Iowa Supreme Court Attorney Disciplinary Board v. Steven F. Olson

IN THE SUPREME COURT OF IOWA
No. 11–1280
Filed December 9, 2011
IOWA SUPREME COURT ATTORNEY
DISCIPLINARY BOARD,
Complainant,
vs.
STEVEN F. OLSON,
Respondent.
On review of the report of the Grievance Commission of the
Supreme Court of Iowa.
The Grievance Commission of the Supreme Court of Iowa
recommends the respondent be ordered to cease and desist from
practicing law in Iowa for thirty days. COMPLAINT DISMISSED.
Charles L. Harrington and Amanda K. Robinson, Des Moines, for
complainant.
Steven F. Olson, Bloomington, Minnesota, pro se.
2
MANSFIELD, Justice.
This attorney disciplinary proceeding comes before us on the
report of a division of the Grievance Commission of the Supreme Court of
Iowa. See Iowa Ct. R. 35.10(1). The Iowa Supreme Court Attorney
Disciplinary Board alleged the respondent, Steven F. Olson, violated
ethical rules by communicating directly with a represented party, making
misrepresentations of fact to that party, and engaging in fraud and deceit
toward that party. The commission found two of the alleged violations
had occurred and recommended Olson be ordered to cease and desist
from the practice of law in Iowa for thirty days. Upon our consideration
of the commission’s findings of fact, conclusions of law, and
recommendations, we are unable to conclude by a convincing
preponderance of the evidence that Olson committed any of the alleged
violations. Therefore, we dismiss the complaint.
I. Factual and Procedural Background.
Olson is a member of the Minnesota and South Dakota bars. His
offices are located in Minnesota. Olson also is admitted to practice in the
tribal courts of the Sac & Fox Tribe of the Mississippi (the Tribe). His law
firm regularly represents the Tribe. Olson is not a member of the Iowa
bar.
DNA Today, LLC is a now-defunct software company that was
formerly based in West Des Moines. The company offered software that
potentially could be used to store information about a person’s ancestry
and verify whether that person was a bona fide member of an Indian
tribe. At some point in 2005, DNA Today approached the Tribe about its
software. Eventually the parties agreed the Tribe would provide funding
to the company.
3
In July 2005, the Tribe loaned one million dollars to DNA Today
secured by “all assets of the Company,” including “source code or similar
software.” Steven Whitehead, the President of DNA Today, personally
guaranteed repayment of the one million dollar debt.
The debenture agreement also contained terms under which the
Tribe could convert its debt interest into stock. Additionally, the
agreement required DNA Today to keep the collateral free and clear of
any other security interests. The agreement was governed by the laws of
the Tribe and deemed to have been executed on Indian lands.
The agreement was prepared by Olson and negotiated between
Olson and Whitehead. Olson and Whitehead continued to deal directly
with each other after that.
Under the terms of the debenture agreement, DNA Today was
required to pay interest to the Tribe of $25,000 per quarter and to repay
the one million dollars in principal on the one-year anniversary of
signing—i.e., July 2006. By the fall of 2005, however, DNA Today was in
default with the Tribe. DNA Today was actively searching for other
investors. One possible deal that would have required the Tribe to
subordinate its debt fell through in the spring of 2006.
In or about March 2006, without notifying the Tribe, DNA Today
took out a $200,000 secured line of credit with a commercial bank. This
was in violation of the debenture agreement, which prohibited DNA
Today from encumbering its assets with other security interests.
In late May 2006, DNA Today signed an agreement to retain
Windstone Capital of Scottsdale, Arizona as a broker to use its best
efforts to raise $5 million in outside capital for the company. The
agreement required a $25,000 cash retainer with $15,000 due upon
signature and the remaining $10,000 payable in thirty days. DNA Today
4
paid the initial $15,000, but was unable to pay the remaining $10,000 of
Windstone’s retainer. 1
Meanwhile, DNA Today was not compensating its team of
computer programmers, who were located in France. As a result, they
had ceased working for the company. By July 2006, DNA Today was in a
very precarious financial position. As Whitehead explained to Olson in
an e-mail:
[W]e are in need of immediate relief if we are to
stabilize the company to insure that we will be operational
over the next several months. . . .
....
. . . We are at a serious crossroads that not only
[a]ffects us, bu[t] the tribe as well. . . .
....
The biggest risk is holding our team, including the
technical team, together. The[] guys in France are refusing
to provide services for us until they get paid. This will be a
very big problem if it goes on much longer. Our staff has
forfeited pay for many pay periods, but can no longer afford
to do so. We are at partial staffing as a result, which is also
dangerous.
I urge [you] to review this situation with full and deep
consideration. With the tribe’s support, we can make it
through and should be in great shape to cash in on the
market that is so strong for us. Without any support, the
tribe’s investment and our company are in serious
jeopardy—and I mean serious. This is not a scare tactic, it is
reality.
Whitehead’s e-mail included suggestions of how the Tribe might provide
additional funding to DNA Today.
On July 11, 2006, a meeting took place between DNA Today and
the Tribe. No attorneys were present. On July 25, 2006, Olson faxed a
1In his complaint against Olson, Whitehead referred to Windstone as a “new
investor.” The record clearly indicates that Windstone was not an investor, but rather,
a broker for potential investments.
5
letter on behalf of the Tribe to Whitehead regarding another potential
business meeting to occur on July 26. The July 26 meeting took place,
again without attorneys present.
On July 27, 2006, according to Whitehead’s later explanation to
his investors, Whitehead called Olson to find out what the Tribe planned
to do. Olson returned the call on July 28. In that call, Whitehead
warned Olson that “our business was in serious jeopardy of shutting
down and that we would likely lose the Windstone deal, which would
mean that the tribe would never get their money back for the debenture.”
In the mean time, Whitehead contacted Windstone and obtained yet
another extension of the deadline to pay the remaining $10,000 of the
broker fee.
Olson recalled these events similarly. As Olson explained:
He [Whitehead] came to the Tribe in July—in late June, early
in July, and explained that he was completely out of money
and that he was going to have to close the doors unless the
Tribe loaned him some additional money.
Well, the Tribe didn’t do anything for an extended
period of time. I don’t know if any of you have ever dealt
with Indian tribes, but I suspect you—some of you have
dealt with governing bodies, political entities. And a tribal
council is like any political entity, it makes decisions very
slowly, and perhaps even more slowly than most traditional
governing bodies that we’re accustomed to dealing with in
the non-Indian world.
And as a consequence of that delay he [Whitehead]
was at the point by the end of July where he was in default
with the Tribe, but he also owed virtually every other
creditor, according to what he was telling the Tribe at the
time. He really had no other resources, and he had no other
direction to go because he didn’t have the $25,000 in the
business coffers that it would take to get this broker, the
Windstone broker that he talked about when he was here, to
put together a deal that could then go out and be marketed
to potential investors. As he indicated, this was an
investment broker; this was not a venture capital firm, this
was not any kind of a firm that had a banking firm or that
had actual resources.
6
Around this time, Olson learned DNA Today had taken out the
$200,000 secured line of credit several months before in violation of the
parties’ debenture agreement. On August 2, 2006, Olson filed a UCC
financing statement with the Iowa Secretary of State regarding DNA
Today’s assets, including the software source code.
On August 7, 2006, Olson filed a complaint in tribal court against
DNA Today and Whitehead alleging default under the loan and security
agreement and seeking damages and an injunction. The injunction
would prohibit the defendants from disposing of or interfering with any
effort by the Tribe to take possession of the Tribe’s collateral. On August
8, 2006, the tribal court issued a temporary restraining order, which
Olson did not immediately serve on DNA Today.
During the month of July, when discussions began about the Tribe
possibly providing additional funding to DNA Today, Olson for the first
time had direct contact with Frank Carroll of the Davis Brown law firm.
Olson recalled receiving a phone call from Carroll and being told by
Carroll that he represented DNA Today for purposes of negotiating the
new agreement, but not with respect to the existing financing. Carroll
testified he did not recall placing any limitations with Olson on his
representation of DNA Today. In any event, Whitehead and Olson
continued to correspond with each other directly on matters other than
the potential new agreement, while copying Carroll on their
communications.
Notably, Whitehead’s recollection on this subject was not far from
Olson’s. Whitehead testified that the Davis Brown firm was fine with his
contacting Olson directly so long as it was for informational purposes as
opposed to negotiations for contracting or legal issues.
7
Between August 7 and August 9, 2006, drafts of a “Collateral
Agreement” were exchanged between the Davis Brown law firm and
Olson. Frank Carroll was away from the office, so Julie McLean Johnson
and Jason Stone of the same law firm communicated with Olson. The
gist of the negotiations was that the Tribe would provide some additional
funds and DNA Today would deposit a copy of the software source code.
The parties did not come to an agreement, however. Among other things,
DNA Today objected to giving the Tribe a copy of the source code as the
Tribe had requested, instead preferring to have the code deposited with a
third-party escrow agent. The amount of funding also was in dispute.
DNA Today sought $30,000 to $50,000 in immediate cash and a
commitment from the Tribe to provide an additional $500,000 in
financing. The Tribe, on the other hand, was willing in its proposals to
advance only the $10,000 required by Windstone.
Around midday on August 9, after receiving Olson’s latest version
of the agreement from Davis Brown, Whitehead wrote his stockholders
that the Tribe had “rejected every key point that we proposed.” With
regard to the interim financing, Whitehead added, “[The Tribe] are telling
us verbally that they are going to do it, but won’t put it in writing.
Why?” 2
On August 10, 2006, at 12:20 p.m., phone records show that
Olson had a one-minute call with Jason Stone, one of DNA Today’s
attorneys. Olson claims that Stone authorized him in that call to
communicate directly with DNA Today. Stone did not recall such a
conversation but testified that, if it had occurred, he thinks he would
have remembered it. Stone also did not think that, under the
2Olson testified that he did not believe negotiations had ended and was awaiting
a response to his latest proposal relating to the $10,000.
8
circumstances, he would have given Olson permission to talk directly to
his client.
Late that afternoon, Olson spoke directly with Whitehead.
Whitehead recalls Olson telling him the Tribe was no longer interested in
taking possession of the software code, but “had agreed to making the
payments of the funds and had agreed in principle to providing us with
the bridge financing.” As Whitehead remembers, Olson also asked
Whitehead if the Tribe could have a couple of its members visit DNA
Today’s offices the next morning to verify the software was there.
Whitehead recalls being told that Janice Eagle Hawk and a “Rich” or
“Mike” were the persons who would be coming. Following the call,
Whitehead e-mailed Stone:
We won. The tribe gave in and has agreed to work with us
on the finances. We played hardball with them and won.
Olson called me today to confirm their interest in moving
forward without us giving them the code. A big victory for
our team. Now we should be able to move ahead freely and
light things up.
Olson denied making any assurances regarding financing to
Whitehead. According to Olson, he called Stone first about scheduling a
meeting to look at the software. Stone told him to talk to Whitehead.
Olson claims he then spoke with Whitehead, but only about examining
the software. Olson said he advised Whitehead that Janice Eagle Hawk
and J.R. would be the two persons coming to DNA Today’s offices. Olson
testified that the Tribe wanted to see the software because it had received
a back-channel communication from the head of the programming team
that the complete software was not in West Des Moines.
After receiving Whitehead’s e-mail reporting on the conversation
with Olson, Stone responded to Whitehead with his own e-mail:
9
Just make sure that you secure the source code tomorrow
and take steps to ensure that the Tribe cannot easily obtain
a copy of it while they are there. Also, you should make sure
that you have a copy. I have no reason to believe that there
will be any issues associated with their trip, but it will not
hurt to be a bit cautious.
Whitehead replied to his counsel early the morning of August 11
that he would “keep my eye on them today.” He also explained that the
company had two copies of the software and that the software had
certain security features preventing outsiders from accessing, editing, or
downloading it even if they obtained a copy of it. 3
At around 9 a.m. that morning, two persons arrived at DNA
Today’s offices. One was tribe member Janice Eagle Hawk; the other was
Olson’s law partner J.R. According to Whitehead, J.R. “mumbled” his
name and did not provide any card or type of identification. Whitehead
recalls that J.R. looked disheveled. The meeting began in a meeting
room where a terminal was set up to show off the software. To
Whitehead’s surprise, Eagle Hawk had a portable hard drive in her
possession.
At some point, J.R. became more agitated and started pacing the
room. He asked where the server was. When shown to the server, J.R.
disconnected it and said, “I’m taking it. It belongs to us. It’s ours.” J.R.
walked out the door, and Eagle Hawk followed shortly thereafter.
Whitehead called the police and also pursued J.R. outside as he put the
server in the trunk of his car.
About ten minutes after J.R. left, a man identifying himself as the
police chief of the Tribe appeared at the offices. According to Whitehead,
he said, “I’m really sorry. We should have given you these papers before;
3Although these e-mails reflecting communications between DNA Today and its
counsel were admitted into evidence, DNA Today generally declined to waive the
privilege with respect to its communications with the Davis Brown law firm.
10
we’re just a little late. But here, here are the papers that explain what
just happened.” 4
Whitehead testified that the server was a leased server, not
actually owned by DNA Today, and that data stored on the server
included confidential information relating to numerous individuals.
An information technology consultant retained by DNA Today, Alex
Romp, also was present when Eagle Hawk and J.R. came to the offices
on the 11th. He testified that the source code at DNA Today was an
older version. According to Romp, his understanding from Whitehead
was that the Tribe’s representatives were coming just to examine the
source code. Romp’s memory of what happened on the 11th generally
corresponded to Whitehead’s; however, Romp added that Eagle Hawk
seemed genuinely surprised by the entire series of events.
Whitehead wrote Olson on August 16, stating, “We strenuously
object to your patently dishonest, highly unethical tactics concerning the
seizure of one of our servers.” Whitehead’s position, as stated in the
letter, was that Olson had lied to him on August 10 about the status of
negotiations and the purpose of the next day’s meeting, in order to obtain
access to the premises so the Tribe could repossess the server.
Whitehead added, “You knew full well that we were represented by
[counsel] during this process and you chose to ignore them and not
involve them in this process.”
In his hearing testimony, Olson denied knowing beforehand that
J.R. would try to take possession of the software on the morning of the
11th. Olson acknowledged that repossession was an option if
4Whitehead testified that, if the Tribe’s process-server had arrived while the
server was still there, he would have called the Davis Brown law firm and asked for
their advice.
11
negotiations broke down; that is why the Tribe had obtained an order
from the tribal court. However, Olson said that his preference would
have been to work with DNA Today. In Olson’s view, it made no sense to
foreclose since that would put DNA Today out of business without
retiring its financial obligation to the Tribe. Olson testified he had told
Stone either on the 10th or earlier that the purpose of the Tribe’s visit on
the 11th would be to verify the company had a complete copy of the
source code that could be downloaded. 5 According to Olson, his concern
was that the French programmers actually owned the code and that the
Tribe did not have a complete or current version. In fact, Olson testified
he later learned that DNA Today did not own the code after all; the
programmers did.
Olson claimed he was “shocked” when he found out J.R. had taken
the server at the meeting on the 11th. Olson explained that he had been
in Minnesota while J.R. had been at the Tribe settlement during the days
leading up to the 11th and he had not been in touch with J.R.. As he
put it, “Unfortunately, at some point after [J.R.] was at the settlement,
plans must have changed. I was not brought into the loop on that at all.”
Olson also testified that as an attorney he would never go to
repossess something. “That’s not my role as an attorney.” He
acknowledged the possibility of repossession had been discussed. He
said he was aware the Tribe believed it needed to look at the source code
before it went any further.
According to Olson’s hearing testimony, J.R. disclosed to him only
afterward that the Tribe had made a firm decision they would come away
from the August 11 meeting with a copy of the code. Olson contends he
5Olson’s phone records show a two-minute call with Stone late on the afternoon
of the 9th, in addition to the one-minute call on the 10th.
12
was later told by J.R. that J.R. made an on-the-spot decision to take the
server when it appeared this was the only way the Tribe would be able to
obtain the code.
Olson acknowledged that, in an initial joint response to the Board
in September 2006, he and J.R. wrote “it was nearly certain” the Tribe
would need to repossess the source code on the 11th. Additionally, in
that response, he and J.R. wrote they had conferred together before the
August 11 trip to DNA Today and decided not to disclose “the second
purpose of the visit,” i.e., to repossess the source code if DNA Today
would not provide a copy voluntarily.
In an effort to reconcile his hearing testimony with the September
2006 letter, Olson explained the response to the Board “was a combined
response that really presented the perspective of the two of us, and that
perspective is not entirely all mine.” Olson testified it was not his
understanding the source code was going to be repossessed, although it
may have been J.R.’s.
Olson was not questioned at the hearing about his written
response in October 2006 to the Minnesota Office of Lawyers Professional
Responsibility. 6 He alone signed that response. In that response, Olson
reiterated that it was “virtually certain” the source code would need to be
repossessed by the time of the meeting and that he and J.R. had
conferred and concluded ahead of time they did not need to disclose the
Tribe’s intent to repossess the source code if DNA Today could not or
would not provide a copy.
6A parallel complaint filed by Whitehead against Olson with the Minnesota Office
of Lawyers Professional Responsibility was denied by that agency.
13
II. Scope of Review.
We review attorney disciplinary proceedings de novo. Iowa
Supreme Ct. Att’y Disciplinary Bd. v. Fields, 790 N.W.2d 791, 793 (Iowa
2010). We give respectful consideration to the commission’s findings and
recommendations, but we are not bound by them. Iowa Supreme Ct.
Att’y Disciplinary Bd. v. Lickiss, 786 N.W.2d 860, 864 (Iowa 2010). “The
board has the burden of proving attorney misconduct by a convincing
preponderance of the evidence.” Id.
III. Review of Alleged Ethical Violations.
In its complaint, the board alleged that Olson violated Iowa Rules
of Professional Conduct 32:4.2(a) by communicating with Whitehead on
August 10 without Stone’s consent, violated rule 32:4.1(a) by
misrepresenting to Whitehead that the Tribe was no longer insisting on a
copy of the software source code and had agreed to provide supplemental
financing as requested by the company, and violated rule 32:8.4(c) by
engaging in deceptive conduct with Whitehead. 7
7Other allegations were dismissed by the commission before the hearing. The
commission also denied Olson’s motion to dismiss based on lack of personal
jurisdiction. We agree with that ruling. Rule 32:8.5(a) provides in part:
A lawyer not admitted in Iowa is also subject to the disciplinary authority
of Iowa if the lawyer provides or offers to provide any legal services in
Iowa. A lawyer may be subject to the disciplinary authority of both Iowa
and another jurisdiction for the same conduct.
Iowa R. of Prof’l Conduct 32:8.5(a).
“Our jurisdiction to discipline attorneys practicing in Iowa under rule
32:5.5(d)(2) rests on our responsibility to protect the citizens of our state from unethical
conduct of attorneys who provide services in Iowa.” Iowa Supreme Court Att’y
Disciplinary Bd. v. Carpenter, 781 N.W.2d 263, 267 (Iowa 2010). As noted by the
commission, this case centers on Olson’s communications with an Iowa resident who
was in Iowa at the time of the communications and was the head of an Iowa-based
company. The purpose of the communications was to enable Olson’s client to visit the
Iowa offices of that company and to obtain a copy of the source code. As a precursor to
those communications, Olson caused a UCC financing statement to be filed with the
Iowa Secretary of State. See In re Tonwe, 929 A.2d 774, 778 (Del. 2007) (stating that
“physical presence is not required to establish that a person is providing, or offering to
provide, legal services in this state”).
14
In a thorough decision that followed a full-day hearing on June 2,
2011, the commission found that Olson did not have express or implied
permission to contact Whitehead directly and thus violated rule
32:4.2(a). The commission did not find a violation of rule 32:4.1(a)
because it deemed the evidence of intentional misrepresentation
insufficient. However, the commission found a violation of rule 32:8.4(c),
stating that Olson should have communicated “[t]he material fact . . . to
Whitehead . . . that the Tribe had the ‘alternative plan’ to repossess the
source code at the meeting.” The commission recommended an order
prohibiting Olson from practicing law in Iowa for thirty days. 8
We now review the commission’s findings, conclusions, and
recommendations. Unlike in many disciplinary cases, we do not have to
examine a long sequence of alleged ethical shortcomings. Instead, our
attention is squarely focused on the phone calls Olson had with Stone
and Whitehead just before the August 11 meeting at which J.R. removed
the server from the DNA Today offices. Whitehead claims he was tricked
by Olson over the phone into agreeing to that meeting. Olson maintains
that he did not mislead Whitehead and that the meeting turned out
differently than he had anticipated.
Some legal background is important. It is undisputed that DNA
Today was in default and that the Tribe had the right to take possession
of the source code as collateral. See Iowa Code § 554.9609(1)(a) (2005)
(providing that “[a]fter default, a secured party . . . may take possession
of the collateral”). This repossession can be carried out “without judicial
process, if it proceeds without breach of the peace.” Id. § 554.9609(2)(b).
8As noted above, Olson is not admitted to practice law in Iowa. Thus, after
concluding a thirty-day suspension of Olson’s license otherwise would have been the
appropriate sanction, the commission properly recommended an equivalent sanction
that invoked our equitable powers. See Carpenter, 781 N.W.2d at 269–70.
15
A. Alleged Violation of Rule 32:4.2(a). Rule 32:4.2(a) provides:
In representing a client, a lawyer shall not communicate
about the subject of the representation with a person the
lawyer knows to be represented by another lawyer in the
matter, unless the lawyer has the consent of the other lawyer
or is authorized to do so by law or a court order.
Iowa R. Prof’l Conduct 32:4.2(a). This rule is designed to “protect[] the
represented party from the imbalance of legal skill and acumen between
the lawyer and that party.” Iowa Supreme Ct. Att’y Disciplinary Bd. v.
Schmidt, 796 N.W.2d 33, 40 (Iowa 2011). It also “promotes the integrity
of the attorney-client relationship and serves to prevent a variety of
overreaching.” Iowa Supreme Ct. Bd. of Prof’l Ethics & Conduct v.
Herrera, 626 N.W.2d 107, 113–14 (Iowa 2001) (equating rule 32:4.2(a)
with its predecessor Iowa Code of Prof’l Responsibility DR 7–104(A)(1)).
We have interpreted this rule to “prohibit an attorney from
communicating with an adverse party represented by counsel concerning
litigation or a transactional matter unless the attorney for the adverse
party gives the opposing attorney permission to talk to the adverse
party.” Iowa Supreme Ct. Att’y Disciplinary Bd. v. Gailey, 790 N.W.2d
801, 806 (Iowa 2010) (equating rule 32:4.2(a) with its predecessor Iowa
Code of Prof’l Responsibility DR 7–104(A)(1)).
As we have set forth above, Olson contends he received permission
from Stone on August 10 to speak directly to Whitehead. Stone does not
recall the phone call, but does not believe he gave Olson permission. The
phone records show there was a call, but it only lasted one minute or
less.
The commission concluded on this record that Olson did not
receive permission and most likely reached Stone’s voicemail. As the
commission put it, “In this era of email, we would expect an email
16
confirming this express permission, especially considering the email
exchanges of the previous three days.”
We believe the commission overlooked some key points in the
record. First, and most importantly, late in the day on August 10,
Whitehead e-mailed Stone and said, among other things, “Olson called
me today to confirm their interest in moving forward without us giving
them the code.” If Stone had not given Whitehead permission to talk to
his client directly, one would have expected Stone to take some action—
e.g., call Olson immediately. Instead, Stone responded to Whitehead
with various advice about the next day’s meeting, telling him to “secure
the source code tomorrow” and “make sure that you have a copy.”
Furthermore, when asked at the hearing whether his attorneys
were “fine with you contacting Mr. Olson directly,” Whitehead answered,
“As long as there weren’t, you know, negotiations for contracting or legal
issues going on. For informational purposes they were fine with that.”
Thus, while Carroll and Stone had no recollection of giving Olson
permission to communicate directly with Whitehead, Whitehead did have
a recollection that such permission had been given, at least on some
subjects. Even after the Davis Brown law firm became involved in July
2006, Olson and Whitehead continued to e-mail each other directly,
except with respect to the text of the proposed Collateral Agreement.
After consulting with his attorneys regarding the events of August 11,
Whitehead again wrote Olson directly on August 16, while only sending
an informational copy to Carroll. Against this backdrop, it is
understandable that Olson would not have sent a confirming e-mail to
Stone on the 10th.
17
We are unable to find by a convincing preponderance of the
evidence that Olson did not have Stone’s permission to speak directly
with Whitehead on August 10. 9
B. Alleged Violation of Rule 32:4.1(a). Rule 32:4.1(a) states, “In
the course of representing a client, a lawyer shall not knowingly:
(a) make a false statement of material fact or law to a third person[.]”
Iowa R. Prof’l Conduct 32:4.1(a).
The Board alleged Olson misrepresented to Whitehead that the
Tribe had agreed to provide supplemental financing to DNA Today as
requested and was no longer insisting on obtaining a copy of the software
source code, but only in verifying that DNA Today had possession of the
source code.
The commission concluded the Board had failed to establish these
allegations by a convincing preponderance of the evidence. We agree.
Regarding the alleged misrepresentation that the Tribe had agreed to
provide the supplemental financing requested by Whitehead, it is
important to contrast the specific differences that had emerged in the
written negotiations with the vagueness of Whitehead’s description of the
conversation where Olson allegedly made the misrepresentation.
According to the written record, the situation on August 9 was that
the Tribe was willing to provide $10,000 whereas DNA Today wanted
$30,000 to $50,000 with a commitment for more to follow. Yet
Whitehead’s e-mail to his attorney Stone on the 10th following the key
call from Olson was fairly nonspecific. It said the Tribe “has agreed to
9After finding that Olson did not have express consent to speak directly with
Whitehead, the commission went on to address whether Olson had implied consent.
Although the commission’s discussion of implied consent is a thorough and thoughtful
treatment of the subject, we do not need to reach the issue of implied consent because
we disagree with the commission’s finding as to express consent.
18
work with us on the finances.” Likewise, in his August 7 communication
with his stockholders, Whitehead acknowledged that the “details” as to
“how much money they will provide us, what the terms are, when that
money will be available etc.” were “extremely important.” Those
important details were missing from Whitehead’s e-mail to his attorney
after the August 10 call.
Moreover, in his subsequent complaint to the Board, Whitehead
said that as of August 10 the “primary issue of the negotiations was
collateral.” This statement, however, seems inconsistent with the
contemporaneous documents, which show the parties well apart on the
amount of financing—the issue that one would have expected the
company to consider “primary.” In short, the paper trail from the
relevant time period tends to suggest that Olson communicated at most a
general intention to work out a deal, as opposed to a commitment to
Whitehead’s specific deal. See id. r. 32:4.1 cmt. [2] (noting that
statements of “a party’s intentions as to an acceptable settlement of a
claim” are ordinarily not considered statements of fact for purposes of
the rule). 10
By midday August 9, 2006, DNA Today was in desperate straits.
Whitehead believed the negotiations with the Tribe were over and his
company was potentially headed into oblivion. This makes it plausible
that, when Olson called the next day, Whitehead may have optimistically
10There was a precedent for Whitehead and Olson being crossed in their signals.
In his August 7 memo to DNA Today shareholders, Whitehead said Olson had told him
on August 3 that the Tribe “had agreed to extend us a line of credit,” but “did not give
any specific details when asked.” When the draft agreement arrived a few days later, it
proposed that the Tribe would only pay the $10,000, with no reference to a line of
credit. Notwithstanding Whitehead’s use of the term “agreed” to characterize Olson’s
August 3 representations, the circumstances indicate there was never any actual
agreement, given Olson’s refusal on August 3 to provide “any specific details when
asked.”
19
thought he heard more than he actually did hear. Of course, it is also
plausible that Olson affirmatively misled Whitehead on the financing.
Ultimately, though, we are not persuaded by a convincing preponderance
of the evidence that Olson told Whitehead on August 10 the Tribe had
agreed to provide the actual supplemental financing requested by DNA
Today. 11
Likewise, we are not persuaded by the required level of proof that
Olson told Whitehead on August 10 the Tribe was no longer insisting on
obtaining a copy of the software code. In our view, it is quite possible
Olson actually said only that the Tribe wanted to examine the software
and Whitehead thought he heard an additional statement that the Tribe
no longer was interested in getting a copy. As with the other alleged
misrepresentation, another possibility is that Olson affirmatively and
intentionally misled Whitehead, but we cannot say this occurred with the
required degree of confidence.
C. Alleged Violation of Rule 32:8.4(c). Rule 32:8.4(c) provides,
“It is professional misconduct for a lawyer to . . . engage in conduct
involving dishonesty, fraud, deceit or misrepresentation[.]” Id. r.
32:8.4(c).
Although the commission did not find that Olson made an
affirmative misrepresentation of fact to Whitehead on August 10, it did
conclude he had engaged in deceptive conduct within the meaning of rule
32:8.4(c). As the commission explained:
It is far too convenient for Olson to now state that he
was not sure whether [J.R.] would or would not seize the
source code the following day at the time he called
Whitehead. The material fact that should have been
11We assume without deciding that such a misrepresentation—i.e., that the
Tribe had agreed to DNA Today’s specific financing request—would be one of material
fact.
20
communicated to Whitehead is that the Tribe had the
‘alternative plan’ to repossess the source code at the
meeting. Considering the ongoing dispute about even
producing a copy of the source code, it is abundantly clear
that had Olson informed Whitehead of this plan, Whitehead
would not have agreed to the meeting. To us, this
demonstrates the artifice that Olson created to let
Whitehead’s guard down to permit the self-help
repossession.
We approach the commission’s resolution of this issue with a
considerable degree of respect. The commission’s written decision
reflects careful and balanced deliberation. We agree with the
commission that a failure to disclose facts with the intent to deceive can
violate rule 32:8.4(c) when there is an underlying duty to disclose. See
Iowa Supreme Ct. Att’y Disciplinary Bd. v. Powell, 726 N.W.2d 397, 406
(Iowa 2007) (holding that an attorney violated former DR 1–102(A)(4),
which is worded similarly to rule 32:8.4(c), by placing a lien on his
client’s property without disclosing this fact to her). Yet we part
company from the commission’s final conclusion, primarily for legal
rather than factual reasons relating to the scope of Olson’s disclosure
obligation.
Under the law, so long as Olson did not affirmatively mislead
Whitehead, see 4 James J. White & Robert S. Summers, Uniform
Commercial Code § 34–8, at 446 (6th ed. 2010) (“When creditors enter
premises under ruses (I am the piano tuner), and particularly when
private parties pose as policemen, they are likely to have broken the
peace . . . .”), he had no legal duty to disclose the Tribe’s contingent plan
to attempt self-help repossession, see 10 Ronald A. Anderson Uniform
Commercial Code § 9–503:156, at 393 (3d ed. rev. 1999) (“The secured
creditor may enter the debtor’s premises without prior notice in order to
repossess the collateral.”); see also Rainwater v. Rx Med. Servs. Corp., 30
U.C.C. Rep. Serv. 2d (West) 983 (E.D. Cal. 1995) (finding no breach of the peace
21
where the plaintiff simply walked into the business premises of her
former employer after having been terminated and took certain
equipment in which she had a security interest). Self-help is to some
extent a rough and tumble world. A commercial debtor that is in default
is not entitled to a Miranda warning that its collateral may be
repossessed if it consents to the creditor’s entry on the premises. 12
In any event, this debtor was not in need of such a warning. Stone
told Whitehead on August 10 to “make sure that you secure the source
code tomorrow” and, if something happened, to make sure “you have a
copy.” Whitehead responded that the code had “unique” protections
which meant that “nothing can be done with the code as far as getting
access to it to edit it or download it” without a smart card and a dongle.
Whitehead himself acknowledged to his counsel that he was engaging in
“hardball.”
The statement that Olson admitted he made, and that we find he
made, was that the Tribe wanted to see the source code firsthand. This
was a true statement and not just a ruse. Based on conversations with
the head of DNA Today’s outside programming team, Olson had concerns
12In some jurisdictions, even a creditor that makes a misrepresentation to
enable repossession does not commit a breach of the peace. See, e.g., K.B. Oil Co. v.
Ford Motor Credit Co., 811 F.2d 310, 313–14 (6th Cir. 1987) (applying Ohio law and
concluding fraudulent misrepresentations to a third party that the debtor had agreed to
repossession did not amount to breach of the peace); Cox v. Galigher Motor Sales Co.,
213 S.E.2d 475, 479 (W. Va. 1975) (stating that, “although we look with disfavor on the
use of deceit, such repossession was achieved without a breach of the peace and was
lawful”). But see Clarin v. Minn. Repossessors, Inc., 198 F.3d 661, 664 (8th Cir. 1999)
(applying Minnesota law and relying on White & Summers treatise to hold that five
factors enter into whether the creditor committed a breach of the peace, including the
creditor’s use of deception); Ford Motor Credit Co. v. Byrd, 351 So. 2d 557, 559 (Ala.
1977) (finding the creditor committed a breach of the peace when it tricked the debtor
into bringing his car into the dealership under false pretenses). There is no Iowa
authority directly on point. Regardless, the key point for present purposes is that a
secured creditor does not normally have a duty to tell the defaulting debtor about plans
for repossession.
22
about the integrity of the version of the code in West Des Moines. The
concerns turned out to be valid.
We recognize a disclosure obligation can be triggered when a party
to a business transaction makes a partial or ambiguous statement of the
facts. In that circumstance, other matters may need to be said to
prevent the statement from being misleading. See Wright v. Brooke
Group Ltd., 652 N.W.2d 159, 175 (Iowa 2002); Restatement (Second) of
Torts § 551(2)(b) (1976). Olson came close to the edge by telling
Whitehead the Tribe wanted to see the source code without also
mentioning it planned to come away from the meeting with a copy. But
given that the Tribe was genuinely interested in looking at the code (and
not just in getting a copy), and given Whitehead’s and his counsel’s
appreciation of the risks in letting them into the offices, we cannot say by
a convincing preponderance of the evidence that Olson crossed the line
here. 13 In short, we cannot conclude Olson violated rule 32:8.4(c)
because the commission’s analysis, in our view, would impose a duty of
disclosure on attorneys that the underlying law does not impose.
With some justification, the commission criticizes Olson for
inconsistency in his testimony. As noted by the commission, Olson
testified “both that he told Whitehead that the purpose of the visit was
merely to confirm that the source code was at DNA Today’s offices, and
that he told Whitehead that the Tribe ‘might make a copy’ of it during the
August 11 meeting.” Initially Olson testified:
[I said] they were coming there to confirm that he had a
complete copy of the source code and that it was
downloadable to a device that, where it could be saved as
13The risk that Whitehead and his counsel did not appreciate was that one of
their guests might walk out of the office with DNA Today’s computer server. However,
we believe J.R.’s decision to walk out with the server was not preplanned and was made
on the spur of the moment.
23
opposed to a copy of the source code that was unique to a
single device or a single system, that this was reproducible
copy.
Later Olson went on, “[I said] there might be a copy of it made if it was a
copy—if it was a source code, a type that could be copied.”
We agree with the commission that there is a distinction between
telling someone you want to find out if something can be copied and
telling someone you actually want a copy. We suspect that Olson only
made the former statement. As previously noted, based on Olson’s
behind-the-scenes conversations with the programmers, one of the
Tribe’s concerns was that DNA Today did not actually have a version of
the software that was capable of being copied or downloaded and the
Tribe needed to do a test. Whitehead’s private communications with his
attorney and his stockholders suggest the Tribe’s concern was legitimate
and that DNA Today was to some extent playing a cat-and-mouse game
with the Tribe. Still, regardless of which of these statements Olson
made, it would not be enough in our mind to establish that Olson
defrauded DNA Today and Whitehead.
There are also apparent inconsistencies between Olson’s 2011
hearing testimony and his September and October 2006 letters to the
Iowa and Minnesota disciplinary authorities. In his hearing testimony,
Olson claimed he was unaware that the Tribe had made a decision to
repossess the software code. In his 2006 letters, on the other hand,
Olson said that he and J.R. spoke beforehand and agreed they “did not
have to disclose” the Tribe’s plan to take possession of the source code if
DNA Today did not voluntarily provide a copy. If we were forced to
choose, we would probably trust Olson’s nearly contemporaneous letters
as a more accurate version of events. However, we do not need to choose
because under either version of what happened we cannot conclude by a
24
convincing preponderance of the evidence that Olson engaged in
fraudulent or deceitful conduct. 14
Since the Board’s complaint against Olson hinges in large part on
Whitehead’s credibility, we believe two additional points should be noted.
Taken as a whole, Whitehead’s writings unrealistically blame the Tribe
and Olson for the demise of DNA Today. After all, the Tribe loaned $1
million to DNA Today, something no one else did. The Tribe also did not
attempt to collect its debt for approximately nine months after the
company went into default. And the Tribe was willing to lend an
additional $10,000 after DNA Today’s programmers had pulled out and
the company had generally stopped paying its bills. Whitehead’s blame-
shifting to some extent detracts from his credibility, in our view.
Furthermore, Whitehead declined to waive the company’s attorney-
client privilege at the commission hearing. The reasons for this decision
are unclear. DNA Today had ceased operations and entered bankruptcy
years before. As a result of this decision, the record includes only a
portion of the DNA Today attorney-client communications—those which
Whitehead chose to release.
IV. Conclusion.
As we have previously observed, this matter requires us to consider
what was said or not said in a few oral communications. For the reasons
we have discussed, as we reconstruct what happened in those
conversations, we are unable to conclude by the required convincing
preponderance of the evidence that Olson violated rule 32:4.2(a), rule
32:4.1(a), or rule 32:8.4(c).
14We are troubled by certain aspects of Olson’s hearing testimony. However,
given some ambiguities in the record (for example, at times it is unclear whether Olson
is referring to the repossession of the server or to the repossession of the source code),
and given the fact that J.R. did not testify, we cannot say anything more at this point.
25
The Board also took exception to a number of Olson’s actions in
defending this disciplinary proceeding, including motions that he filed.
Because these matters are not raised as independent violations, but only
as alleged aggravating factors, we do not consider them.
COMPLAINT DISMISSED.
All justices concur except Zager, J., who takes no part.