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Commonwealth of Massachusetts

No. BD-2001-053


S.J.C. Order of Term Suspension (one year and one day) entered by Justice Spina on October 12, 2001, with an effective date of November 11, 2001. 1


The Board of Bar Overseers filed an Information pursuant to S.J.C. Rule 4:01, § 8 (4), recommending that the respondent, Nicholas B. Soutter, be suspended from the practice of law for one year.

Bar counsel commenced disciplinary proceedings before the board on May 28, 1999. A hearing committee found several violations of the Canons of Professional Responsibility and recommended that the respondent be suspended from the practice of law for two years. Bar counsel and the respondent appealed to the board. After hearing, the board adopted the hearing committee's subsidiary findings, amended the legal conclusions of the hearing committee, and recommended a suspension of one year. Bar counsel seeks an order from the court that the respondent be suspended from the practice of law for two years. The respondent seeks a public reprimand

The findings and conclusions of the board are summarized as follows, by count:

1. Competence and Conflicts of Interest. In early 1979 the respondent was retained to represent Joseph Fitzsimmons in a claim for serious personal injuries that left him permanently disabled at the age of thirty-one (31 ). Although he was fully aware, competent, and lucid after the accident, Joseph was unable to handle his affairs personally or carry out long-term plans, and he was easily frustrated and prone to rage. The respondent settled the claim for $700,000 in August, 1980.

Joseph and his wife, Susan, asked the respondent to advise them in handling the settlement proceeds. He advised them to purchase a larger house for themselves and their four children, and he agreed to manage the investment of the remaining proceeds. He informed them about the asset management fee he customarily charged other clients. They agreed that current income from the investments would be used to pay the family's current expenditures and the principal would be allowed to appreciate over the long term. The respondent assumed responsibility for paying the family's major bills, and he sent monthly checks to Susan for household expenses. Over time, the family's expenses exceeded the income generated by the settlement proceeds. In an effort to make up the shortfall, the respondent made unsuitable and speculative investments. These investments resulted in losses and excessive broker's commissions.

In the spring of 1982, Susan told the respondent that Joseph had become aggressive toward her and their children. The respondent advised the couple to place the settlement assets and their real estate in trust to ensure that the property would be used for the children's benefit. The couple agreed. The respondent established a family trust for the settlement assets and a realty trust for the real estate. The Fitzsimmons's children were beneficiaries of each trust, and the respondent was trustee. The respondent did not advise Susan that he had an obligation of loyalty to Joseph or that she and Joseph might seek the advice of independent counsel. The record does not reflect that he advised Joseph or Susan that his fiduciary duties to the children, as beneficiaries of the trusts, might conflict with his duties to them as the settlors.

In June, 1982, Susan again consulted the respondent about Joseph's increasingly aggressive behavior. She decided she wanted a divorce. The respondent agreed "to take care of it." He did not tell her that because her interests and Joseph's now differed, that he could not represent her after representing Joseph, that he could not represent them both, and that they should seek independent counsel. Susan believed he was representing them both, while the respondent, despite suggesting to Joseph that he ask his parents about getting another lawyer, did not advise Joseph that he (the respondent) was not representing him in the divorce. The respondent filed a petition for divorce on Susan 's behalf, prepared financial statements for both parties, and drafted a separation agreement that was incorporated into the divorce judgment in mid 1983. The agreement provided that Joseph receive the income and benefits from his pension and Susan receive all income from the trusts.

After the stock market crash in October, 1987, the respondent reported to Susan that the settlement assets held in trust had dwindled to about $30,000. He suggested she get a job and apply for a mortgage. About a year later, with the settlement assets almost gone, Susan applied for a $136,000 home mortgage loan. Because the children were the beneficial owners of the residence, the respondent arranged for her to be appointed, with Joseph's assent, as the children's guardian. After the loan closed, the respondent unilaterally took a modest fee owed him from the proceeds and purchased certificates of deposit with the balance.

In August, 1989, Susan asked the respondent to resign from both trusts. He did so and she accepted appointment as successor trustee. A month later the respondent received a notice of settlement of a securities class action that would benefit the family trust. Without notifying Susan or Joseph, the respondent filled out a statement of claim on behalf of the trust, falsely certified under oath that he was authorized to make the claim, and signed the statement as trustee. He received a $3,600 payment, which he forwarded to Susan upon receipt.

2. Misrepresentations. In 1982 Susan and Joseph decided to sell their former residence, now rental property, to Susan's brother for $35,000. The property was worth at least $75,000. The respondent was aware that, as trustee of the real estate trust, he could not sell the property for less than fair market value. He sought to dissuade the couple from selling what he felt was a good investment for the family, but they insisted and he acquiesced. He prepared closing documents and participated in a closing at which the brother bought the property from him, as trustee, for a stated purchase price of $75,000, purportedly to be paid with a $40,000 check from the brother and $35,000 in proceeds from a mortgage loan the brother had obtained. The respondent failed to disclose the actual terms of the sale in the HUD-l settlement statement, including the amount of the down payment and extent of the buyer's personal investment in the property. He also prepared and signed a purchase and sale agreement containing a false purchase price for the house. Immediately after the closing, the brother and the respondent executed a previously drafted "option" agreement by which the respondent "gave" the brother $40,000 (by returning his closing check in that amount) in exchange for an option to repurchase the property for $35,000, if at least one of the children-beneficiaries wished to occupy it with a custodial parent. The option was never exercised.

3. Mishandling Fitzsimmonses ' Client Funds. There were irregularities with respect to the respondent's handling of funds belonging to the Fitzsimmons family. Some funds were maintained in an IOLTA account when they should have been deposited to a separate, interest-bearing account. The respondent intentionally authorized at least 122 disbursements from the pooled account to or on behalf of the family when he knew the Fitzsimmonses did not have sufficient funds in the account to fund the disbursements. Instead, the checks were paid out of funds belonging to other clients. In all but the final transactions in the fall of 1988, there were sufficient funds in the Fitzsimmons investment account to make up the deficit.

4. Mishandling Other Clients' Funds. The respondent also mishandled funds of a second client. The respondent had been entrusted with the management of that client's funds for a fee. He improperly left the funds in his IOLTA account instead of segregating them in a separate, interest-bearing account. He mistakenly drew a check payable to the client in an amount greater than the amount the client had on deposit in that account, thereby negligently using about $7,750 of other clients ' funds. After discovering his error two weeks later, he did not correct it. He proceeded to make several additional disbursements to the client, totaling just under $2,000, this time intentionally drawing upon other clients' funds in the IOLTA account. The IOLTA account was eventually restored.

A third client entrusted the respondent with the management of about $100,000. The funds initially were deposited (not inappropriately) with those of other clients in the respondent's IOLTA accounts. He later transferred most of them to a broker's investment account. Notwithstanding the transfer, the respondent made disbursements to or for the client out of the IOLTA account, thus intentionally using the funds of other clients to pay the disbursements. The deficits averaged about $3,000 over a six-month period and at one point exceeded $5,500. Of those disbursements, about $1,750 was used to pay fees owed the respondent. As with the previous client, the IOLTA account was eventually restored.

5. The Board' s Conclusions. The board concluded that the respondent's investment activities arose from a pre-existing attorney/client relationship, and that there was a sufficient nexus to the practice of law to bring those activities within the ambit of "legal matter" as that term is used in Canon Six, DR6-101 (A) (handling a legal matter beyond his competence). See Matter of Horgan, 5 Mass. Att'y Disc. R. 156 (1987). The board found, however, that the evidence did not support a finding of incompetence, despite the disastrous results of his investments, because the respondent had experience in managing funds, and his decisions were made in consultation with a professional at an established brokerage house. Although the board expressly did not approve of his investment strategy, it based its decision on the fact that the strategy had been driven by the family's excessive spending as well as the lack of evidence of incompetence. Similarly, the board concluded that the respondent did not violate Cann Seven, DR 7-101 (A) (intentionally failing to seek the lawful objectives of his client). The board noted that the rule requires only a good faith effort on the client's behalf, not guaranteed success. The board also noted the absence of evidence that the respondent intentionally harmed or prejudiced the Fitzsimmonses. See Matter of Kerlinsky, 428 Mass. 656 (1999).

The board found that a conflict of interest between the respondent's representation of Joseph and Susan arose at least as early as the spring of 1982 when Susan sought the respondent's assistance in dealing with Joseph's aggression. The board found that the situation should have alerted the respondent that he could not represent both sides with equal zeal. The board further found that the respondent's response to Susan's concerns about Joseph, namely, creation of the two trusts for the benefit of the children, was made without full disclosure of the possible effect such representation could have on the exercise of his independent professional judgment on behalf of the various family members. See, e.g., Matter of Brady, 7 Mass. Att'y Disc. R. 18, 20-21 (1991). The burden was on the respondent to prove "that the client's consent was obtained after full disclosure of the conflict." Matter of Eisenhauer, 426 Mass. 448, 452, 14 Mass. Att'y Disc. R. 251, 256 (1998). Here, there was neither disclosure nor consent. The board reached a similar conclusion regarding the respondent's representation of Susan in the divorce, and by his service as trustee under the trust for the children. The sale of the former family residence to Susan's brother for less than market value, after it had been placed in trust for the children, derogated from his duty to the children. The respondent's conduct in these three instances, at a minimum, constituted breaches of Canon Five, DR 5-105 (A), (8) (refusing to accept or continue employment of interests of another client may impair professional judgment, unless obvious lawyer can adequately represent each and each consents after full disclosure). See Matter of Eisenhauer, 426 Mass. 448, 453 (1998).

The board found that the respondent violated Canon One, DR 1-102 (A) (4) (dishonesty, fraud, deceit, or misrepresentation), and DR 1-102 (A) (6) (conduct adversely reflecting on fitness to practice), when he signed the false HUD-l statement at the closing on the sale of the former Fitzsimmons' residence to Susan's brother, misrepresenting that the brother had paid $40,000 toward the purchase price of the residence and that there were no side deals to the transaction. The same analysis applies to the purchase and sale agreement prepared by the respondent as one of the transaction documents presented to the lender at closing. Cf. Bar Counsel v. Doe, 12 Mass. Att'y Disc. R. 731, 746-747 (1996); Matter of Eastwood, 10 Mass. Att'y Disc. R. 70 (1994); Matter of Behanna, 10 Mass. Att'y Disc. R. 15 (1994).

The respondent's failure to place the Fitzsimmonses' funds into a separate interest- bearing account in October, 1987, violated Canon Nine, DR 9-102 (C) (deposit client funds in individual interest-bearing account). His use of other clients' funds to make payment to the Fitzsimmonses or on their behalf, and his failure to safeguard those clients' funds violated Canon One, DR 1-102 (A) (4) (dishonesty, fraud, deceit, and misrepresentation), and DR 1-102 (A) (6) (conduct adversely reflecting on fitness to practice), and Canon Nine, DR 9-102 (A) (deposit client funds into separate account), and DR 9-102 (B) (identify and safeguard property of client).

The respondent's misuse of other client funds constituted violations of Canon Nine, DR 9-102 (C) (deposit client funds in individual interest-bearing account) Canon One, DR 1-102 (A) (4) (dishonesty, fraud, deceit, and misappropriation), DR 1-102 (A) (6) (conduct adversely reflecting on fitness to practice), and Canon Nine, DR 9-102 (B) (identify and safeguard property of client).

I am satisfied that the findings and conclusions of the board are supported by the record.

6. Appropriate Sanction. The board found that the respondent' s actions were motivated by an intent to serve the interests of the Fitzsimmons's family, and not by self- interest. The board further found, however, that in assuming the role of family lawyer, the respondent "arrogated certain decisions to himself instead of taking care that his clients gave their informed consent to them, but the fault here springs primarily from paternalism, not cupidity or a want of zeal on their behalf. If his misconduct were confined to the first two Fitzsimmons' counts, we might be persuaded to impose the public reprimand he seeks. We must also weigh, however, his cavalier handling of client funds in general, and those described in the last count in particular. And when we do, it is apparent that a suspension of some length is warranted." These findings are supported by the record, and I agree with the board's conclusion.

In Matter of the Discipline of an Attorney (and two companion cases) (Three Attorneys), 392 Mass. 827 (1984), we said that, "[i]ntentional use of clients' funds, with no intent to permanently deprive the client, and no actual deprivation, should be punished by a term suspension of appropriate length," absent substantial mitigating circumstances. Id. at 836. Here, the respondent authorized at least one hundred and twenty-two disbursements on behalf of the Fitzsimmonses from pooled client funds from October, 1980, to May, 1989. IOLTA accounts are not meant to be used for long term maintenance of a client's funds. The Three Attorneys case was decided in August, 1984, so the respondent was on notice that such conduct called for a suspension. The respondent's misuse of the funds of the other clients also occurred after Three Attorneys was decided.

The respondent contends that Three Attorneys was concerned with commingling client funds with those of the attorney, a far more serious violation than what occurred here. Although commingling funds of one client with those of another may not have quite the unsavory quality as commingling a client's funds with those of the lawyer, a misappropriation of the funds of one client for the benefit of another is as detrimental to the client as a misappropriation of such funds to the lawyer's own use. The respondent's conduct in this regard is no mere technical violation. It is not just a sloppy business practice. When clients entrust funds to lawyers, the duty that arises is that of a fiduciary. " Any action by a lawyer which is contrary to this principle weakens confidence of the public in all of us." Id. Unauthorized use of one client's funds to make payments to or on behalf of another is a fundamental violation of that duty. The violation of that duty is indeed serious, and a suspension is required.

The respondent's misrepresentation on the HUD-l form of the equity Susan Fitzsimmons' brother had in the former Fitzsimmons residence also requires a suspension, based on the level of discipline imposed in comparable cases. See Matter of Komack, 429 Mass. 1025 (1999); Matter of Concemi, 422 Mass. 326 (1996); and Matter of Eastwood, 10 Mass. Att'y Disc. R. 70 (1994). A six-month suspension was imposed in Matter of Komack, supra, where an attorney with no prior disciplinary record filed a false HUD-l form to assist a client in concealing a second mortgage used to finance the down payment of a home.

The respondent's conduct was also conflicted in his representation of various members of the Fitzsimmons family, yet another area of violation that the board found.

I have considered the respondent's conduct and the discipline imposed in other cases for comparable offenses have also considered the cumulative misconduct. See Matter of Saab, 406 Mass. 315 (1989). I conclude that a suspension of one year and one day would not be markedly disparate from that imposed in similar cases." Matter of Alter, 389 Mass., 153, 156 (1983). Therefore, it is ORDERED that Nicholas B. Soutter be suspended from the practice of law for one year and one day.

By the Court,

Francis X. Spina
Associate Justice

ENTERED: October 12, 2001

1 The complete Order of the Court is available by contacting the Clerk of the Supreme Judicial Court for Suffolk County.

2 Compiled by the Board of Bar Overseers based on the record before the Court.

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