Nov. 21, 2018 – Not all Wisconsin standards of conduct are based on Model Rules from the American Bar Association – so, not all disciplinary rules are listed in the Supreme Court Rules.

Question

I was speaking with another lawyer who had an unfortunate experience with a former associate at his firm, who improperly retained fees to which the firm was entitled.

The lawyer told me that the associate was disciplined for “breaching his fiduciary duty” to his firm. I always assumed that such a duty existed, but when I looked through the disciplinary rules, I could not find any rule that seemed to impose such a duty.

Where can I find the rule that says lawyers owe a fiduciary duty to their firms?

Answer

In the recent disciplinary decision, Disciplinary Proceedings against Wiensch,¹ the respondent lawyer was disciplined, in part, for violating SCR 20:8.4(f), which states that it is misconduct to “violate a statute, supreme court rule, supreme court order or supreme court decision regulating the conduct of lawyers” (emphasis added).

The decision explains the basis for the alleged SCR 20:8.4(f) violation as follows:

In addition, the complaint alleges that by failing to disclose to Foley and Lardner, LLP, his conduct in drafting false documents and in submitting them to the IRS, Attorney Wiensch breached the fiduciary duties owed to his firm and his duty of honesty in his professional dealings with the firm, thereby violating a standard of conduct set forth by this court in In re Disciplinary Proceedings Against Shea, 190 Wis. 2d 560, 527 N.W.2d 314 (1995), actionable via SCR 20:8.4(f).²

In this matter, discipline was imposed for violating a decision that regulated the conduct of lawyers, so there was no rule to find that explicitly imposed fiduciary duties to one’s firm.

The Wisconsin Comment to SCR 20:8.4(f) provides another example of case law that can serve as the basis for discipline:

Intentional violation of tax laws, including failure to file tax returns or failure to pay taxes may violate SCR 20:8.4(f), absent a showing of inability to pay. In re Disciplinary Proceedings Against Cassidy, 172 Wis. 2d 600, 493 N.W.2d 362 (1992).

OLR Private Reprimand 1996- 24 states:

While representing a client on a family law matter, a lawyer repeatedly asked the client about intimate sexual matters and made sexually suggestive remarks to the client, even though on more than one occasion the client had asked the lawyer to stop such conduct. The Board found that the lawyer had put the lawyer's own interests above those of the client, contrary to the standard of professional conduct set forth in Disciplinary Proceedings Against Heilprin, 168 Wis. 2d 1, 482 N.W.2d 908 (1982), and, therefore, contrary to SCR 20:8.4(f). The lawyer had no prior discipline.

Another example is found in OLR Private Reprimand 1993-23:

The Board also determined that the attorney's unilateral deduction of legal fees from the $20,000 bond money violated a standard of professional conduct set forth by the Supreme Court in Disciplinary Proceedings Against Marine, 82 Wis. 2d 602, 264 N.W.2d 285 (1977), and therefore, was contrary to SCR 20:8.4(f), which provides that "[i]t is professional misconduct for a lawyer to violate a statute, supreme court order or supreme court decision regulating the conduct of lawyers." In Marine, the court ruled, in part, that in order for an attorney to withdraw fees from client funds held in trust, agreement must be reached between the attorney and the client on at least three points: (1) the right of the attorney to look to the client for payment of fees, (2) the amount to which the attorney is entitled, and (3) the time at which payment will be expected. The Board concluded that absent any agreement between the attorney and his client as to the exact amount of fees to be paid or when exactly the attorney was to be paid, the standards in Marine had not been met.

These examples illustrate the larger point that SCR 20:8.4(f) has no analogue in the ABA Model Rules, and thus Wisconsin lawyers must be aware of standards of conduct set forth in supreme court case law rather than explicitly in disciplinary rules.

There are not many of these cases, but they serve as a basis for discipline – and ignorance is not a defense.

In In re Disciplinary Proceedings Against Siderits,³ the supreme court responded to a lawyer’s argument that due process prohibited the imposition of discipline for violating a standard set forth in case law of which he was unaware as follows:

As to Attorney Siderits' ignorance-of-the-law defense, we emphatically reject it. To allow an ignorance-of-the-law excuse in lawyer ethics cases would encourage and reward indifference to the ethics code and the cases interpreting it, a pernicious outcome. In any event, the injunction against stealing from one's own law firm is not an abstract one, and this court has stated it clearly and repeatedly. In re Disciplinary Proceedings Against Russell, 216 Wis. 2d 488, 489, 574 N.W.2d 247 (1998) ("We treat a lawyer's misappropriation of law firm funds as we do misappropriation of funds belonging to a client") (citing Casey); In re Disciplinary Proceedings Against Olson, 216 Wis. 2d 483, 484, 574 N.W.2d 245 (1998) ("We have stated on prior occasion that a lawyer's misappropriation of funds belonging to a law firm where that lawyer is employed is to be treated no differently than misappropriation of funds belonging to the lawyer's client") (citing Casey). Attorney Siderits should have known better.

Also noteworthy from the Wiensch decision is the way the Shea standard was applied. As the excerpt above demonstrates, the Shea standard has been used to address financial misconduct with respect to funds owed to the firm.

In the Wiensch case, however, there was no financial misconduct. Rather, the basis of the SCR 20:8.4(f) violation was the respondent’s failure to disclose to other firm lawyers working on the matter that falsified documents had been submitted to the IRS.⁴

In the Dec. 19 issue of InsideTrack, I will examine some instances where lawyers were disciplined under SCR 20:8.4(f) for violating a statute that regulates the conduct of lawyers.

Endnotes

¹ 2018 WI 98, 918 N.W.2d 423.

² The respondent had knowingly submitted falsified documents to the IRS on behalf of a client and knew that other lawyers in his firm were working on the matter, yet unaware of the respondent’s misconduct.

³ 2013 WI 2, 824 N.W.2d 812.

⁴ The language from the Shea decision is not limited to financial dealings with the firm: “We understand the referee to have ultimately concluded that the entire pattern of Attorney Shea's conduct constituted a breach of his fiduciary duty to his law firm and his duty of honesty in his professional dealings with it. We agree.”