97th Installment. Wisconsin Bar Equates Clients with Business Partners

Attorneys have a qualitatively greater ethical duty to their clients than to their firms because the agency relationship between attorney and client is essential to law practice, whereas the relationship between attorney and firm is a business incidental. The courts of the State of Wisconsin disagreed, citing the principle that they’re ethically equivalent to justify attorney Matthew C. Siderits’s severe one-year suspension. "We have stated on prior occasions 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." (In re Siderits (Wis., Jan. 4, 2013).) Are sharp business practices with one’s partners the legal-ethical equivalent of stealing from your clients? That’s what the Wisconsin courts have repeatedly stated, but the Siderits decision—too severe for the presented conduct but far too mild for fraud against clients—shows that Wisconsin’s Office of Lawyer Regulation and Supreme Court know that the equation doesn’t hold; the rhetoric is for stiffening penalties to enforce law-firm labor discipline and shifting recovery costs from the firm to its employees.

Attorney Siderits was a recently promoted law-firm shareholder who allegedly cheated on his firm’s bonus policy by submitting several inflated bills, which he reduced before the clients were invoiced. Each of the two years, Siderits obtained a bonus of about $25,000 that he allegedly would not have obtained had he reported his billings accurately. Despite returning the bonuses, Siderits was terminated by the firm.

Equating dishonesty with clients and business associates wasn’t always the rule in Wisconsin, where the courts announced the new policy in In re Casey (1993) 174 Wis.2d 341, in which the attorney nevertheless received the traditional lesser suspension lasting 60 days. The Wisconsin Supreme Court has been clear that disbarment is warranted when an attorney steals from his clients. Taking money belonging to a client for oneself "warrants the most severe discipline—license revocation." (In re Wright (1994) 180 Wis.2d 492, 493.) But even in its zeal to defend the interests of major partners, the court imposed discipline much less severe than if Siderits had stolen funds from a client trust account.

Although the Wisconsin bar hasn’t succeeded in its drive to equate offenses against clients with those against business partners, we’re left with the question of why it’s pushing that envelope. Who benefits? The answer, the major partners in the large law firms, who can use free bar discipline in place of expensive civil suits. The state bars impose the heavy financial costs of discipline on the respondent. The threat of discipline secured the return of the bonus money without cost to the firm. The firm, which could have sought punitive damages under Wisconsin law, otherwise might have had to sue Siderits on its own dime. (Wisconsin Stat. § 895.043, subd. (3); Berner Cheese Corporation v. Krug (2008) 312 Wis.2d 251 [plaintiff may receive punitive damages for defendant's breach of fiduciary duty if defendant acted maliciously toward plaintiff or with intentional disregard of plaintiff's rights].)