People v. Storey

523 P.3d 1025

The PEOPLE of the State of Colorado

v.Brenda L. STOREY, #25828

Case Number: 20PDJ063

Office of Presiding Disciplinary Judge of the Supreme Court of Colorado.

NOVEMBER 10, 2022

OPINION AND DECISION ON REMAND IMPOSING SANCTIONS UNDER C.R.C.P. 251.19(b)¹

Before a Hearing Board comprising citizen member Laurie Albright, lawyer Donald F. Cutler IV, and Presiding Disciplinary Judge Bryon M. Large ("the PDJ")² is a mandate from the Colorado Supreme Court. That tribunal remanded this matter to the Hearing Board to determine the appropriate sanction for Brenda L. Storey ("Respondent"), who violated Colo. RPC 1.7(a)(2), Colo. RPC 1.15A(a), Colo. RPC 1.15A(c), and Colo. RPC 8.4(c) while representing a client in a marriage dissolution case.³ The Colorado Supreme Court concluded that Respondent did not knowingly disobey a court order to return funds her client had paid her, reversing only the Hearing Board's conclusion that Respondent violated Colo. RPC 3.4(c).⁴ On remand, a Hearing Board majority determines that Respondent's misconduct warrants a suspension of one year and one day.

I. PROCEDURAL HISTORY

Respondent was admitted to practice law in Colorado in 1995 under attorney registration number 25828. She is thus subject to the jurisdiction of the Colorado Supreme Court and the Hearing Board in this disciplinary proceeding.⁵

On September 17, 2020, Justin P. Moore of the Office of Attorney Regulation Counsel ("the People") filed a complaint with the Office of the Presiding Disciplinary Judge, alleging that Respondent violated Colo. RPC 1.7(a)(2) ; Colo. RPC 1.15A(a) ; Colo. RPC 1.15A(c) ; Colo. RPC 3.4(c) ; and Colo. RPC 8.4(c). Lawyer Michael T. McConnell answered on Respondent's behalf.

On June 25, 2021, the Hearing Board issued an "Opinion and Decision Imposing Sanctions Under C.R.C.P. 251.19(b)," suspending Respondent for one year and one day. In that opinion, the Hearing Board concluded that Respondent violated five Rules of Professional Conduct relating to her representation of Cynthia Sullivan in a marriage dissolution proceeding. The Hearing Board found that during the dissolution proceeding Ms. Sullivan became unable to timely pay Respondent's legal bill and that Respondent prioritized her own interest in getting paid for her legal services over her client's interests in the case, thereby adversely affecting the representation in violation of Colo. RPC 1.7(a)(2). The Hearing Board determined that Respondent transgressed the rule in three respects. First, while threatening to withdraw from the case, Respondent pressured Ms. Sullivan to liquidate furniture and other marital assets to pay Respondent's bill without advising her client of the legal risks of selling the property during the proceeding. Second, Respondent accepted from Ms. Sullivan an IRS tax refund check ("the IRS check") for $47,578.43 as payment for Respondent's bill, but she did not counsel Ms. Sullivan about any potential consequences of using the IRS check to pay for legal fees. Nor, in order to ensure that Ms. Sullivan would not suffer any adverse tax implications, did Respondent investigate why the IRS issued the check. Third, after Respondent accepted the IRS check, she shirked her duty to advise Ms. Sullivan about the need to timely disclose the check to the opposing party, Caldwell Sullivan, effectively delaying the point at which Mr. Sullivan became aware of the check until Respondent had applied in two tranches all of the check's funds to her earned fees. And because Mr. Sullivan held an unresolved interest in the IRS check when Respondent authorized the transfers from her trust account to her operating account, the Hearing Board found that she violated Colo. RPC 1.15A(a) and Colo. RPC 1.15A(c).

The Hearing Board also determined that by avoiding her obligation to ensure that the IRS check was timely disclosed, Respondent effectively concealed the check's existence from the opposing party in violation of Colo. RPC 8.4(c). Relying on her client's initial instruction to tread carefully in disclosing the IRS check, Respondent avoided discussing the check during the parties’ settlement negotiations and at a court status conference where the parties discussed legal fees and costs. But the IRS check was material to those discussions, the Hearing Board found, as Respondent had already applied the majority of the check's funds to her earned fees and held the remaining funds in trust, and Respondent did not use those opportunities to revisit the topic of the IRS check's disclosure with her client. Instead, the Hearing Board concluded, Respondent directed her client not to communicate with the opposing party and deflected her client's request for advice regarding the IRS check: when Ms. Sullivan asked whether she should provide to Mr. Sullivan a letter from the IRS that would alert him to the check's existence, Respondent waited eight days before telling Ms. Sullivan, "Do whatever you want on this issue."⁶ The Hearing Board thus found that Respondent acted recklessly because she had deliberately closed her eyes to facts she had a duty to consider. The Hearing Board also deemed reckless Respondent's failure to investigate the IRS check before accepting it as payment for her bills. Had Respondent done so, she would have learned that the IRS check named both Mr. and Ms. Sullivan as payees. She also would have discovered that the IRS had misapplied an earlier payment from the Sullivans and erroneously issued the check as a refund, leaving the Sullivans with an unpaid tax liability.

Last, the Hearing Board determined that after Respondent withdrew as Ms. Sullivan's counsel, Respondent violated Colo. RPC 3.4(c) by knowingly disobeying a court order to return the funds from the IRS check to the Sullivans, who had attempted to claw back the funds from her.

The Hearing Board agreed that Respondent's misconduct warranted a suspension of one year and one day.

On July 15, 2021, Respondent moved to stay her suspension pending appeal. The People did not oppose a stay so long as Respondent complied with conditions, including practice monitoring, during the stay. Respondent filed a notice of appeal with the Colorado Supreme Court on July 16, 2021. The Hearing Board granted Respondent's motion for stay on July 21, 2021. Respondent's stay has remained in effect since that date.

On October 4, 2022, the Colorado Supreme Court issued an opinion affirming in part and reversing in part the Hearing Board's opinion. Specifically, that court agreed with the Hearing Board that Respondent violated Colo. RPC 1.7(a)(2), Colo. RPC 1.15A(a) and 1.15A(c), and Colo. RPC 8.4(c). The Supreme Court disagreed, however, that clear and convincing evidence showed that Respondent knowingly disobeyed a court order. The Colorado Supreme Court thus reversed the Hearing Board's determination that Respondent violated Colo. RPC 3.4(c) and remanded this case to us to determine the appropriate sanction in light of the partial reversal. The mandate issued on October 19, 2022.

II. SANCTIONS

On remand, a majority of the Hearing Board determines the appropriate sanction in this matter,⁷ considering the relevant factual findings in our opinion and the Colorado Supreme Court's ruling affirming our determination that Respondent violated Colo. RPC 1.7(a)(2), Colo. RPC 1.15A(a) and 1.15A(c), and Colo. RPC 8.4(c). We are guided in this task by the American Bar Association Standards for Imposing Lawyer Sanctions ("ABA Standards ")⁸ and Colorado Supreme Court case law.⁹ When imposing a sanction after a finding of lawyer misconduct, a hearing board must consider the duty violated, the lawyer's mental state, and the actual or potential injury caused by the lawyer's misconduct. These three variables yield a presumptive sanction that may be adjusted based on aggravating and mitigating factors.

ABA Standard 3.0 – Duty, Mental State, and Injury

Duty: "Loyalty and independent judgment are essential elements in the lawyer's relationship to a client."¹⁰ But Respondent lost sight of these essential elements and breached her duty of loyalty when she advanced her own interests: first by encouraging Ms. Sullivan to sell marital assets and then by accepting the IRS refund check as payment for her fees without counseling Ms. Sullivan about the potential consequences of those actions. In addition, Respondent owed a duty of candor to Mr. Sullivan and to the court presiding over the Sullivan dissolution proceeding but violated that duty by concealing the IRS check. Through her dishonest conduct, Respondent also failed to meet the duty she owes the public to maintain her standards of personal integrity.

Mental State: We find that Respondent acted knowingly when she prioritized the payment of her fees above Ms. Sullivan's interests in violation of Colo. RPC 1.7(a)(2). As discussed above, we conclude that Respondent recklessly concealed the existence of the IRS check in violation of Colo. RPC 8.4(c). We do not find that Respondent acted knowingly because we saw no evidence that Ms. Sullivan directed Respondent to disclose the IRS check. We find that Respondent acted negligently when she authorized the first transfer of funds from the IRS check from her trust account to her operating account in violation of Colo. RPC 1.15A(a) and Colo. RPC 1.15A(c). Though Respondent knew at that time that the IRS check was a marital asset, we did not see clear and convincing evidence that she knew that the check was made out to both Ms. Sullivan and Mr. Sullivan and that it had not been disclosed to Mr. Sullivan. In contrast, we find that Respondent acted recklessly when she authorized the second transfer of funds from the IRS check, because she knew by that time that Mr. Sullivan had an interest in the check and that the check had not been disclosed. The evidence is not clear and convincing that Respondent knew she was not authorized to use the funds, however.

Injury: Ms. Sullivan testified that the litigation over the IRS check resulted in...