In the Matter of Disciplinary Proceedings Against James E. Gatzke, Attorney at Law: Office of Lawyer Regulation, Complainant-Respondent,
James E. Gatzke, Respondent-Appellant
Argument February 4, 2016.
Attorney's license suspended.
the respondent-appellant there were briefs filed by Terry E.
Johnson and Peterson, Johnson & Murray, S.C., Milwaukee, and
oral argument by Terry E. Johnson.
Office of Lawyer Regulation, there were briefs filed by Paul
W. Schwarzenbart. Oral argument by Paul W. Schwarzenbart.
J. GABLEMAN, J. (concurring in part, dissenting in part).
Justice REBECCA G. BRADLEY joins this concurrence/dissent.
[¶1] Attorney James E. Gatzke appeals a
report filed by Referee Christine Harris Taylor, concluding
that Attorney Gatzke committed 45 counts of professional
misconduct and recommending that this court revoke his
license to practice law in Wisconsin. The referee further
recommended that Attorney Gatzke make restitution totaling
$551,128.32, and that he be required to pay the full costs of
this proceeding, which are $56,879.77, as of February 24,
2016. Attorney Gatzke asserts that many of the referee's
findings of fact are clearly erroneous. He also argues that,
even assuming that this court finds that he committed some or
all of the counts of misconduct found by the referee, a
license suspension of less than five months would be an
appropriate level of discipline.
[¶2] Upon careful review of this matter, we
uphold all of the referee's findings of fact and
conclusions of law and conclude that a three-year suspension
of Attorney Gatzke's license to practice law is an
appropriate sanction for his misconduct. We agree with the
referee that Attorney Gatzke should be required to make
restitution and that he be required to pay the full costs of
[¶3] Attorney Gatzke was admitted to
practice law in Wisconsin in 1994 and practices in New
Berlin. For a time he served as the mayor of New Berlin. He
has also been licensed as a real estate broker since 1981. He
has no prior disciplinary history.
[¶4] On August 22, 2013, the Office of
Lawyer Regulation (OLR) filed a complaint against Attorney
Gatzke. The referee was appointed on November 5, 2013. The
OLR filed an amended complaint on March 11, 2014, and on May
19, 2014, it filed a second amended complaint.
[¶5] The bulk of the allegations in the
second amended complaint arise out of Attorney Gatzke's
representation of P.S. P.S.'s husband, S.W., was an
investment advisor who owned a number of businesses. In late
2004, S.W.'s business partner filed a lawsuit alleging
that S.W. had stolen $3.5 million from him. In June 2005,
with the litigation and criminal investigations pending, S.W.
[¶6] P.S.'s niece, N.S., worked for
Attorney Gatzke between 2003 and 2007. Soon after S.W.'s
death, P.S. executed an agreement retaining Attorney
Gatzke's law firm to represent her. P.S. executed a
specific durable power of attorney (POA) naming Attorney
Gatzke as her attorney in fact. In the course of representing
P.S., Attorney Gatzke learned there were four life insurance
policies issued by the Northwestern Mutual Life Insurance
Company (NML) insuring S.W., with combined proceeds of $8.5
million, payable on his death.
[¶7] In September 2005, following a partial
settlement of the litigation involving S.W.'s business
partner, NML wired $8,542,230.50 in life insurance proceeds
and interest. Over $2.5 million was wired to P.S. via
Attorney Gatzke's trust account. The remaining funds went
to two of S.W.'s former business partners.
[¶8] The OLR's second amended complaint
alleged that Attorney Gatzke invested P.S.'s funds in
businesses in which he was an investor, primarily real estate
developments, without obtaining P.S.'s written consent to
the investments after giving her a reasonable opportunity to
seek the advice of independent counsel. The second amended
complaint also alleged that Attorney Gatzke converted
P.S.'s funds, and it alleged that Attorney Gatzke failed
to provide P.S. with written accountings or invoices relating
to legal work he performed for her.
[¶9] In addition, the second amended
complaint alleged that at the time of his death, S.W. had a
$500,000 life insurance policy with the Jackson National Life
Insurance Company (Jackson National). Between 2001 and 2004,
the beneficiary of that policy changed from N.K., another
business partner of S.W., to A.S., the minor daughter of S.W.
and P.S. In December 2004, S.W. had requested Jackson
National to change the beneficiary back to N.K., but Jackson
National never processed the request because certain forms
were not properly completed.
[¶10] In July 2005, an attorney representing
N.K. wrote to Jackson National claiming entitlement to the
full amount of the policy proceeds. Attorney Gatzke wrote to
N.K.'s attorney asserting that he represented both P.S.
and A.S. The second amended complaint alleged that both P.S.
and A.S. had an interest in the prospective settlement of the
matter but that Attorney Gatzke did not discuss their
individual and potentially differing interests in such a
settlement with them, nor did he obtain P.S.'s and
A.S.'s written consent to continue the representation
following a consultation regarding the conflict.
[¶11] In April 2006, Jackson National filed
an action in Waukesha County circuit court seeking a court
order as to payment of the $500,000. The litigation was
resolved by a stipulation in April 2007. The stipulation,
which was signed by Attorney Gatzke as attorney for P.S. and
A.S., divided the proceeds between N.K., A.S., and P.S.
Attorney Gatzke did not seek court approval for the
settlement, despite the fact that A.S. was a minor. The
Waukesha County clerk of courts disbursed a check in the
amount of $325,446.25 to Attorney Gatzke's trust account.
Attorney Gatzke issued a $50,000 trust account check payable
to his firm for attorney's fees. The remaining funds were
deposited to a preexisting brokerage account at Northwestern
Mutual Investment Services entitled " Attorney James E.
Gatzke, Conservator for P.S." The second amended
complaint alleged that Attorney Gatzke did not provide either
P.S. or A.S. with written notice of his receipt of the funds.
[¶12] The second amended complaint also
alleged that Attorney Gatzke engaged in multiple counts of
professional misconduct with respect to his recordkeeping and
handling of his trust account. The second amended complaint
alleged that Attorney Gatzke failed to hold client funds in
trust and converted those funds to his own purposes. The
second amended complaint also alleged that Attorney Gatzke
allowed his trust account to become overdrawn and as a result
of those overdrafts, client funds were converted.
[¶13] Specifically, the second amended
complaint alleged that Attorney Gatzke violated the following
supreme court rules:
[¶14] Former SCR 20:1.7(b) (effective
through July 1, 2007) (count twenty):
A lawyer shall not represent a client if the representation
of that client may be materially limited by the lawyer's
responsibilities to another client or to a third person, or
by the lawyer's own interests, unless: (1) the lawyer
reasonably believes the representation will not be adversely
affected; and (2) the client consents in writing after
consultation. When representation of multiple clients in a
single matter is undertaken, the consultation shall include
explanation of the implications of the common representation
and the advantages and risks involved.
[¶15] Former SCR 20:1.8(a) (effective
through July 1, 2007) (counts four, five, nine, fourteen and
A lawyer shall not enter into a business transaction with a
client or knowingly acquire an ownership, possessory,
security or other pecuniary interest adverse to a client
unless: (1) the transaction and terms on which the lawyer
acquires the interest are fair and reasonable to the client
and are fully disclosed and transmitted in writing to the
client in a manner which can be reasonably understood by the
client; (2) the client is given a reasonable opportunity to
seek the advice of independent counsel in the transaction;
and (2) the client consents in writing thereto.
[¶16] SCR 20:1.15(b)(3) (effective July 1,
2004) (counts thirty-one, thirty-five, and thirty-eight):
No funds belonging to the lawyer or law firm, except funds
reasonably sufficient to pay monthly account service charges,
may be deposited or retained in a trust account.
[¶17] SCR 20:1.15(b)(4) (effective July 1,
2004) (count one):
Unearned fees and advanced payments of fees shall be held in
trust until learned by the lawyer, and withdrawn pursuant to
SCR 20:1.15(g). Funds advanced by a client or 3rd party for
payment of costs shall ...