Supreme Court dismisses disciplinary charges against attorney; Thomas and Karmeier dissent

The Illinois Supreme Court has dismissed disciplinary charges lodged against a Barrington attorney accused of violating the Rules of Professional Conduct in regards to his father’s estate.

In a 5-2 ruling handed down today, the majority of the high court agreed with a panel of the Illinois Attorney Registration and Disciplinary Commission’s (ARDC) Review Board in dismissing the charges against Theodore George Karavidas because the ARDC administrator failed to prove the alleged rule violations.

Led by Chief Justice Rita Garman, the majority held that “professional discipline may be imposed only upon a showing by clear and convincing evidence that the respondent attorney has violated one or more of the Rules of Professional Conduct” and that “[m]ere bad behavior that does not violate one of the Rules is insufficient.”

Contrary to the majority’s ruling, Justice Robert Thomas wrote in his dissent that he believes “an attorney absolutely may be disciplined for misconduct that is not specifically set forth in our Rules of Professional Conduct.”

Thomas, who was joined in his dissent by Justice Lloyd Karmeier, wrote he supports the ARDC Hearing Board’s recommendation that Karavidas should be suspended from the practice of law for four months.

The case came to the state high court after the ARDC administrator filed exceptions to December 2012 Review Board report that recommended the dismissal of Karavidas' charges.

In 2009, the ARDC accused Karavidas of converting assets entrusted to him as the executor of his father’s estate and breaching fiduciary obligations owed to the beneficiaries of the estate, which included himself, his sister and mother.

The commission's complaint also alleged that Karavidas engaged in conduct involving dishonesty, fraud, deceit or misrepresentation that was prejudicial to the administration of justice in violation of Rule 8.4(a)(4) and (5) of the Rules of Professional Conduct, as well as conduct that tends to defeat the administration of justice or bring the legal professional into disrepute in violation of Supreme Court Rule 770.

Following a hearing, a panel of the ARDC Hearing Board determined that Karavidas breached his fiduciary duty to the beneficiaries of his father’s estate by taking funds from the estate in the form of undocumented loans, which he later repaid, for personal use.

The Hearing Board concluded that Karavidas committed conversion when he took the estate funds because he had no authority to do so under his father’s will or the state's Probate Act and that his conduct violated Rule 8.4(a)(5) and Supreme Court Rule 770.

The panel of the Hearing Board, however, determined that Karavidas did not violate Rule 8.4(a)(4) because he did not intend to deceive of defraud the estate’s beneficiaries.

Based on its findings, the Hearing Board recommended that Karavidas be suspended from the practice of law for a period of four months, spurring both Karavidas and the ARDC administrator to appeal to the Review Board.

Karavidas argued that the Hearing Board erred in determining he breached his fiduciary duty to the estate and its beneficiaries by concluding his conduct amounted to conversion. He also argued that reprimand or censure would be the most appropriate discipline.

On the other side, the administrator argued that the Hearing Board was wrong in finding that Karavidas did not violate Rule 8.4(a)(4) and in recommending a four-month suspension, rather than a one-year suspension.

The Review Board disagreed with the Hearing Board, and recommended that the disciplinary charges against Karavidas be dismissed.

The Review Board determined that the charges of breach of fiduciary duty and conversion could not serve as a basis for discipline because there was no attorney-client relationship between Karavidas and the estate or its beneficiaries.

Among other findings, the Review Board found that the ARDC administrator failed to prove by clear and convincing evidence that Karavidas violated the Rules of Professional Conduct when he allegedly committed conversion and breach of fiduciary duty.

The majority of the Supreme Court today agreed with the Review Board and dismissed the charges against Karavidas in its 25-page opinion.

Garman wrote the majority of the court agreed with the Hearing Board that Karavidas’ conduct, “because he was not acting as an attorney and he was not involved in the judicial process at the time of the breach, did not undermine the administration of justice.”

“While an attorney’s breach of fiduciary duty owed to a non-client could constitute an act that is prejudicial to the administration of justice, this did not occur in this case,” Garman wrote.

She added, “Further, if an attorney is to be disciplined for such conduct, the Administrator must, as a matter of due process, plead and prove that the breach of fiduciary duty had a prejudicial effect on the administration of justice. To the extent that our earlier decisions state or imply otherwise, they are hereby overruled.”

In his six-page dissent, Thomas, wrote that he disagrees with the majority’s conclusion that Karavidas is “immune from professional discipline because none of his misconduct violated a specific Rule of Professional Conduct.”

“The problem with the majority’s reasoning is that this court has not merely suggested that an attorney may be subjected to professional discipline for conduct that is not specifically prohibited by the Rules of Professional Conduct,” he wrote. “On the contrary, this court has expressly held as much.”

Pointing to the 1997 disciplinary case of In re Rinella, Thomas explained that “this court began its analysis by reject[ing] respondent’s contention that attorney misconduct is sanctionable only when it is specifically proscribed by a disciplinary rule.’”

“In doing so,” Thomas wrote, “this court explained that ‘the standards of professional conduct enunciated by this court are not a manual designed to instruct attorneys what to do in every conceivable situation.’”

While the majority of the court did not mention Rinella in its opinion, Thomas asserts in his dissent that it "is of paramount importance in this case” and that “once Rinella is taken into account, the majority’s reading of Rule 770 becomes untenable.”

Thomas contends in his dissent, which Karmeier joined, that Rinella “makes crystal clear” that “attorneys may be sanctioned for engaging in misconduct that is not ‘specifically proscribed by a disciplinary rule.’”

“In sum, I am convinced that, contrary to the majority’s conclusion, an attorney absolutely may be disciplined for misconduct that is not specifically set forth in our Rules of Professional Conduct,” Thomas wrote.

As such, Thomas wrote that he believes the Hearing Board’s recommendation that Karavidas be suspended for four months is appropriate.