Graeme Hancock v. Hon. o'neil/state Bar of Arizona ( 2022 )

IN THE
SUPREME COURT OF THE STATE OF ARIZONA
GRAEME HANCOCK,
Petitioner,
v.
HON. WILLIAM J. O’NEIL, PRESIDING DISCIPLINARY JUDGE,
Respondent Judge,
STATE BAR OF ARIZONA,
Real Party in Interest.
No. CV-21-0145-SA
Filed August 29, 2022
Special Action from the Office of the Presiding Disciplinary Judge
No. PDJ2019-9040
JURISDICTION ACCEPTED, RELIEF GRANTED
COUNSEL:
Dominic E. Draye (argued), Andrew F. Halaby, William E. Eye, Greenberg
Traurig, LLP, Phoenix, Attorneys for Graeme Hancock
David L. Sandweiss, Senior Bar Counsel (argued), Kelly J. Flood, David E.
Wood, State Bar of Arizona, Phoenix, Attorneys for State Bar of Arizona
J. Scott Rhodes, In Propria Persona, Phoenix, Attorney for Amicus Curiae J.
Scott Rhodes
CHIEF JUSTICE BRUTINEL authored the Opinion of the Court, in which
VICE CHIEF JUSTICE TIMMER and JUSTICES BOLICK, LOPEZ, BEENE,
MONTGOMERY, and PELANDER (RETIRED) joined.*

Justice Kathryn Hackett King has recused herself from this case. Pursuant
to article 6, section 3 of the Arizona Constitution, Justice John Pelander
(Ret.), was designated to sit in this matter.
GRAEME HANCOCK v. HON. O'NEIL/STATE BAR OF ARIZONA
Opinion of the Court
CHIEF JUSTICE BRUTINEL, Opinion of the Court:
¶1 In this special action, we are asked to decide whether
offensive issue preclusion applies in attorney disciplinary proceedings. The
Arizona Rules of the Supreme Court governing attorney discipline give
preclusive effect to two types of prior judgments in attorney disciplinary
matters: (1) criminal convictions, Rule 54(g), and (2) attorney discipline
imposed in other jurisdictions, Rule 54(h). Because our rules dictate when
a prior judgment may have preclusive effect in attorney disciplinary
proceedings, we hold that offensive issue preclusion does not apply.
Therefore, a sanctions order in a prior lawsuit does not have preclusive
effect in an attorney disciplinary proceeding.
I. BACKGROUND
¶2 This case arises from one of many lawsuits concerning
Goodyear’s G159 tire. The plaintiffs in the underlying action, the Haegers,
suffered serious injuries when the front tires to their motor home failed.
The Haegers sued Goodyear in state court, and Goodyear subsequently
removed the case to federal district court.
¶3 Goodyear appointed Basil Musnuff, an Ohio lawyer, as
“national coordinating counsel” on all G159 cases across the country to
oversee discovery requests, coordinate the search for documents, and draft
responses. Goodyear hired Arizona attorney Graeme Hancock as local
counsel.
¶4 During discovery, the Haegers requested test records for the
G159, but Goodyear, through its counsel, repeatedly denied the existence
of such tests and otherwise refused to produce them. The Haegers and
Goodyear settled on the first day of trial after extensive pre-trial litigation.
¶5 Almost a year after the Haeger settlement, a newspaper article
reporting on another G159 case mentioned testing data, the same data
Goodyear and its counsel denied existed. The Haegers filed a motion for
sanctions alleging discovery fraud. Following sanctions proceedings, the
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Opinion of the Court
district court issued a lengthy sanctions order against Goodyear, Musnuff,
and Hancock, detailing each party’s involvement in defrauding the court.1
¶6 Subsequently, the State Bar of Arizona (the “Bar”) initiated an
investigation into Hancock’s conduct. Upon completing the investigation,
the Bar recommended an Order of Probable Cause to the Attorney
Discipline Probable Cause Committee. The committee found probable
cause, and the Bar filed a formal complaint against Hancock. See Ariz. R.
Sup. Ct. 47 (outlining attorney discipline procedural matters).
¶7 At the disciplinary proceeding, the Presiding Disciplinary
Judge (“PDJ”) granted the Bar’s motion for partial summary judgment,
applying offensive non-mutual issue preclusion to prevent Hancock from
relitigating the district court’s fact findings.
¶8 Hancock filed a petition for special action in this Court
challenging the applicability of issue preclusion in Bar disciplinary
proceedings. We have jurisdiction under article 6, section 5(3) of the
Arizona Constitution.
II. DISCUSSION
¶9 “Application of issue preclusion is an issue of law, which we
review de novo.” Picaso v. Tucson Unified Sch. Dist., 217 Ariz. 178, 180 ¶ 6
(2007).
A.
¶10 Issue preclusion is a judicial doctrine that, when applicable,
prevents a party from relitigating an issue of fact decided in a prior
judgment. Crosby-Garbotz v. Fell ex. rel. Cnty. of Pima, 246 Ariz. 54, 55 ¶ 1
(2019).2 Offensive issue preclusion occurs when the party invoking the
doctrine uses it as a sword against another party who lost on the issue in a
prior judgment. See id. at 60 ¶ 26. Our Court, as well as the United States
Supreme Court, has noted that offensive issue preclusion is “a situation
that . . . present[s] different considerations” beyond the four elements state
1 Haeger v. Goodyear Tire & Rubber Co., 906 F. Supp. 2d 938 (D. Ariz. 2012),
aff’d, 813 F.3d 1233 (9th Cir. 2016), rev’d and remanded, 581 U.S. 101 (2017).
2 Issue preclusion is also known as collateral estoppel. Id.3
GRAEME HANCOCK v. HON. O'NEIL/STATE BAR OF ARIZONA
Opinion of the Court
and federal law require for defensive issue preclusion.3 Id.; see Parklane
Hosiery Co. v. Shore, 439 U.S. 322, 329–31 (1979).4
¶11 The law of the jurisdiction of the court from which the
underlying initial judgment issues determines whether that judgment has
preclusive effect. In re Gen. Adjudication of All Rts. to Use Water in Gila River
Sys. & Source, 212 Ariz. 64, 69 ¶ 13 (2006). But in federal diversity cases,
such as the Haeger case, federal law incorporates “the law that would be
applied by state courts in the State in which the federal diversity court sits.”
Semtek Int’l Inc. v. Lockheed Martin Corp., 531 U.S. 497, 508 (2001). As a result,
Arizona law governs the preclusive effect of a judgment from a District of
Arizona federal court sitting in diversity. And this Court is the ultimate
authority on Arizona law, to which the federal courts must defer. See Erie
R. Co. v. Tompkins, 304 U.S. 64, 79 (1938). Thus, it is our duty to decide
whether Arizona law would give effect to such a judgment.
3 For defensive issue preclusion, federal and state law require that: (1) The
issue at stake must be the same in both proceedings; (2) the issue must have
been actually litigated and decided in the prior proceedings; (3) the party
against whom the doctrine is to be invoked must have had a full and fair
opportunity to litigate the issue; and (4) the issue must have been necessary
to decide the merits of the prior action. Janjua v. Neufeld, 933 F.3d 1061, 1065
(9th Cir. 2019) (quoting Oyeniran v. Holder, 672 F.3d 800, 806 (9th Cir. 2012),
as amended (May 3, 2012)); Chaney Bldg. Co. v. City of Tucson, 148 Ariz. 571,
573 (1986).
4 Because offensive, non-mutual use of the doctrine may lead to perverse
outcomes, federal courts employ a four-factor “fairness” test before giving
a judgment preclusive effect on an issue when the parties are not identical
in both suits and the party invoking the doctrine uses it offensively, that is
as a sword, not a shield. See Parklane, 439 U.S. at 330–32; Off. of Disciplinary
Couns. v. Kiesewetter, 889 A.2d 47, 52 (Pa. 2005) (“(1) [W]hether the plaintiff
could have joined the earlier action; (2) whether the subsequent litigation
was foreseeable and therefore the defendant had an incentive to defend the
first action vigorously; (3) whether the judgment relied upon as a basis for
collateral estoppel is inconsistent with one or more previous judgments in
favor of the defendant; and (4) whether the second action would afford the
defendant procedural opportunities unavailable in the first action that
could produce a different result.”) (summarizing Parklane fairness factors).
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GRAEME HANCOCK v. HON. O'NEIL/STATE BAR OF ARIZONA
Opinion of the Court
¶12 This Court is not only the ultimate authority on Arizona law,
but also “the ultimate body wielding the State’s power over the practice of
law.” Bates v. State Bar of Ariz., 433 U.S. 350, 360 (1977); see also Ariz. Const.
art. 6, § 3 (entrusting this Court with administrative supervision over state
courts); Scheehle v. Justices of the Sup. Ct. of the State of Ariz., 211 Ariz. 282,
290 ¶ 31 (2005) (concluding that article 6, section 3 provides for this Court’s
“constitutional power over attorneys as officers of the court”). We are
therefore not required to give preclusive effect to any prior judgment in an
attorney disciplinary matter, other than that which is already provided
under our rules or caselaw. Thus, in the exercise of our regulatory authority
over the practice of law in this state, we hold as a matter of Arizona law that
the doctrine of offensive issue preclusion does not apply to attorney
disciplinary proceedings. Instead, our rules determine the preclusive effect
of prior judgments in attorney disciplinary proceedings.
B.
¶13 The Arizona Supreme Court Rules governing attorney
disciplinary matters do not explicitly reference issue preclusion. But the
rules do enumerate grounds for discipline, and two grounds arise from
prior judgments: (1) discipline for the conviction of a crime, Rule 54(g), and
(2) discipline imposed by other jurisdictions, Rule 54(h). The practical effect
of these subsections is that, if an attorney is convicted of a crime or
disciplined by another jurisdiction, the attorney is precluded from
relitigating whether he or she committed the underlying crime or ethical
violation, subject to the provisions of Rule 57(b) in the context of discipline
by another jurisdiction.
¶14 Although the practical effect of these subsections is effectively
issue preclusion, Rules 54(g) and 54(h) do not apply the doctrine of issue
preclusion. Rather, the rules prescribe the procedure. If an attorney is
convicted of a crime or disciplined in another jurisdiction, then the attorney
may be disciplined. The rules provide further instruction for recognizing
and imposing discipline ordered in another jurisdiction:5
5 The findings that would prevent the imposition of discipline stemming
from discipline in another jurisdiction are in large part akin to the Parklane
fairness factors. See Parklane, 439 U.S. at 330–32. Though we note these
similarities, we refrain from characterizing our rules as permitting issue
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GRAEME HANCOCK v. HON. O'NEIL/STATE BAR OF ARIZONA
Opinion of the Court
[T]he presiding disciplinary judge shall impose the identical
or substantially similar discipline, unless bar counsel or
respondent establishes by a preponderance of the evidence,
through affidavits or documentary evidence, or as a matter of
law by reference to applicable legal authority, or the presiding
disciplinary judge finds on the face of the record from which
the discipline is predicated, it clearly appears that:
A. the procedure was so lacking in notice or opportunity to be
heard as to constitute a deprivation of due process; or
B. there was such infirmity of proof establishing the
misconduct as to give rise to the clear conviction that the
presiding disciplinary judge could not, consistent with its
duty, accept as final the other jurisdiction’s conclusion on that
subject; or
C. the imposition of the same discipline would result in grave
injustice; or
D. the misconduct established warrants substantially
different discipline in this state.
Ariz. R. Sup. Ct. 57(b)(3). Thus, when a United States District Court avails
itself of the federal attorney disciplinary process, see D. Ariz. LRCiv 83.2,
we will recognize and impose its decision so long as the attorney has the
opportunity to explain why he or she should not be bound by the federal
court’s disciplinary order.6 But the judgment here was not an exercise of
disciplinary authority by the district court; this is an order for sanctions in
a civil case.
preclusion in certain cases. Issue preclusion is a well-studied doctrine with
its own body of caselaw, which has no bearing on our rules.
6 Federal and state courts have independent disciplinary authority. See
Chambers v. NASCO, Inc., 501 U.S. 32, 43 (1991) (“[A] federal court has the
power to control admission to its bar and to discipline attorneys who
appear before it.”); In re Smith, 189 Ariz. 144, 146 (1997) (explaining that this
Court determines who can practice law in Arizona and under what
conditions).
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GRAEME HANCOCK v. HON. O'NEIL/STATE BAR OF ARIZONA
Opinion of the Court
¶15 Under the interpretive canon expressio unius est exclusio
alterius, “the expression of one item implies the exclusion of others.” City
of Surprise v. Ariz. Corp. Comm’n, 246 Ariz. 206, 211 ¶ 13 (2019). Our rules
provide only two instances in which a prior judgment would effectively
prevent an attorney from relitigating the underlying facts in a disciplinary
hearing. Therefore, under our rules, the doctrine of issue preclusion is not
applicable to attorney disciplinary hearings in Arizona; rather, our rules
define when a prior judgment has preclusive effect.
¶16 Our caselaw’s requirement for independent fact finding in
attorney disciplinary proceedings supports this conclusion. In re Levine,
174 Ariz. 146, 150 (1993) (“In reviewing disciplinary proceedings[,] . . . [this
Court is] an independent trier of both fact and law . . . .”); In re Wolfram,
174 Ariz. 49, 52 (1993) (“In disciplinary proceedings, this [C]ourt acts as an
independent trier of fact and law in the exercise of our supervisory
responsibility over the State Bar.”). Giving a prior judgment preclusive
effect, other than as provided by our rules, abrogates this Court’s authority
and duty to act as an independent trier of fact.
¶17 Moreover, if the Bar relied on a state court sanctions order to
discipline Hancock, such an order would not have preclusive effect under
our rules because it is neither a criminal conviction nor discipline from
another jurisdiction. It is incongruous to apply offensive issue preclusion
to a federal court order where we would not apply it to an identical state
court order, especially in a matter where state law applies.
¶18 The Bar nonetheless contends that rejecting issue preclusion
here breaks from Arizona courts’ treatment of issue preclusion in
disciplinary proceedings of other regulated professions, positing that
today’s holding “exempt[s] lawyers from a rule that applies to everyone
else.” The Bar warns that this will “create a public perception that lawyers
form a clubby group of elitists who rig laws in our self-interest, knowing
we can count on friendly courts for shelter.”
¶19 But any differential treatment of lawyers, if it exists, comes
from our constitutional authority under article 6, section 3 of the Arizona
Constitution. We have administrative supervision over the courts, id., and
lawyers are officers of the court, Scheehle, 211 Ariz. at 290 ¶ 31. Under this
authority, we have crafted rules governing the attorney disciplinary
process—rules that, of course, are inapplicable to other professions. The
rules governing disciplinary matters are the result of a carefully crafted
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Opinion of the Court
rulemaking process. This process benefits greatly from public input and
can readily be modified when appropriate.
¶20 Furthermore, nothing in our decision today precludes the Bar
from pursuing its prosecution and using the sanctions proceeding in the
district court as evidence. The inapplicability of the issue preclusion
doctrine in attorney disciplinary matters does not render collateral
proceedings irrelevant to the resolution of disciplinary proceedings. A PDJ
is not bound by the rules of evidence and “may conduct the hearing in any
manner that will achieve substantial justice.” Ariz. R. Sup. Ct. 61(c)(2)(B).
Although the Bar cannot prevent an attorney from relitigating issues
determined in a sanctions order, a PDJ is permitted to admit transcripts and
other evidence of collateral proceedings and credit the persuasiveness of
such evidence, so long as the PDJ affords an attorney the opportunity to
contest such evidence and introduce additional evidence as appropriate.7
¶21 Moreover, we reject the Bar’s assertion that our holding
exempts lawyers from a rule that applies to everyone else. The Bar cites
two cases involving the use of issue preclusion in disciplinary proceedings
for other regulated professions to support this argument: In re Marquardt,
161 Ariz. 206 (1989), and Wetzel v. Ariz. State Real Est. Dep’t, 151 Ariz. 330(App. 1986). Both cases are inapposite.
¶22 In Marquardt, an Arizona superior court judge was convicted
in a Texas state court of possessing marijuana. 161 Ariz. at 207. In a
subsequent judicial misconduct case, this Court ruled that the judge was
bound by the criminal conviction and was precluded from arguing that he
did not intend or know that he was in possession of the drug. Id. at 213.
Judicial disciplinary proceedings are different from attorney disciplinary
proceedings and are subject to different rules. See Ariz. Const. art. 6.1,
§§ 1–3 (establishing a judicial conduct commission and prescribing
parameters for suspension or disqualification of state judges); Ariz.
Comm’n on Jud. Conduct R. 20–34. Nevertheless, if attorney disciplinary
rules governed, this Court would still have given the criminal conviction
preclusive effect because Rule 54(g) allows for the use of a criminal
7 As to the admissibility of the collateral court order finding improper
attorney conduct and conclusive reliance thereon, because a PDJ is not
bound by the order, we struggle to imagine a scenario in which admitting
the order achieves substantial justice when the evidence from the
proceeding is available.
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Opinion of the Court
conviction as a basis for attorney discipline. See Ariz. R. Sup. Ct. 54(g).
Thus, Marquardt’s criminal conviction would have had the same preclusive
effect under our rules if he was facing attorney discipline rather than
judicial misconduct charges.
¶23 Wetzel involved a real estate broker who was also a recently
disbarred lawyer. 151 Ariz. at 332. The Arizona State Department of Real
Estate (the “Department”) revoked the broker’s real estate license based
solely on this Court’s disbarment orders. Id. After exhausting his
administrative remedies, the broker challenged the Department’s use of
offensive non-mutual issue preclusion in court. Id. The court of appeals
affirmed. Id. at 333–34.8
¶24 The hearing officer gave the disbarment orders preclusive
effect pursuant to Department rules. Id. at 332. This is markedly different
from the PDJ here who felt obliged to apply issue preclusion under federal
law. Other administrative agencies are free to adopt procedural rules or
apply judicial doctrines in their discretion; here the issue is the PDJ’s
application of our rules for attorney disciplinary proceedings.
¶25 Unlike Marquardt and the case at hand, Wetzel involved an
administrative proceeding in a profession over which we have no
regulatory authority. Here, we are vested with authority over attorney
disciplinary proceedings. Ariz. Const. art. 6, § 3; Scheehle, 211 Ariz. at 290
¶ 31. And our rules speak on the matter. We hold that under our rules,
issue preclusion is not applicable in attorney disciplinary proceedings; only
criminal convictions and disciplinary orders from other jurisdictions may
be given preclusive effect.
8 Although Wetzel approved the use of offensive, non-mutual issue
preclusion, the court noted that in Arizona, non-mutual issue preclusion
“has been limited to the defensive use of the doctrine.” Id. (citing Standage
Ventures, Inc. v. State, 114 Ariz. 480 (1977)). Indeed, in Standage Ventures,
this Court expressly prohibited offensive use of issue preclusion. 114 Ariz.
at 484. Other courts have noted that the law is unclear in Arizona. Am.
Fam. Mut. Ins. Co. v. Clancy, 512 F. App’x 674, 676 (9th Cir. 2013) (noting
disagreement between Standage and Wetzel). Because our rules, rather than
the issue preclusion doctrine, govern here, this case does not require us to
clarify this point.
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GRAEME HANCOCK v. HON. O'NEIL/STATE BAR OF ARIZONA
Opinion of the Court
III. CONCLUSION
¶26 We accept jurisdiction and grant relief, vacating the PDJ’s
order and remanding for further proceedings.
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