis. Other jurisdictions, namely the D.C. Circuit Court of Appeals, have adopted approaches wherein mental illness can be a mitigating factor in certain misappropriation cases.[4] The Court further reasoned that prior case law did not explicitly proscribe consideration of mental illness as a mitigating factor. Missouri adopted the American Bar Association standards that require disciplinary boards to consider “mitigating factors” in determining the correct sanction.

The Court ruled that the combination of Belz’s mitigating factors called for a sanction less than disbarment. The misappropriation would have probably gone unnoticed but for his self-reporting. Belz’s relapse of bipolar disorder was a significant factor. Furthermore, weighing in favor against disbarment was Belz’s restitution of monies he misappropriated and his expression of remorse. Belz argued that these mitigating factors were sufficient to justify reducing the sanction to that of a stayed suspension. The Court rejected this argument because of the serious nature of misappropriation. The Court held that the proper punishment was an indefinite suspension without leave to reapply for three years.

The dissent argued that intentional misappropriation of client funds is a serious enough violation to warrant disbarment even in light of mitigating factors.

II. Legal Background

The Missouri Rules of Professional Conduct explicitly prohibit misappropriation of client funds. [5] In Missouri, misappropriation of funds warrants disbarment.[6] Missouri case law has indicated that there are some mitigating factors that may dissuade the Court from ordering disbarment but has not defined what those factors might be.

The ruling in Belz depends heavily on the interpretation of the In re Mendell case.[7] In that case, a lawyer withheld money from a settlement check and tried to conceal it.[8] The Court noted in Mendell that the conduct was “willful, deliberate and inexcusable,” and that “[a]ny earlier decisions indicating that a lesser sanction might be considered in cases such as this are no longer authoritative.”[9] In Belz, the Supreme Court noted that the OCDC improperly applied the rule announced in Mendell.[10]

III. Commentary

Belz should not be read as establishing a general rule that psychological problems may preclude disbarment in a misappropriation case. The Court took care in noting that there were many factors mitigating the attorney’s conduct in the instant case. Belz had self reported the incident and opposing council conceded that the defalcation would not have been discovered but for Belz coming forward. The Court noted that this behavior was of great significance. Regarding policy, this outcome makes sense. If the Court would have imposed disbarment, there would be no incentive for an attorney to self report incidents.

Belz self reported the incident, made restitution, showed remorse, suffered from a bona fide mental illness and his medical treatment should help prevent a reoccurrence. The Missouri Supreme Court has noted that the objective in disbarment proceedings is not punishment for the ethical violation but rather protection of the public from dishonest legal practitioners.[11] In this case the policy was met because the continuing medication would likely prevent relapse and the potential of public harm. Yet, the Court still decided that an indefinite suspension was proper. It seems unlikely that an attorney could successfully argue for imposition of a stayed suspension in an intentional misappropriation case. Suspension is the best outcome an attorney who misappropriates funds can expect in the aftermath of Belz.

- Brian T. Bear

[1]In re Belz, 258 S.W.3d 38 (Mo. 2008)
[2] Id. at 47.
[3] Id. at 39-46.
[4]Id. citing In re Zakroff, 934 A.2d 409, 421 (D.C. Cir. 2007).
[5] Mo. Rules Prof. Conduct § 4-1.15(a)
[6] In re Witte, 615 S.W.2d 421 (Mo. 1981) (en banc).
[7] In re Mendell, 693 S.W.2d 76 (Mo. 1985) (en banc).
[8] Id. at 76.
[9] Id. at 78.
[10] Belz, 258 S.W.3d at 42-43.
[11] In re Mentrup, 665 S.W.2d 324, 325 (Mo. 1984.)