In re Petition for Disciplinary Action against Adam William Klotz
Original Jurisdiction Office of Appellate Courts
M. Humiston, Director, Timothy Michael Burke, First Assistant
Director, Office of Lawyers Professional Responsibility,
Saint Paul, Minnesota, for petitioner.
Todd Cooperstein, Minneapolis, Minnesota, for respondent.
appropriate discipline for an attorney who misappropriated
client funds, commingled client and business funds, made
false statements to the Director, failed to cooperate with
the Director's investigation, created a false and
misleading document, failed to maintain required trust
account records, failed to safeguard and promptly refund an
unearned retainer, made false statements to clients,
neglected client matters, and failed to communicate with
clients is, given the existence of substantial mitigating
factors, an indefinite suspension with no right to petition
for reinstatement for 18 months.
Director of the Office of Lawyers Professional Responsibility
(Director) filed a petition for disciplinary action against
respondent Adam William Klotz. The Director alleged that
Klotz misappropriated client funds, commingled client and
business funds, made false statements to the Director, failed
to cooperate with the Director's investigation, failed to
maintain trust account records, failed to diligently pursue
client matters, failed to communicate with clients, made
false statements to clients, and failed to safeguard and
promptly refund an unearned retainer. We appointed a referee.
After a hearing, the referee concluded that Klotz committed
the alleged misconduct and recommended an indefinite
suspension with no right to petition for reinstatement for 1
year. The Director asks us to disbar Klotz, while Klotz
supports the referee's recommended discipline. We
conclude that in light of substantial mitigating factors, the
appropriate discipline for Klotz's misconduct is an
indefinite suspension with no right to petition for
reinstatement for 18 months.
Klotz was first licensed to practice law in Minnesota in
September 2010. During the time of his misconduct, he
maintained a general civil practice, worked as a part-time
public defender under a contract with Brown County, and
handled child protection cases on a per-hour basis for the
County. Klotz has no prior disciplinary history. The
misconduct at issue here involves six clients, failure to
cooperate with the Director, and trust account deficiencies.
Matter and Failure to Cooperate
represented P.C. in three separate collection actions a
creditor brought against P.C. In 2013, Klotz negotiated a
settlement agreement that resolved all three cases for a
total payment of $11, 000, to be paid in monthly installments
of $500. Klotz and P.C. agreed that P.C. would make
electronic payments directly to Klotz each month and that
Klotz would make a $500 payment from his trust account each
month to the creditor. Because Klotz believed that he could
not have funds electronically deposited into his trust
account, he gave P.C. the information necessary to
electronically deposit his monthly payments into Klotz's
business account. Before each monthly payment was due to the
creditor, Klotz was to transfer $500 from his business
account to his trust account.
February 2, 2015, Klotz overdrew his trust account. His bank
reported the overdraft to the Director, and the Director
contacted Klotz, requesting trust account books and records
related to the overdraft.
receiving the Director's overdraft notice, but before
responding to the Director, Klotz reviewed his account
statements. He determined that not only had P.C. been making
consistent, timely payments, but that P.C. had actually paid
Klotz $5, 600 more than he was obligated to pay to his
creditor.  Klotz refunded $5, 600 to P.C. around
March 5, 2015.
response to the Director, Klotz produced the requested books
and records and told the Director about the payment
arrangement he had with P.C., including the deposits into his
business account. Klotz claimed the overdraft occurred
because P.C made erratic and undocumented deposits into
Klotz's business account, making it difficult for him to
make timely transfers to his trust account.
19, 2015, the Director notified Klotz that she was opening an
investigation into his trust account practices and requested
all business account records related to P.C.'s
settlement. Klotz did not timely respond but instead
requested and received several extensions. He finally
produced some, but not all, of the requested documents at the
end of June 2015. In his response, he also included a chart
that purported to show that all payments he received from
P.C. were timely deposited into his trust account. This chart
was false and misleading because Klotz had not timely
deposited P.C.'s funds into his trust account.
2015, Klotz produced more of the documents the Director had
requested, but he still failed to fully comply. In January
2016, Klotz finally produced most of the account records the
Director requested, but he heavily redacted the records to
conceal how much of P.C.'s money actually had been
deposited in Klotz's business account. The Director
continued to request the remaining records in unredacted form
and ultimately acquired the records from Klotz's bank.
Klotz eventually produced all requested records in unredacted
form after he retained counsel.
reviewing Klotz's records, the Director determined that
P.C. often deposited more than $500 into Klotz's business
account in a given month. Because Klotz was not tracking how
much money P.C. deposited into his business account, Klotz
did not transfer all of P.C.'s funds into his trust
account every month. As a result, Klotz's business
account became a repository for P.C.'s funds, and the
amount of P.C.'s funds in the account grew nearly every
paid personal and business expenses out of his business
account. At times, the balance of his business account was
insufficient to account for all of P.C.'s funds that
should have been in the account. The referee specifically
found that Klotz used up to $5, 340.97 of P.C.'s funds to
pay his personal and business expenses.
referee concluded that Klotz's conduct regarding P.C.
violated Minn. R. Prof. Conduct. 1.15(a),
8.1(a) and (b), 8.4(c) and (d), and Rule 25, Rules on
Lawyers Professional Responsibility (RLPR).
referee found that, between May 2013 and March 2015, Klotz
failed to maintain the required books and records for his
trust account. During some of this time period, Klotz's
trust account did not contain sufficient funds to cover
aggregate client balances, and Klotz overdrew the account on
three occasions. Klotz caused these shortages and
overdrafts by making a monthly payment to P.C.'s creditor
before he had deposited sufficient funds into his trust
account to cover the transfer.
referee found that Klotz's proffered justification for
the overdraft-P.C.'s erratic deposits-was false. The
referee found that "[a]t all times, . . . total funds
transferred by P.C. . . . were sufficient to cover the $500
monthly settlement payments" to the creditor and that it
was Klotz's misappropriation of P.C.'s funds that
caused the overdraft." The referee concluded that
Klotz's management of his trust account violated Minn. R.
Prof. Conduct. 1.15(a) and (h), as interpreted by Appendix
negotiated settlements with creditors on behalf of two
clients. In each case, Klotz issued a check drawn on his
trust account and payable to his client's creditor. But
when the checks were issued, Klotz's trust account
contained funds for neither client. Instead, Klotz deposited
his own funds into his trust account to cover the settlement
amounts. The referee found that each of these transactions
was a loan to a client and that these loans violated Minn. R.
Prof. Conduct 1.8(e).
September 2013, A.H. retained Klotz to represent him in an
employment matter and executed a flat-fee retainer agreement.
In January 2014, A.H. paid the portion of the fee due and met
with Klotz to discuss the case. They agreed that Klotz would
draft and serve a complaint on A.H.'s behalf within about
3 weeks. For nearly 3 months after the planned date of
service, A.H. made numerous attempts to contact Klotz but
never heard from him.
March 12, 2014, Klotz sent A.H. an e-mail apologizing for the
delay. Klotz said that he was still working on the complaint
and would complete it as soon as he could. On April 1, 2014,
A.H. again asked for an update. Klotz responded that he was
still working on the complaint. For the next month, A.H.
tried to contact Klotz four times. After A.H.'s fourth
attempt, Klotz told A.H. that he was free to retain other
counsel if he was dissatisfied. After this exchange, A.H.
twice asked for an estimated time of completion. On May 13,
2014, Klotz told A.H. that the complaint would be served on
May 19 and a copy would be mailed to him. On June 19, 2014,
Klotz finally served a complaint in the A.H. matter.
serving the complaint, Klotz did not keep A.H. informed about
the status of an answer in the case. In mid-August, A.H.
asked Klotz about the status of the case, received no
response, and filed an ethics complaint with the Director. It
was only after receiving word of the complaint that Klotz
gave A.H. a copy of the complaint and answer. Klotz also
informed A.H. that a scheduling conference was set. Klotz did
not timely ...