IN THE SUPREME COURT OF IOWA
No. 22–0376
Submitted September 15, 2022—Filed November 10, 2022
IOWA SUPREME COURT ATTORNEY DISCIPLINARY BOARD,
Appellee,
vs.
BONNIE J. HEGGEN,
Appellant.
On appeal from the report of the Iowa Supreme Court Grievance
Commission.
In an attorney disciplinary action, the grievance commission recommends
a six-month suspension for the attorney’s violation of ethical rules. LICENSE
SUSPENDED.
McDonald, J., delivered the opinion of the court, in which all justices
joined.
David L. Brown of Hansen, McClintock & Riley, Des Moines, for appellant.
Alexis W. Grove, Des Moines, for appellee.
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McDONALD, Justice.
The Iowa Supreme Court Attorney Disciplinary Board charged attorney
Bonnie Heggen with violating multiple rules of professional conduct related to
the management of her client trust account and a retainer paid by a client. A
division of the Iowa Supreme Court Grievance Commission found Heggen
violated several rules of professional conduct but found the Board failed to prove
Heggen violated several others, including Iowa Rules of Professional Conduct
32:1.5(a) (prohibiting an attorney from charging or collecting an unreasonable
fee) and 32:8.4(b) (prohibiting an attorney from committing a criminal act “that
reflects adversely on the lawyer’s honesty, trustworthiness, or fitness as a lawyer
in other respects”). The commission recommended suspending Heggen’s license
for six months. Heggen filed this appeal. She challenges only the commission’s
recommended sanction. The Board cross-appealed the commission’s
recommendation. The Board argues Heggen converted client funds, in violation
of Iowa Rules of Professional Conduct 32:1.5(a) and 32:8.4(b), and the
appropriate sanction should be the revocation of Heggen’s license to practice law.
I.
This court reviews attorney disciplinary proceedings de novo. Iowa Sup.
Ct. Att’y Disciplinary Bd. v. Kozlik, 943 N.W.2d 589, 594 (Iowa 2020). The Board
must prove each alleged ethical violation by a convincing preponderance of the
evidence. Iowa Sup. Ct. Att’y Disciplinary Bd. v. Rhinehart, 953 N.W.2d 156, 162
(Iowa 2021). “A convincing preponderance of the evidence lies between the
preponderance-of-the-evidence standard in a civil case and the
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reasonable-doubt standard in a criminal case.” Iowa Sup. Ct. Att’y Disciplinary
Bd. v. Noyes, 936 N.W.2d 440, 442 (Iowa 2019).
II.
Heggen was admitted to practice law in 2004. During the period relevant
to this matter, Heggen worked as a sole practitioner. A focus of Heggen’s practice
was special education law. She assisted families and students in securing special
education services as required by federal and state law. The attorney–client
relationship at issue in this proceeding involves Heggen’s representation of a
family with a student who required special education services.
The first set of disciplinary charges at issue relate to Heggen’s
management, or more accurately, mismanagement of her client trust account.
In 2018, the Iowa Supreme Court Client Security Commission (CSC) audited
Heggen’s client trust account. CSC determined that Heggen had failed to
maintain a check register for her client trust account. It also determined she had
not performed or maintained records of the monthly triple reconciliations of her
client trust account. The auditor explained to Heggen the reconciliation process,
gave her a reconciliation worksheet, and explained the importance of proper
accounting.
The training did not take. In 2020, CSC conducted a second audit of
Heggen’s client trust account. The 2020 audit found Heggen violated multiple
client trust account rules. She failed to deposit funds into her client trust
account. She failed to maintain a receipts and disbursements journal. She failed
to maintain client ledger cards. She failed to retain records of electronic transfers
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from her client trust account. She withdrew fees from her client trust account
before the fees were earned. She failed to notify clients in writing of withdrawals
from her client trust account. And she failed to perform monthly triple
reconciliations of her trust account. Despite Heggen’s ongoing failure to reconcile
her client trust account on a monthly basis, she filed annual statements with
CSC in which she represented that she had done so.
The second set of disciplinary charges against Heggen arise out of her
representation of Joann and Robert Burgett Jr. On January 10, 2020, the
Burgetts retained Heggen to represent them in a dispute with their local school
district. The Burgetts entered into a written attorney fee contract with Heggen.
The attorney fee contract provided the Burgetts were to pay $275 per hour for
all services performed. The attorney fee contract provided the Burgetts were to
pay a retainer of $3,000 plus an advance of $50 for expenses. The attorney fee
contract also contained an unusual provision that provided “[i]f attorney fee is
paid in full by district, Clients receive refund of retainer advanced in the amount
of $3000.00.”
On January 10, pursuant to the attorney fee contract, the Burgetts paid
Heggen the $3,000 retainer and the $50 advance for expenses. Heggen deposited
the funds into her client trust account the same day. She then withdrew the
funds prior to earning the fees or incurring the expenses. On the same day
Heggen deposited the funds, she withdrew $2,555.25 from her client trust
account. On January 16, Heggen withdrew another $475. Heggen did not notify
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the Burgetts of these withdrawals. Heggen’s records show she did not perform
any billable work for the Burgetts until January 20.
Heggen’s representation of the Burgetts was successful. The Burgetts’
dispute with the district was resolved at a mediation occurring on May 22. The
Burgetts agreed to dismiss their complaint against the district and release all
their claims. The Burgetts received no financial consideration as part of the
agreement. In exchange for the dismissal and release, the district agreed to
provide the Burgetts’ son with all of the special education services requested.
The district also agreed to pay “attorney’s fees in the amount of $6765.00 to
Bonnie Heggen.” Because the district agreed to pay Heggen’s fees directly to
Heggen, the Burgetts were contractually entitled to receive a refund of $3,000
from Heggen after she was paid.
On May 24, two days after the successful mediation, Heggen wrote an
email to the Burgetts regarding the refund. Heggen stated she would refund the
$3,000 as soon as she received payment from the district’s insurer. Heggen said
the process usually took two to three weeks. Heggen received her payment from
the district’s insurer on or about June 3.
On July 1, Joann Burgett emailed Heggen about the refund. Heggen
replied the same day, stating, “I should have it for you by the 15th.” Heggen did
not disclose to Joann that the district’s insurer had already paid Heggen. Heggen
did not refund the money by July 15.
On July 21, Robert Burgett Jr. telephoned Heggen and left her a voicemail
about the refund. Two days later, on July 23, Heggen called Joann and left a
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voicemail. Heggen stated that she needed to speak “about the situation” and that
she had encountered a “huge problem” causing her to take “a little longer than
[she] expected to get everything . . . straightened around.” Heggen said the
Burgetts would receive payment in “another two to three weeks.” Heggen stated
the delay was caused by things “completely out of [her] control.” After receiving
the July 23 voicemail from Heggen, Joann called Heggen back. Heggen explained
the delay was due to unexpected personal expenses—she had spent her payment
on a hot water heater and an air conditioner.
Joann phoned Heggen again on August 5. During this call, Heggen stated
she would “try to get [the Burgetts] $2,000” but did not know when the Burgetts
would receive the remaining $1,000. Joann sent Heggen a follow-up email on
August 11. Joann requested the refund as “outlined in our said contract when
we hired you.” Heggen replied the same day and stated the following:
Joann, you cannot be paid with what I don’t have; you and I
are waiting for [the school district’s insurer] to cut me a check for
the fee they agreed to pay. There were outstanding issues that had
to be worked through on behalf of this client. I have a phone call
scheduled with opposing counsel at 3 o’clock today. We will finalize
the last issue and I will file the dismissal this afternoon. So the check
will be cut [in] two or three days. Unfortunately, I don’t control that
end. As soon as I have it, you will be reimbursed. Try to bear in mind
I am currently working on your case again now.
Joann replied to this email and expressed confusion about whether
Heggen had, in fact, already been paid by the school district. In response, Heggen
left Joann a voicemail stating that she had “spent money on things [she] had to
spend money on” and that the Burgetts would receive their money in “a few more
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days.” Heggen stated she had requested the school district’s insurer “cut the
check ASAP.”
On August 26, Heggen paid the Burgetts their refund pursuant to the
parties’ written attorney fee contract.
The Board filed its complaint against Heggen in March 2021. The
commission held a two-day hearing in November. The commission found Heggen
violated Iowa Rules of Professional Conduct 32:1.15, subsections (a), (c), and (d),
and 32:8.4(c) as well as Iowa Court Rules 45.1; 45.2, subsections (2), (3)(a)(1),
(3)(a)(2), and (3)(a)(9); and 45.7, subsections (3) and (4). The commission found
the Board failed to prove violations of Iowa Rules of Professional Conduct
32:1.5(a) (unreasonable fee) and 32:8.4(b) (criminal act). The commission
recommended a six-month suspension of Heggen’s license to practice law.
III.
We first evaluate the charges against Heggen related to her
mismanagement and maladministration of her client trust account. We find
Heggen violated chapter 45, which sets forth the rules governing client trust
accounts. Specifically, we find Heggen violated Iowa Court Rules 45.1; 45.2,
subsections (2), (3)(a)(1), (3)(a)(2), and (3)(a)(9); and 45.7, subsections (3) and (4).
Heggen does not contest the violations, conceding her business practices were
“in disarray.” We thus see no need to discuss the alleged violations in any detail.
In short, a convincing preponderance of the evidence shows Heggen, among
other things, failed to maintain client ledger cards, failed to maintain a receipts
and disbursements journal, failed to deposit client funds in her client trust
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account, failed to promptly deliver client funds to the Burgetts, failed to maintain
records related to her client trust account, failed to perform monthly triple
reconciliations, withdrew money from her client trust account before it was
earned, and failed to notify clients before making withdrawals from her client
trust account.
We also find Heggen violated rule 32:1.15(f), which states “[a]ll client trust
accounts shall be governed by chapter 45 of the Iowa Court Rules.” The
commission concluded rule 32:1.15(f) “is not an ethics rule which stands on its
own [but] is merely the provision which incorporates the client trust account
rules into the ethical standards.” We disagree. “[A] violation of an attorney’s
obligations under chapter 45 also constitutes a violation of rule 32:1.15(f).” Iowa
Sup. Ct. Att’y Disciplinary Bd. v. Eslick, 859 N.W.2d 198, 201 (Iowa 2015).
IV.
We next evaluate the disciplinary charges against Heggen arising out of
her representation of the Burgetts. The commission found Heggen violated rule
32:1.15, subsections (a), (c), and (d), as well as rule 32:8.4(c), but the commission
also found the Board failed to prove by a convincing preponderance of the
evidence that Heggen’s conduct violated rules 32:1.5(a) and 32:8.4(b). We
address the uncontested violations first and the contested violations second.
A.
The commission found Heggen violated rule 32:1.15, subsections (a), (c),
and (d). Heggen does not contest these violations. We agree the Board proved
these violations by a convincing preponderance of the evidence.
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The evidence establishes Heggen violated rule 32:1.15(a). That provision
provides:
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. 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 six years after termination of the
representation.
Iowa R. Prof’l Conduct 32:1.15(a). Heggen withdrew fees from her client trust
account prior to earning the fees. She did this on multiple occasions. Heggen
also intermingled client funds, firm funds, and personal funds, although perhaps
inadvertently due to failure to maintain proper accounting records.
The evidence also establishes that Heggen violated rule 32:1.15(c). That
rule provides, “A lawyer shall deposit into a client trust account legal fees and
expenses that have been paid in advance, to be withdrawn by the lawyer only as
fees are earned or expenses incurred.” Id. r. 32:1.15(c). Heggen violated this rule
when she withdrew fees from her client trust account before earned. See, e.g.,
Comm. on Prof’l Ethics & Conduct of the Iowa State Bar Ass’n v. O’Connor,
329 N.W.2d 1, 4 (Iowa 1983) (en banc).
A convincing preponderance of the evidence also shows Heggen violated
Iowa Rule of Professional Conduct 32:1.15(d), which provides:
Upon receiving funds or other property in which a client or third
person has an interest, a lawyer shall promptly notify the client or
third person. Except as stated in this rule or otherwise permitted by
law or by agreement with the client, a lawyer shall promptly deliver
to the client or third person any funds or other property that the
client or third person is entitled to receive and, upon request by the
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client or third person, shall promptly render a full accounting
regarding such property.
Here, pursuant to the Burgetts’ settlement agreement with the district, the
district paid Heggen. Pursuant to the written attorney fee contract with the
Burgetts, “if” Heggen was “paid in full by district,” then Heggen was contractually
obligated to refund $3,000 to the Burgetts. Pursuant to rule 32:1.15(d), Heggen
was required to “promptly deliver” the contractual refund to the Burgetts. While
Heggen received payment from the district on June 3, she did not refund the
$3,000 until August 26. An almost-three-month delay in issuing a contractual
refund is not prompt. This is particularly true where, as here, the clients
repeatedly contacted the attorney to inquire about the delayed refund.
B.
We find Heggen violated Iowa Rule of Professional Conduct 32:8.4(c). This
rule provides it is misconduct for a lawyer to “engage in conduct involving
dishonesty, fraud, deceit, or misrepresentation.” Id. “[A]n attorney must act with
some level of scienter greater than negligence to violate rule 32:8.4(c).” Iowa Sup.
Ct. Att’y Disciplinary Bd. v. Parrish, 801 N.W.2d 580, 587 (Iowa 2011).
“An attorney’s ‘casual, reckless disregard for the truth’ also establishes sufficient
scienter to support a violation of the rule.” Iowa Sup. Ct. Att’y Disciplinary Bd. v.
Muhammad, 935 N.W.2d 24, 38 (Iowa 2019) (quoting Iowa Sup. Ct. Att’y
Disciplinary Bd. v. Clarity, 838 N.W.2d 648, 656 (Iowa 2013)).
Heggen violated the rule in multiple respects. She made
misrepresentations to CSC when she falsely stated on three annual reports that
she had completed monthly triple reconciliations of her client trust account when
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she had not. See Iowa Sup. Ct. Att’y Disciplinary Bd. v. Vandel, 889 N.W.2d 659,
668–69 (Iowa 2017); Iowa Sup. Ct. Att’y Disciplinary Bd. v. Wengert, 790 N.W.2d
94, 100 (Iowa 2010).
Heggen also engaged in deceitful and dishonest conduct in her dealings
with the Burgetts after receiving payment from the district’s insurer. “When
dealing with a violation of rule 32:8.4(c), the key question we must answer is
whether the effect of the lawyer’s conduct is to mislead rather than to inform.”
Iowa Sup. Ct. Att’y Disciplinary Bd. v. Haskovec, 869 N.W.2d 554, 560
(Iowa 2015). Heggen made misleading statements and misrepresentations to the
Burgetts when they inquired about their contractual refund. In August, Heggen
sent Joann an email in which she stated “you and I are waiting for [the school
district’s insurer] to cut me a check for the fee they agreed to pay.” Later, in a
voicemail, Heggen stated she was trying to get the insurer to “cut the check
ASAP.” Both statements implied Heggen had not yet received her payment from
the district’s insurer. However, at the time Heggen made these statements, she
had already received her payment from the district’s insurer. Heggen clearly
acted with a level of scienter greater than negligence in violation of the rule.
See Parrish, 801 N.W.2d at 587.
C.
We now turn to the contested violations in the Board’s cross-appeal. The
Board contends that Heggen violated rule 32:1.5(a). The rule provides, “A lawyer
shall not make an agreement for, charge, or collect an unreasonable fee or an
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unreasonable amount for expenses, or violate any restrictions imposed by law.”
Iowa R. Prof’l Conduct 32:1.5(a).
We have held that a lawyer in a probate matter who takes a fee prematurely
or without court authorization violates rule 32:1.5(a) because the collection of
the fee violates a restriction imposed by law, namely statutes and court rules
governing probate fees. See Iowa R. Prof’l Conduct 32:1.5(a), cmt. 1 (“A fee that
is otherwise reasonable may be subject to legal limitations, of which the lawyer
should be aware. For example, a lawyer must comply with restrictions imposed
by statute or court rule on the timing and amount of fees in probate.”);
Iowa Sup. Ct. Att’y Disciplinary Bd. v. Saunders, 919 N.W.2d 760, 763
(Iowa 2018) (stating lawyer’s premature collection of probate fee violated court
rule 7.2(4) and thus violated rule 32:1.5(a), and collecting cases); Iowa Sup. Ct.
Bd. of Prof’l Ethics & Conduct v. D’Angelo, 619 N.W.2d 333, 337 (Iowa 2000)
(en banc) (stating Iowa probate law prohibits taking early fee without court
approval and taking unapproved fee is illegal); 16 Gregory C. Sisk & Mark S.
Cady, Iowa Practice Series: Lawyer and Judicial Ethics § 5:5(b)(3), at 211 & n.1
(2019 ed. 2019) [hereinafter Sisk & Cady] (stating rule is applicable when lawyers
take probate fees prematurely, and citing cases).
Outside probate proceedings, we have also held a lawyer violates
rule 32:1.5(a) by retaining an unearned fee. See Iowa Sup. Ct. Att’y Disciplinary
Bd. v. O’Brien, 971 N.W.2d 584, 590 (Iowa 2022) (holding attorney violated
rule 32:1.5(a) when he took a retainer, filed a pleading, “just quit, wholly and
abruptly,” and “refused to return any of the retainer”); Sisk & Cady § 5:5(f)(1), at
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224 (discussing rule 32:1:5(a) and stating the rule requires “any advance
payment for the performance of contemplated legal services is to be refunded if
the work is not performed”). This latter line of cases makes sense because
retention of an unearned fee is necessarily an “unreasonable fee.”
The Board contends that in all circumstances an attorney’s withdrawal of
fees prior to the time the fees have been earned, standing alone, violates
rule 32:1.5(a). In support of its argument, the Board relies on Iowa Supreme
Court Attorney Disciplinary Board v. Parrish, 801 N.W.2d 580. But Parrish does
not support the Board’s argument. Parrish involved an attorney’s handling of
fees in two separate client matters. 801 N.W.2d at 586. The first client paid the
attorney a $10,000 retainer for representation in a criminal case. Id. at 584. After
the termination of the representation, a fee arbitration committee found the
attorney had earned less than $2,000 in fees, but the attorney failed to refund
the remaining balance. Id. at 584–85. The second client fired the attorney and
requested a refund of the unused portion of a $5,000 retainer. Id. at 585. The
attorney failed to refund the unearned portion of the retainer to the client. Id. We
concluded the attorney collected an unreasonable fee in violation of the rule
because the attorney withdrew the entire advance and “then subsequently failed
to return the unearned portions.” Id. at 586. It was the lawyer’s retention of the
unearned fees that constituted an unreasonable fee and not the lawyer’s
premature withdrawal of fees subsequently earned.
With that understanding, we conclude the Board failed to prove Heggen
charged an “unreasonable fee” in violation of rule 32:1.5(a). It is not disputed
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that Heggen withdrew nearly the entire retainer paid by the Burgetts before she
earned any fees, but it is also not disputed that Heggen subsequently earned the
fees and refunded $3,000 to the Burgetts after being paid by the district’s
insurer. After Heggen refunded the retainer, the Burgetts ended up paying only
$50. Generally speaking, an attorney’s withdrawal of a fee from a client trust
account prior to the time it is earned, standing alone, does not constitute a
violation of rule 32:1.5(a). See O’Brien, 971 N.W.2d at 590 (“Failing to refund
unearned fees violates this rule.”). As discussed above, rules 32:1.15(c) and 45.7
directly address an attorney’s early withdrawal of unearned fees and not incurred
expenses. There is no reason to conflate those rules with this separate rule.
D.
The Board also contends Heggen violated rule 32:8.4(b). The rule states
that it is professional misconduct for a lawyer to “commit a criminal act that
reflects adversely on the lawyer’s honesty, trustworthiness, or fitness as a lawyer
in other respects.” Iowa R. Prof’l Cond. 32:8.4(b). “When assessing whether a
lawyer has violated rule 32:8.4(b), we consider ‘[t]he nature and circumstances
of the act . . . to determine if the commission of the criminal act reflects adversely
on the attorney’s fitness to practice law.’ ” Iowa Sup. Ct. Att’y Disciplinary Bd. v.
Aeilts, 974 N.W.2d 119, 125 (Iowa 2022) (alteration and omission in original)
(quoting Iowa Sup. Ct. Att’y Disciplinary Bd. v. Schmidt, 796 N.W.2d 33, 40
(Iowa 2011)). A formal criminal charge or conviction is not required to find a
violation under rule 32:8.4(b). Iowa Sup. Ct. Att’y Disciplinary Bd. v. Thomas,
844 N.W.2d 111, 116 (Iowa 2014). However, the Board must still establish by a
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convincing preponderance of the evidence that the attorney committed “a
criminal act.”
The Board contends that Heggen committed theft, as defined in Iowa Code
section 714.1 (2020). As relevant here, Iowa Code section 714.1 provides:
A person commits theft when the person does any of the
following:
1. Takes possession or control of the property of another, or
property in the possession of another, with the intent to deprive the
other thereof.
2. Misappropriates property which the person has in trust, or
property of another which the person has in the person’s possession
or control, whether such possession or control is lawful or unlawful,
by using or disposing of it in a manner which is inconsistent with or
a denial of the trust or of the owner’s rights in such property, or
conceals found property, or appropriates such property to the
person’s own use, when the owner of such property is known to the
person.
The commission found the Board failed to prove Heggen committed the
criminal act of theft. Relying on section 714.1(1), the commission found Heggen
did not commit theft because she did not have the “intent to deprive” the Burgetts
of the retainer. The Board counters that this was error. Relying on
section 714.1(2), the Board contends Heggen misappropriated the Burgetts’
property. As the Board explains it:
By the time of mediation, Heggen had already paid herself $3000 of
those fees, meaning she was only entitled to an additional $3765.
The rest of it belonged to the Burgetts. When the check came from
the insurance company, Heggen took and used the entire $6765.
Although Heggen had only earned $6765 in fees, she paid herself a
total of $9765. Heggen paid herself her attorney fees twice, and in
so doing, she stole from the Burgetts.
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Like the commission, we conclude on the unique facts and circumstances
of this case that the Board failed to meet its evidentiary burden in proving Heggen
committed the criminal act of theft. Iowa Code section 714.1(2) defines theft as
misappropriation of “property which the person has in trust, or property of
another which the person has in the person’s possession or control.” In attorney
disciplinary cases, “[w]e use the same definition of misappropriation as the
criminal act.” Iowa Sup. Ct. Att’y Disciplinary Bd. v. Suarez-Quilty, 912 N.W.2d
150, 158 (Iowa 2018). The theft statute requires proof the specific property
allegedly stolen—in this case, the check from the district and the proceeds
therefrom—was property of another either held in trust by the perpetrator or in
the possession or control of the perpetrator. See State v. Caslavka, 531 N.W.2d
102, 105 (Iowa 1995) (discussing theft by misappropriation); State v. Galbreath,
525 N.W.2d 424, 426–27 (Iowa 1994) (same).
The Board failed to prove by a convincing preponderance of the evidence
that Heggen misappropriated the Burgetts’ property. Here, Heggen and the
Burgetts entered into an unusual attorney fee contract. The Burgetts agreed to
pay a retainer of $3,000. The attorney fee contract then gave the Burgetts a right
to receive a refund in the amount of $3,000 “if attorney fee is paid in full by
district.” (Emphasis added.) The Burgetts’ right to receive payment was thus
contractual and contingent upon Heggen first being paid by the district. Heggen
successfully mediated the matter for the Burgetts. Like the attorney fee contract,
the settlement agreement was unusual. The settlement agreement provided no
financial consideration to the Burgetts. Pursuant to the terms of the settlement
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agreement, the school district was to pay “the amount of $6,765.00 to Bonnie
Heggen.” (Emphasis added.)
Thus, when the insurer sent a check directly to Heggen, made payable to
Heggen, and for Heggen, she had legal title to and possession of the check as
well as the proceeds from the same. The Burgetts had no legal right to the check
or the proceeds that could support a claim of misappropriation of their property.
See e.g., Caslavka, 531 N.W.2d at 105 (reversing theft conviction and explaining
misappropriation); Galbreath, 525 N.W.2d at 427 (same); State v. Topic,
No. 13–0836, 2014 WL 3748206, at *2 (Iowa Ct. App. July 30, 2014) (reversing
theft conviction where $6,000 check at issue did not belong to alleged victim).
Indeed, if the district had failed to pay Heggen pursuant to the terms of the
settlement agreement, Heggen—and not the Burgetts—would have the right to
sue the district for the money owed Heggen. In short, under the unique facts and
circumstances of this case, involving both an unusual attorney fee contract and
an unusual settlement agreement, it was Heggen’s check, and it was Heggen’s
money.
Our conclusion in this case is in line with Larew v. Hope L. Firm, P.L.C.,
977 N.W.2d 47 (Iowa 2022). Larew involved a dispute over a contingent fee award
between a law firm and an attorney who was formerly of counsel at the law firm.
Id. at 51–52. The attorney alleged the firm committed conversion by placing the
disputed contingent fee in its business account rather than in a trust account.
Id. at 54–55. The firm countered that, per the of-counsel agreement between the
attorney and the firm, the fees earned by the attorney belonged to the firm. Id.
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at 55. We rejected the attorney’s conversion claim since the right to recover a
portion of the contingent fee from the firm was contractual in nature. Id. at
62–63. As we stated, “[N]o conversion claim exists where the dispute arises solely
out of contractual obligations.” Id. at 63. While the attorney had a contractual
right to some amount of money as a result of representing the client and winning
the contingent fee, the attorney had no right to the specific money received by
the firm as a contingent fee. See id. at 61.
The Board points to other decisions of this court where we sanctioned
attorneys for misappropriating client funds, but those cases are distinguishable.
Each case involved a lawyer misappropriating what was undisputedly other
people’s property. See, e.g., Kozlik, 943 N.W.2d at 595–96 (concluding attorney
violated rule by paying himself funds of estate which were held in trust for estate
beneficiaries); Iowa Sup. Ct. Att’y Disciplinary Bd. v. Den Beste, 933 N.W.2d 251,
254 (Iowa 2019) (concluding attorney violated rule by retaining fees that
belonged to his law firm); Iowa Sup. Ct. Att’y Disciplinary Bd. v. Kowalke,
918 N.W.2d 158, 162 (Iowa 2018) (concluding attorney violated rule by paying
assets of estate to himself); Suarez-Quilty, 912 N.W.2d at 155 (holding attorney
improperly failed to return advance payment to client); Iowa Sup. Ct. Att’y
Disciplinary Bd. v. Guthrie, 901 N.W.2d 493, 498–99 (Iowa 2017) (holding
attorney misappropriated client funds by billing client for unperformed work);
Iowa Sup. Ct. Att’y Disciplinary Bd. v. Kelsen, 855 N.W.2d 175, 185 (Iowa 2014)
(revoking license where attorney converted $7,500 cost retainer paid by client);
Thomas, 844 N.W.2d at 117 (holding attorney misappropriated client’s
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settlement money for his own purposes); Wengert, 790 N.W.2d at 100 (holding
attorney misappropriated client’s settlement funds intended to pay subrogation
obligation); Iowa Sup. Ct. Bd. of Prof’l Ethics & Conduct v. Bell, 650 N.W.2d 648,
655 (Iowa 2002) (finding attorney misappropriated funds by embezzling from
organization for which he acted as treasurer).
Our decision on the unique facts of this case does not call into question
our cases involving the conversion and theft of other people’s property. We simply
hold the Board failed to meet its evidentiary burden in proving Heggen engaged
in theft or conversion of her clients’ funds given the unique combination of
contractual arrangements presented here. The Board thus failed to prove Heggen
committed a criminal act in violation of rule 32:8.4(b).
E.
In sum, on our de novo review, we find and conclude Heggen violated Iowa
Rules of Professional Conduct 32:1.15, subsections (a), (c), (d), and (f), and
32:8.4(c) as well as Iowa Court Rules 45.1; 45.2, subsections (2), (3)(a)(1),
(3)(a)(2), and (3)(a)(9); and 45.7, subsections (3) and (4). The Board failed to prove
Heggen violated Iowa Rule of Professional Conduct 32:1.5(a) or 32:8.4(b).
V.
Having concluded Heggen violated several rules of professional conduct,
we now must consider the appropriate sanction. “There is no standard sanction
for a particular type of misconduct, and though prior cases can be instructive,
we ultimately determine an appropriate sanction based on the particular
circumstances of each case.” Iowa Sup. Ct. Att’y Disciplinary Bd. v. Earley,
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729 N.W.2d 437, 443 (Iowa 2007). “We do, however, seek a degree of consistency
in our disciplinary cases with respect to sanctions.” Iowa Sup. Ct. Att’y
Disciplinary Bd. v. Taylor, 814 N.W.2d 259, 268 (Iowa 2012). “In determining an
appropriate sanction, we consider ‘the nature of the violations, the need for
deterrence, protection of the public, maintenance of the reputation of the Bar as
a whole, and the violator’s fitness to continue to practice law,’ as well as any
aggravating and mitigating circumstances.” Earley, 729 N.W.2d at 443
(quoting Iowa Sup. Ct. Bd. of Prof’l Ethics & Conduct v. Ramey, 639 N.W.2d 243,
245 (Iowa 2002)).
Heggen acknowledges some level of discipline is warranted and suggests a
public reprimand. There are some mitigating factors in this case. Heggen has no
disciplinary history. See, e.g., Iowa Sup. Ct. Att’y Disciplinary Bd. v. Kersenbrock,
821 N.W.2d 415, 422 (Iowa 2012). As the commission found, she “fully
cooperated with the Board’s investigation” and admitted “some of her
wrongdoing.” See Eslick, 859 N.W.2d at 202 (“[R]emorse and cooperation
generally mitigate our sanction.”). She also provides legal services to students
with special education needs, an underserved and vulnerable population.
See, e.g., Iowa Sup. Ct. Att’y Disciplinary Bd. v. Santiago, 869 N.W.2d 172, 182
(Iowa 2015) (noting as mitigating factor that attorney primarily represented
underserved immigrant community). Heggen hired a bookkeeper after the 2020
CSC audit to avoid trust account violations in the future, although she failed to
do so prior to that time because of the expense. See, e.g., Iowa Sup. Ct. Att’y
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Disciplinary Bd. v. Arzberger, 887 N.W.2d 353, 369 (Iowa 2016) (stating
attorney’s implementation of “new office procedures” was mitigating factor).
Despite these mitigating factors, we conclude a more severe sanction is in
order. In Iowa Supreme Court Attorney Disciplinary Board v. Ricklefs, the attorney
was audited twice by CSC, with both audits revealing the attorney violated
numerous provisions of chapter 45. 844 N.W.2d 689, 692–93 (Iowa 2014). The
attorney made no meaningful effort to improve his practices after the first audit.
Id. at 694. The attorney was also commingling personal funds in his client trust
account in an apparent attempt to evade his creditors and misrepresented on
CSC forms that he was complying with trust accounting rules. Id. at 695.
Aggravating factors included the attorney’s attempts to stall the second audit,
failure to cooperate with the audit, and two prior public reprimands. Id. at 700.
Mitigating factors included the lack of any harm to clients and the attorney’s
taking responsibility for his misconduct. Id. We suspended the attorney’s license
for three months, noting particularly the attorney’s “complete failure to address
the problems noted in the [first] audit.” Id. at 702.
In Iowa Supreme Court Attorney Disciplinary Board v. Parrish, we
disciplined an attorney for trust account violations and for repeatedly
withdrawing unearned fees without contemporaneous notice, maintaining poor
billing records, and failing to return an unearned retainer even after the fee
dispute was submitted to arbitration. 801 N.W.2d at 586–87, 589. The attorney
had also been subject to six prior private admonitions for misconduct. Id. at 589.
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We concluded a sixty-day suspension was appropriate under the circumstances.
Id. at 589–90.
In Iowa Supreme Court Attorney Disciplinary Board. v. Kieffer-Garrison, we
suspended an attorney’s license where, among other things, she neglected client
matters and made misrepresentations to the client. 847 N.W.2d 489, 496
(Iowa 2014). In Iowa Supreme Court Attorney Disciplinary Board v. Hamer, we
suspended an attorney’s license for six months where he “acted with deceit” with
respect to a client billing matter. 915 N.W.2d 302, 325–26 (Iowa 2018).
Generally, “[s]anctions for violations involving dishonesty have ranged from a
brief suspension of two months to revocation.” Kieffer-Garrison, 847 N.W.2d at
496 (citing cases).
After reviewing the relevant authorities, we conclude this case is most
comparable to Iowa Supreme Court Attorney Disciplinary Board v. Morris,
847 N.W.2d 428 (Iowa 2014). In that case, the attorney’s “record-keeping and
management deficits were severe and they persisted over a long period of time
even after [CSC] intervened with an audit and provided information that should
have facilitated compliance with the applicable rules.” Id. at 436. As in this case,
“Morris’s violations extend[ed] beyond mere failure to observe rudimentary trust
account record-keeping rules and mismanagement, however, as he engaged in
dishonesty in representing that he regularly reconciled his trust account as
required by a court rule.” Id. at 437. In addition, Morris deposited client
settlement funds into his trust account but failed to use the client’s funds to
23
satisfy a subrogation claim. See id. at 431 n.2. We concluded that a six-month
suspension was appropriate. Id. at 437.
As in Morris, there are several aggravating factors in this case. First,
Heggen violated multiple ethical rules. “Where there are multiple violations of
our disciplinary rules, enhanced sanctions may be imposed.” Iowa Sup. Ct. Bd.
of Prof’l Ethics & Conduct v. Alexander, 574 N.W.2d 322, 327 (Iowa 1998).
Heggen’s experience as an attorney, with more than fifteen years of practice
under her belt at the time of the conduct at issue, is another aggravating factor.
See, e.g., Iowa Sup. Ct. Att’y Disciplinary Bd. v. Wright, 758 N.W.2d 227, 231
(Iowa 2008). Harm to clients is an aggravating factor. In this case, Heggen
harmed the Burgetts by not promptly returning the $3,000 to which they were
contractually entitled, money the Burgetts needed to care for their children.
See, e.g., Iowa Sup. Ct. Att’y Disciplinary Bd. v. McCann, 712 N.W.2d 89, 97
(Iowa 2006). Heggen’s cavalier treatment of her client trust accounting
obligations and her failure to remediate the issues identified by CSC after the
2018 audit are additional aggravating factors. See Santiago, 869 N.W.2d at 184
(“We expect lawyers to learn from their mistakes, and their failure to take to
heart lessons learned through audits is an aggravating factor.”); Ricklefs, 844
N.W.2d at 700 (finding attorney’s continued disregard of trust account rules after
audit was aggravating factor for sanctions).
Balancing this conduct against Heggen’s clean disciplinary record and the
other mitigating factors, and being particularly mindful of “the nature of the
violations, the need for deterrence, protection of the public, [and] maintenance
24
of the reputation of the Bar as a whole,” we believe a six-month suspension of
Heggen’s license to practice law is appropriate. Ramey, 639 N.W.2d at 245. This
was the commission’s recommended sanction.
VI.
We suspend Heggen’s license to practice law with no possibility of
reinstatement for six months. Pursuant to Iowa Court Rule 34.23(1), Heggen’s
suspension will commence ten days from the date of this decision. This
suspension applies to all facets of the practice of law under Iowa Court
Rule 34.23(3). Heggen must comply with the notification requirements to her
clients in Iowa Court Rule 34.24. At the conclusion of this suspension, Heggen
still must become compliant with Iowa Court Rule 41.4 and Iowa Court Rules
39.1 through 39.13 before she can be reinstated to practice law. We tax the costs
of this action to Heggen under Iowa Court Rule 36.24(1).
LICENSE SUSPENDED.