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Terry J. Preszler (WSBA No. 13836, admitted 1983), of Kennewick, was suspended for three years, effective June 17, 2010, by order of the Washington State Supreme Court, following an appeal. This discipline was based on conduct involving charging unreasonable fees, providing erroneous legal advice, submitting false documents to a tribunal, failing to supervise a non-lawyer employee, and disbursing funds without permission of the court. See In re Disciplinary Proceeding Against Preszler 169 Wn.2d 1, 232 P.3d 1118 (2010) (No. 200,570-5).
On December 19, 2000, Clients K and J hired Mr. Preszler to represent them in a chapter 13 bankruptcy. Client K told Mr. Preszler of her unresolved pre-bankruptcy personal injury claim stemming from an auto accident that occurred on September 6, 2000. Without learning the details of the injury claim or its value, Mr. Preszler listed the claim as an asset of the bankruptcy estate with a current value of $16,150 when he filed the chapter 13 bankruptcy on April 4, 2001. On October 12, 2001, the U.S. Bankruptcy Court for the Eastern District of Washington entered the order confirming Client K and J’s chapter 13 plan. At the time, Mr. Preszler did not represent Client K in her personal injury claim.
By August 18, 2003, Client K had not settled her claim and the statute of limitations was about to run. The clients met with Mr. Preszler, who told them that he believed Client K’s claim was worth $53,000, which Client K said she would accept. Mr. Preszler said he was not interested in handling the case because of the statute of limitations, but as a courtesy he would contact the insurance adjuster handling the claim. Mr. Preszler and Clients K and J understood he would not receive a fee for his help. The insurance adjuster told Mr. Preszler that she needed additional medical information from Client K before the claim could be reevaluated. The adjuster did not believe that Mr. Preszler was representing Client K. Mr. Preszler instructed Client K to deliver the necessary records to the adjuster and reiterated that he did not want to take the case.
On August 19, 2003, the clients met with Mr. Preszler. Client J wanted to hire Mr. Preszler to handle the personal injury claim, but Client K had suffered a personal loss the day before and was too emotional to make a decision. Mr. Preszler advised her not to decide that day and she did not hire him.
On August 20, 2003, Client K saw her doctor and requested that he fax her medical records to the insurance adjuster. The next day, Client K called the adjuster to discuss her claim and, at her request, the adjuster sent a letter outlining their conversation to Mr. Preszler, who reviewed it. On August 22, 2003, after receiving the medical information, the adjuster called Client K and offered her policy limits of $50,000, out of which $19,000 would reimburse Insurance Company B for PIP benefits and the remaining $31,000 would go to Client K. To accept the offer, Client K needed to sign a release of claims against the insurance company’s insured. At Client K’s request, the adjuster faxed the release and a letter confirming the settlement offer to Mr. Preszler.
That same day, Client K met with Mr. Preszler to discuss the settlement paperwork. Mr. Preszler explained that he could ask for the personal injury exemption in the bankruptcy plan to be increased from $16,150 to $17,425, but the remainder of the settlement proceeds would go to Client K and J’s creditors in the bankruptcy. Mr. Preszler did not advise Client K that almost $10,000 more could have been exempted under the “Wild Card” exemption. Client K signed a contingency fee agreement with Mr. Preszler, which was backdated to August 18, 2003. The fee agreement provided that Mr. Preszler would receive one-third of the remaining $31,000. Mr. Preszler promised that Client K would receive $17,425 and handwrote a guarantee to that effect on the fee agreement.
Mr. Preszler sent the settlement paperwork to the adjuster and requested a settlement check payable to Client K and himself. On August 27, 2003, Mr. Preszler’s office received the check and deposited it as a credit to Client K in Mr. Preslzer’s trust account. Mr. Preszler instructed his paralegal to contact the bankruptcy trustee to determine the process for disbursing the funds to himself. Based on directions from the trustee’s employee, Mr. Preszler’s paralegal drafted an application for an order approving Mr. Preszler’s appointment as an attorney for the trustee in the personal injury claim. Being unfamiliar with the application, Mr. Preszler asked his paralegal if the trustee wanted the application; the trustee confirmed he did. Mr. Preszler signed the application without reading it thoroughly or fully understanding it. The application described Mr. Preszler as a fiduciary to Client K and J’s bankruptcy estate and represented, under penalty of perjury, that “the case needs an attorney to settle” and that Mr. Preszler would render services to “settle with [the insurance company] the personal injury claim” and would be paid pursuant to the contingent fee agreement executed by Client K. The application required Mr. Preszler to take payment under the contingent fee agreement in accordance with federal law and bankruptcy court rules which require approval by the bankruptcy judge prior to the time payment is disbursed. When the trustee received the application, he did not know that Client K’s claim had already been settled.
With the settlement in hand, Mr. Preszler prepared and reviewed the bankruptcy schedules. He did not indicate the current market value of Client K’s personal injury claim. Schedule C claimed that $17,425 of the proceeds from the car accident claim was exempt from creditors, but Mr. Preszler wrote “[u]nknown” in the schedule C space for the current market value of the car accident claim. On August 29, 2003, Clients K and J signed the amended schedules. After reviewing the amended schedules, the trustee learned about the settlement with Insurance Company, and discovered the fee agreement bore the date of August 18, 2003, when it had actually been signed on August 22, 2003. Although the trustee had concerns, he did not pursue them.
On September 3, 2003, Mr. Preszler’s paralegal was told that the trustee signed the application but could not file it until Clients K and J agreed to commit nonexempt proceeds from Client K’s personal injury claim to funding the bankruptcy plan. Mr. Preszler signed and filed a stipulation agreeing to commit the nonexempt proceeds to funding the plan. Mr. Preszler’s paralegal prepared an order approving employment, which Mr. Preszler signed. The order stated Mr. Preszler was employed for an ongoing personal injury case and provided that Mr. Preszler would “continue the personal injury case in order to obtain a resolution and settlement.” The order mandated that compensation accord with federal statutes and bankruptcy court rules requiring Mr. Preszler request court approval to disburse prior to doing so. Mr. Preszler and the bankruptcy judge signed the order.
On September 15 and 16, 2003, without first obtaining a court order, Mr. Preszler disbursed $10,323 to himself from Clients K and J’s trust account. Mr. Preszler did not prepare a settlement statement nor did he disclose the disbursement to the clients, the trustee, or the bankruptcy court.
In late September 2003, Client K learned that she might have been able to use more of the settlement payment to reduce the term of her chapter 13 bankruptcy plan. She hired a new bankruptcy attorney, who informed Mr. Preszler that he had failed to use the wild card exemption. The new attorney asked Mr. Preszler to waive his fee so that the exemptions could be amended to provide the clients with an additional $9,650 of personal injury claim recovery. He also indicated the rest of the settlement could be used to reduce the term of the client’s plan and that Mr. Preszler was not entitled to the contingent fee because the case had settled prior to the execution of the agreement. The attorney demanded that Mr. Preszler pay the clients all money received from Insurance Company. He also demanded an itemization of the money actually received, how much had been paid to the clients, and a check for the difference. The attorney offered to have Clients K and J sign a release of all claims against Mr. Preszler.
Mr. Preszler compiled with the demands and reimbursed his trust account with the contingent fee he had taken. However, the itemization did not include the portion of the client ledger related to his disbursement to himself or the replacement of the funds back to the trust account. After Clients K and J signed the release, Mr. Preszler issued a check to Client K. The new attorney filed a new amended schedule that included an additional exemption of the personal injury claim proceeds and applied the remaining proceeds to reduce the number of payments to creditors.
In his appeal of the Disciplinary Board’s decision, Mr. Preszler did not argue he did nothing wrong. Rather, he argued that a single instance of impropriety did not justify a finding of conduct prejudicial to the administration of justice; that two counts of misconduct should be merged; and that the Disciplinary Board erred in its sanctions analysis. The Court upheld the Board’s recommendation for a three-year suspension.
Mr. Preszler’s conduct violated former RPC 1.5(a), requiring a lawyer’s fee be reasonable; former RPC 1.4(b), requiring a lawyer to explain a matter to the extent reasonably necessary to permit the client to make informed decisions regarding the representation; former RPC 3.4(c), prohibiting a lawyer from knowingly disobeying an obligation under the rules of a tribunal except for an open refusal based on an assertion that no valid obligation exists; former RPC 5.3(b) and (c)(1), requiring a lawyer with direct supervisory authority over a non-lawyer to make reasonable efforts to ensure that the person’s conduct is compatible with the professional obligations of the lawyer, and requiring the lawyer be responsible for conduct of such a person that would be a violation of the RPC if engaged in by a lawyer, if the lawyer orders or, with knowledge of the conduct, ratifies the conduct involved; and former RPC 8.4(d), prohibiting a lawyer from engaging in conduct that is prejudicial to the administration of justice.
Jonathan H. Burke represented the Bar Association at hearing. Joanne S. Abelson represented the Association on appeal. Kurt M. Bulmer represented Mr. Preszler. Lewis W. Card was the hearing officer. |