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Associates Violated Theft Statute by Taking Client Files to Jump-Start Their New Practice

Monday, September 17, 2012

By Joan C. Rogers


Two law firm associates violated a criminal theft statute, warranting their suspension from practice, when they took some of their employer's client files for their own use in setting up a new practice, the Florida Supreme Court decided Sept. 6 (Florida Bar v. Winters, Fla., No. SC10-1332, 9/6/12).

In a per curiam opinion, the court imposed a 60-day suspension on one of the lawyers who took files out at lunch and had them copied; the other lawyer, who kept control of some files after leaving the firm, received a 91-day suspension. The lawyers' appropriation of their employer's client files for their own purpose constituted not only criminal theft but also dishonesty and conduct prejudicial to the administration of justice, the court added.

Damages Award Vacated
The case involves Tampa personal injury lawyers William H. Winters and Marc E. Yonker, who left their employment with the Law Firm of Richard Mulholland and Associates in 2001 to start their own practice.

“[The respondents'] conduct in appropriating client files from their employer for their own personal use constitutes theft.”

Florida Supreme Court

After Winters and Yonker left, Mulholland sued them on a variety of theories, seeking as damages the fees they received from settling cases they took to their new firm. The jury found in favor of Mulholland against both Winters and Yonkers, but only Winters appealed.

As recounted in Winters v. Mulholland, 33 So. 2d 54, 26 Law. Man. Prof. Conduct 88 (Fla. Dist. Ct. App. 2010), the jury found that Winters committed civil theft in violation of Fla. Stat. §772.11, which allows for treble damages, and awarded Mulholland $748,502.90. The trial court remitted the damages award to $383,105 but then trebled it to $1,149,315.

While saying that “The facts in this case are enough to make any legal ethics professor cringe,” the appeals court threw out the jury verdict. It said there was no evidence that Winters's conduct, “loathsome as it might have been,” actually caused any of the clients to leave with a resulting loss of fees to the firm.

Bar Complaint
Six months after the appellate decision, the Florida Bar filed disciplinary charges against Winters and Yonker, contending that they violated numerous ethics rules in the course of making secret plans to leave the Mulholland firm.

A referee found that Yonker took client files from the Mulholland firm during a lunch break and had information in them copied for his own personal use, and that this conduct “was not within the scope of his employment and was not done for advancing the good of the law firm.”

As for Winters, the referee found that he “maintained control over less than ten files” after leaving the Mulholland firm, and that the firm recovered those files within a few days.

The referee proposed that Winters and Yonker receive an admonition for briefly holding themselves out as partners with a third lawyer who ultimately decided not to join their new firm, and for violating Rule 3-4.3 of the Rules Regulating the Florida Bar, which permits discipline for “any act that is unlawful or contrary to honesty and justice.”

The supreme court's opinion in the disciplinary matter omits most of the colorful allegations made in the civil case, such as the claim that the lawyers received help from a former Mulholland paralegal who was Winters's paramour and who hacked into the firm's computer system and altered client contact data so that Mulholland would have difficulty contacting the departing clients.

Criminal Theft
Although the referee recommended that Winters and Yonker be found not guilty of the most serious disciplinary charges, the court took a much different view.

The court agreed with the bar that the lawyers' personal use of the Mulholland firm's client files constituted acts of criminal theft under Fla. Stat. §812.014(1), and that this criminal act inherently reflected adversely on their honesty, trustworthiness, or fitness as lawyers, in violation of Florida Rule of Professional Conduct 4-8.4(b). (Apparently no criminal charges were ever brought against Winters and Yonker. No mention of criminal proceedings is made in either the appellate opinion in the civil case or the supreme court's opinion in the disciplinary proceeding.)

The criminal theft statute defines the offense as follows:

A person commits theft if he or she knowingly obtains or uses, or endeavors to obtain or to use, the property of another with intent to, either temporarily or permanently:

(a) Deprive the other person of a right to the property or a benefit from the property. (b) Appropriate the property to his or her own use or to the use of any person not entitled to the use of the property.


 

“Winters' and Yonker's conduct in appropriating client files from their employer for their own personal use constitutes theft,” the court declared.

The court also ruled that the lawyer's conduct in copying client files and maintaining possession of client files without the Mulholland firm's permission violated Rule 4-8.4(c) (conduct involving dishonesty, fraud, deceit, or misrepresentation).

The same conduct, the court ruled, also violated Rule 4-8.4(d) (conduct in connection with law practice that is prejudicial to administration of justice). Because the lawyers' misconduct occurred in their capacities as associate attorneys of the Mulholland firm, it was sufficiently “in connection with the practice of law” to be covered by this rule, it found.

On the question of appropriate discipline, the court concluded that in light of these three additional rule violations, the referee's recommended admonishment would not be a sufficient sanction. Florida bar rules make clear that minor misconduct is the only type of conduct for which an admonishment is an appropriate sanction, and that misconduct may not be regarded as minor if it involved dishonesty, misrepresentation, deceit, or fraud, the court explained.

The court suspended Winters from the practice of law for 91 days, which will require him to petition for reinstatement before resuming practice. Yonker received a 60-day suspension.

New Rule Not Implicated
Florida now has a professional conduct rule that regulates contact with clients when lawyers leave law firms or when firms dissolve. Winters and Yonker were not charged with violating that rule, the court said, because it did not exist when their misconduct occurred in 2001.

Rule 4-5.8, which went into effect Jan. 1, 2006, forbids a lawyer who is leaving a firm to contact clients unilaterally about the departure unless good-faith negotiations with the firm to craft a joint notice to clients have failed. When a joint notice has not been negotiated, a lawyer's individual notice to clients must spell out their choices and inform them about their potential liability for prior legal services and costs. The rule specifies that the contract for legal services, not the rule, creates the legal relationships between the client and the law firm and between the client and individual lawyers, including the ownership of the client's file. See 21 Law. Man. Prof. Conduct 530.

The Florida Bar was represented by Executive Director John F. Harkness Jr. and Staff Counsel Kenneth L. Marvin, Tallahassee, Fla., along with Bar Counsel Henry L. Paul and Assistant Bar Counsel Chardean M. Hill, Tampa, Fla.

Donald A. Smith Jr. and Todd W. Messner of Smith, Tozian & Hinkle, Tampa, represented Winters and Yonker.


Full text at /uploadedFiles/Content/News/Legal_and_Business/Bloomberg_Law/Legal_Reports/fl_bar(1).pdf.

 

The ABA/BNA Lawyers’ Manual on Professional Conduct is a joint publication of the American Bar Association Center for Professional Responsibility and Bloomberg BNA.

Copyright 2012, the American Bar Association, All Rights Reserved.

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