4/9/2019
Omaha Bar Association and Creighton University School of Law 13th Annual Seminar on Ethics and Professionalism
April 5, 2019
J. Scott Paul McGrath North Mullin & Kratz PC LLO Omaha, Nebraska
Attorney Discipline Decisions
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1 4/9/2019
State ex. rel. Counsel for Discipline v. Trembly, 300 Neb 195 (2018) • The only question for the Supreme Court was the appropriate sanction.
• Felony conviction for false individual tax return.
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Facts
• The failure to report on tax return over $1 million from both law related and non- law related activity.
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2 4/9/2019
• Per Curiam Opinion
• No bright-line rule that a felony conviction creates a presumption in favor of disbarment, as it has for acts of misappropriating trust account funds.
• Lawyer argued underlying conduct – not felony conviction, should be focal point.
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• “There should be no question that a knowing failure to file tax returns and to pay taxes is a serious violation of the ethical obligations of an attorney.
• “Failure to file a tax return is a crime of moral turpitude which is prohibited by Neb. S. Ct. Rule Section 3-508.4.”
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3 4/9/2019
Mitigating Factors
• Letters were submitted to the Referee as evidence of lawyer’s good character and honesty.
• However, these letters were not mentioned in the Referee’s report.
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Failure to note exception:
• Lawyer did not take exception to the findings of fact in the Referee’s report
• Because there was no exceptions made to the Referee’s findings of fact, the Supreme Court may consider the Referee’s findings final and conclusive.
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4 4/9/2019
• Neb. S. Ct. found the Referee’s report to be final and conclusive and as a result refused to consider any letters submitted on lawyer’s behalf.
• Referee recommended 18 month suspension.
• Supreme Court imposed 3 year suspension.
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State ex. rel. Counsel for Disc. v. Nimmer, 300 Neb. 906 (2018)
• Lawyer violated disciplinary rules by depositing personal and third party funds into his client trust account and using his client trust account to pay personal expenses.
• Example: A “$10,000 loan” from his mother.
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5 4/9/2019
• Referee recommended a one year suspension and two year supervised probation.
• Lawyer challenged both the finding that he violated the disciplinary rules and the recommended sanction.
• Wrong Attitude: Lawyer challenged Court’s authority to discipline him.
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Facts
• Lawyer wrote numerous checks for personal expenses ranging from rent and child support to dog boarding and landscaping fees out of his trust account.
• Lawyer argued that any funds deposited were not personal funds but instead belonged to client “third parties” such as his daughter and mother.
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6 4/9/2019
• Pattern of conduct that spanned nearly a decade.
– Hundreds of checks; thousands of dollars.
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S. Ct. Holding
• Per Curiam Opinion
• Trust accounts are for the deposit of client funds and not, as Lawyer suggested for holding “third party” funds that have no connection to the representation of the client.
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7 4/9/2019
• There is inherent danger in co-mingling funds for frequently unforeseen circumstances arise that may jeopardize the safety of the client funds.
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• Even when the client suffers no loss, co- mingling client funds with personal funds is not a trivial or technical rule violation.
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8 4/9/2019
• Co-mingling is one of the most frequent basis for disciplinary action against lawyers and disciplinary sanctions are intended in part as a “prophylactic warning that co-mingling will not be tolerated.”
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• The goal of attorney discipline is not as much punishment as a determination whether it is in the public interest to allow an attorney to keep practicing law.
• “Providing for the protection of the public requires the imposition of an adequate sanction to maintain public confidence in the Bar.”
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9 4/9/2019
• Poor accounting procedures and sloppy office management are not excuses or mitigating circumstances in reference to co- mingled funds.
• The fact that a client did not suffer financial loss does not provide a reason for a less severe sanction.
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• The Court has repeatedly held that disbarment is the appropriate discipline in cases of misappropriation or co-mingling of client funds.
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10 4/9/2019
Holding:
• Court found that lawyer comingled client funds with personal funds in violation of RPC and concluded that the appropriate sanction for lawyers misconduct is disbarment.
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Take-Aways from Trembly and Nimmer 1. Court will not hesitate to impose greater sanctions than recommended by referee if circumstance warrant.
2. Client does not have to be adversely affected for sanctions to be imposed regarding mis- management of trust accounts.
3. Don’t challenge Court’s authority to regulate lawyer conduct.
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11 4/9/2019
Florida’s Fighting Judge
• In a criminal courtroom packed with defendants waiting for their turn Brevard County Circuit Judge had a candid exchange of opinions with assistant public defender.
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• Afterward, the courtroom crowd, which had heard everything, clapped and laughed. Judge Murphy, clearly out of breath, said, “Well, I’m an old man.”
• The Florida Supreme Court was not amused and removed him from the bench.
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12 4/9/2019
Final Orders – Appellate Jurisdiction Malpractice Alert
• Heckman to Fidler – changing precedent.
• Stare “in-decisis.”
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Neb. Rev. Stat. §25-1902 • When determining whether appellate jurisdiction exists. The statute requires an order to be final for purposes of appeal if it affects a substantial right and 1) determines the action and prevents a judgment, 2) is made during a special proceeding; or 3) is made on summary application in an action after judgment is rendered.
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13 4/9/2019
Collateral Order Doctrine • The collateral order doctrine provides that an interlocutory order is immediately appealable if it 1) finally decides an important matter 2) that is separate and distinct from the merits and 3) is effectively unreviewable at the end of the litigation.
• Common law doctrine at odds with Neb. Rev. Stat. 25-1902.
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Richardson Exception:
• On appeal from the order disqualifying counsel, the Supreme Court concluded the trial court’s order was not final.
• No substantial right affected.
• Adopted the collateral order doctrine – later referred to as the Richardson exception – as an exception to the final order requirement.
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14 4/9/2019
Heckman v. Marchio, 296 Neb. 498 (2017) •TheRichardson exception had been relied on in at least eight other occasions.
• Court reiterated that appellate jurisdiction is “purely statutory;” relied on 25-1902.
• The Court refused to engage in “judicial legislation.”
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Heckman v. Marchio • The Heckman court ultimately overturned Richardson. In doing so, it reasoned that principles of stare decisis didn’t serve the broader, sounder doctrine of eliminating inconsistency.
• The Court reasoned stare decisis is not a justification for perpetuating a mistake.
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15 4/9/2019
Heckman Effect
• Attorney disqualification is an area where the loss of collateral order doctrine may lead to inconsistent results.
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Heckman Effect
• In other words, “mandamus can be used to compel the lower court to disqualify counsel (do something) – but it cannot be used to prevent the lower court from disqualifying counsel (do not do something).”
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16 4/9/2019
Heckman Effect • Under existing caselaw, parties for whom a disqualification motion has been denied may seek mandamus relief.
• For those litigants whose attorneys have been disqualified, mandamus is not an option.
• Pending Legislation – Immunity cases.
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E.D. v. Bellevue Pub. Sch., 299 Neb. 621 (2018)
• Sovereign Immunity Case
• The Supreme Court found jurisdiction to be lacking because of no final order. In doing so, the Court overruled its 2011 decision in StoreVisions v. Omaha Tribe of Nebraska.
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17 4/9/2019
E.D. v. Bellevue School District
• Heckman not limited to overruling Richardson.
• Richardson “directly at odds with our continued application of the collateral order doctrine to an interlocutory order where there is no final order.”
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Fidler v. Life Care Centers, 301 Neb. 724 (2018)
• Nursing home malpractice case.
• Case dismissed for lack of prosecution.
• Motion to set aside dismissal granted; case reinstated.
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18 4/9/2019
Fidler Cont.
• Life Centers appealed order reinstating case relying on Jarret v. Eichler, 244 Neb. 310 (1993).
• Issue: Was order reinstating case a final order under 25-1902?
• Was substantial right affected?
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• Jarrett found substantial right to be affected – dismissal would have triggered likely successful statue of limitations defense in subsequent re- filing.
• Same situation in Fidler.
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19 4/9/2019
Holding in Fidler: • Per Curiam opinion,
• Court agreed that Jarrett supports that reinstatement order was a final order.
• However, Jarrett “focused on wrong action” – focus should be on present case as opposed to future hypothetical action.
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Fidler Holding: • Court’s “misdirected focus” caused answer to wrong question allowing finding of final order where none existed.
• Jarrett overruled.
• Court referenced two cases relied on in Jarrett opinion that it also “disapproved.”
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20 4/9/2019
Fidler Holding:
• Final order jurisprudence would be strengthened by expressly disapproving the statute of limitations reasoning in Jarrett.
• No difference whether there is a viable statute of limitations defense in subsequent new action filed because of prior dismissal.
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Fidler Holding:
• Basically all the reinstatement order did was put the parties back in same position as before administrative dismissal.
• No substantial right; No final order.
• Appeal dismissed.
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21 4/9/2019
• Heckman – precedent overruled.
• E.D. v. Bellevue – precedent overruled.
• Fidler – precedent overruled.
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Malpractice Insurance Policy Re Final Order
• $126.00 filing fee for appeals from District Court.
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22 4/9/2019
Iowa State Bar Association Law PAC Solicitation to Attorneys: T-Shirt for Donation
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“Hate Us Until You Need Us.”
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23 4/9/2019
West Virginia Jurisprudence
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Caperton v. Massey Coal • In 2002 Don Blankenship, chairman and CEO of Massey, lost a $50 million verdict in a fraud lawsuit brought by smaller rival, Hugh Caperton, who claimed he was driven out of business by Massey.
• In judicial election, Blankenship spent $3 million to defeat a liberal judge on W. V. Supreme Court.
• Conservative Brent Benjamin was elected instead of liberal judge.
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24 4/9/2019
• Caperton moved to recuse Justice Benjamin three times, on grounds that he could not be impartial toward Blankenship.
• Benjamin refused each time saying he could absolutely be impartial.
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• Three years later, Benjamin, cast a critical vote in a 3-2 decision that sided with Blankenship and threw out $50 million verdict against Blankenship.
• Caperton raised due process objections and appealed.
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25 4/9/2019
• In 2009 US Supreme Court, ruled in a 5-4 decision that Benjamin should have disqualified himself in this extraordinary situation because an interested party’s election spending had a “disproportionate influence” in a pending case.
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• No actual bias;
• No control over amount spent;
• Possible appearance of impropriety; and
• Public could reasonably question impartially.
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26 4/9/2019
What Blankenship should have done. . .
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Why am I telling you about a 2009 West Virginia case?
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27 4/9/2019
• Former local counsel.
• Reversed trial court decision in my case.
• DQ action in U.S. Supreme Court.
• Brent Benjamin lost election for his Supreme Court seat to Justice Elizabeth Walker in 2016.
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August 2018
• The West Virginia House of Delegates voted to impeach 4 of the 5 West Virginia Supreme Court Justices.
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28 4/9/2019
• Justice Allen Loughry was impeached for spending:
– $363,000 on renovations to his office;
– Putting a $42,000 antique desk and a $32,000 suede couch owned by the State in his home office;
– Lying to the House of Delegates Finance Committee about taking home the desk and the suede couch, and;
– For his personal use of state vehicles.
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• Justice Robin Davis was impeached for spending $500,000 on office renovations and permitting overpayments to senior status judges.
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29 4/9/2019
• Justice Margaret Workman was impeached for abuse of authority and permitting overpayment to senior status judges.
• Justice Elizabeth Walker was impeached for abuse of authority.
• Four out of Five Justices?
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• The fifth of the five West Virginia Supreme Court Justices, Menis Ketchum, resigned on July 27, 2018 before the House could impeach him.
• He pleaded guilty to one count of felony wire fraud for his personal use of a state vehicle and fuel card.
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30 4/9/2019
• Justice Loughry had previously written a book chronicling West Virginia political corruption.
• In addition to being impeached, Loughry was indicted on numerous counts of mail fraud, wire fraud, lying to federal investigators, witness tampering and obstruction of justice.
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• Now in 2019 there is an entirely new West Virginia Supreme Court of Appeals.
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31 4/9/2019
Fastest Five Minutes in Ethics
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Update From NSBA President:
• Testimony on Pending Bills
- LB 300
- 2% Salary Increase for Judges
- LB 309
- Increase number of Judges in Douglas County District Court from 16 to 17 (Delayed until 2020)
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32 4/9/2019
Baylis v. Clason 26 Neb. App. 195 (2018) • Filing of suggestion of bankruptcy constitutes a general appearance resulting in party filing submitting for jurisdiction of the court.
• Pending LB 308 seeks to change ruling.
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House Canary, Inc. v. Quicken Loans Inc. Western District of Texas, San Antonio Division (2018)
• Order setting initial status conference in San Antonio federal court.
• Court commented on civility among lawyers:
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33 4/9/2019
• “Although the Court expects vigorous advocacy and does not expect counsel to hold hands and sing Kumbaya, the consequences of unprofessional conduct or acerbic shrillness in the pleadings can also include:
• “Acerbic shrillness”?
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• Revocation of pro hac vice privilege.
• Sitting a timeout in the rotunda of the courthouse.
• Opposing counsel being required to kiss each other on the lips in front of the Alamo with cameras present.
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34 4/9/2019
Avoiding “CC” or “BCC” in Client Communication
• Copying a client on communications with an adversary risks privilege waiver.
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Alaska Bar Association, in Ethics Opinions No. 2018-1
• Opinion 2018-1 concludes that an attorney should not copy a client on an email to opposing counsel because a “reply all” from a client could reveal the client’s confidences and secrets.”
• Rule 4.2 – which forbids communication with a represented party without consent.
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35 4/9/2019
• Opinion recommends that attorneys “forward” adversary communications to their clients, instead of using “cc” or “bcc.”
• “Blind copying” a client can create a “foreseeable risk that the client would respond to all recipients.”
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What Have We Learned?
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1. Nebraska Supreme Court’s emphasis on protecting the public in attorney discipline cases often results in strong penalties.
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2. Irrespective of stare decisis, Nebraska Supreme Court will not hesitate to overrule long standing precedent where circumstances warrant.
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3. No matter how strong the attorney discipline, and no matter the lack of adherence to precedent in Nebraska appellate courts. . .
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. . . Just be glad you don’t practice in West Virginia!
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J. Scott Paul P: 402.341.3070 I F: 402.341.0216 [email protected]
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