Direct Appeal Third District, Salt Lake Dep't The
Honorable Todd M. Shaughnessy No. 120905676
Wahlquist, Salt Lake City, for appellant
Michael F. Skolnick, Troy L. Booher, Erin B. Hull, Beth E.
Kennedy, Salt Lake City, for appellee.
Justice Durham authored the opinion of the Court in which
Chief Justice Durrant, Associate Chief Justice Lee, Justice
Himonas, and Justice Pearce joined.
The Utah State Bar's Office of Professional Conduct (OPC)
appeals from a final judgment of the Third District Court
suspending Abraham Bates from the practice of law for a
period of five months for violating rules 1.4(a), 1.15(a),
and 1.15(d) of the Utah Rules of Professional Conduct. The
OPC asks this court to elevate Mr. Bates' sanction from
suspension to disbarment, by inferring from the district
court's factual findings that Mr. Bates acted both
"knowingly" and "with the intent to
benefit" from his misconduct. We affirm the district
court's sanction of suspension, albeit on alternate
Just six months after beginning to practice law, Abraham
Bates started his own law firm, Wasatch Advocates. Mr. Bates
solely owned and operated Wasatch Advocates. Although the
firm started with only six employees, its clientele rapidly
expanded, and, within a single year, it employed thirty-seven
people to meet the growing workload. In order to deal with
the increasing expenses, Mr. Bates established lines of
credit to maintain enough money in the firm's operating
account. He regularly made draws against these lines of
Although he managed the operating and trust accounts on his
own with the assistance of his receptionist in the beginning,
the accounting became more complicated as the firm's
income and expenses quickly grew. Mr. Bates retained a
certified public accountant to perform monthly
reconciliations, auditing, and tax work. Later, as the
practice expanded, Mr. Bates hired an accounting firm to do
more frequent reconciliations and to train Mr. Bates and his
staff in accounting procedures. Despite this, he noticed that
there were still accounting issues, such as his receptionist
mistakenly depositing client money into the operating account
and earned fees into the trust account. At the accounting
firm's suggestion, a chief operating officer was also
hired to help with the firm's accounting practices.
However, even after taking these corrective measures, the
operation of the firm's accounts remained chaotic.
In January 2012, Wasatch Advocates imploded due to changing
economic circumstances and the abrupt departure of a
significant proportion of Mr. Bates' staff. Around the
time of the firm's dissolution, John Liti, a former
client, filed a bar complaint against Wasatch Advocates
resulting in an OPC investigation. During the investigation,
the OPC focused heavily on Mr. Bates' accounting
practices and identified possible violations in other client
matters. The only matter at issue on this appeal is the F.A.
Apartments matter. The OPC alleges that Mr. Bates'
actions amount to intentional misappropriation of F.A.
Apartments' funds and merit disbarment in two different
instances: his management of F.A. Apartments' funds held
in the trust account and his management of a retainer paid by
F.A. Apartments that was held in the operating account.
TRUST ACCOUNT SHORTFALLS
F.A. Apartments hired Mr. Bates to defend it against a
foreclosure. In December 2010, F.A. Apartments gave Mr. Bates
$28, 000 to be deposited in trust. The $28, 000 consisted of
rents collected on the property that was the subject of the
foreclosure action. The money was to be held in trust during
settlement negotiations and was to be used only for property
management and other authorized expenses, not for Mr.
Bates' attorney fees. Wasatch Advocates deposited the
$28, 000 into its trust account. Mr. Bates made authorized
expenditures out of the trust account and kept detailed
records about the remaining balance.
Despite these accounting efforts, the OPC's investigation
revealed that the overall trust account balance dipped below
the amount Wasatch Advocates was holding for F.A. Apartments.
On three particular days in early 2011-January 3, March 17,
and June 30-the balance of Mr. Bates' trust account was
less than the amount he should have been holding for F.A.
Apartments by $2, 001.26, $2, 343.98, and $4, 221.80
respectively. However, there was enough in the operating
account to cover these shortfalls, and his lines of credit
also had more than enough to cover these shortfalls.
OPERATING ACCOUNT SHORTFALL
During the first week of August 2011, F.A. Apartments paid
Wasatch Advocates a $16, 500 retainer. Despite Mr. Bates'
direction that these funds be deposited in the trust account,
his staff mistakenly deposited $16, 000 of the $16, 500 into
the firm's operating account without Mr. Bates'
knowledge. The retainer was to be used
for Mr. Bates' work in the foreclosure action. About
three weeks after the money was incorrectly deposited, Mr.
Bates was nearing the completion of settlement negotiations
for the foreclosure case, with an agreement to settle for
At this point, while conducting a review of the trust account
to determine if there was enough of the $28, 000 left to
cover the settlement, Mr. Bates discovered the $16, 000
retainer had been deposited in the operating account,
contrary to his instructions. After conducting his review,
Mr. Bates knew that F.A. Apartments did not have the money to
pay the settlement amount. Not wanting his client to lose the
favorable settlement, Mr. Bates agreed to defer billing for
his work on the matter and to use the retainer funds to pay
the settlement, even though he had already earned the bulk of
the $16, 500 retainer. For reasons that do not appear on the
record, Mr. Bates failed to move the money into his trust
account at that time, even though he acknowledged that the
$16, 000 became client funds after the agreement to use the
retainer to settle the foreclosure case.
Approximately four weeks after Mr. Bates learned that the
$16, 000 had been incorrectly deposited, he made a $20, 000
withdrawal from the operating account and transferred it to
payroll, leaving a negative balance in the operating account.
All of F.A. Apartments' $16, 000 was thus transferred to
Mr. Bates' payroll account and apparently used for the
In the two weeks leading up to the payroll transfer, Mr.
Bates made two draws on his lines of credit, and maintained
the ability to draw money that "significantly exceeded
the amount of the [$20, 000] transfer." Three days after
the payroll transfer, Mr. Bates took a $5, 000 draw on a line
of credit and placed the money in his operating account. Two
days after that, he took another $7, 000 draw. Ten days after
the payroll transfer, Mr. Bates wired $20, 000 (including the
$16, 000 retainer) to settle the F.A. Apartments'
After the settlement payment, Mr. Bates' representation
of F.A. Apartments concluded to the satisfaction of all
parties. F.A. Apartments never raised any concerns, even
during the disciplinary proceedings, with Mr. Bates'
representation or management of its funds.
After its investigation, the OPC sought Mr. Bates'
disbarment, alleging seven violations of the Utah Rules of
Professional conduct in connection with five different client
matters. Over the course of the trial, the OPC withdrew two
of its previous allegations and ultimately asked the court to
disbar Mr. Bates based only on his conduct in the F.A.
Apartments matter. The district court held that Mr. Bates
violated three rules during his representation of F.A.
Apartments and the other clients: 1.4(a) (communication),
1.15(a) (safekeeping property), and 1.15(d) (safekeeping
property). The court did not hold, however, that Mr. Bates
intentionally misappropriated F.A. Apartments' funds.
Mr. Bates gave the following testimony during trial:
Q: . . . [F]rom December of 2010, the point in time after FA
[Apartments] provided the $28, 000, up through the end of
September 2011 [when the foreclosure case settled] did you
ever intend to utilize FA Apartments' funds for any
purpose, other than FA Apartments-related expenses?
. . . ...