## Facts

- Lottie Wolfe Cohen, a California attorney (State Bar No. 94674), represented Maria Calderon in a matter that settled for $98,000.
- Cohen deposited the settlement proceeds into a client trust account (CTA).
- At Calderon’s request, Cohen disbursed Calderon’s share in installments.
- After Cohen wrote what was intended to be the final installment check to Calderon, Cohen transferred funds from the CTA to Cohen’s general operating account.
- When Calderon attempted to negotiate the final installment check, it was returned for insufficient funds (NSF).
- Cohen later paid Calderon the amount owed.
- Cohen also represented Adam Calhoun in a matter that settled for $15,000, with settlement funds to be distributed in part to Calhoun’s medical providers.
- Cohen deposited the Calhoun settlement proceeds into a CTA and issued checks to providers; at least one provider’s check was returned NSF.
- The CTA did not have sufficient funds for reasons that included Cohen’s overpayment of another client from the same CTA and Cohen’s failure to regularly monitor whether the CTA remained adequately funded.
- Cohen later paid the affected provider.
- The Office of Chief Trial Counsel of the State Bar of California (OCTC) filed disciplinary charges based on Cohen’s handling of funds and her CTA practices.
- At trial, Cohen did not introduce certain CTA records, including a written ledger for each client and a written journal for each bank account.
- The hearing judge dismissed OCTC’s moral-turpitude charges based on the NSF checks, but found Cohen culpable of: (1) two counts of moral turpitude based on misappropriation of client funds, (2) two counts of failure to keep client funds in trust, and (3) two counts of failure to maintain required trust-account records, and recommended a six-month suspension.
- Cohen appealed to the Review Department of the California State Bar Court.

## Issues

1. Whether Cohen’s handling of entrusted settlement funds—resulting in CTA shortages and NSF checks—constituted misappropriation involving moral turpitude under Business and Professions Code section 6106.
2. Whether issuing NSF checks from a client trust account can constitute moral turpitude when the attorney knew or acted with reckless disregard as to whether sufficient entrusted funds were available.
3. Whether Cohen violated former Rule 4-100(A) by failing to keep client funds in trust until properly disbursed, and former Rule 4-100(B)(3) by failing to maintain required CTA books and records.
4. What level of discipline was warranted in light of the nature of the trust-account violations and the purposes of attorney discipline.

## Decision

- The Review Department found Cohen culpable of two counts of moral turpitude for misappropriation of entrusted funds (Bus. & Prof. Code, § 6106).
- The Review Department found Cohen culpable of two counts of failing to keep client funds in trust (former Rule 4-100(A)).
- The Review Department found Cohen culpable of two counts of failing to maintain required trust-account records (former Rule 4-100(B)(3)).
- The Review Department found moral turpitude based on Cohen’s issuance of NSF checks from the CTA.
- The Review Department imposed discipline including six months of actual suspension and probationary conditions.

## Legal Principles

- Misappropriation of entrusted client funds constitutes moral turpitude under Business and Professions Code section 6106, even if the attorney later makes restitution.
- An attorney commits misappropriation when the attorney causes a client trust account to fall below what must be held for clients or third-party payees, including by transferring CTA funds to an operating account before all trust obligations are satisfied.
- Issuing NSF checks from a client trust account may support a moral-turpitude finding when the circumstances show knowledge or reckless disregard as to whether sufficient entrusted funds were available.
- Former Rule 4-100(A) requires attorneys to keep funds held for clients or others in a trust account and not withdraw or transfer those funds except as permitted (for example, after the funds are earned or properly payable).
- Former Rule 4-100(B)(3) requires attorneys to maintain specified trust-account records (including client ledgers and account journals); failure to maintain or produce these records is an independent violation and may support adverse inferences about trust compliance.
- Attorney discipline focuses on protection of the public, the courts, and the legal profession; repeated trust-account failures and creation of risk to clients or payees are aggravating considerations, while restitution may be mitigating but does not eliminate culpability.

## Conclusion

In the Matter of Cohen, the State Bar Court Review Department addressed an attorney’s mishandling of settlement funds in two client matters, including transfers from a client trust account that led to NSF checks and a failure to maintain required trust-account records, and imposed discipline that included six months of actual suspension with probation.


In the Matter of Cohen, State Bar No. 94674, 2019 WL 5584962 (2019)