In the Matter of Gerald Larry Klein (1994)

Overview

This case addresses the limits of an attorney’s ability to retain and apply funds collected from a third party, even where the attorney honestly but mistakenly believes the funds belong to the client. The Review Department rejected a finding of moral turpitude but imposed public discipline to reinforce that attorneys must obey court orders and promptly release funds to parties with legitimate claims.

Facts

Gerald Larry Klein represented a wife in a marital dissolution proceeding. In December 1984, the husband stipulated to pay spousal support. In July 1985, Klein obtained a writ of execution and initiated wage garnishment to collect alleged arrearages.

In August 1985, during trial, the superior court orally ruled that spousal support was terminated and that the writ of execution was quashed and recalled pending further proceedings. Despite disagreeing with the ruling and believing it was jurisdictionally defective, Klein did not seek clarification, modification, or appellate relief.

Because Klein had already initiated garnishment, he later received $1,523.80 from the husband’s wages and deposited the funds into his trust account. Klein believed—based on an agreement with his client—that the money could be applied to unpaid attorney’s fees. When the husband’s counsel demanded return of the funds, Klein refused, stating the funds were in dispute.

In April 1986, the parties’ property settlement expressly awarded the garnished funds to the husband and required their prompt return. Klein still refused to release the money. After prevailing in a fee arbitration against the wife, Klein withdrew the $1,523.80 from trust and applied it to his fee award.

In separate matters, Klein advised divorcing spouses to file a joint bankruptcy without obtaining proper written conflict waivers and then delayed filing the bankruptcy petition for months despite the clients’ urgent need for relief, resulting in client dissatisfaction and replacement counsel.

Rules and Statutes Violated

Moral Turpitude Analysis

The hearing judge initially found moral turpitude. On independent review, the Review Department rejected that conclusion. Although Klein’s conduct was objectively unreasonable and violated court orders and trust rules, the record showed he honestly—though mistakenly—believed the funds belonged to his client and that the court’s order was invalid.

Relying heavily on Sternlieb v. State Bar, the court held that honest but unreasonable belief may negate moral turpitude even though it does not excuse trust account violations or disobedience of court orders.

Mitigation and Aggravation

• Mitigation: Long discipline-free career before and after misconduct; extraordinary record of pro bono work and community service; strong character testimony; cooperation and remediation in bankruptcy matter.
• Aggravation: None found. Failure to make restitution initially was not treated as aggravation due to respondent’s honest belief and fee arbitration context.

Outcome

The Review Department rejected a private reproval as insufficient. To protect the courts and the profession, it imposed public discipline but found no actual suspension necessary because Klein did not pose an ongoing risk to the public.

Sanctions Table