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IN THE SUPREME COURT OF IOWA No. 138 / 06-1394 Filed January 19, 2007 IOWA SUPREME COURT ATTORNEY DISCIPLINARY BOARD, Complainant, vs. RODNEY H. POWELL, Respondent. ________________________________________________________________________ On review of the report of the Grievance Commission.

Iowa Supreme Court Grievance Commission recommends a six-month suspension of respondent's license to practice law in this state. LICENSE SUSPENDED.

Charles L. Harrington and David J. Grace, Des Moines, for complainant.

Mark McCormick of Belin Lamson McCormick Zumbach Flynn, A Professional Corporation, Des Moines, for respondent.

2 WIGGINS, Justice. On July 28, 2005, the Iowa Supreme Court Attorney Disciplinary Board filed a complaint against Rodney H. Powell with the Grievance Commission of the Iowa Supreme Court alleging Powell committed various violations of the Iowa Code of Professional Responsibility for Lawyers. The complaint contained three counts arising out of Powell's representation of three different clients. The Board amended the complaint to include a fourth count involving an additional client. The Commission found Powell's conduct violated numerous provisions of the Iowa Code of Professional Responsibility for Lawyers and recommended we suspend Powell's license to practice law with no possibility of reinstatement for a period of six months. The Commission also recommended as a condition of reinstatement that Powell release the liens he acquired in properties owned by one of his clients. Because we agree with the Commission's finding that Powell's conduct violated numerous provisions of the Iowa Code of Professional Responsibility for Lawyers and its recommendations regarding Powell's sanction, we suspend Powell's license to practice law indefinitely with no possibility of reinstatement for a period of six months. I. Scope of Review. We review attorney disciplinary proceedings of the Commission de novo. Iowa Supreme Ct. Att'y Disciplinary Bd. v. Walker, 712 N.W.2d 683, 684 (Iowa 2006). The Board must prove ethical violations by a convincing preponderance of the evidence. Id. "Although we consider the

Commission's factual findings and discipline recommendations, they do not bind us." Id.

3 II. Findings of Fact. On our de novo review of the record, we make the following findings of fact. We admitted Powell to the Iowa bar in 1973. After graduation from law school, he entered the Air Force as a JAG officer. There he primarily prosecuted and defended courts-martial. Powell served as a JAG officer until 1977. During that period, Powell was admitted to practice in front of the Air Force courts, as well as the United States Court for Military Appeals. In 1977 Powell separated from active duty and moved to St. Louis, Missouri. Powell began working for Missouri Legal Services and was

admitted to the Missouri bar in 1978. Powell was a managing attorney for the St. Louis County Office for Legal Aid from 1980 to 1988. Powell held a supervisory position, overseeing the clinical program between legal services and Washington University in St. Louis School of Law, the family law department, and the volunteer lawyer program. In addition, Powell created an ecumenical legal assistance ministry that reached out to impoverished areas of St. Louis. Powell left legal services in 1988 to return to Iowa. He entered the private practice of law as an associate with a Des Moines law firm. He eventually became a partner in the firm. The firm practiced primarily as a labor and employment law firm. Powell was hired to handle the firm's other caseload. For example, if a client had a family law problem, Powell would handle the case. When the firm dissolved in 1996, Powell opened a solo practice in Norwalk. As his practice grew, Powell hired two additional attorneys to join his firm. The firm's practice is a general one; however, Powell has centered his practice on wills, probate, and real estate matters.

4 A. Walton Matter. In November 1991 Malissa Walton hired Powell to represent her in a dissolution of marriage. Walton's parents suggested she retain Powell. Powell and Walton's parents, the Hinshaws, knew each other from community activities. Mrs. Hinshaw called Powell and arranged for a meeting. She and her daughter saw Powell at the Des Moines law firm. Although a fee arrangement was discussed, nothing was put in writing. It was understood by both Walton and Powell that Walton's

mother, Mrs. Hinshaw, would pay for Powell's services. However, Powell sent every bill to Walton's address. Walton claims she only sometimes saw the billing statements. Mrs. Hinshaw paid Powell approximately $300 from 1991 until 1993. However, both Walton and Powell agree after Walton's father passed away in 1996, Mrs. Hinshaw no longer agreed to be responsible for Powell's fees. The court finalized Walton's marriage dissolution in August 1992. Powell obtained a favorable outcome for Walton. The total legal fees

generated for the dissolution amounted to $2850. Walton or her mother made small payments toward the bill, totaling a little over $350. Walton did not pay the balance of her bill. Powell knew from the dissolution, Walton had three young children, had over $10,000 in debt, and was living on a limited income. On almost every billing cycle, Powell charged Walton a finance charge. From December 13, 1991, until February 17, 1995, Powell charged Walton an interest rate of 18 percent or 1.5 percent per month on any unpaid balance. Powell never informed Walton that he would charge her compound interest. The interest rate then increased to 22 percent or 1.83 percent per month. He never informed Walton that he had the right to raise the interest

5 rate. By March 31, 2003, Walton owed Powell $21,920.50. Of this,

$18,691.27 was attributable to the finance charges. Powell made several attempts to collect fees from Walton. From 1993 to 1996 Powell sent Walton several letters asking for any payment. In his first letter, Powell acknowledged Walton was on a very limited income, but still requested she make regular payments on her bill. He also stated if Walton made regular payments, he was willing to waive the finance charges for each month he received a payment. In 1995 Powell notified Walton he would send her account to a collection agency if she did not start making payments on the bill. In 1996 Powell sent a letter to Walton encouraging her to work with him to "negotiate an arrangement which is acceptable to both [Walton] and [Powell]." After receiving phone calls from Powell's office, Walton did pay $10 toward her bill. By May 1997 now some six years after Powell first represented Walton, the account remained open and Powell was still sending monthly bills, but no other exchanges occurred between Powell and Walton. In 2000 Powell once again attempted to collect payment from Walton. This time his efforts were more aggressive. On February 28, 2001, Powell sent a letter stating, unless Walton paid $3250 he would report the discharged debt to the Internal Revenue Service (IRS) as income and she would be responsible for more than $5000 in taxes because of this discharge. Walton did not pay Powell the $3250. From February 2000 to February 2002 Powell's office made over 120 phone calls in an attempt to collect the debt from Walton. On June 13, 2002, Powell sent Walton a right to cure notice stating $21,474.34 would be reported as a discharged debt to the IRS if some

6 acceptable payment was not received in twenty days. Walton did not pay Powell. On November 13, 2002, Powell wrote to Walton and informed her the debt was discharged and indicated he would be reporting the discharge as income to the IRS. The letter also included an IRS 1099-MISC form showing Walton had other income of $21,920.50. Powell filed the 1099-MISC form with the IRS. Considering this

discharge as other income, the IRS proposed Walton pay $2991 in taxes. However, after Walton provided further information to the IRS

demonstrating she did not work for Powell, but rather that he discharged a debt, the IRS no longer required Walton to pay the taxes. B. Hutchins-Carroll Matter. Sandra Hutchins and Marvin Carroll

hired Powell in May 2000 for help in retrieving personal property Hutchins left at a home she just sold. Hutchins did not sign a written fee agreement when she retained Powell. Powell never advised Hutchins or Carroll that he would charge them finance charges. While Powell was investigating the property dispute, Hutchins hired him for another matter involving Hutchins' daughter. Hutchins generally received Powell's bills on a monthly basis detailing her fees. In each bill, it stated, "the monthly finance charge will be at an ANNUAL PERCENTAGE RATE of 22% (1.83% per month)." Powell charged Hutchins a total of $2974 for the property matter and $4249 for the matter involving her daughter. The bill also reflected $1,655.66 in finance charges. These charges were offset by $858.50 in write-downs and payments of $1030. By March 2002 Hutchins owed Powell $8,028.29. On two separate occasions, Hutchins wrote to Powell and complained about the finance charges. In her first letter, received by Powell on May 21, 2001, she stated, "you are charging a $100 a month finance charge. Now if

7 I'm making payments of $40 how could I possibly ever get this paid." In her second letter received by Powell on December 1, Hutchins again expressed her frustration at the finance charges. Hutchins also met with Powell's staff to discuss the growing bill. Powell gave her various payment options. However, Hutchins did not enter into any payment agreement at that time. Because no payment agreement could be reached, Hutchins filed a complaint with the Board. C. Perkins Matter. Robert Perkins operated Perkins Electric, an

electrical contracting business. Powell represented Perkins primarily for matters relating to Perkins Electric from 1998 to 2003. During Powell's representation of Perkins, they never entered into a written fee agreement. Instead, Powell simply sent Perkins invoices detailing his charges. Perkins did not always pay his bill on time. Powell described Perkins as generally slow in paying his bills, but Powell attempted to be accommodating because of their ongoing relationship. Over the period of time Powell represented Perkins, Powell charged Perkins $66,435 in fees, $1547 in costs, and $7,304.54 in finance charges. The finance charges included compound monthly interest at the rate of 1.83 percent or 22 percent per annum on all unpaid balances and a $15 late charge on any unpaid monthly balance. Perkins paid Powell $47,281.01. Perkins and Powell spoke in November 2002 regarding several issues, including Perkins' concerns about the billing arrangements and the finance charges. Powell followed up on these earlier discussions with a letter, which in part discussed the finance charges. In his letter, Powell stated: You have also expressed concern at times relating to our interest charges. As I may have explained to you, we have great difficulty operating when we extend credit to clients. We are not in the lending business, and it is important that we be

8 paid every month for the work performed for our clients. Our hourly rates do not contain any padding for "carrying charges." Perkins then wrote to Powell terminating their attorney-client relationship because of the finance charges. In his letter, Perkins stated, "[a]s I have tried to communicate to you on various occasions I will NOT agree to paying finance charges." Powell responded to this letter and discussed the issues relating to the status of his legal representation, the billing invoice, the account history, the finance charges, and Perkins' files. In discussing the finance charges, Powell described the Perkins account as "commercial" and stated, "there is no requirement that there be any more writing to evidence the agreement to pay interest charges." On January 28, 2004, Powell responded to a letter written by Perkins in which Perkins stated he considered his account with the Powell office to be paid in full and he would not be making any further payments on the account. In his response, Powell stated Perkins never questioned the

accuracy of the invoices. Powell also contended the account was not paid in full. Further, Powell claimed if he discharged the unpaid balance in the account, the law required Powell to report the amount discharged to the IRS as income to Perkins. Unlike the Walton matter, where Powell made a similar statement, Powell did not file a 1099 form with the IRS. In the letter, Powell also stated his office had a lien for unpaid fees against all papers and documents in Perkins' files. However, Powell never pursued enforcement of a lien. Finally, Powell offered to negotiate a

settlement of the attorney's fees through binding arbitration, with the costs to be paid by the unsuccessful party. Perkins did not respond to this letter. Instead, Perkins filed a complaint with the Board.

9 Finally, Powell testified after this court made its decision in Iowa Supreme Court Board of Professional Ethics & Conduct v. McKittrick, 683 N.W.2d 554 (Iowa 2004), he "promptly recomputed the invoices from the beginning, and [he] gave [Perkins] a compound interest credit, taking off all compound interest amounts, so eventually converting it all to simple interest." So, on September 8, 2004, Powell sent a letter and invoice to Perkins stating he was crediting the Perkins account $1,961.30 for the compound interest charges. 1 remaining debt. D. Jondall Matter. In fall 2004 Amy Jondall hired Powell to represent her in her marriage dissolution. At the onset of the representation, Jondall received the firm's fee policy and agreement form. In part the agreement contained: (1) a provision acknowledging if Jondall's nonpayment of fees resulted in Powell discharging the fees, he would report the discharge as income to the IRS; (2) a provision stating if Jondall does not challenge a charge within ten days from receiving the invoice, she waives any claim to the accuracy of the bill or the sufficiency of the work done; and (3) a provision containing an indemnity clause stating any costs arising out of any complaint made by Jondall against Powell would be paid by Jondall if the complaint is resolved favorably to Powell. Jondall paid a portion of Powell's retainer in three installments. Powell was responsible for drafting Jondall's consent decree of dissolution of marriage. After drafting the decree, Powell gave it to Jondall for her to look over. She approved the decree. Powell then sent the decree to opposing counsel for Mr. Jondall's signature.
Powell also testified, in light of McKittrick, he made an appropriate credit to all of his active accounts where he charged compound interest.
1

Powell never discharged Perkins of his

10 Paragraph twenty-two of the decree contained a clause stating, "all said attorneys' fees shall constitute a judgment herein." Powell never

explained to Jondall that this clause would create a lien on her property if her attorney's fees were not paid. Neither Mr. Jondall's attorney nor the judge, who signed the decree, raised any issue about paragraph twenty-two. The court filed the decree on January 31, 2005. At the time of the dissolution action, Jondall and her soon-to-be exhusband owned a home and an acreage. They planned to sell the home and the acreage. During the pendency of the dissolution proceeding, the

Jondalls sold the acreage. The dissolution decree divided the proceeds from the acreage sale, awarding Jondall $20,000 of the proceeds, and her former husband $5000 of the proceeds. On January 20, 2005, the buyer's attorney prepared a title opinion concerning the sale of the acreage. The title opinion did not note the

judgment for attorneys' fees because the decree was not filed until January 31. The sale of the acreage closed on or about February 10. The buyer's mortgage company distributed the settlement funds without requiring an updated title opinion. The Jondalls delivered a warranty deed to the buyer. At the time the sale of the acreage closed, Jondall had not made any payments to Powell, other than the three initial payments used to retain Powell. The highest invoice in the record shows Jondall owed Powell

$7,855.29 in fees. On April 8 Powell's office contacted Jondall concerning the nonpayment of her bill. Jondall complained the fees were excessive. After learning the Jondalls sold the acreage and the mortgage company disbursed funds to Jondall, Powell sent Jondall a letter requesting payment of his fees. The letter reaffirmed the existence of Powell's lien in

11 the property. The letter also requested that she pay her fees so Powell would not have to take action against the buyer. After receiving this letter and speaking with the staff at the Powell Law Firm, Jondall took her home off the market because with the attorney's lien on the property she felt there was not any way she could give a clean title to a buyer. Jondall filed a complaint with the Board and requested Powell release the judgment liens on her properties. As of September 6, 2006, Powell still had not released the liens. III. Violations. We have previously discussed the pitfalls an attorney faces when involved in a fee dispute with a client. McKittrick, 683 N.W.2d at 559-60. There we said, Attorneys should avoid fee disputes with clients as much as possible because the collection of fees by attorneys from clients can give rise to a host of problems and pitfalls. Attorneys should aspire to resolve fee disputes amicably, and sue clients only when necessary "to prevent fraud or gross imposition by the client." While it is not unethical for a lawyer to engage in fee collection practices against a former client, the practices employed to enforce collection should be carefully scrutinized. Illegal, aggressive, and improper collection practices can lead to disciplinary actions against attorneys, as can the use of attorney liens and confessions of judgment. Additionally, an attorney who imposes an unlawful finance charge and improperly calculates the amount of interest on a fee can violate the rules of professional ethics. Id. (internal citations omitted). Based on our review of the record, we find the Board met its burden and proved Powell violated numerous rules of the Iowa Code of Professional Responsibility for Lawyers when he utilized the following practices in charging and collecting his fees. A. Finance Charges. An attorney cannot assess finance charges when the attorney collects a fee, unless the client agrees in writing in

12 advance to the finance charges imposed. Id. at 561. Additionally, where the legislature authorizes a finance charge, the legislature does not allow compounding of the finance charge. Iowa Code

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