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State ex rel. Counsel for Discipline of the Nebraska Supreme Court v. Nimmer

Supreme Court of Nebraska

August 31, 2018

State of Nebraska ex rel. Counsel for Discipline of the Nebraska Supreme Court, Relator.
v.
John C. Nimmer, respondent.

         1. Disciplinary Proceedings: Appeal and Error. Because attorney discipline cases are original proceedings before the Nebraska Supreme Court, the court reviews a referee's recommendations de novo on the record, reaching a conclusion independent of the referee's findings.

         2. ___: ___. In an attorney discipline proceeding, when a party takes exception to the referee's report, the Nebraska Supreme Court conducts a trial de novo on the record, in which the court reaches a conclusion independent of the findings of the referee; provided, however, that where the credible evidence is in conflict on a material issue of fact, the court considers and may give weight to the fact that the referee heard and observed the witnesses and accepted one version of the facts rather than another.

         3. Disciplinary Proceedings. Client trust accounts, in particular, are always open to review by the Counsel for Discipline.

         4. Disciplinary Proceedings: Rules of the Supreme Court: Time. An attorney's failure to preserve client trust account records does not provide an affirmative defense to charges of impermissible commingling, nor does the 5-year preservation rule under Neb. Ct. R. of Prof. Cond. § 3-501.15 constrain or limit the Counsel for Discipline's investigative or prosecutorial duties.

         5. Disciplinary Proceedings: Time. There is no time limitation on the acts or omissions that can give rise to attorney discipline for violating the Nebraska Rules of Professional Conduct, the attorney's oath, or the provisions of Nebraska's disciplinary rules.

         6. Disciplinary Proceedings: Attorneys at Law. Attorneys licensed to practice law in the State of Nebraska agree to operate under the supervision of the office of the Counsel for Discipline.

         [300 Neb. 907] 7. ___: ___. A license to practice law confers no vested right, but is a conditional privilege, revocable for cause.

         8. ___: ___. Violation of any of the ethical standards relating to the practice of law or any conduct of an attorney in his or her professional capacity which tends to bring reproach on the courts or the legal profession constitutes grounds for suspension or disbarment.

         9. Disciplinary Proceedings. Violation of the standards set forth in the disciplinary rules must be established by clear and convincing evidence.

         10. Disciplinary Proceedings: Rules of the Supreme Court. Collectively, subsections (a) and (b) of Neb. Ct. R. of Prof. Cond. § 3-501.15 prohibit the commingling of client funds with an attorney's personal funds.

         11. Disciplinary Proceedings. Generally speaking, an attorney violates the rule against commingling when the funds of the client are intermingled with those of the attorney in such a way that their separate identity is lost and they may be used by the attorney for personal expenses or subjected to the claims of the attorney's creditors.

         12. Disciplinary Proceedings: Proof: Circumstantial Evidence. Disciplinary violations can be proved by circumstantial evidence.

         13. Disciplinary Proceedings: Attorneys at Law. In the context of attorney discipline cases, the Nebraska Supreme Court has repeatedly recognized the ancient maxim that ignorance of the law is no excuse. It is a maxim sanctioned by centuries of experience and it applies with even greater emphasis to an attorney at law who is expected to be learned in the law.

         14. Disciplinary Proceedings. Neither good faith nor ignorance of the rules prohibiting commingling client and personal funds provides a defense to a disciplinary charge that an attorney violated the rules against commingling.

         15. ___. To determine whether and to what extent discipline should be imposed in an attorney discipline proceeding, the Nebraska Supreme Court considers the following factors: (1) the nature of the offense, (2) the need for deterring others, (3) the maintenance of the reputation of the bar as a whole, (4) the protection of the public, (5) the attitude of the respondent generally, and (6) the respondent's present or future fitness to continue in the practice of law.

         16. ___. Each attorney discipline case must be evaluated in light of its particular facts and circumstances.

         17. ___. For purposes of determining the proper discipline of an attorney, the Nebraska Supreme Court considers the attorney's actions both underlying the events of the case and throughout the proceeding, as well as any aggravating or mitigating factors.

         [300 Neb. 908] 18. ___. In attorney discipline cases, the propriety of a sanction must be considered with reference to the sanctions imposed in prior similar cases.

         19. Disciplinary Proceedings: Rules of the Supreme Court. Under Neb. Ct. R. § 3-304, the Nebraska Supreme Court may impose one or more of the following disciplinary sanctions: (1) disbarment; (2) suspension; (3) probation, in lieu of or subsequent to suspension; (4) censure and reprimand; or (5) temporary suspension.

         20. Disciplinary Proceedings. The Nebraska Supreme Court considers commingling of client funds with an attorney's own funds to be a matter of gravest concern in reviewing claims of lawyer misconduct.

         21. ___. The goal of attorney discipline proceedings is not as much punishment as a determination of whether it is in the public interest to allow an attorney to keep practicing law.

         22. ___. Providing for the protection of the public requires the imposition of an adequate sanction to maintain public confidence in the bar.

         23. ___. An attorney's admission of responsibility for his or her actions reflects positively upon his or her attitude and character and is to be considered in determining the appropriate discipline.

         24. ___. Because cumulative acts of attorney misconduct are distinguishable from isolated incidents, they justify more serious sanctions. Cumulative acts of misconduct can, and often do, lead to disbarment.

         25. Disciplinary Proceedings: Words and Phrases. In the context of attorney disciplinary proceedings, misappropriation is any unauthorized use of client funds entrusted to an attorney, including not only stealing, but also unauthorized temporary use for the attorney's own purpose, whether or not the attorney derives any personal gain or benefit therefrom.

         26. Disciplinary Proceedings. Lack of financial harm to clients is not a mitigating factor in disciplinary proceedings where an attorney has commingled client and personal funds.

         27. ___. Absent mitigating circumstances, disbarment is the appropriate discipline in cases of misappropriation or commingling of client funds.

         28. Disciplinary Proceedings: Presumptions. Mitigating factors may overcome the presumption of disbarment in misappropriation and commingling cases where they are extraordinary and substantially outweigh any aggravating circumstances.

          Original action. Judgment of disbarment.

          William F. Austin, Special Prosecutor, of Blake & Austin Law Firm, L.L.P., for relator.

         [300 Neb. 909] John C. Nimmer, pro se.

          Heavican, C.J., Miller-Lerman, Cassel, Stacy, Funke, and Papik, JJ., and Dobrovolny, District Judge.

          PER CURIAM.

         On February 1, 2017, the Counsel for Discipline of the Nebraska Supreme Court filed formal charges against John C. Nimmer, alleging he violated Neb. Ct. R. of Prof. Cond. §§ 3-501.15 and 3-508.4 (rev. 2016) and his oath of office as an attorney licensed to practice in Nebraska[1] by commingling personal funds with client trust account funds. This court appointed a referee who held an evidentiary hearing and then filed a report finding Nimmer had violated the disciplinary rules by depositing personal funds into his client trust account and using his client trust account to pay personal expenses. The referee recommended a 1 -year suspension followed by a 2-year period of probation. Nimmer filed an exception to the referee's report, challenging both the finding that he violated the disciplinary rules and the recommended sanction.

         We find by clear and convincing evidence that Nimmer commingled client funds with personal funds, in violation of §§ 3-501.15 and 3-508.4 of the Nebraska Rules of Professional Conduct and his oath of office. Furthermore, we conclude on this record that the appropriate sanction for Nimmer's misconduct is disbarment.

         I. BACKGROUND

         Nimmer was admitted to the practice of law in the State of Nebraska in 1993, and since that time has practiced primarily in Omaha and Bellevue, Nebraska. In 2004, Nimmer opened a client trust account at an Omaha area bank. The manner in which Nimmer has used that client trust account is the central issue in this disciplinary proceeding.

         [300 Neb. 910] 1. Grievance and Investigation

         In a letter dated March 11, 2016, the enforcement division of the U.S. Securities and Exchange Commission (SEC) notified the Counsel for Discipline of "possible professional misconduct" by Nimmer. The SEC had subpoenaed records from Nimmer's client trust account in connection with an unrelated investigation and reported that its "review of Nimmer's trust account transactions revealed that he wrote numerous checks for personal expenses, ranging from rent and child support to dog boarding and landscaping fees." On March 18, the Counsel for Discipline notified Nimmer that he was the subject of an investigation and provided him a copy of the grievance.[2]

         On June 8, 2016, the Counsel for Discipline provided Nimmer with copies of the bank records subpoenaed by the SEC and asked him to explain several checks written on his client trust account that did not appear to be client related. Nimmer was also asked to explain a $10, 000 check from his mother with the memorandum notation "loan" which had been deposited into his client trust account. Nimmer declined, at the time, to answer the questions posed by the Counsel for Discipline.

         The Counsel for Discipline then subpoenaed Nimmer's client trust account records directly from the bank. Through two subpoenas, records were obtained for the time period from January 1, 2006, through September 1, 2016. After reviewing these records, the Counsel for Discipline determined there were reasonable grounds for discipline, and thus reduced the SEC's grievance to a complaint and forwarded it to the Committee on Inquiry of the Fourth Judicial District.[3] Thereafter, the inquiry panel found reasonable grounds for discipline and determined it would be in the public's interest to file formal charges.[4]

         [300 Neb. 911] 2. Formal Charges

         On February 1, 2017, the Counsel for Discipline filed formal charges against Nimmer. It alleged that between January 2006 and February 2016, Nimmer wrote personal checks on his client trust account to 29 different businesses, individuals, and organizations. Additionally, it alleged that on December 20, 2007, Nimmer deposited a $10, 000 check from his mother issued to him with the notation "loan" into his client trust account. The formal charges alleged that by using his client trust account in this fashion, Nimmer commingled his personal funds with client funds and thereby violated his oath of office as an attorney licensed to practice in Nebraska[5] and § 3-501.15, which provides in part:

(a) A lawyer shall hold property of clients or third persons that is in a lawyer's possession in connection with a representation separate from the lawyer's own property. Funds shall be kept in a separate account maintained in the state where the lawyer's office is situated. Other property shall be identified as such and appropriately safeguarded. Complete records of such account funds and other property shall be kept by the lawyer and shall be preserved for a period of 5 years after termination of the representation.
(b) A lawyer may deposit the lawyer's own funds in a client trust account for the sole purpose of paying bank service charges on that account, but only in an amount necessary for that purpose.

         The formal charges also alleged Nimmer's actions violated § 3-508.4, which provides in relevant part that it is professional misconduct for a lawyer to "violate or attempt to violate the Rules of Professional Conduct."[6]

         [300 Neb. 912] 3. Nimmer Moves to Dismiss and Recuse

         Nimmer filed a motion to dismiss the formal charges, alleging the Counsel for Discipline "is part of the Nebraska judicial branch under the direct supervision of this Court, which violates separation of powers, which violates constitutional due process, which in turn negates [the Counsel for Discipline] from having standing to have filed the Formal Charges, thereby constituting a lack of subject matter jurisdiction." This court overruled Nimmer's motion to dismiss as meritless.[7]

         Nimmer also moved to recuse the Counsel for Discipline, alleging he had a conflict of interest because Nimmer planned to call him as a necessary fact witness. We overruled his motion to recuse, but determined it was prudent under the circumstances to appoint a special prosecutor.

         4. Nimmer Files Answer and Second Motion to Dismiss

         After his motion to dismiss was overruled, Nimmer filed a verified answer to the formal charges. His answer admitted some of the factual allegations in the formal charges, but generally denied that his conduct amounted to commingling in violation of the disciplinary rules. Additionally, Nimmer's answer raised several affirmative defenses which will be addressed later in this opinion.

         Nimmer also filed a second motion to dismiss, this time asking that the disciplinary proceeding be dismissed without prejudice due to alleged procedural errors predating the filing of the formal charges. This court found the motion was merit-less and overruled it.

         [300 Neb. 913] 5. Nimmer Seeks to Exclude Client Trust Account Records

         Nimmer filed "Motions to Quash Subpoenas and Exclude Evidence," seeking to prevent his client trust account records from being offered at the disciplinary hearing. He argued the records had been obtained improperly and suggested the SEC had violated federal privacy laws when it provided his trust account records to the Counsel for Discipline in connection with the grievance. Nimmer acknowledged that after receiving the grievance, the Counsel for Discipline independently subpoenaed the trust account records as part of the disciplinary investigation.[8] Nimmer did not claim those subpoenas were unreasonable or oppressive, [9] but argued he did not have an opportunity to object and thus asked that all records produced in response to those subpoenas be excluded.

         Additionally, Nimmer asked that any client trust account records more than 5 years old be excluded even if more recent records were admitted. In support, Nimmer relied on § 3-501.15(a), which requires attorneys to maintain complete records of client property for 5 years after termination of the representation. Nimmer claimed that because he had not retained any client records predating 2011, the Counsel for Discipline should be prevented from offering any subpoenaed trust account records for that period.

         The referee found no merit to Nimmer's arguments for exclusion of the subpoenaed trust account records and overruled the motions.

         6. Evidentiary Hearing On December 4, 2017, an evidentiary hearing was held on the formal charges. Nimmer represented himself and was the only witness to testify.

         [300 Neb. 914] (a) Exhibits

         The special prosecutor introduced, and the referee received. Nimmer's client trust account records from 2006 through 2016. Nimmer did not dispute the veracity of those records and instead stated, "I'll concede every transaction in this exhibit is a bona fide transaction. Whatever the notations say, they say. . . . [T]he exhibit speaks for itself."

         The special prosecutor also introduced, and the referee received, a record of a prior attorney disciplinary proceeding involving Nimmer. In 2013, the Counsel for Discipline alleged Nimmer had received $12, 500 from a client to deliver "qualified investors" as advertised on his website and then failed to provide such services.[10] Nimmer's actions were alleged to have violated Neb. Ct. R. Prof. Cond. § 3-507.1 and § 3-508.4(a).[11]Nimmer entered a conditional admission to the 2013 charges and requested a public reprimand.[12] This court accepted his conditional admission and issued a public reprimand.[13]

         (b) Nimmer's Testimony As stated, at the hearing, Nimmer did not dispute the veracity of the client trust account records or the accuracy of the notations on various checks deposited into and written on the client trust account. For instance, Nimmer admitted writing numerous checks for personal expenses from his client trust account over the course of several years, including checks for rent, checks to his church, checks to his mother, and checks for his daughter's summer camp. He also admitted his mother had given him thousands of dollars that he deposited into his client trust account. Nimmer characterized these deposits as "credit line[s]," rather than "loan[s]" from his mother, but he admitted the funds were placed into his client [300 Neb. 915] trust account and were available for his personal use "or hers, if she asked."

         Nimmer also admitted that on several occasions, he transferred funds from his personal checking account into his client trust account. He admitted these funds were not transferred to pay bank service charges and were not connected to the representation of any client.

         (c) Nimmer's Affirmative Defenses

         While Nimmer did not vigorously contest the documentary evidence detailing the non-client-related funds going into and out of his client trust account, he did argue that this activity did not amount to unlawful commingling. In support of this contention, Nimmer advanced three basic arguments, which he framed as affirmative defenses. First, he argued that writing personal checks directly from his client trust account was not a violation of § 3-501.15, because it was possible he was writing those checks on earned fees. Second, he argued § 3-501.15 does not prohibit attorneys from depositing non-client-related funds into a client trust account. And third, he argued that even if the referee found he had violated the rules against commingling personal and client funds, he acted in "good faith" and thus should be exempt from discipline. He makes these same arguments in his briefing to this court, and we address them later in our analysis.

         7. Referee's Report and Recommendation On February, 13, 2018, the referee filed his written report. The referee found, summarized, that from January 1, 2006, through September 1, 2016, Nimmer impermissibly deposited personal funds into his client trust account in amounts more than necessary to pay bank service charges on that account and used his client trust account to pay personal expenses. It is not necessary to recite all of the referee's factual findings, but the following are representative:

[300 Neb. 916]• On or about December 20, 2007, Nimmer deposited a $10, 000 check from his mother with the notation "'loan'" into his client trust account. Nimmer admitted these funds were for his personal use, but were also available to pay his mother's personal expenses if she asked. In that regard, Nimmer wrote a check from the client trust account in the amount of $4, 775 to a construction company for repairs to his mother's house, and wrote several checks to his mother for a car he was purchasing from her. None of these checks or transactions were connected to representation of a client.
• On or about June 25, 2013, Nimmer deposited two checks totaling $10, 855.18 into his client trust account. The checks had been made payable to Nimmer's mother, and she endorsed both checks over to him. Nimmer described this deposit as a '"credit line'" from his mother. He admitted the funds were not connected to the representation of any client, but, rather, were intended to be used by Nimmer for his personal expenses if necessary.
• On multiple occasions in 2014 and 2016, Nimmer transferred money from his personal checking account into his attorney trust account. Nimmer admitted these transfers were not to pay bank fees and were not in connection with any client representation, but he claimed the transfers were "for the benefit of his daughter.
• Nimmer wrote approximately 35 checks on his client trust account to his church, with notations such as "dues," "Almsgiving Fund," "dinner tickets," and "Food for Hungry Funds." Nimmer admitted the notations on the checks were accurate and the payments were not made in connection with client representation.
• Nimmer wrote multiple checks over multiple years out of his client trust account to Camp St. Raphael. Nimmer admitted those checks were for his daughter's summer camp and were not connected to any client representation.
• Nimmer wrote approximately 20 checks on his client trust account payable to the landlord of his Omaha law office [300 Neb. 917] in the amount of either $1, 750, $2, 000, or some multiple thereof. Nimmer admitted these checks ...

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