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STATE OF MINNESOTA IN SUPREME COURT A07-259

Original Jurisdiction

Per Curiam Took no part, Dietzen, J.

In re Petition for Disciplinary Action against David A. Overboe, a Minnesota Attorney, Registration No. 83318. Filed: March 13, 2008 Office of Appellate Courts

SYLLABUS Suspension from the practice of law for a minimum of 1 year is warranted for a lawyer who deceptively labeled a personal account as a trust account to shield his personal funds from judgment creditors, improperly kept personal funds in his client trust account, commingled client and personal funds, and made misrepresentations to and failed to cooperate with the Office of Lawyers Professional Responsibility, when the lawyer also had two prior instances of similar misconduct, failed to recognize the wrongfulness of his conduct, and failed to place client retainers in a trust account. Heard, considered, and decided by the court en banc. OPINION PER CURIAM. In September 2004, the Director of the Office of Lawyers Professional Responsibility initiated a formal disciplinary investigation of David A. Overboe that was

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triggered by an overdraft on Overboes client trust account.

Following numerous

communications between the Director and Overboe, the Director filed a petition for disciplinary action against Overboe alleging that Overboe had 1) deceptively used a trust account to shield his personal funds from judgment creditors; 2) made misrepresentations and failed to cooperate with the Director during a disciplinary investigation; and 3) commingled client funds with personal funds. The referee assigned to hear the case found that Overboes conduct violated the Minnesota Rules of Professional Conduct and the Minnesota Rules on Lawyers Professional Responsibility, and recommended that Overboe be suspended from the practice of law for a minimum of 1 year. Overboe appeals the referees findings of fact, conclusions of law, and recommendation. We conclude that the referees findings were not clearly erroneous and that the appropriate discipline under these facts is to suspend Overboe from the practice of law for a minimum of 1 year. David A. Overboe was admitted to the practice of law in Minnesota on June 13, 1980. Overboe is also licensed to practice law in North Dakota. At all times relevant to this matter, Overboes law practice was located in North Dakota. Overboe maintained two relevant bank accounts in North Dakota: 1) an account at Western State Bank entitled "Overboe Trust Account" (WSB trust account); and 2) an Interest on Lawyers Trust Accounts (IOLTA) account at Wells Fargo Bank, also entitled "Overboe Trust Account" (IOLTA account). In 2003, Overboe certified on his annual Minnesota attorney license application that his IOLTA account at Wells Fargo Bank was his client trust account. On

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March 16, 2004, Overboe had an overdraft on his IOLTA account. Overboe had written an $8,000 check on the account when the account balance was only $515.67. Correspondence with the Director of the Office of Lawyers Professional Responsibility Pursuant to Minn. R. Prof. Conduct 1.15(l), Wells Fargo Bank notified the Office of Lawyers Professional Responsibility of Overboes IOLTA account overdraft. On March 19, 2004, the Director sent Overboe a notice of the overdraft, requesting an explanation and documents pertaining to the account, such as client ledgers. On

March 29, 2004, Overboe responded that "[t]he check was written to transfer funds to [his] family farm account," which is in his wifes name. Overboe also stated that "[t]here were no client funds in the account at the time that check was issued" and there had not been client funds in the account since April 21, 2003. He did not include client ledgers with his response. Overboe further explained: At the time the check was written I believed that there was [sic] sufficient funds in the account to cover the $8,000.00 check. I wrote the check without checking. The check was written on March 15th, 2004. On March 16th I checked to see if there were sufficient funds to cover the check and found that there was not. I promptly deposited two checks totaling $9,500.00 in the account on March 16th, 2004. In this exchange of letters, Overboe made no mention of his WSB trust account. On May 3, 2004, the Director requested additional information regarding the overdraft. The Director asked Overboe to explain the basis on which Overboe believed there were sufficient funds in his IOLTA account because at the time of the overdraft, the account balance was only $515.67. The Director also indicated that the IOLTA account had since been closed and that a check for the $9,985.67 balance in the account was made

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payable to "Overboe Trust Account." The Director asked for an explanation of why the IOLTA funds were placed in the "Overboe Trust Account" and requested the books and records for that account. In his response on May 14, Overboe stated: The $8,000 check was supposed to be drawn on a different account. I was going to deposit the funds in that account to cover the check when I realized the check has been drawn on this account. * * * The $515.57 balance in the trust account was my funds * * * . Overboe did not mention or include any records of his WSB trust account with the May 14 letter. Overboe again stated that no client funds were involved in the overdraft. The Director then requested further explanation, specifically concerning the "different account" Overboe referred to in his previous response. Overboe responded that the other account that he meant to draw the check from was a personal account --the "Overboe Trust Account" at Western State Bank. This was the first time Overboe identified the WSB trust account to the Director. Overboe suggested that because both the IOLTA account and WSB trust account bore the same name and the checks for each account looked "similar," he mistakenly wrote a check from the IOLTA account when he actually meant to write it from his personal WSB trust account.1 According to Overboe, the WSB trust account was opened for the purpose of "transactions between [his] wife and [him]," and not for client funds. Overboe also stated:

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Overboe included copies of checks from his IOLTA account and his WSB trust account to demonstrate the similarity of the checks.

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Approximately 15 years ago a judgment was taken against me for 1 and 1/2 million dollars as a result of my investing $6,000.00 in a farmer cooperative. It is necessary for me to be careful about transferring funds between by [sic] wife and me. It is also important that I not keep a great deal of money in my own account, because the law firm that obtained the Judgment is right next door to me. This judgment was entered against Overboe in North Dakota federal court on May 22, 1990. On September 9, 2004, the Director sent a letter notifying Overboe that the Office of Lawyers Professional Responsibility had initiated a formal investigation into his conduct. The Director made a request under Rule 25 of the Rules on Lawyers

Professional Responsibility (RLPR) that Overboe provide further information regarding his trust accounts within 14 days. On September 28, 2004, Overboe responded with a letter stating that the purpose of his WSB trust account was to "handle funds between [his] wife and [him]. [He] handle[s] her business affairs. [He] did not want her funds levied on and tied up in court for months because of a Judgment against [him]. A joint account would not have worked." Concerning the IOLTA account, Overboe explained that on December 31, 2003, all the funds in his IOLTA account--$1,515.67--were his and on February 16, 2004, he wrote a $1000 check on the account to himself, leaving the $515.67 balance in the account at the time of the overdraft. On December 29, 2004, in a response to another letter from the Director, Overboe agreed that he had designated his IOLTA account as his client trust account on his Minnesota annual attorney license application. In response to the Directors

September 2005 request for further information regarding the clients whose funds were

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kept in the IOLTA account at various times, Overboe stated that he believed providing this information would violate N.D. R. Prof. Conduct 1.6. Overboe and the Director continued to exchange letters concerning this issue. Eventually, Overboe requested that the North Dakota Ethics Committee issue an advisory opinion on the matter. After the North Dakota Ethics Committee issued its advisory opinion, Overboe provided information about one client. After another request, Overboe eventually provided the Director with the remainder of the requested client information. The Director filed a petition for disciplinary action on February 5, 2007. In the petition, the Director alleged that Overboe: 1) violated Minn. R. Prof. Conduct 8.4(c) by deceptively using a trust account; 2) violated Minn. R. Prof. Conduct 8.1(a) and 8.4(c), as well as Rule 25, RLPR, through his misrepresentations to and noncooperation with the Director during the disciplinary investigation; and 3) violated Minn. R. Prof. Conduct 1.15(a) by commingling client funds and his personal funds in his IOLTA account. Referee Hearing On March 27, 2007, we appointed a referee to hear this matter. In preparation for the hearing, Overboe served the Director with Interrogatories and a Request for Production of Documents. The Director filed a response approximately one month later. Overboe requested that the Director respond more adequately to the interrogatories and document requests. Overboe then filed a Motion to Compel Discovery and for a

Continuance of the hearing. The referee denied Overboes motions. At the hearing, Overboe testified that the WSB trust account was a personal account opened to handle funds between himself and his wife. Overboe acknowledged 6

that the purpose of the WSB trust account was to protect his wifes funds from attachment by Overboes judgment creditors because if he had a joint account with his wife the funds could be seized due to the outstanding judgment against him. But

Overboe stated that the purpose of the WSB trust account was not to protect his own funds, because even if in the account, his funds are subject to levy. Overboe later stated that his funds in the WSB trust account are not subject to levy because they are exempt under North Dakota Law due to an exemption in lieu of homestead. Nevertheless, Overboe admitted and provided no explanation for the fact that in his responses to the Directors letters he stated that the purpose of the WSB trust account was to protect his own funds as well as his wifes. The Director submitted to the referee a spreadsheet of activity for Overboes WSB trust account from March 13, 2003, to January 27, 2004. According to the information on the spreadsheet, Overboe was the source of every deposit into the trust account, and the majority of the funds deposited in the account were Overboes earned fees for legal services. Further, Overboe was the payee of approximately half the checks written on the account. Only two of the checks were made out to Overboes wife. The Director also offered into evidence a spreadsheet of Overboes IOLTA account activity from April 16, 2003, to March 19, 2004. According to the information on the spreadsheet, at all times before the overdraft that triggered the current disciplinary proceedings, the account had a surplus, meaning that the overall amount of funds in the account was greater than the amount of client funds in the account. Further, the

spreadsheet showed that on April 16, 2003, Overboe deposited $77,675 into his IOLTA 7

account on behalf of a client and on July 25, 2003, Overboe deposited $200 into the IOLTA account on behalf of another client. At the time that these client funds were in the account, Overboe had over $1,000 of his own funds in the account. Overboe agreed that the numbers on the spreadsheet were accurate but asserted that the amount of surplus was nonetheless overstated for two reasons. First, Overboe stated that his wife was a client, so her funds in the IOLTA account should not have been considered part of the surplus. Overboe asserted that using this analysis, the surplus amount in the IOLTA account when client funds were also in the account only reached a maximum of $29.67.2 Overboe provided no documentation evidencing that his wife was a client. For his second reason, Overboe stated that $4,500 of the surplus in the IOLTA account at one time was money Overboe had deposited with the purpose of donating it to the local V.F.W for a war veterans memorial. While Overboe acknowledged that the V.F.W. was not a client, he stated that the money was properly in his IOLTA account because he was setting it aside "for the benefit of" the V.F.W. memorial. Overboe also admitted that part of the reason for putting the donation money into the IOLTA account was to avoid the possibility that judgment creditors would levy on it. Overboe stated that after the V.F.W. notified him that it no longer needed his donation, he eventually took the $4,500 out of the trust account for himself.

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Overboe also offered as an exhibit a letter to the Director stating that he had made a mistake when he stated in his December 29, 2004, letter that his IOLTA account contained no client funds on May 30, 2003.

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Referee's Findings of Fact, Conclusions of Law, and Recommendation for Discipline Deceptive Use of a Trust Account. The referee found that Overboe "did not use the WSB trust account as a fiduciary account in his capacity as a lawyer," but instead as a personal account. In light of the $1.4 million judgment against him and his admissions that the account was opened to protect his personal funds, the referee concluded that Overboes use of the WSB trust account was deceptive and violated Minn. R. Prof. Conduct 8.4(c). Misrepresentations to and Noncooperation with the Director. The referee found that Overboe made false statements to the Director about the purpose and nature of his WSB trust account because Overboe was not using the account in a fiduciary capacity. The referee also found that Overboes testimony that the majority of the surplus funds in the IOLTA account belonged to his wife as a client was inconsistent with his numerous prior statements to the Director that there were no client funds in the IOLTA account and that the testimony was false. The referee concluded that these actions violated Minn. R. Prof. Conduct 8.1(a) and 8.4(c), as well as Rule 25, RLPR. Commingling and Other Trust Account Improprieties. The referee found that on April 16, 2003, the total balance of Overboes IOLTA account consisted of his personal funds. Additionally, the referee concluded that Overboe violated Minn. R. Prof. Conduct 1.15(a), and put his clients funds at risk of attachment by commingling personal funds with client funds when he deposited $77,675 in client funds into the account on April 16, 2003, and $200 in client funds into the account on July 25, 2003, while maintaining approximately $1,100 of his own funds in the account. 9

Prior Discipline. The referee also found that Overboe had been disciplined for professional misconduct on two previous occasions. In 1987, the North Dakota Supreme Court suspended him from the practice of law for 6 months for practicing law under a misleading firm name and for misusing funds in a client trust account. In re Overboe, 403 N.W.2d 1, 1-3 (N.D. 1987). In that case, Overboe withdrew $12,000 from his client trust account for his own personal use. Id. at 2. Overboe subsequently wrote a check to a client from the same account, which resulted in an overdraft on the account. Id. Overboe then used a dishonored check from another overdrawn account to pay for the nonsufficient funds (NSF) check. Id. In 1988, the North Dakota Supreme Court suspended Overboe for 90 days for, inter alia, 1) "[e]ngag[ing] in conduct involving dishonesty, fraud, deceit, or misrepresentation"; 2) "[c]onceal[ing] or knowingly fail[ing] to disclose that which he is required by law to reveal"; 3) "[k]nowingly mak[ing] a false statement of law or fact"; and 4) "counsel[ing] or assist[ing] his client in conduct that [he knew] to be illegal or fraudulent." In re Overboe, 417 N.W.2d 853, 853-54 (N.D. 1988). Recommendation for Discipline. While the referee found that no clients were harmed by Overboes actions, he found numerous aggravating factors, including that Overboe: 1) "committed multiple acts of professional misconduct [in this case] over an extended period of time"; 2) has a history of discipline for similar misconduct involving dishonesty and misuse of client funds; 3) "made false statements during the hearing before the referee"; and 4) "refused to acknowledge the wrongful nature of his misconduct." Further, the referee found that Overboe did not deposit checks from clients for unearned retainers into a client trust account, which is a violation of Minn. R. Prof. 10

Conduct 1.15(a). Based on Overboes conduct and these aggravating factors, the referee recommended that Overboe be suspended from the practice of law in Minnesota and be ineligible for reinstatement for a minimum of 1 year. I. Overboe first argues that the referee abused his discretion when he denied Overboes Motion to Compel Discovery regarding the interrogatories and document requests Overboe served on the Director. In his motion to compel discovery, Overboe asserted that the Director provided insufficient answers to nine of the twenty-seven interrogatories and failed to provide documents for two of the five document requests. In five of the nine interrogatories and the two document requests Overboe sought to compel, Overboe asked the Director to provide case law or statutory law that supported the Directors allegations.3 Overboe also asked the Director to explain how titling his WSB

account as a "trust" account involved dishonesty and deceit in violation of Minn. R. Prof. Conduct 8.4(c). Overboe went on to request that the Director provide the dates on which Overboe maintained a balance of personal funds in his IOLTA account over the amount allowed by N.D. R. Prof. Conduct 1.15. Overboe also asked the Director to provide evidence that the personal funds in his WSB trust account were not exempt from legal
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In two interrogatories Overboe asked for a list of cases that supports the Directors allegation that Overboes use of his WSB account was dishonest. Overboe also asked the Director to provide case law that supports the contention that Overboes use of a trust account could shield money from creditors. In an interrogatory and a document request, Overboe asked the Director to provide a copy of North Dakota Rule of Professional Conduct 1.15 that states the maximum amount of personal funds a lawyer can have in his client account.

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process under North Dakota law. Finally, Overboe asked the Director to disclose the basis of the allegation that Overboe did not cooperate with the Director. A referee has broad discretion to issue discovery orders and will be "reversed on appeal only upon an abuse of such discretion." In re File No. 17139, 720 N.W.2d 807, 811 (Minn. 2006) (quoting Minn. Twins P'ship v. State ex rel. Hatch, 592 N.W.2d 847, 850 (Minn.1999)). "The objective of our rules of discovery is to encourage the exchange of relevant information by the parties prior to trial and to discourage and prevent unjust surprise and prejudice at trial * * * ." Gale v. County of Hennepin, 609 N.W.2d 887, 891 (Minn. 2000). Thus, "[p]arties may obtain discovery regarding any matter, not privileged, that is relevant to a claim or defense of any party." Minn. R. Civ. P. 26.02(a). But discoverable information must be "reasonably calculated to lead to the discovery of admissible evidence." Id. Evidence is admissible only if it is relevant evidence, Minn. R. Evid. 402, which relevant evidence is defined as "evidence having any tendency to make the existence of any fact that is of consequence to the determination of the action more probable or less probable than it would be without the evidence," Minn. R. Evid. 401. The Director asserts that he adequately responded to or properly objected to each of Overboes interrogatories and documents requests. We have reviewed the Directors answers and objections, and we conclude that the Director sufficiently answered or properly objected to each interrogatory and document request. We note that for a number of the interrogatories to which the Director objected, he still provided an answer. We further note that a number of Overboes interrogatories and document requests fell

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outside the scope of permissible discovery. We therefore hold that the referee did not abuse his discretion in denying Overboes motion to compel discovery. II. Before reviewing the referees findings and conclusions, we must as a preliminary matter determine whether the Minnesota or North Dakota professional responsibility rules apply to Overboes conduct.4 The Minnesota Rules of Professional Conduct state that "[a] lawyer admitted to practice in this jurisdiction is subject to the disciplinary authority of this jurisdiction, regardless of where the lawyers conduct occurs." Minn. R. Prof. Conduct 8.5(a). Thus, Overboe is subject to our disciplinary authority because he is admitted to practice law in Minnesota. But Rule 8.5 further states that when the conduct in question is not connected to a matter pending before a tribunal, the rules of professional conduct that apply are the rules of the jurisdiction in which the lawyers conduct occurred, or, if the predominant effect of the conduct is in a different jurisdiction, the rules of that jurisdiction shall be applied to the conduct. A lawyer shall not be subject to discipline if the lawyers conduct conforms to the rules of a jurisdiction in which the lawyer reasonably believes the predominant effect of the lawyers conduct will occur. Minn. R. Prof. Conduct 8.5(b)(2). Therefore, the question for each allegation of

misconduct is--where did the conduct and its predominant effect occur?

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We note that while we address this issue, the relevant North Dakota Rules of Professional Responsibility and Minnesota Rules of Professional Responsibility are nearly identical.

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The Director first alleges that Overboe deceptively labeled a personal account as a trust account, the WSB trust account, to shield Overboes personal funds from judgment creditors. The WSB trust account was held in a North Dakota bank. The judgment against Overboe was entered in the United States District Court for the District of North Dakota. Further, no clients in Minnesota or North Dakota were harmed by Overboes conduct regarding the WSB trust account. Because Overboe held this personal account in North Dakota and because the use of the account did not have any predominant effects in Minnesota, we conclude that the North Dakota Rules of Professional Conduct apply to the allegations that Overboe deceptively used a personal trust account. The second allegation against Overboe is that he made misrepresentations to and failed to cooperate with the Director during his disciplinary investigation. The Director is the representative of Minnesotas Office of Lawyers Professional Responsibility. Thus, regardless of where the conduct that is being investigated occurred, any conduct constituting misrepresentations to and noncooperation with the Director has its predominant effects in Minnesota. We therefore conclude that as to Overboes alleged misrepresentations to and noncooperation with the Director, the Minnesota professional conduct rules apply. Overboes IOLTA account was held in a North Dakota bank. The alleged

misconduct concerning the IOLTA account is that Overboe commingled client funds and personal funds in the account and maintained personal funds in the account that were not for permissible client purposes. At all times relevant to this matter, the funds held in the account were funds of Overboe, his wife, or North Dakota clients. While Overboe 14

certified to our court on his annual Minnesota attorney license application that the IOLTA account was his client trust account, the conduct at issue--improper use of a trust account and commingling client funds--occurred in North Dakota. Further, the possible effects of the conduct--the risk that judgment creditors would attach client funds--also occurred in North Dakota. Moreover, it was reasonable for Overboe to believe that the predominant effect of his conduct concerning his IOLTA account would occur in North Dakota. See Minn. R. Prof. Conduct 8.5(b)(2). We therefore conclude that Overboes alleged IOLTA account misconduct is subject to review under the North Dakota Rules of Professional Conduct. III. Having determined the appropriate rules under which to review each allegation, we now turn to the referees findings. Overboe ordered a transcript of the hearing in this case, thereby preserving his right to challenge the referees findings. Rule 14(e), RLPR; In re Nelson, 733 N.W.2d 458, 461 (Minn. 2007). Nevertheless, we give "great

deference to a referees findings," Nelson, 733 N.W.2d at 461, and will uphold them "if they have evidentiary support in the record and are not clearly erroneous," In re Moulton, 721 N.W.2d 900, 905 (Minn. 2006). Moreover, "[d]eference to the referee is particularly appropriate when the findings are based on a respondents demeanor, credibility, or sincerity." Id. We will therefore only reverse a referees findings if, " ,,upon review of the entire evidence, [we are] left with the definite and firm conviction that a mistake has been made. " Id. (quoting In re Pinotti, 585 N.W.2d 55, 62 (Minn. 1998)).

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Deceptive Use of a Trust Account The Director asserts that Overboe deceptively labeled a personal account that contained only Overboes funds as a trust account in order to shield his funds from judgment creditors. Overboe argues that it is neither unethical nor illegal for a lawyer to have a personal trust account such as his WSB trust account. The referee agreed with the Director and concluded that Overboes establishment and use of the WSB trust account violated Minn. R. Prof. Conduct 8.4(c), which states that "[i]t is professional misconduct for a lawyer to * * * engage in conduct involving dishonesty, fraud, deceit, or misrepresentation." The North Dakota Supreme Court, like our court, has made clear that lawyers have a "high duty of candor," stating that " ,,[t]ruth and candor are synonymous with justice, and honesty is an implicit characteristic of the legal profession. " In re Johnson, 743 N.W.2d 117, 125 (N.D. 2007) (quoting In re Kaiser, 484 N.W.2d 102, 108 (N.D. 1992). Further, N.D. R. Prof. Conduct 8.4(c) makes it "professional misconduct for a lawyer to * * * engage in conduct involving dishonesty, fraud, deceit, or misrepresentation that reflects adversely on the lawyers fitness as a lawyer." North Dakota Rules for Lawyer Discipline 1.2A(3) states that a lawyer may be disciplined for "[e]ngaging in conduct involving dishonesty, fraud, deceit or misrepresentation." Deceit is defined as "[t]he act of intentionally giving a false impression." Black's Law

Dictionary, 435 (8th ed. 2004). We emphasize that to be disciplined under these rules, a lawyers conduct need only be dishonest, fraudulent, deceitful, or misrepresentative, not necessarily illegal. See, e.g., In re Howe, 621 N.W.2d 361, 364 (N.D. 2001) (imposing 16

discipline on a lawyer for conduct that was not illegal but still violated the professional responsibility rules); see also N.D. R. Prof. Conduct 8.4(b) (providing a separate ground to impose discipline when the lawyer has committed a criminal act). Whether Overboes use of his WSB trust account was deceptive depends on the proper use of a trust account. North Dakota requires that "a trust and its terms [are] for the benefit of its beneficiaries," N.D. Cent. Code

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