author: CADY, Justice.

text:
    IOWA SUPREME COURT BOARD OF PROFESSIONAL ETHICS AND CONDUCT, Complainant, v. Ryan B. MOORMAN, Respondent.
    No. 04-0156.
    Supreme Court of Iowa.
    June 16, 2004.

      Norman G. Bastemeyer and Mark J. Schouten, Des Moines, for complainant.
    Ryan B. Moorman, Des Moines, pro se.
   CADY, Justice.

The Iowa Supreme Court Board of Professional Ethics and Conduct charged Ryan B. Moorman with numerous violations of the Iowa Code of Professional Responsibility for Lawyers mainly stemming from his neglect of client matters in multiple cases. The Grievance Commission of the Supreme Court of Iowa found that Moorman violated the Code of Professional Responsibility. It recommended Moorman be suspended from the practice of law for a period of not less than six months. On our review, we find Moorman violated the Code of Professional Responsibility and impose an indefinite suspension of not less than two years.

I. Background Facts and Proceedings.

Ryan B. Moorman is an Iowa lawyer. His background as a lawyer is largely unknown to us because he never responded to the Board’s complaint, and did not appear at the hearing on the complaint before the Grievance Commission. However, witnesses familiar with his conduct as a lawyer did appear and provided testimony about numerous incidents of client neglect and other acts in violation of the Code of Professional Responsibility.

A former client testified that Moorman failed to file a petition on her behalf in a personal injury claim arising out of a motor vehicle accident within the statute of limitations period. Moorman agreed to represent the client, entered into a contingent fee contract, and simply failed to take action to file the petition. After acknowledging his mistake, Moorman promised to pay the client $20,000, an amount he believed the client would have received if the case would have been pursued, less his contingent fee. Moorman told the client, however, that she must not disclose their settlement arrangement. Moorman also failed to counsel the client to seek independent legal advice before entering into the agreement. The settlement was to be paid in monthly installments of $500.

Moorman made only a few sporadic payments to the client. He also promised a physician that he would pay the costs of an operation the client needed for the injury she received from the motor vehicle accident. Although the surgeon performed the operation, Moorman failed to pay as promised. Additionally, Moorman offered to misrepresent the date of the client’s injury to an insurance company in an effort to obtain medical coverage for the client under an employer-provided insurance policy.

As a result of mounting medical bills and sporadic employment, the client was forced to file for bankruptcy. The client then brought a claim against Moorman for professional malpractice. Moorman did not carry professional liability insurance, and the claim resulted in a $20,000 settlement.

There was additional testimony at the Grievance Commission hearing from the deputy clerk of the supreme court concerning Moorman’s neglect in five separate criminal and juvenile cases on appeal. In all five cases, Moorman failed to properly prosecute the appeals, resulting in a dismissal of each case. In one instance, the appeal was subsequently reinstated. In another case, Moorman filed an application following the dismissal for want of prosecution that contained contradictory and dubious information. He claimed his client never received notice of the court decision and sought permission to file a delayed appeal. We issued an order requesting Moorman to submit an affidavit to support his claim, but no response was filed.

Moorman was described as the worst violator of the time requirements of the rules of appellate practice in the state. He accumulated nearly $900 of unpaid default fines in various appeals since 2000.

II. Board Complaint.

The Board charged Moorman with numerous violations of the Code of Professional Responsibility, including DR 6-101(A)(3) (neglect of a client’s legal matter), DR 1-102(A)(6) (conduct adversely reflecting on the fitness to practice law), DR 7-101(A)(2) (failure to perform a contract of employment), and DR 1-102(A)(4) (conduct involving misrepresentation).

The commission found the Board established the violations as set forth in the complaint, with two exceptions. It found the evidence of neglect was insufficient in one of the five appellate cases because Moorman ultimately succeeded in obtaining a reinstatement of the case. The commission also made no finding that Moor-man engaged in misrepresentation. The commission recommended Moorman be suspended from the practice of law for a period of not less than six months.

III. Scope of Review.

“We review attorney disciplinary proceedings de novo.” Iowa Supreme Ct. Bd. of Prof l Ethics & Conduct v. Bernard, 653 N.W.2d 373, 375 (Iowa 2002). “We are not bound by the findings of the Commission, but we give them weight.” Id.

IV. Violations.

Neglect is not defined by our rules of ethics, but it has generally been recognized to involve indifference and a consistent failure to perform those obligations that a lawyer has assumed, or a conscious disregard for the responsibilities a lawyer owes to a client. Comm, on Prof'l Ethics & Conduct v. Rogers, 313 N.W.2d 535, 536 (Iowa 1981). Neglect is more than ordinary negligence and usually involves multi-pie acts or omissions. Id. It is a form of professional incompetence that often involves procrastination, such as a lawyer doing little or nothing to advance the interests of a client after agreeing to represent the client. See Charles W. Wolfram, Modern Legal Ethics § 5.1, at 191-92 (1986); Comm, on Prof l Ethics & Conduct v. Nadler, 467 N.W.2d 250, 253 (Iowa 1991) (“incompetence is grounds for disciplinary action”). See generally Debra T. Landis, Annotation, Negligence, Inattention, or Professional Incompetence of Attorney in Handling Client’s Affairs in Personal Injury or Property Damage Actions as Ground for Disciplinary Action — Modem Cases, 68 A.L.R.4th 694 (1989) (collecting and discussing cases providing examples of attorney incompetence).

An attorney who fails to file a claim on behalf of a client within the statute of limitations period is not necessarily subject to a professional disciplinary action. See Iowa Supreme Ct. Bd. of Prof l Ethics & Conduct v. Adams, 623 N.W.2d 815, 819 (Iowa 2001) (no neglect if omission was inadvertent or error in judgment). Evidence in this case, however, revealed Moorman’s omission in failing to file the client’s claim within the statutory period of limitations was more than mere negligence. The client was actively engaged in pursuing her claim, and Moorman repeatedly informed the client that the petition would be filed. The driver of the other vehicle was covered by insurance with substantial limits. The client repeatedly attempted to contact Moorman by telephone during the weeks preceding the date the statute of limitations expired, but was told that Moorman was unavailable. Moorman failed to act to protect the client’s interests at a critical time when action was required and could not be delayed any longer. His conduct showed a total indifference constituting a conscious disregard for the client. It involved multiple acts and amounted to procrastination.

Under all the circumstances presented, we conclude Moorman neglected client matters by failing to timely file the petition on behalf of the client, in violation of DR 6-101(A)(3). See Nadler, 467 N.W.2d at 251-53 (failing to file lawsuit within the statute of limitations constitutes neglect). The neglect also violated DR 7 — 101(A)(2), prohibiting a lawyer from intentionally failing to carry out a contract for employment. See Iowa Supreme Ct. Bd. of Prof'l Ethics & Conduct v. Sherman, 619 N.W.2d 407, 409 (Iowa 2000). Additionally, the neglect amounted to conduct prejudicial to the administration of justice and adversely reflected on Moorman’s fitness to practice law. See Bernard, 653 N.W.2d at 375.

Moorman also neglected client matters in each of the five appellate cases that were dismissed for failure to prosecute. See Iowa Supreme Ct. Bd. of Prof'l Ethics & Conduct v. Daggett, 653 N.W.2d 377, 380 (Iowa 2002) (failure to comply with appellate deadlines regarding client’s appeal constitutes neglect); Iowa Supreme Ct. Bd. of Prof l Ethics & Conduct v. Herrera, 626 N.W.2d 107, 112 (Iowa 2001) (ignoring deadlines on appeal constitutes neglect). Moorman failed to comply with the rules of appellate procedure, as well as the subsequent notices to cure the defaults issued by the clerk of court. This conduct revealed a blatant pattern of neglect and constituted a conscious disregard for the responsibilities an appellate lawyer owes a client and the court. Moreover, neglect occurred in each case, even though one of the cases was ultimately reinstated. The neglect took place in the reinstated case when Moorman ignored the default notice, resulting in the dismissal of the case. The subsequent reinstatement did not cure the prior neglect and was not a remedy that served to maintain the high standards of the profession. See id. (prejudice is not an essential component of neglect).

The record was insufficient to support a finding of misrepresentation as alleged by the Board based on Moorman’s filing of the application for a delayed appeal. Misrepresentation generally requires an intent to deceive. See Hyler v. Gamer, 548 N.W.2d 864, 871 (Iowa 1996). Negligent misrepresentation does not violate DR 1-102(A)(4). Comm, on Prof'l Ethics & Conduct v. Bitter, 279 N.W.2d 521, 526 (Iowa 1979). The application filed by Moorman was questionable — even odd — but alone did not support intent to deceive.

We observe that the Board did not charge Moorman with a violation of DR 1-102(A)(4) regarding his offer to misrepresent the date and nature of his client’s claim to an insurance company. The Board also did not charge Moorman with conflict of interest, or limiting liability to a client, based on his conduct in settling the potential legal malpractice complaint with his client. See Nadler, 467 N.W.2d at 251-58 (attempting to limit liability by offering money to a client after allowing the statute of limitations to run on the client’s claim violated DR 6-102(A)). Nevertheless, this conduct, as alleged by the Board, adversely reflected on Moorman’s fitness to practice law. See DR 1-102(A)(6). The conduct engaged in by Moorman was improper and was committed in a desperate effort to diminish the impact of his neglect. It was the antithesis of the high standards of our profession and revealed an inclination to subvert the interests of a client.

V. Discipline.

When neglect of client matters is the principal violation in an attorney disciplinary case, the resulting discipline normally “ ‘ranges from a public reprimand to a six-month suspension.’ ” Iowa Supreme Ct. Bd. of Profl Ethics & Conduct v. Grotewold, 642 N.W.2d 288, 294 (Iowa 2002) (citation omitted). However, precedents in such cases are of little value, and each case must be individually considered. Iowa Supreme Ct. Bd. of Profl Ethics & Conduct v. Eich, 652 N.W.2d 216, 219 (Iowa 2002). Additionally, multiple incidents of neglect become aggravating circumstances to consider in determining discipline. Iowa Supreme Ct. Bd. of Profl Ethics & Conduct v. Pracht, 656 N.W.2d 123, 126 (Iowa 2003). Neglect resulting in harm supports more serious discipline. See Adams, 623 N.W.2d at 819. Ultimately, we consider “ ‘ “the nature of the alleged violations, the need for deterrence, protection of the public, maintenance of the reputation of the [bar] as a whole, and the respondent’s fitness to continue” ’ ” to engage in the practice of law. Iowa Supreme Ct. Bd. of Profl Ethics & Conduct v. Hohenadel, 634 N.W.2d 652, 655 (Iowa 2001) (citation omitted).

Considering all the relevant facts and circumstances, we conclude Moorman should be indefinitely suspended from the practice of law with no possibility of reinstatement for two years. In a recent similar case involving numerous incidents of profuse and pervasive neglect, we imposed a one-year suspension. Iowa Supreme Ct. Bd. of Profl Ethics & Conduct v. Sullins, 613 N.W.2d 656, 656-57 (Iowa 2000). Moorman, however, has not only established a reputation as an attorney who frequently ignores time lines, he has inflicted great harm on a client as a result of his neglect in his office practice. He also repeatedly engaged in conduct during the course of his client relationships that adversely reflected on his fitness to practice law. His clandestine attempt to limit his personal liability to his client and his offer to engage in fraudulent conduct support additional punishment. Finally, Moor-man’s failure to respond to the proceedings and to cooperate with the Board reflects adversely on his general fitness to practice law and is an additional factor in imposing discipline. See Comm, on Prof l Ethics & Conduct v. Horn, 379 N.W.2d 6, 8-9 (Iowa 1985).

VI. Conclusion.

We suspend Moorman’s license to practice law with no possibility of reinstatement for a period of not less than two years from the date of the filing of this opinion. The suspension applies to all facets of the practice of law. Iowa Ct. R. 35.12(3). Upon application for reinstatement Moorman shall have the burden to prove he has not practiced during the period of suspension, that he has acquired malpractice insurance, and that he meets all the requirements of Iowa Court Rule 35.13. Costs of the action shall be taxed to Moorman pursuant to rule 35.25(1).

LICENSE SUSPENDED.


source: Caselaw Access Project

license: Public Domain

text:
    IOWA SUPREME COURT BOARD OF PROFESSIONAL ETHICS AND CONDUCT, Complainant, v. Deborah K. McKITTRICK, Respondent.
    No. 03-2094.
    Supreme Court of Iowa.
    June 16, 2004.

      Norman G. Bastemeyer and David Grace, Des Moines, for complainant.
    Nicholas Critelli, Jr., of Law Chambers of Nicholas Critelli, P.C., Des Moines, for respondent.
   CADY, Justice.

The Iowa Supreme Court Board of Professional Ethics and Conduct charged Deborah K. McKittrick with several violations of the Iowa Code of Professional Responsibility for Lawyers based on her conduct in representing a client in a dissolution action and her subsequent conduct in collecting fees for her services from the client. The Grievance Commission of the Supreme Court of Iowa found McKittrick violated the Code of Professional Responsibility. It recommended McKittrick receive a public reprimand. On our review, we find McKittrick violated the Code and impose an indefinite suspension of not less than three months.

I. Background Facts and Proceedings.

Deborah K. McKittrick is a lawyer in Ankeny, Iowa. She was admitted to the practice of law in 1989. She primarily practices in the area of family law, and also works as a mediator. She is a former member of the Family Law Committee of the Iowa State Bar Association and served as a member of a division of the Grievance Commission.

In July 1995, McKittrick agreed to represent Mary Jo Walker in a domestic abuse proceeding and a subsequent dissolution action. A written attorney fee contract was executed, providing for compensation based on an hourly fee, billed on a monthly basis. Among other provisions, the contract imposed a service charge of “1.5% per month on all unpaid balances.”

The paramount dispute in the dissolution action concerned the designation of the primary caretaker of the parties’ daughter. Following a temporary custody hearing, Walker was awarded temporary primary care of the child. A trial was then set for March 26, 1996.

In September 1995, opposing counsel sent written interrogatories to McKittrick. McKittrick forwarded the interrogatories to Walker for her to answer, but did not inform her of a deadline to respond. On December 27, 1995, opposing counsel filed a motion to compel answers to the interrogatories, after he had written McKittrick on December 1, requesting the answers be served. The district court ordered the answers to be served within thirty days.

McKittrick served the answers to the interrogatories on January 31, 1996. Opposing counsel claimed some of the answers to questions requesting information about the witnesses Walker intended to call at trial were incomplete. After the two lawyers were unable to resolve the dispute, opposing counsel filed a motion for sanctions.

On March 12, the district court ordered that McKittrick serve complete answers to the disputed interrogatories within seven days. The court also informed the attorneys that sanctions would be considered immediately prior to trial.

McKittrick transmitted a witness list to opposing counsel by fax on March 18 but did not serve answers to the disputed interrogatories as ordered by the district court. On March 20, opposing counsel filed a motion to exclude witnesses and exhibits at trial.

On March 26, prior to the commencement of the trial, the district court considered sanctions and ordered most of Walker’s witnesses excluded for the failure to comply with the order of March 12. The case then proceeded to trial. McKittrick did not call any witnesses other than Walker. In the dissolution decree that followed, the district court designated Walker’s husband as the primary caretaker of the parties’ daughter.

Walker discharged McKittrick after the decree was entered and employed another attorney, who unsuccessfully sought to overturn the decree by post-trial motions and, eventually, an appeal. McKittrick promptly transferred the client file to Walker’s new attorney. McKittrick also waived her fee for services she performed after January 30, 1996. The unpaid amount of the fee prior to this date was $3,610.72. Walker declined to pay the bill.

McKittrick took no action to collect the bill until July 13, 1998, when she filed a notice of attorney lien. By this time, the accumulating interest on the unpaid bill, as computed by McKittrick, had increased the amount due to $6,304.04. McKittrick charged compound interest and at times during the course of the representation, charged interest on services performed before Walker was obligated to pay for the services. McKittrick filed the lien against real estate awarded to Walker in the dissolution action. She pursued no further action to collect the fee and did not notify Walker of her actions.

Walker learned of the attorney lien against her real estate in 1999, after she sought to refinance the mortgage on the property. Walker had filed a modification action in an effort to obtain custody of her daughter and sought to refinance to obtain funds to pay the required retainer of her new attorney. Walker then contacted McKittrick, who agreed to release the lien if Walker paid her $2000 from the refinancing proceeds, and further paid her $50 a month until the remaining debt was paid. Walker agreed to the arrangement and further agreed to sign a written confession of judgment permitting McKittrick to file the judgment in the event she failed to make a monthly payment. The agreement provided that the monthly payments were to be paid on the tenth day of each month, starting July 10,1999.

Walker made the first payment in early July as agreed and then received an invoice from McKittrick indicating payment was due July 23. Walker believed this meant the $50 payments were not due until the twenty-third of each month and waited until August 16 to make the next monthly payment. However, McKittrick filed the confession of judgment on August 11 after she did not receive the August payment by August 10. McKittrick did not contact Walker before taking this action. McKittrick later obtained a general execution and began garnishing Walker’s wages.

Walker ultimately succeeded in obtaining primary care of her daughter in the modification action. However, the accumulating financial burdens, including the wage garnishment, forced Walker to file for bankruptcy shortly after that time. Walker discharged the remainder of the debt to McKittrick in the bankruptcy action.

McKittrick testified at the commission hearing that she was responsible for the imposition of the discovery sanctions in the dissolution action, but explained that the underlying failure to timely provide the discovery was largely attributable to problems with her office staff and the lack of cooperation by Walker. She also pointed out that her conduct did not harm the client because the district judge who entered the dissolution decree indicated in the decree that the custody award was not influenced by the exclusion of witnesses. McKittrick also testified that the attorney fee contract she used, providing for the 1.5% monthly interest, was virtually identical to the form attorney fee contract contained in the 1999 family law manual published by the Iowa State Bar Association.

McKittrick has been privately 'admonished on four occasions in the past for ethical violations. In 1993, she was admonished for requiring a client to pay a fee in a dissolution action before requesting the court to enter a stipulated decree. In 1994, she was admonished for ■ representing a client in a dissolution action when the opposing counsel was an attorney with whom she shared office space. In 1999, she was admonished for billing a person for services she performed when the person had not retained her services. Finally, in 2000, McKittrick was admonished for securing signatures on blank verification forms.

II. Board Complaint.

The Board charged McKittrick with multiple violations of the Code of Professional Responsibility. It claimed McKit-trick’s conduct resulting in the discovery sanctions violated Code of Professional Responsibility DR 6-101(A)(3) (neglect of a client’s legal matter), DR 1 — 102(A)(5) (conduct “prejudicial to the administration of justice”), and DR 1-102(A)(6) (conduct that “adversely reflects on the fitness to practice law”). It claimed McKittrick failed to supervise employees in violation of DR 3-104(D). It further claimed McKittrick charged an illegal interest rate on the unpaid balance of her fees and compounded interest in violation of DR 2-106(A) (a lawyer shall not charge or collect an illegal fee) and DR 1-102(A)(6). It further claimed the attorney lien violated DR 5-103(A) (“A lawyer shall not acquire a proprietary interest in the ... subject matter of litigation being conducted for a client .... ”), DR 7-102(A)(2) (advancing an unwarranted claim), and DR 1-102(A)(5) and (6). Finally, it claimed McKittrick’s conduct in filing a confession of judgment and garnishing Walker’s wages violated DR 2-106(A), DR 7-101(A)(3) (intentional prejudice to client), and DR 1-102(A)(5) and (6).

The commission found the Board established the violations as set forth in the complaint. It recommended McKittrick receive a public reprimand.

III. Scope of Review.

We review attorney disciplinary matters de novo. Iowa Supreme Ct. Bd. of Prof l Ethics & Conduct v. Bernard, 653 N.W.2d 373, 375 (Iowa 2002). Although we give weight to the findings of the commission, they do not bind us. Id.

IY. Violations.

The violations alleged by the Board essentially cover McKittrick’s conduct in representing a client and her subsequent conduct in collecting her attorney fee from the client. We will address the conduct separately.

A. Neglect.

In Iowa Supreme Court Board of Professional Ethics & Conduct v. Moorman, 683 N.W.2d 549 (Iowa 2004), also filed today, we reviewed the distinction between professional malpractice and professional neglect supporting disciplinary action. Conduct amounting to inadvertence or conduct resulting from a good-faith error in judgment does not constitute neglect warranting discipline. Iowa Supreme Ct. Bd. of Profl Ethics & Conduct v. Adams, 623 N.W.2d 815, 819 (Iowa 2001). Instead, neglect normally involves indifference and a consistent failure to advance client interests when action is required. Moorman, 683 N.W.2d at 551-52. It can result from extreme inaction amounting to abandonment of the client or a ease of procrastination, usually accompanied by some additional aggravating circumstances. Charles W. Wolfram, Modern Legal Ethics § 5.1, at 191-92 (1986) [hereinafter Wolfram], Neglect generally involves more than one act or omission. Comm, on Prof'l Ethics & Conduct v. Rogers, 313 N.W.2d 535, 536 (Iowa 1981).

In this case, McKittrick failed to comply with clear and unequivocal time limitations imposed by a court order for discovery. The court order warned McKittrick that sanctions would be considered, and McKittrick was obligated to act promptly to protect the interests of her client. Notwithstanding, the court directive and admonition failed to prompt McKittrick to timely perform her responsibility, just as the previous court order, discussions and correspondence with opposing counsel, and the rules of procedure failed to compel McKittrick to comply with the discovery mandates during the preceding months. This type of conduct extended beyond negligence and rose to the level of neglect, in violation of DR 6-101(3). It also adversely reflected on McKittrick’s fitness to practice. See Iowa Code of Profl Responsibility DR 1 — 102(A)(6). McKittrick further failed to supervise employees and oversee employee work that contributed to the neglect. See id. DR 3-104(D).

B. Collection of Fees.

Attorneys should avoid fee disputes with clients as much as possible because the collection of fees by attorneys from clients can give rise to a host of problems and pitfalls. See Wolfram, § 9.6.1, at 553-54. Attorneys should aspire to resolve fee disputes amicably, and sue clients only when necessary “to prevent fraud or gross imposition by the client.” Iowa Code of Prof'l Responsibility EC 2-25; Heninger & Heninger, P.C. v. Davenport Bank & Trust Co., 341 N.W.2d 43, 51 (Iowa 1983).

While it is not unethical for a lawyer to engage in fee collection practices against a former client, the practices employed to enforce collection should be carefully scrutinized. See generally Debra T. Landis, Annotation, Attorneys at Law: Fee Collection Practices as Ground for Disciplinary Action, 91 A.L.R.3d 583 (1979) (collecting and discussing cases on attorney fee collection practices). Illegal, aggressive, and improper collection practices can lead to disciplinary actions against attorneys, as can the use of attorney liens and confessions of judgment. See id. Additionally, an attorney who imposes an unlawful finance charge and improperly calculates the amount of interest on a fee can violate the rules of professional ethics. Fla. Bar v. Fields, 520 So.2d 272, 272-73 (Fla.1988).

1. Finance Charge and Interest.

We first consider the Board’s claim that McKittrick violated the Iowa usury statutes. The Board maintains that McKit-trick was not permitted to charge interest in excess of the maximum amount set forth in Iowa Code section 535.2(3) (2003), without complying with the notice and disclosure provisions of the state and federal laws governing consumer credit transactions.

Iowa usury law limits the rate of interest that may be charged in a written agreement for the payment of interest to a variable amount based on the rates of government notes and bonds. Id. § 535.3(a). At the time relevant to this action, the maximum rate of interest was 8.75%. See July 19, 1995 Iowa Admin. Bull, at 93.

The usury law, however, does not apply to finance charges on accounts receivable. Under section 535.11, a creditor may impose a finance charge on the unpaid balance of an account receivable, not exceeding certain rates permitted under the consumer credit code, if the creditor gives notice as provided under the statute. Iowa Code § 535.11(1). If the transaction is subject to the Truth in Lending Act (TILA), written notice must be given as required under the Act. Id. § 535.11(2)(a). If the transaction is not subject to the TILA, notice must be given when the debt arises and must be contained in the invoice or bill of sale. Id. § 535.11(2)(6). For an open account, this notice must be given when credit is initially extended. Id. Notwithstanding, section 535.11 exempts parties who “have agreed” in writing for a different finance charge or rate of interest. Id. § 535.11(1).

The Board claims McKittrick was not permitted to impose a finance charge in excess of 8.75% because she failed to give notice to Walker as required under the statute. However, the written fee agreement entered into between McKit-trick and Walker, providing for a finance charge on accounts receivable, satisfied the statute and made further notice unnecessary. Moreover, although lawyers are not necessarily exempt from the provisions of the consumer credit code and the TILA, the requirements of those provisions did not apply under the circumstances of this case. See Riethman v. Berry, 287 F.3d 274, 277-79 (3d Cir.2002) (law firm not subject to the TILA where client had no right to defer payment of the bill); Ault v. Gen. Prop. Mgmt. Co., 683 P.2d 988, 991 (Okla.Ct.App.1984) (Uniform Consumer Credit Code applies to credit sales of legal services by an attorney who regularly extends credit).

However, the record supports a finding that McKittrick compounded interest and, at times, imposed interest on charges for services performed before those charges were billed or before they were due. “Compound interest is interest on interest.” 47 C.J.S. Interest & Usmy § 3, at 21 (1982). The accrued interest is added to the principal sum, which is then considered the new principal for the calculation of interest for the next period. Id. Compound interest was disfavored at common law as harsh and oppressive because it has the effect of unduly accelerating the accumulation of debt. Henderson v. Camden County Mun. Util. Auth., 176 N.J. 554, 826 A.2d 615, 619 (2003). Consequently, compound interest is not permitted absent an agreement between the parties. See Power Equip., Inc. v. Tschiggfrie, 460 N.W.2d 861, 863 (Iowa 1990). Moreover, our legislature does not permit a finance charge on accounts receivable to be compounded. Iowa Code § 535.11(6). The Board established that McKittrick compounded the finance charge imposed in this case. This resulted in the imposition of an illegal finance charge, in violation of DR 1-102(A)(6).

2.Attorney Lien.

Generally, an attorney is permitted to secure a claim for fees by two methods. See Feaker v. Bulicek, 538 N.W.2d 662, 663 (Iowa Ct.App.1995). The first form of security is a retaining lien. Id. This gives an attorney the right to hold client property or funds in the possession of the attorney until the fee is paid. Id.; see also Wolfram, § 9.6.3, at 558. The second form of security is the charging lien. This gives an attorney the right to a portion of money or property obtained or recovered in litigation through the efforts of the attorney. Feaker, 538 N.W.2d at 663; see also Wolfram, § 9.6.3, at 558. These liens are an exception to the rule of professional conduct that prohibits an attorney from acquiring a proprietary interest in the client’s case. See Iowa Code of Prof'l Responsibility DR 5-103(A)(l) (a lawyer may “[a]cquire a lien granted by law to secure a fee”). Nevertheless, this exception applies only to liens “granted by law.” Id. The use of attorney liens not authorized by statute can constitute a violation of the rules of professional conduct. See Wolfram, § 9.6.3, at 558. See generally Thomas G. Fischer, Annotation, Attorney’s Assertion of Retaining Lien as Violation of Ethical Code or Rules Governing Professional Conduct, 69 A.L.R.4th 974 (1989) (collecting and discussing cases considering ethical issues raised by the use of attorney liens). Thus, we turn to the Iowa statute governing attorney liens.

Iowa Code section 602.10116 provides:

An attorney has a lien for a general balance of compensation upon:
1. Any papers belonging to a client which have come into the attorney’s hands in the course of professional employment.
2. Money in the attorney’s hands belonging to a client.
3. Money due a client in the hands of the adverse party, or attorney of such party, in an action or proceeding in which the attorney claiming the lien was employed, from the time of giving notice in writing to such adverse party, or attorney of such party, if the money is in the possession or under the control of such attorney, which notice shall state the amount claimed, and, in general terms, for what services.
4. After judgment in any court of record, such notice may be given, and the lien made effective against the judgment debtor, by entering the same in the judgment or combination docket, opposite the entry of the judgment.

The first two subsections establish retaining liens, which are possessory in nature. See id. § 602.10116(1), (2). The second two subsections are in the nature of non-possessory liens. See id. § 602.10116(3), (4). In particular, subsection (4) recognizes a charging lien upon a judgment obtained for the client as a result of the legal services rendered by the attorney to secure compensation for the services. See id. § 602.10116(4).

We have previously indicated that the charging lien recognized under the statute is only on the judgment and does not reach real property, even when the real property was the subject of the litigation. Keehn v. Keehn, 115 Iowa 467, 471-72, 88 N.W. 957, 958 (1902); see also Note, Nature of the Attorney’s Lien in Iowa, 26 Iowa L.Rev. 840, 845 (1941) (“[T]he Iowa lien has been held not to extend to real property involved in the litigation ....”) (footnote omitted). While this approach is based on the language of the statute, the underlying rationale appears to be tied to the potential dangers of allowing attorney liens to attach to real property based on unliqui-dated, unadjudicated claims. One court observed the pitfalls of permitting attorney liens on real property as follows:

[t]he result of our approving the practice would allow members of the Bar to cloud title to real property with “claims of attorney lien” without resort to any adjudication of such claims. The potential for economic coercion by attorneys is obvious. In today’s economic setting a client may well be forced to settle the attorney’s claim for fees, no matter how unfounded, simply to gain the ability to convey, lease, or otherwise utilize the “liened” property.

Ross v. Scannell, 97 Wash.2d 598, 647 P.2d 1004,1008-09 (1982).

These potential dangers were clearly exposed in this case. McKittrick was able to cloud title to Walker’s property without any adjudication of the fee claim, and during a time period that made the former client very vulnerable to pressures of settlement. Clearly, the lien placed McKittrick in a superior position, which enabled her to obtain a portion of Walker’s refinancing proceeds as well as a confession of judgment. We conclude the lien was not authorized by law and resulted in a form of economic coercion. It violated DR 1-102(5) and (6).

3. Confession of Judgment.

We next consider McKittrick’s use of a confession of judgment to collect legal fees. At least one jurisdiction has concluded that the use of a confession of judgment by an attorney to collect a legal fee is improper. Hulland v. State Bar, 8 Cal.3d 440, 105 Cal.Rptr. 152, 503 P.2d 608, 613-14 (1972). The court focused on the imbalance created by clients who likely lack any real understanding of the character and effect of a confession of judgment and found the practice presented opportunities for overreaching with no judicial scrutiny. Id. Another court has determined that there is no per se rule against the use of a confession of judgment to collect legal fees, but requires attorneys to carefully ensure that the client fully understands and appreciates the process. See Katlowitz v. Halberstam, 284 A.D.2d 306, 726 N.Y.S.2d 438, 439 (App.Div.2001).

Although we have never established a per se rule against the use of confessions of judgment to collect legal fees, we agree such collection methods are a source of potential problems and should be used by attorneys with care and caution. Nevertheless, the use of the confession of judgment in this case became part of a greater overall pattern of aggressive and forceful collection conduct that adversely reflected on McKittrick’s fitness to practice law. See Iowa Code of Profl Responsibility DR 1-102(A)(6). She placed an illegal lien on Walker’s property and then offered the confession of judgment as a way out, without explaining the full consequences of the procedure and without involving Walker’s new attorney. Additionally, McKittrick promptly filed the confession of judgment and commenced garnishment proceedings without making any effort to discover the understandable confusion concerning the date the second payment was due. See id. EC 2-25. The use of a confession of judgment in this manner was oppressive and adversely reflected on the fitness of an attorney to practice law.

4. Overall Conduct.

We have identified several separate instances of conduct engaged in by McKittrick during the course of her collection of the fee that violated our rules of professional conduct. Moreover, the overall nature of her conduct reflected a general indifference to some of the core responsibilities that an attorney owes a client, and the legal system as a whole. See People v. Smith, 773 P.2d 522, 528 (Colo.1989). McKittrick chose to pursue a fee claim that was tainted by her own professional neglect. McKittrick then waited to pursue the collection of the fee until the imposition of an illegal interest doubled the amount owed. She then used aggressive tactics and procedures over an extensive period of time that were both illegal and unprofessional and eventually contributed to a financial burden for the client that forced her into bankruptcy. This conduct, as a whole, adversely reflects on McKittrick’s judgment and fitness to practice law. See Iowa Code of Prof 1 Responsibility DR 1-102(A)(6). It was also “prejudicial to the administration of justice.” Id. DR 1-102(A)(5).

V. Discipline.

We have discussed our general principles governing attorney discipline in prior cases. See Iowa Supreme Ct. Bd. of Prof l Ethics & Conduct v. Walters, 646 N.W.2d 111, 113-14 (Iowa 2002). To determine the appropriate level of discipline, we focus on “ ‘ “the nature of the alleged violations, the need for deterrence, protection of the public, maintenance of the reputation of the [bar] as a whole, and the respondent’s fitness to continue” ’ ” to practice. Id. at 113 (citation omitted). We also consider aggravating and mitigating circumstances. Id. (citation omitted). Multiple instances of past disciplinary action is an aggravating circumstance. Id. Harm to the client is also an aggravating circumstance. Id. Yet, we do not overlook an attorney’s service to the profession. Iowa Supreme Ct. Bd. of Prof'l Ethics & Conduct v. Frerichs, 671 N.W.2d 470, 478 (Iowa 2003). In the end, the discipline imposed is based on the facts of each case. Id.

A review of our prior cases reveals that the discipline imposed in cases of neglect typically “ranges from a public reprimand to a six-month suspension.” Iowa Supreme Ct. Bd. of Prof'l Ethics & Conduct v. Hohenadel, 634 N.W.2d 652, 655-56 (Iowa 2001). In Frerichs, we imposed a four-month suspension for unethical conduct by an attorney that included charging an illegal fee. 671 N.W.2d at 478. In Committee on Professional Ethics & Conduct v. Michelson, 345 N.W.2d 112 (Iowa 1984), we reprimanded an attorney for threatening a client with criminal prosecution in an effort to collect a fee. Yet, this case is particularly unique and involves conduct we have not previously considered.

We recognize the rigors of the practice of law and the difficulties that can be encountered by attorneys in meeting filing deadlines at times. We also understand the importance of dependable office staff to a busy attorney in meeting deadlines. Additionally, lawyers should be paid reasonable compensation for their professional services. Nevertheless, the seriousness of the neglect that occurred in this case intensified as the trial date approached, as did the potential prejudice to the client. The interests of the client demanded that McKittrick take prompt and thorough action. But the inaction continued, and McKittrick’s failure to timely respond to the discovery prejudiced the client. Notwithstanding, the most serious conduct committed by McKittrick involved the methods she employed to pursue the collection of her fee. This too caused harm to the client and the profession. It was abusive and continued over a long period of time. Furthermore, McKittrick has been disciplined on two other occasions over fees. Considering all the facts and circumstances in light of the relevant factors and principles that govern discipline, we conclude McKittrick should be suspended from the practice of law in this state for a period of time of not less than three months.

VI. Conclusion.

We suspend McKittrick’s license to practice law with no possibility of reinstatement for a period of not less-than three months from the date of filing of this opinion. The suspension imposed applies to all facets of the practice of law as provided in .Iowa Court Rule 35.12(3). Upon application for reinstatement, McKittrick shall have the burden to prove she has not practiced during the period of suspension and that she meets all requirements of Iowa Court Rule 35.13. The costs of this proceeding are taxed against McKittrick.

LICENSE SUSPENDED.

All justices concur except TERNUS, J., who takes no part.

      . The law otherwise limits interest in other specifically enumerated instances to five percent. See Iowa Code § 535.2(1) (2003). It also permits some specific persons to agree in writing to any rate of interest. Id. § 535.2(2). These provisions are inapplicable to this case.

      . Some state statutes specifically permit liens to attach to real property. See Ross v. Scan-nell, 97 Wash.2d 598, 647 P.2d 1004, 1008 n. 2 (1982) (collecting cases). The scope of attorney lien statutes varies from state to state. See id. at 1008.


author:
HANSON, Justice. GILBERT, Justice PAGE, Justice
      ANDERSON, RUSSELL A., Justice

text:
    John H. BREKKE, Respondent, v. THM BIOMEDICAL, INC., Appellant.
    No. C8-03-119.
    Supreme Court of Minnesota.
    July 1, 2004.
    Rehearing Denied Aug. 4, 2004.

      Gerald J. Brown, Brown, Andrew & Sig-norelli, P.A., Duluth, MN, for Appellant.
    John G. Fillenworth, Duluth, MN, for Respondent.
   OPINION

HANSON, Justice.

Respondent employee, Dr. John H. Brekke, brought an action against appellant employer, THM Biomedical, Inc. (THM), under Minn.Stat. § 181.79 (2002) for a statutory penalty based on THM’s unauthorized deduction from Dr. Brekke’s salary of the principal of a debt owed by Dr. Brekke to THM. The district court ruled that the deduction violated Minn. Stat. § 181.79 and awarded Dr. Brekke twice the amount deducted. The court of appeals affirmed the district court. Brekke v. THM Biomedical, Inc., 667 N.W.2d 452 (Minn.App.2003). We reverse and remand.

In November 1990, a group of individuals formed THM Biomedical, Inc., to commercialize patents on medical devices that had been developed by Dr. Brekke. Although Dr. Brekke had developed the patents, he no longer owned them at the time that THM was formed. In fact, he had exhausted his capital in the failed efforts of two predecessor companies.

Dr. Brekke received 15 percent of THM common stock for services to be performed pursuant to the terms of an employment agreement with THM. Under the terms of his employment agreement, Dr. Brekke was obligated to perform such services as directed by the president of THM and was entitled to-receive wages or salary. Section Fourteen of the employment agreement obligated Dr. Brekke to disclose to THM all pertinent information he acquired before or during his employment with THM, stating in part:

Employee shall communicate and channel to Employer all knowledge, business, and customer contacts and any other matters of information that could concern or be in any way beneficial to the business of Employer, whether acquired by Employee before or during the term of this Agreement.

In addition, Dr. Brekke served on THM’s board of directors and as Vice President of Research and Development.

In August and October of 1991, THM made loans to Dr. Brekke and issued promissory notes in the amounts of $10,000 and $55,000, respectively. Although the original expectation was that Dr. Brekke would repay the notes in 1991, he was unable to do so. On April 28, 1993, Dr. Brekke repaid $5,000 on the notes. Thereafter, the $60,000 balance of the notes remained outstanding, was regularly listed as a receivable on THM’s balance sheets and was annually acknowledged by Dr. Brekke to THM’s auditors.

THM adopted the practice of only paying employee salary if it could do so from current cash flow. For the 6-year period from 1993 through 1998, a portion of Dr. Brekke’s salary was accrued but unpaid. As Dr. Brekke’s counsel acknowledged at oral argument, this practice was uniform for all employees and Dr. Brekke acquiesced in it. The THM balance sheet dated June 30, 2000, showed that Dr. Brekke’s accrued unpaid salary had accumulated to a total of $188,872.98.

In the summer of 2000, while negotiating a possible sale of its assets to Kensey Nash Corporation, THM received $950,000 in settlement of a licensing dispute with a third party. As a prerequisite to any transaction with Kensey Nash, THM was required to “clean up its balance sheet” by collecting its assets and paying off its liabilities. Dr. Brekke’s notes to THM were part of the assets that were to be collected and his accrued salary was one of the liabilities that was to be paid.

Thomas Maas testified that, at a meeting of THM’s board of directors on June 14, 2000, he informed Dr. Brekke that the amount of his notes would be deducted from his accrued unpaid salary. At a meeting on July 11, 2000, between William Maas and Dr. Brekke, Maas reported that, after deducting taxes, loan principal and interest, Dr. Brekke would net about $20,000 from his accrued salary. Dr. Brekke objected to the deduction and asked that the loans and the accompanying interest be forgiven as an honorarium for his service with THM. The board refused. On July 13, 2000, Dr. Brekke was presented with a “pro forma check,” which showed a deduction for the loan principal, but not for interest. Dr. Brekke said that he preferred to be paid the full value of the accrued salary and that he would separately pay his notes to THM, to create a better documented record of the transactions. The board declined this request and, on July 14, 2000, issued a net check for $59,700.71, which reflected Dr. Brekke’s accrued salary less tax withholdings and a $60,000 deduction in loan principal.

After receiving the pro forma check but before receiving the actual check, Dr. Brekke consulted with his attorney and was informed that there was the possibility that THM’s proposed method of payment would expose it to liability for a statutory penalty of $120,000 under section 181.79. Dr. Brekke did not communicate that information to THM, but accepted and cashed the check from THM for $59,200.71, representing full payment of his accrued salary after deduction of his $60,000 debt and tax withholdings. At the time Dr. Brekke accepted the check, he knew that the satisfaction of his debt to THM was essential to completing the proposed sale to Kensey Nash, from which he stood to gain substantially.

As the negotiations with Kensey Nash proceeded, Dr. Brekke was required to make positive representations to Kensey Nash about the accuracy of THM’s balance sheet, which by then did not reflect any unpaid liability to Dr. Brekke. As an essential step to completing the sale to Ken-sey Nash, Dr. Brekke signed an officer’s certificate that represented that THM had no undisclosed liabilities. As a consequence of signing that certificate and not disclosing the potential liability for a statutory penalty, Dr. Brekke caused THM to breach its disclosure obligations to Kensey Nash, with the consequence that Kensey Nash would later deny any obligation to THM to assume THM’s liability to Dr. Brekke.

When the sale to Kensey Nash was complete, Dr. Brekke received just over $2 million for his shares of THM. Within 60 days of the closing, he commenced this action to recover a $120,000 penalty from THM under Minn.Stat. § 181.79. THM denied any liability and asserted the affirmative defenses of waiver and estoppel.

The district court concluded that THM wrongfully deducted $60,000 from Dr. Brekke’s wages, in violation of Minn.Stat. § 181.79, and awarded Dr. Brekke $120,000 in damages, twice the amount of the deduction. The district court did not make findings on or otherwise address THM’s waiver and estoppel defenses, except to conclude that Dr. Brekke’s position as an officer, director and shareholder did not disqualify him from relying on section 181.79 and that none of his actions or inactions provided consent to the deduction. The court of appeals affirmed the judgment in favor of Dr. Brekke. Brekke, 667 N.W.2d at 452.

I.

We first address whether section 181.79 applies to Dr. Brekke’s accrued unpaid salary. That section provides:

No employer shall make any deduction, directly or indirectly, from the wages due or earned by any employee, who is not an independent contractor, for lost or stolen property, damage to property, or to recover any other claimed indebtedness running from employee to employer, unless the employee, after the loss has occurred or the claimed indebtedness has arisen, voluntarily authorizes the employer in writing to make the deduction or unless the employee is held liable in a court of competent jurisdiction for the loss or indebtedness.

Minn.Stat. § 181.79, subd. 1. THM argues that Dr. Brekke should not be treated as an “employee,” because of his position as an officer, director and shareholder, and that the salary of an officer of a closely held corporation should not be treated as “wages.”

A district court’s interpretation of a statute is reviewed de novo. State v. Tennin, 674 N.W.2d 403, 406 (Minn.2004). When the words of a law in their application to an existing situation are clear and free from all ambiguity, the letter of the law shall not be disregarded under the pretext of pursuing the spirit. Minn.Stat. § 645.16 (2002). Statutory provisions that provide for a penalty are strictly construed. Chatfield v. Henderson, 252 Minn. 404, 410, 90 N.W.2d 227, 232 (1958).

Section 181.79 provides four exceptions. The statute does not apply in cases where (a) the employee is held liable in a court of competent jurisdiction for the indebtedness; (b) there is a contrary provision in a collective bargaining agreement; (c) the deduction is made pursuant to rules established by an employer for employees who are commissioned salespeople, where the rules are used for purposes of discipline; or (d) the employee voluntarily authorizes in writing, prior to incurring the debt, that the debt shall be deducted from the employee’s wages. THM does not claim that the deduction from Dr. Brekke’s salary was authorized by any of these exceptions.

Although Dr. Brekke was more than just an employee of THM, it is undisputed that he was also an employee. And although the term “wages” is not specifically defined for section 181.79, it is broadly defined in the equal pay provisions of MinmStat. ch. 181 to mean “all compensation for performance of services by an employee for an employer * * *.” Minn. Stat. § 181.66, subd. 4 (2002). We see no reason to apply a different definition of wages for section 181.79. Therefore, a plain reading of the statute supports the conclusion that section 181.79 applies to these facts. Dr. Brekke was an “employee” of THM, his accrued salary represented “wages” that were earned and due, and THM made an unauthorized deduction of a debt running from the employee to the employer from wages due.

II.

The conclusion that section 181.79 applies to this fact situation does not end the inquiry. THM has asserted the affirmative defenses of waiver and estoppel, each of which assumes that the statute applies but provides a personal bar to preclude Dr. Brekke from making a claim under the statute. Because the statute 'did not supercede or abrogate these common law defenses, there is factual support for them in the record, and the district court made no findings or conclusions concerning them, we conclude that the judgment should be reversed and the matter remanded to the district court to address the waiver and estoppel defenses.

We do not consider THM’s waiver and estoppel defenses as an exception to section 181.79 because that section already enumerates the permitted exceptions. The question, then, is whether the statute, by specifying certain exceptions to its application, should be interpreted as su-perceding or abrogating common law defenses that would otherwise be available to preclude enforcement of the statutory remedy. We conclude that section 181.79 was not intended to supercede or abrogate the common law defenses of waiver and estoppel. In fact, we essentially reached that conclusion some years ago when we decided Stiff v. Associated Sewing Supply Co., 436 N.W.2d 777 (Minn.1989).

In Stiff, an employee brought a claim for unpaid commissions and for penalties under section 181.79. Stiff, 436 N.W.2d at 778. We considered whether section 181.79 superceded the common law doctrine of forfeiture, whereby an employee who materially breaches his employment agreement (as by embezzlement) forfeits his right to any unpaid compensation. Stiff, 436 N.W.2d at 780. We said that the district court’s conclusion that forfeiture applied “was clearly correct unless that common law doctrine has now been super-ceded by statute.” Id. Although forfeiture was not one of the exceptions expressed in the statute, we held that it had not been superceded by the statute. Id.

Stiff is not completely analogous to the present case for two reasons. First, it is narrower than the present case because the court also determined that the same acts that supported forfeiture prevented the employee from proving that any commissions were “earned,” as required by the statute. See id. THM does not dispute that Brekke’s unpaid salary was “earned.” But, second, it is also broader because it dealt not only with the forfeiture of the penalty, but also with the forfeiture of the underlying compensation. See id. THM has paid Brekke all of his earned compensation and only attempts to defeat his claim for the penalty.

To the extent that Stiff determined that section 181.79 did not supercede or abrogate common law defenses, it reflects the appropriate application of well-established principles of statutory construction. “We have * * * long presumed that statutes are consistent with the common law, and if a statute abrogates the common law, the abrogation must be by express wording or necessary implication.” Ly v. Nystrom, 615 N.W.2d 302, 314 (Minn.2000) (citing In re Shetsky, 239 Minn. 463, 469, 60 N.W.2d 40, 45 (1953)). See also Shaw Acquisition Co. v. Bank of Elk River, 639 N.W.2d 873, 877 (Minn.2002) (“Unless statutory provisions instruct otherwise, the conclusion we reach under the common law will stand.”). More significantly, we have repeatedly held that statutes will be presumed to not eliminate equitable remedies and are to be strictly construed so as to not supplant or restrict “equity’s normal function as an aid to complete justice.” Swogger v. Taylor, 243 Minn. 458, 465, 68 N.W.2d 376, 382 (1955). See also In re Lakeland Dev. Corp. (Anderson v. Anderson), 277 Minn. 432, 441-45, 152 N.W.2d 758, 764-66 (1967) (stating that the court may look to equitable principles in applying a statute). Section 181.79 makes no express reference to forfeiture, waiver or estoppel, and provides no evidence of an intent to abrogate these equitable defenses. See Minn.Stat. § 181.79.

Dr. Brekke argues that because section 181.79 does not allow the employer to offset for a debt that is based on an employee’s misconduct, such as for “stolen property,” it should be construed to preclude any consideration of an employee’s misconduct. This argument conflicts with our decision in Stiff, which allowed consideration of an employee’s misconduct for the defense of forfeiture. Further, the argument confuses two separate concepts, the misconduct that is the basis for the employee’s debt and the misconduct that establishes an equitable waiver or estoppel.

Section 181.79 is clear that the employer cannot use self help to enforce a claimed indebtedness against an employee by a unilateral offset that would force the employee to take action if he disputes the indebtedness. That clear legislative directive would be seriously eroded if the prohibition against offset did not apply because the “claimed indebtedness” was based on serious misconduct by the employee. Therefore, an offset for the “claimed indebtedness” cannot be made no matter what legal theory the claimed indebtedness is based on.

THM’s claim of estoppel is not based on the facts that support Dr. Brekke’s indebtedness. The claimed indebtedness of Dr. Brekke is based on his loan. THM’s claim of estoppel is based on Dr. Brekke’s separate and independent breaches of contract and fiduciary duties. Thus, although THM did violate the statute by offsetting the loan against Dr. Brekke’s wages, and that violation would have provided Dr. Brekke with the right to seek the statutory remedy, Dr. Brekke may have waived that right or be estopped from asserting it by conduct that is wholly separate from that on which the claimed indebtedness is based. Dr. Brekke may be estopped by conduct that is independent of the indebtedness and that makes enforcement of the penalty inequitable.

III.

If the defenses of waiver and estop-pel have not been superceded by section 181.79, we then address the question whether the record contains evidentiary support for each of the elements of waiver or estoppel. If so, the district court erred in not addressing those defenses.

Equitable estoppel is a “doctrine addressed to the discretion of the court and is intended to prevent a party from taking unconscionable advantage of his own wrong by asserting his strict legal rights.” Northern Petrochemical Co. v. U.S. Fire Ins. Co., 277 N.W.2d 408, 410 (Minn.1979). In order to invoke equitable estoppel, the following elements must be shown:

1. There must be conduct acts, language or silence amounting to a representation or a concealment of material facts. 2. These facts must be known to the party estopped at the time of his said conduct, or at least the circumstances must be such that knowledge of them is necessarily imputed to him. 3. The truth concerning these facts must be unknown to the other party claiming the benefit of the estoppel, at the time when such conduct was done, and at the time when it was acted upon by him. 4. The conduct must be done with the intention, or at least with the expectation, that it will be acted upon by the other party, or under such circumstances that it is both natural and probable that it will be so acted upon. * * * 5. The conduct must be relied upon by the other party, and, thus relying, he must be led to act upon it. 6. He must in fact act upon it in such a manner as to change his position for the worse, in other words, he must so act that he would suffer a loss if he were compelled to surrender or forego or alter what he has done by reason of the first party being permitted to repudiate his conduct and to assert rights inconsistent with it.

Lunning v. Land 0’Lakes, 303 N.W.2d 452, 457 (Minn.1980) (omission in original) (quoting 3 J. Pomeroy, A Treatise on Equity Jurisprudence § 805 (5th ed.1941)). We conclude that the record contains evidence sufficient to show each of these elements.

1. Representation or Concealment

Section fourteen of Dr. Brekke’s employment agreement obligated him to disclose to THM the potential liability that THM could incur for a penalty under section 181.79 and, perhaps more importantly, what his intentions were concerning that liability. Such disclosure was also generally required of Dr. Brekke by virtue of his fiduciary duty as an officer and director of THM. Advanced Communication Design, Inc. v. Follett, 615 N.W.2d 285, 293-94 (Minn.2000) (citing Fewell v. Tappan, 223 Minn. 483, 493-94, 27 N.W.2d 648, 654 (1947)). Dr. Brekke’s failure to disclose information about the potential liability under section 181.79 concerned a material fact that could lead THM to incur a liability of $120,000. More importantly, Dr. Brekke’s misrepresentation in the officer’s certificate not only misled THM about the potential liability, it caused THM to breach its disclosure obligations to Kensey Nash and defeated THM’s later claims for indemnity from Kensey Nash. Although equitable estoppel could apply even where the misrepresentation and concealment were not a breach of an employment agreement or of fiduciary duties, the presence of those breaches reinforces the need for equitable relief.

2. Knoum to the Party Estopped

Dr. Brekke admits that he knew of the potential liability at the time he accepted the check from THM, when he signed the officer’s certificate, and when he accepted over $2 million for the sale of his shares to Kensey Nash. The court of appeals discounted Dr. Brekke’s knowledge by crediting his testimony that he “did not intend to pursue the claim” when he accepted the check (and presumably when he signed the officer’s certificate) and he only filed the claim after THM demanded interest. But, Dr. Brekke cannot be so facile with his intent. It would be true that Dr. Brekke would have had nothing material to disclose to THM if, at the time he accepted the check and signed the officer’s certificate, he intended to forever waive his claims under the statute. But if he intended to preserve his claims, he had a duty to disclose that intent even if he was then thinking that he might not pursue them.

3. Unknown to the Other Party

There is no evidence that THM actually knew about the potential liability to Brekke. Given the magnitude of that liability, it is not credible to conclude that THM would have ignored the statute if their attention had been called to it. Dr. Brekke argues that THM should be presumed to know of the liability under section 181.79, relying on the time worn but often-misused concept that everyone is presumed to know the law. That concept does not necessarily apply to a fiduciary, who may have an expanded obligation to inform the beneficiary of the legal implications of their dealings. And Dr. Brekke’s employment agreement obligated him to communicate all relevant information he acquired and did not exclude information about the law. Further, the claim of Dr. Brekke’s breach is not based solely on his failure to disclose the law, but more importantly is based on his failure to disclose his intent about whether he would bring, or at least preserve, a claim for the statutory penalty. THM cannot be presumed to know that fact, which was very material to its actions and which was known only to Dr. Brekke. Finally, Dr. Brekke’s breach is not limited to' nondisclosure, but includes the affirmative misrepresentation that there were no liabilities of THM that were not disclosed on its balance sheet. This was a misrepresentation of fact, not of law.

4. Intention

Dr. Brekke clearly expected THM to rely on his silence and his signature on the officer’s certificate. He had $2 million at stake. He undoubtedly knew that if he disclosed that he had a claim for a statutory penalty of $120,000, THM would be able to avoid that claim by the simple mechanism of an exchange of checks.

5. Reliance

THM relied on Dr. Brekke’s silence and misrepresentation to expose itself to a liability that it could easily have avoided and to breach its own disclosure obligations by forwarding Dr. Brekke’s misrepresentation in the officer’s certificate to Kensey Nash.

6. Prejudice

THM was prejudiced by its reliance. It now faces a liability for $120,000, and it has lost any right to seek indemnification from Kensey Nash for that liability.

The district court made some findings that are consistent with these facts but it did not address or make findings or conclusions on the legal effect of Dr. Brekke’s nondisclosure, his misrepresentation in the officer’s certificate, or the breach of his contractual or fiduciary duties. Because such findings and conclusions are necessary to the resolution of THM’s waiver and estoppel defenses, the failure of the district court to address them was error.

Reversed and remanded.

GILBERT, Justice

(concurring in part, dissenting in part).

I concur with the majority’s conclusion that Minn.Stat. § 181.79 (2002) applies to the loan deduction taken from Dr. Brekke’s wages without his consent. I respectfully dissent from the majority’s reaching a waiver and estoppel issues because they were not preserved on appeal and, even if they were, the record supports the district court’s rejection of the affirmative defenses.

The majority opinion has created a slippery judicial slope that erodes the protection of working people that was created by the legislature. The majority, in doing so, describes our precedent “that everyone is presumed to know the law” as a “time worn but often misused concept,” and adopts new law relating to fiduciary obligation under the statute. In the process, the majority has shifted the burden to this employee of informing an employer of the employee’s knowledge of the law. Now, an employee’s knowledge of Minn.Stat. § 181.79 could relieve an employer from complying with this very statute at issue unless the employee informs the employer of his knowledge of the statute. This reasoning is contrary to the whole purpose of the statute: to prevent an employer from an unauthorized, unilateral action resulting in the deduction from wages due and owing an employee. Accordingly, I would affirm the court of appeals, which affirmed the district court.

The district court concluded that none of the defenses asserted by THM excused the wrongful deduction from Brekke’s wage or affected his right to recover under the statute. The district court reasoned in its memorandum accompanying the findings of fact and conclusions of law as follows:

Plaintiffs position as an officer and director of the corporation does not change his position as an employee pursuant to the employee agreement- or defendant’s obligations as an employer under the statute prohibiting deductions from wages without prior written consent. That which the statute is designed to protect against is exactly what occurred in this case. Plaintiff did not want the amounts of the notes deducted from his wages, plaintiff did not agree to such a deduction, and defendant, using the leverage which employers have, made the deduction anyway.
At trial defendant made a point of noting that plaintiff never informed defendant of his knowledge of the statute or his possible intention to seek the penalty. Nothing that this Court has seen suggests that an employee is under any obligation to do so or that failure to do so somehow becomes the equivalent of a written consent to the deduction. The fact that the statute contains a written consent requirement eliminates the ability of an employer to argue that somehow there is some kind of implied consent and that that excuses the statutory violation. Under the clear language of the statute, it does not.

The district court rejected THM’s affirmative defenses, as did the court of appeals. Brekke v. THM Biomedical, Inc., 667 N.W.2d 452, 456 (Minn.App.2003). The court of appeals specifically rejected the two equitable defenses of accord and satisfaction and estoppel. The court of appeals reasoned:

Although Brekke testified that his attorney informed him about the penalty provision, Minn.Stat. § 181.79 the night before he cashed the check, he also testified that he did not intend to pursue the claim and that he filed a claim only after THM demanded the interest on the loans.

Id. at 456. I agree with the court of appeals.

THM sought further review of the court of appeals’ decision from this court. The appellant petitioned for review of two issues from the court of appeals and they are as follows:

(1) Must an officer, director, shareholder, and employee of a closely held corporation disclose material information to fellow officers and directors, namely a penal statute prohibiting certain offsets from “employee” wages under Minn. Stat. § 181.79? If so, does the fiduciary’s breach of this duty preclude him from personally benefiting from his breach by collecting the statutory penalty as an “employee”?
(2) Did the trial court abuse its discretion by failing to make any factual findings regarding respondent’s fiduciary duties?

In their briefs, both parties employed the exact same language to frame the issues presented to this court. The first part of question one only presents a question of law that does not require any discussion of waiver or estoppel. The second part of question number one only raises a breach of fiduciary duty that also does not require a separate discussion of waiver and estop-pel. Moreover, the fiduciary duty issues raised in the petition were not even pled as an affirmative defense in THM’s amended answer. The second question solely relates to factual findings regarding the respondent’s fiduciary duties. Waiver and estoppel issues are plainly missing from the petition for review to this court. The majority concedes that “[ajlthough the issues were not perfectly framed before the court of appeals or in the petition for further review, we conclude that these defenses are before us because the arguments before the court of appeals and in the petition for further review raise questions that have no relevance except to the defense of waiver and estoppel.” It is true that these defenses were raised at the court of appeals. However, they were simply not brought forth in the petition for review. The majority then concludes that the above two questions “have no relevance to the construction of the statute but are central to the application of the defenses of waiver and estoppel.” However, the majority stretches and supplements the actual issues raised in the petition for review in order to reach the separate and distinct issues of waiver and estoppel. The questions raised in the petition for review relate to statutory construction and breach of fiduciary duty. Contrary to what the majority holds, waiver and estop-pel have no relevance to and should not have been commingled with the two straightforward issues addressed by the parties. This argument ignores the clear statutory language and the findings of fact and conclusions of law issued by the district court, which are clearly supported by the record. Finally, this approach embarks upon an expansive view of what is required in the petition for review of a court of appeals’ decision contrary to our precedent. “When submitting a petition for review, a party should bring issues ripe for review to the supreme court’s attention with specificity, or waive the opportunity to have them reviewed.” Peterson v. BASF Corp., 675 N.W.2d 57, 67 (Minn.2004); see Minn. R. Civ.App. P. 117, subd. 3(a). The waiver and estoppel issues the majority decides were simply not preserved as such on appeal and they should not be addressed.

Importantly, the majority concedes that Brekke was an employee of THM, his accrued wages were earned and due, and THM made an unauthorized deduction of a debt running from the employee to the employer for wages due. It further contends that Brekke’s unique position as an officer, director and shareholder of a closely held corporation imposed upon him a fiduciary duty, which required him to disclose his knowledge of the law contained in Minn.Stat. § 181.79. However, the legislature specifically enumerated only four exceptions to the unauthorized wage deduction law. See Minn.Stat. § 181.79. Therefore, the text of the statute demonstrates that the legislature considered the universe of exceptions to the wage deduction statute and, in its discretion, chose to refrain from creating additional exceptions similar to what THM proposes — an exception based on the employee’s status as an officer, director or shareholder or, for those who failed to disclose their knowledge of this statute. We presume that the legislature’s omission of additional exemptions was deliberate. See Willmus v. Comm’r of Revenue, 371 N.W.2d 210, 214 (Minn.1985) (stating that the court will not supply a statute with additional language where the legislature has intentionally omitted or inadvertently overlooked including such language). The majority acknowledges that waiver and estoppel are not exceptions to the statute but rather concludes that they are “common law defenses.” The majority is basically creating an exception to the statute beyond what the statute expressly provides and beyond what was presented in THM’s petition for review.

Although the $120,000 amount of the penalty is large in this case, the legislature chose not to limit or cap the amount of the penalty, but instead made it a multiple of the wrongfully held amount. In relative terms, the penalty is twice what was wrongfully withheld and amounts to only 1.08% of the $11,100,000 purchase price resulting from the sale of THM’s assets.

In an attempt to avoid the clear statutory language, the majority discusses whether or not this statute “should be interpreted as superceding or abrogating common law defenses that would otherwise be available to preclude enforcement of the statutory remedy.” The majority then cites to our Stiff v. Associated Sewing Supply Co., 436 N.W.2d 777 (Minn.1989), decision. However, the holding in Stiff clearly does not apply to the present case. In Stiff, there was a specific finding that the wages or commissions from which a deduction had been taken, were not earned. Stiff, 436 N.W.2d at 780. In this case, wages are not in contention and it is undisputed that Brekke had a claim of unpaid wages amounting to $194,642.22. In Stiff, we concluded that “[i]n this case it is the earnings, themselves, which are in dispute. Respondent had the burden of proving the earnings to which he claimed to be entitled but failed to do so primarily because the relevant records did not exist substantially because of his participatory misconduct.” Id. We then held that “the employer’s statutory liability is limited to those wages or commissions ‘actually earned and unpaid.’ In this case respondent failed to establish the amount of the commissions earned and unpaid. The trial court found that Stiff had skimmed cash, appropriated the company’s customers, and had participated in dismantling the company’s business records. In those circumstances, he never earned his commissions during the years in question.” Id. The majority is now effectively overruling Stiff by misreading its holding. The majority’s conclusion that Minn.Stat. § 181.79 was not intended to supercede or abrogate the common law defenses of waiver and estoppel is not even mentioned in Stiff and Stiff is a limited discussion of the “old forfeiture doctrine.” Id.

The majority then concedes that “although THM did violate the statute by offsetting the loan against Dr. Brekke’s wages, and that violation would have provided Dr. Brekke with the right to seek the statutory remedy, Dr. Brekke may have waived that right or be estopped from asserting it by conduct that is wholly separate from that on which the claimed indebtedness is based. Dr. Brekke may be estopped by conduct that is independent of the indebtedness and that makes enforcement of the penalty inequitable.” The majority does not cite any authority in support of that proposition. Importantly, that proposition also ignores the conclusion that the district court made on the equitable defenses raised by THM. Specifically, the court concluded that there was not an accord and satisfaction between the parties and it further concluded that “none of the defenses asserted by defendant excuse the wrongful deduction from plaintiffs wages or affect plaintiffs right of recovery under the statute.” The record supports this conclusion. The uncontradicted testimony of Brekke indicates that he was not going to make a claim under this statute until THM demanded interest in October of 2000.

The majority then asserts that “THM’s claim of estoppel is based on Dr. Brekke’s separate and independent breaches of contract and fiduciary duties. * * * Dr. Brekke may have waived that right or be estopped from asserting it by conduct that is wholly separate from that on which the claimed indebtedness is based.” So, what is this conduct?

The only conduct in this record relates to Dr. Brekke’s alleged knowledge of Minnesota law through Minn.Stat. § 181.79, which was not disclosed to THM. First of all, it must be remembered that it has long been held that “[a]ll members of an ordered society are presumed either to know the law or, at least, to have acquainted themselves with those laws that are likely to affect their usual activities.” State v. King, 257 N.W.2d 693, 697-98 (Minn.1977). This principle of law is not a “time worn” concept but is still part of our common law. Furthermore, during the entire period that THM was actively engaged in business, Minn.Stat. § 181.79 was part of Minnesota’s law and THM was a sophisticated entity that ultimately sold its assets for over $11 million. Therefore, although the statute may contain material information, it is also reasonable to presume that THM either knew the law or, at least, would have acquainted themselves with the laws that are likely to affect their usual activities. As the district court found, “[t]hat which the statute is designed to protect against is exactly what occurred in this case.” The district court further reasoned that “nothing that this [c]ourt has seen suggests that an employee is under any obligation to [inform THM of his knowledge of the statute] or that the failure to do so somehow becomes the equivalent of a written consent to the deduction.” I agree with the district court and with the court of appeals.

On July 13, 2000, one of the principals of THM presented plaintiff with a pro forma check, including a deduction for their loan amount but not for the interest. On July 14, 2000, a net check was issued by THM to Brekke in the amount of $59,700.71. The deductions from this check included not only taxes but the $60,000 loan balance. At this point in time, on July 14, 2000, THM had already violated the statute and had indicated its intent to violate the statute since the July 11, 2000 board meeting where the decision to net out the loan was made. Brekke only learned about the statute himself after the wrongful conduct of THM, which was the night before he actually cashed the check. The majority does not discuss this timing and does not discuss the fact that members of an ordered society are presumed to either know the law or at least have acquainted themselves with the law in this instance. The majority has, in effect, shifted the burden of explaining what the legal- requirements are to run a business on the employee who has already suffered from the illegal actions of the employer’s wrongful deduction.

The conduct of THM is also put into dispute beyond the statutory violation. In October of 2000, THM indicated to Brekke that it would seek interest on the note. (THM ultimately demanded $42,506.76 in interest). However, by that time, the sale to Kensey Nash of all of its assets had occurred. The sale included all receivables, such as the $42,506.76 of interest, which was not disclosed as a receivable of THM in the asset purchase agreement of September 1, 2000 or in the accompanying financial statements of December 31, 1999, June 30, 2000, and the certificate of representation of warranties or in any of the closing documents. The Bill of Sale simply sold all of the assets of THM. As the district court found, this interest receivable was also sold to Kensey Nash and Kensey owns the right to pursue any remaining liability of Brekke on the notes. Yet, Brekke testified that it was THM’s wrongful assertion of this claim that triggered his claim for the penalty pursuant to Minn.Stat. § 181.79. “[I]t is a maxim of equity that ‘he who seeks equity must do equity, and he who comes into equity must come with clean hands.’ ” Gully v. Gully, 599 N.W.2d 814, 825 (Minn.1999). This case should end here with an affirmance.

PAGE, Justice

(concurring in part, dissenting in part).

I join in the concurrence and dissent of Justice Gilbert.

ANDERSON, RUSSELL A., Justice

(concurring in part, dissenting in part).

I join in the concurrence and dissent of Justice Gilbert.

      . In August of 2000, when THM’s assets were acquired by Kensey Nash Corporation, Dr. Brekke owned 18.6 % of THM's stock.

      . THM's board of directors consisted of three individuals. From 1993 until the time at which THM was acquired, Thomas Maas, Dr. Brekke, and William Maas, the son of Thomas Maas, comprised THM’s board of directors. Each board member was entitled to one vote.

      . THM did not deduct the interest, which Dr. Brekke was obligated to pay under the terms of the promissory notes. However, in district court THM attempted to collect the unpaid interest from Dr. Brekke in a counterclaim for $42,506.76. The district court denied THM's counterclaim. It found that Kensey Nash now owns the right to pursue recovery of any outstanding liability of Dr. Brekke. Kensey Nash was not a party to this action and has not pursued this claim. The district court further found that THM "no longer has any interest in the notes as creditor. Defendant no longer has the right to recover from plaintiff on the notes.” This finding and a corresponding conclusion of law to that effect were not appealed by THM.

      . Dr. Brekke argues that the waiver and es-toppel defenses were not preserved for appellate review. Although the issues were not perfectly framed before the court of appeals or in the petition for further review, we conclude that these defenses are before us because the arguments before the court of appeals and in the petition for further review raise questions that have no relevance except to the defenses of waiver and estoppel. Thus, the questions whether Dr. Brekke had an obligation to "disclose material information to fellow officers and directors,” whether his breach of that obligation should “preclude him from personally benefiting from his breach by collecting the statutory penalty as an 'employee,'" and whether the district court "abuse[d] its discretion by failing to make any factual findings regarding [Dr. Brekke’s] fiduciary duties,” have no relevance to the construction of the statute but are central to the application of the defenses of waiver and estoppel.

      . On the other hand, Dr. Brekke was not materially prejudiced by the offset, Although Dr. Brekke testified that he would have preferred a simultaneous exchange of checks, to create a better paper trail for tax purposes, the legal consequence of that form of payment would not be materially different from an offset. Dr. Brekke did not contest his debt, and thus was not required to take any action against THM to dispute it. Dr. Brekke’s payment of the loan principal of $60,000 was documented by the deduction made on his pay voucher, and was confirmed by the elimination of the debt from THM's balance sheet. Dr. Brekke's opportunity to ask for the return of his promissory notes marked paid would have been the same, whether the loan was paid by an offset or by a simultaneous exchange of checks.

      . The Concurrence and Dissent suggests that "the majority has shifted the burden to this employee of informing an employer of the employee's knowledge of the law. Now an employee's knowledge of Minn.Stat. § 181.79 could relieve an employer from complying with this very statute at issue unless the employee informs the employer of his knowledge of the statute.” This reads our holding too broadly. First, there is no doubt that the burden is on the THM to prove the factual elements of the affirmative defenses of waiver and equitable estoppel. We only conclude that the record contains evidentiary support for those elements, leaving it to the district court to make the factual determinations. Second, our conclusion that there is eviden-tiary support for the element of misrepresentation or concealment is not based merely on Dr. Brekke's status as an employee, or his silence about his knowledge of the law, but includes the facts that Dr. Brekke was also an officer and director, with fiduciary duties; Dr. Brekke had a specific contractual duty to disclose; and Dr. Brekke made an affirmative misrepresentation in the officer's certificate. The case, therefore, does not address the situation of an employee who has no fiduciary or contractual duties to disclose and who made no affirmative misrepresentation.

      . The majority also overlooks the significant prejudice to Brekke resulting from addressing issues that were not properly raised by THM. By predicating its ruling on waiver and estop-pel issues, neither of which were briefed by either party to this court, the majority stripped Brekke of the opportunity to advance counterarguments with respect to these issues either in his brief or at oral argument.


author: ANDERSON, RUSSELL A., Justice.

text:
    Thomas Paul CLARK, Debtor/Appellant, v. Dwight R.J. LINDQUIST, Trustee/Appellee.
    No. A03-1951.
    Supreme Court of Minnesota.
    July 22, 2004.
    Thomas F. Miller, Minneapolis, MN, for Appellant.
    Patrick B. Hennessy, Best & Flanagan, LLP, Minneapolis, MN, for Respondent.
   OPINION

ANDERSON, RUSSELL A., Justice.

The United States District Court for the District of Minnesota certified to this court the following question of law: Does Minn. Stat. § 550.37, subd. 24 exempt funds in an Individual Retirement Account and/or an Individual Retirement Annuity, each as defined in Section 408 of the Internal Revenue Code, whether or not the debtor has unlimited access to the account balance? We answer the question in the affirmative.

The essential facts underlying the action that generated this certified question have been stipulated to by the parties. In February 2003, appellant Thomas Paul Clark filed a petition for relief under Chapter 7 of the Bankruptcy Code. Clark’s household consisted of him and his wife, each age 55 at the time the petition was filed. Clark owned a “qualified individual retirement annuity” (“IRA”), on which the return varied with the performance of the underlying stock and bond investments. The IRA met the requirements of I.R.C. § 408(b) as an individual retirement annuity. At the time of Clark’s bankruptcy petition, the IRA had a net surrender value of approximately $107,500. The IRA was originally funded in 2001 when Clark resigned his position with a former employer and rolled over the balance of his 401K plan to this account. The IRA allowed Clark to withdraw funds at any time, up to the full principal amount of the annuity, less a surrender charge, which began at 6 percent and declined as the funds were left invested for several years. The IRA was also subject to applicable tax penalties for removing funds prior to age 59 1/2.

Clark claimed in his bankruptcy petition that the IRA was exempt from his bankruptcy estate under Minn.Stat. § 550.37, subd. 24, and the trustee, respondent Dwight Lindquist, objected to the claimed exemption. The bankruptcy court disallowed the exemption, concluding that the IRA was not exempt property. Clark appealed to the United States District Court for the District of Minnesota and moved for certification of the question as to the extent to which IRAs are exempt from the estate of a debtor under Minnesota law. The federal district court granted the motion and certified the question before this court.

Certified questions are questions of law that are reviewed de novo. B.M.B. v. State Farm Fire & Cas. Co., 664 N.W.2d 817, 821 (Minn.2003). Construction of a statute, the underlying issue here, is also a legal issue subject to de novo review. Martin ex rel. Hoff v. City of Rochester, 642 N.W.2d 1, 9 (Minn.2002). “The object of all interpretation and construction of laws is to ascertain and effectuate the intention of the legislature.” Minn.Stat. § 645.16 (2002).

Under the Bankruptcy Code, virtually all property in which a debtor has a legal or equitable interest at the commencement of the case is included in the bankruptcy estate. See 11 U.S.C. 541 (2004). But the code also includes a list of properties that may be exempted, 11 U.S.C. 522(d) (2004), and it allows states to establish separate exemption lists. See 11 U.S.C. 522(b)(2)(A) (2004). A debtor may choose either the federal exemption provisions or the state provisions unless the debtor resides in a state that has “opted out” of the federal exemptions. See 11 U.S.C. 522(b)(1) (2004). In that Minnesota has not “opted out,” residents in this state may elect the federal exemptions included in section 522(d).

Pursuant to 11 U.S.C. § 522(d)(10)(E), a debtor may claim an exemption for

a payment under a stock bonus, pension, profit sharing, annuity, or similar plan or contract on account of illness, disability, death, age, or length of service, to the extent reasonably necessary for the support of the debtor and any dependent of the debtor, unless — •
(i) such plan or contract was established by or under the auspices of an insider that employed the debtor at the time the debtor’s rights under such plan or contract arose;
(ii) such payment is on account of age or length of service; and
(iii) such plan or contract does not qualify under section 401(a), 403(a), 403(b), or 408 of the Internal Revenue Code of 1986.

Federal circuit courts have reached differing conclusions with respect to whether IRAs are covered by the federal bankruptcy exemptions. Some circuit courts hold that IRAs are not exempt where the debt- or has the right to withdraw funds, at any time, subject only to early withdrawal tax penalties. E.g., In re Rousey, 347 F.3d 689, 693 (8th Cir.2003), cert, granted sub nom. Rousey v. Jacoway, — U.S.—, 124 S.Ct. 2817, 159 L.Ed.2d 246 (2004). These courts reason that because IRA funds are readily accessible, payments are not “on account of’ illness, disability, death, age, or length of service and thus run afoul of the federal bankruptcy exemption statute. See, e.g. id. Other courts have held that IRAs are exempt notwithstanding the debtor’s right to early withdrawal of funds from the IRA. E.g., In re Brueher, 243 F.3d 242, 243-44 (6th Cir. 2001). These courts reason that illness, disability, death, age, or length of service do not comprise an exhaustive list of factors that may trigger payment from an IRA and that the presence of additional factors does not destroy exemptibility. See, e.g., id.

In Minnesota, debtors may exempt from their bankruptcy estate the right to payments from “a stock bonus, pension, profit sharing annuity, individual retirement account, Roth IRA, individual retirement annuity, simplified employee pension, or similar plan or contract on account of illness, disability, death, age, or length of service.” Minn.Stat. § 550.37, subd. 24(a). Accordingly, unlike the Bankruptcy Code, Minnesota expressly exempts funds in IRAs. Nevertheless, to comport with the state constitution, the exemption is subject to monetary limitations. Estate of Jones by Blume v. Kvamme, 529 N.W.2d 335, 339 (Minn.1995).

In Kvamme, we concluded that an unlimited exemption for IRAs in a prior version of Minnesota’s exemption provision violated the state constitution’s “reasonable amount” requirement. 529 N.W.2d at 338. The statute at that time exempted IRAs

(1) to the extent the plan or contract is described in section 401(a), 403, 408, or 457 of the Internal Revenue . Code of 1986, as amended, or payments under the plan or contract are or will be rolled over as provided in section 402(a)(5), 403(b)(8), or 408(d)(3) of the Internal Revenue Code of 1986, as amended; or
(2) to the extent of the debtor’s aggregate interest under all plans and contracts up to a present value of $30,000 and additional amounts under all the plans and contracts to the extent reasonably necessary for the support of the debtor and any spouse or dependent of the debtor.

Minn.Stat. § 550.37, subd. 24 (1994). The state constitution provides: “A reasonable amount of property shall be exempt from seizure or sale for the payment of any debt or liability. The amount of such exemption shall be determined by law.” Minn. Const, art. I, § 12. Because the first subsection of subdivision 24 did not require a court to limit the size of the exemption based upon objective criteria, we held that it violated Minn. Const, art. I, § 12, and severed it, leaving subsection 2 in effect. Kvamme, 529 N.W.2d at 338-39. In so doing, we explained that our holding meant that plans like an IRA would not be entirely exempt, but rather would “only be exempt up to an indexed $30,000, plus an amount reasonably necessary for the support of the debtor and the debtor’s spouse or dependents.” Id. at 339. We believed that this approach more fairly achieved the legislative aim of exempting retirement income so as “to insure that debtors, despite them debts, will nevertheless have a reasonable means to support themselves and their dependents” without at the same time allowing them to “shield assets over and above those necessary to support themselves and their dependents.” Id.

With regard to the matter currently before us, the trustee argues that to qualify for the exemption under Minn.Stat. § 550.37, subd. 24(a), the debtor’s right to payment must be on account of illness, disability, death, age, or length of service, relying on a series of bankruptcy cases involving exemptions for annuities under state law and for IRAs under federal law. See Rousey, 347 F.3d at 693; In re Jenkins, 300 B.R. 348, 349-50 (Bankr.D.Minn.2003). This line of cases holds that to qualify for the exemption, the debtor’s right to payment under the asset must be on account of illness, disability, death, age, or length of service and that future payments from the corpus of an IRA “are not ‘on account of age’ where debtors have unfettered discretion to withdraw from the corpus at any time subject only to modest early withdrawal tax penalties.” Rousey, 347 F.3d at 693.

But it seems to us that our legislature clearly intended that IRAs generally be exempt by expressly listing them, in contrast to 11 U.S.C. § 522(d)(10)(E), which does not mention them by name. Furthermore, the debtor’s access to the funds is not completely unfettered. Consistent with the legislative intent of the exemption, as articulated in Kvamme, the statute properly balances a debtor’s need to access funds and the creditor’s right to satisfy judgments. Kvamme, 529 N.W.2d at 339. The statute designates a minimum plan value that is protected from creditors. This amount is expressed as the present value of $54,000. This initial amount is exempted without regard to need. Any claimed exemptions on amounts surpassing the present value of $54,000 are allowed only to the extent that they are “reasonably necessary for the support of the debt- or and any spouse or dependent of the debtor.” Minn.Stat. § 550.37, subd. 24(a). More importantly, the exemption statute aggregates all plans that fall under the purview of section 550.37, subdivision 24. The aggregating mechanism disables debtors from shielding large amounts of funds from creditors by spreading retirement income over several accounts. These limitations, taken together, ensure that debtors may not permissibly exempt unreasonable amounts of retirement funds; and implicitly guarantees that debtors, despite their debts, will have reasonable means necessary to meet their financial needs. We therefore hold that an IRA, as defined by the Internal Revenue Code § 408, is exempt property under Minn.Stat. § 550.37, subd. 24, as limited by the terms of subdivision 24(a) to an indexed present value and sums reasonably necessary for the support of the debtor and the debtor’s spouse or dependents.

Certified question answered in the affirmative.

      . We use the generic term IRA for both Individual Retirement Accounts and Individual Retirement Annuities as there is no analytical difference between the two under Minn.Stat. § 550.37, subd. 24.

      . Pursuant to 28 U.S.C. § 158(c)(1)(A) (2004), an appeal from a bankruptcy court decision may be heard by the United States District Court if an election is filed.

      . Minnesota Statutes § 480.065, subd. 3 (2002), provides:
      The supreme court of this state may answer a question of law certified to it by a court of the United States * * * if the answer may be determinative of an issue in pending litigation in the certifying court and there is no controlling appellate decision, constitutional provision, or statute of this state.

      . Minnesota Statutes § 550.37, subd. 24 provides:
      (a) The debtor’s right to receive present or future payments, or payments received by the debtor, under a stock bonus, pension, profit sharing, annuity, individual retirement account, Roth IRA, individual retirement annuity, simplified employee pension, or similar plan or contract on account of illness, disability, death, age, or length of service, to the extent of the debtor’s aggregate interest under all plans and contracts up to a present value of $30,000 [$54,000 under current indexing] and additional amounts under all the plans and contracts to the extent reasonably necessary for the support of the debtor and any spouse or dependent of the debtor.
      (b) The exemptions in paragraph (a) do not apply when the debt is owed under a support order as defined in section 518.54, subdivision 4a.

      . In 1999, the legislature amended the exemption statute to include Roth IRAs and to delete that portion of the statute held unconstitutional and severed in Kvamme, 529 N.W.2d at 339. Act of May 13, 1999, ch. 160, § 1, 1999 Minn. Laws 870.

      . This amount is adjusted periodically according to the implicit price deflator for the gross national product compiled by the United States Department of Commerce. Minn.Stat. § 550.37, subd. 4a (2002).