Disbarment Ordered for Client Trust Misappropriation and Practicing Law Without a License


Early next year, I will be speaking at PLI’s 7th Annual Patent Law Institute.  The event, like in previous years, will be bi-coastal. We will be live from New York City on February 4-5, 2013, and live from San Francisco, CA on March 4-5, 2013, with the San Francisco location also being webcast. My topic will be ethics, which will provide the all-important and highly sought after ethics CLE credit.

I will be discussing ethical issues raised by the America Invents Act, such as the new statute of limitations and avoiding catastrophic malpractice issues with the shift to first to file. I will also be providing a summary of the actions taken by OED over the previous 12 months to give insight into the problems OED sees, what their enforcement agenda is, and to try to learn lessons from our brothers and sisters in the bar who have gotten into one form of trouble or another.  The last time I did this was several years ago.  See Patent Office Disciplinary Actions and Lack Thereof.

One of the more recent disciplinary proceedings brought by OED was In the Matter of Bambi Walters (November 15, 2012).  Bambi Walters was disbarred from practice at the USPTO on November 15, 2012.  This was a case of reciprocal discipline and ultimately was the result of Walters’ failure to respond to formal investigation inquiries of the USPTO. The USPTO was unable to serve Walters at her last known address, which required publication in the Official Gazette on October 23, 2012 and again on October 30, 2012.

Walters was disbarred in the State of North Carolina on April 30, 2012, as a result of misappropriating funds from her client trust account.  The North Carolina State Bar filed a formal complaint against Walters on January 26, 2012, and Walters consented to disbarment by filing an affidavit with the Chair of the Disciplinary Hearing Commission.

Walters was also disbarred in Louisiana on September 12, 2012.  The decision of the Supreme Court of Louisiana sheds more light on the situation. This matter seems to have started when Walters was suspended in Virginia for two years as the result of practicing law in Virginia without a license. There were also allegations of converting client funds in Virginia. The Virginia action is what triggered the North Carolina disciplinary proceedings for the same act of misappropriation of client funds considered in Virginia.

So how did the Virginia matter unfold? On December 20, 2009, Virginia attorney Linda Quigley filed a complaint with the Virginia Bar alleging that Walters was practicing law in Virginia without a license. Quigley explained to Virginia disciplinary authorities that Walters had lied to her and her clients about being licensed in Virginia. Upon investigation the Virginia State Bar learned that Walters was practicing law in Virginia state courts and before the Virginia State Corporation Commission without being admitted to practice in Virginia. Walters also falsely represented that she was a Virginia lawyer in printed brochures and on her law firm website.

With respect to the misappropriation of client funds, the Virginia State Bar found that Walters had misappropriated $6,000 of client money by making two withdrawals of $3,000 each from her client trust account and transferring the funds into her firm’s operating account. Although it is not said specifically in the documents, those funds would have had to have been unearned in order for this to be a violation. Walters also failed to keep appropriate trust account records and otherwise commingled funds from the client trust account and the firm’s operating account.

MORAL OF THE STORY: This case gives us several reminders. First, patent practitioners are allowed to practice patent law anywhere in the United States thanks to Sperry v. Florida.  Sperry does not mean patent attorneys can practice other areas of law. In order to do anything other than patent practice before the United States Patent and Trademark Office, attorneys must be admitted to practice where they offer services. Second, for goodness sake, don’t commingle funds; keep clean and separate trust account records and only transfer funds from the client trust account once the work has been completed and the funds have been fairly earned.

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