Lawyer Loses License for Failure to Pay Student Loans

The National Law Journal reported yesterday that a Texas lawyer lost his law license because he defaulted on his student loan. I'd heard of lawyers losing their licenses for failure to pay child support, but student loan debt-- that's hitting close to home. It turns out that there's a little more to this story than the NLJ reported.

Attorney Frank Santulli first ran into trouble with the Texas Bar in 2001. Five years earlier, in 1996, the Supreme Court of Texas adopted Rules for Suspension of Attorneys in Default of Guaranteed Student Loans under which the Texas Guaranteed Student Loan Corporation (TGSCL) can inform the State Bar that a lawyer is in default. The Bar then notifies the lawyer of the report and the lawyer has sixty days to obtain certification from the TGSLC that he has entered into a repayment agreement or that he is otherwise not in default. On the sixty-first day following the notice, if the lawyer cannot produce the requisite certificate, he is automatically suspended from the practice of law. (The New Jersey Bar has adopted a similar rule).

In 2001, after TGSLC informed the Bar of Santulli's default, he appealed his suspension before the Board of Law Examiners. Santulli was in a swamp of credit card and student loan debt. He had worked out a debt management plan with Consumer Credit Counseling Services (CCCS). The Board entered an agreed order granting Santulli a two-year probationary license. He agreed to make payments under the CCCS plan and provide proof of payments to the Board.

Santulli defaulted on the payments due under the plan and in December 2002, the Board held a hearing on revocation of his probationary license. Santulli explained that he had experienced financial setbacks and indeed had not made the agreed payments on his student loan since December 2001. The Board was concerned with the professional implications of his financial problems, in particular that Santulli could find himself "in so much debt and under so much pressure that there are opportunities and temptation either to short-shrift . . . clients, or . . .convert money [from clients] to take care of those debts."

The Board granted Santulli a six-month extension of his probationary license subject to conditions including one that required him to "make suitable arrangements for payment or discharge of all his past due debts." Moreover, the order stated that Santulli's failure to comply with this payment condition would conclusively indicate a lack of trustworthiness and support the inference that Santulli posed an unreasonable risk of harm to his clients. Santulli did not object to the order.

A year later, in December 2003, Mr. Santulli appeared again before the Board and admitted that he had not made any payments on his debt. He had made arrangements with a bankruptcy lawyer to swap family-law work for bankruptcy represenation. But, the bankruptcy lawyer didn't deliver. Santulli hired another bankruptcy lawyer in October, but still no bankruptcy petition. Santulli asked the Board for another month to file for bankruptcy.

The Board rejected Santulli's request for an extension and found him in violation of the condition of his probationary license -- that he make arrangements to pay or discharge his debts. Pursuant to the 2002 agreement, Santulli's failure indicated the lack of good moral character required for the privilege of practicing law. In particular, it found that his failure to make arrangements to pay or discharge his debt presented a clear likelihood that he would harm a client, obstruct justice or violate the lawyer disciplinary rules.

Santulli sought judicial review of the revocation of his license. The trial court affirmed the Board. Santulli appealed arguing that the trial court's order did not rest on substantial evidence, that the condition of his probationary license requiring him to pay or discharge his loans was arbitrary and capricious, and that the Board erred in concluding that his behavior justified a conclusion that he was unfit for the practice of law.

The Texas Court of Appeals (3d Dist.) noted that Santulli did not object to or appeal the Board's 2002 order that imposed the payment condition. The condition was not ambiguous or otherwise inappropriate, and Santulli fully understood it. Although Santulli had filed for bankrutpcy relief in 2004, after entry of the Board's 2003 order, his bankruptcy case and ultimate discharge was not before the Board in 2003. The court held that based on the record before the Board, its decision to revoke Santulli's law license was not erroneous. "[T]he evidence shows that two and one-half years after being given a probationary license conditioned in part on paying or discharging his debts to satisfy the Board's concerns, Santulli had not made any progress . . . other than to develop a more concrete intention to file for bankruptcy within a month."

As for the connection between Santulli's failure to pay his debts and his moral character, the court found that the Board's order was supported by reliable evidence "such that a reasonable man could find that there were substantial doubts about [Santulli's] 'honesty, fairness and respect for the rights of others and for the laws of the state and nation.'" (citing Koningsberg v. State Bar of Cal., 353 U.S. 252 (1957).