Peter M. Napolitano v. Board of Professional Responsibility

IN THE SUPREME COURT OF TENNESSEE
AT NASHVILLE
November 2, 2016 Session in Jackson
PETER M. NAPOLITANO v. BOARD OF
PROFESSIONAL RESPONSIBILITY
Montgomery Circuit, No. CC-15-CV-159
Ben H. Cantrell, Special Judge
BPR Docket No. 2013-2272-6-AW
___________________________________
No. M2016-00869-SC-R3-BP – Filed May 24, 2017
___________________________________
This matter initially originated from a fee dispute between attorney Peter M. Napolitano
(“Attorney”) and his client Gayle Connelly (“Client”). Client filed a complaint with the
Tennessee Board of Professional Responsibility (“the Board”) regarding the fee dispute
in 2008. The Board dismissed this complaint in 2010 without imposing any sanctions.
Client sued Attorney over the fee dispute and, after Attorney was deposed in conjunction
with the lawsuit, Client filed a second complaint with the Board in 2012. This second
complaint alleged that Attorney had mishandled funds in his trust account and lied under
oath. The Board prosecuted this second complaint, resulting in a hearing before a hearing
panel (“the Panel”). The Panel determined that Attorney had committed ethical
violations related to his trust account and by lying under oath. Accordingly, the Panel
imposed sanctions against Attorney, including a five-year suspension of Attorney’s law
license, with one year of active suspension. Attorney and the Board both sought review
in circuit court. The circuit court modified the Panel’s sanctions in part but affirmed the
five-year suspension.1 Both Attorney and the Board sought review by this Court, with
Attorney seeking a lesser punishment and the Board seeking disbarment. Additionally,
both parties disagree with the Panel’s order of $7,500 in restitution to Client. We hold
that the five-year suspension is appropriate and that the Panel did not err in ordering
$7,500 in restitution. Accordingly, we affirm the circuit court’s judgment but modify it
by adding the requirement of a practice monitor during Attorney’s probationary period.
1
The circuit court affirmed the Panel’s determinations that Attorney be suspended for five years,
probated after one year of active suspension; that he serve 400 hours of public service as a condition to
the probation; and that he pay $7,500 to Client. The court, however, reversed the Panel’s imposition of a
lifetime restriction on Attorney’s self-management of his trust account.
Tenn. Sup. Ct. R. 9, § 1.3 (2013);2
Judgment of the Circuit Court Affirmed and Modified
JEFFREY S. BIVINS, C.J., delivered the opinion of the Court, in which CORNELIA A. CLARK,
SHARON G. LEE, HOLLY KIRBY, and ROGER A. PAGE, JJ., joined.
Brian S. Faughnan, Memphis, Tennessee, for the appellant, Peter M. Napolitano.
A. Russell Willis, Brentwood, Tennessee, for the appellee, Board of Professional
Responsibility.
OPINION
Factual and Procedural Background
Client hired Attorney in 2005 to represent her in an employment claim against the
Department of the Army (“the Litigation”). Client and Attorney entered into a written
fee agreement concerning this representation, and Client paid $22,000 to Attorney
pursuant to this agreement. In September 2007, the parties settled the Litigation for
$75,000, and this sum was paid into Attorney’s trust account (“the Litigation Proceeds”).
Client and Attorney entered into an agreement regarding the split of the Litigation
Proceeds, with Attorney to pay Client $40,000 and Attorney to retain the $35,000 balance
in full satisfaction of his remaining fees and expenses (“the 2007 Fee Agreement”).
Shortly after entering into the 2007 Fee Agreement, Attorney contacted Client and
stated that he had miscalculated his expenses by approximately $1,800. Attorney asked
Client to accept less than the $40,000 previously agreed upon in order to compensate him
for this omitted expense. Client refused to modify the 2007 Fee Agreement. Attorney
then refused to pay Client the agreed-upon $40,000.
A few days later, Client wrote the administrative law judge who had overseen the
Litigation in an effort to rescind the settlement. Client was unsuccessful in this effort.
2
This Court revised Tennessee Supreme Court Rule 9 effective January 1, 2014. This
disciplinary proceeding, however, was initiated in November 2013, and it is therefore governed by the
2013 version of the Rule.
-2-
Eventually, in April 2008, she filed a complaint with the Board (“the First Complaint”).
Client asserted the following in the First Complaint:
I was awarded $75,000 in a settlement agreement with the U.S.
Army at Fort Campbell, Ky. That amount was deposited in my attorney’s
trust account. The agreement was that Attorney would retain $35,000 and
forward $40,000 of the settlement to me. Attorney continues to refuse to
pay me my portion. He claims I moved without giving him a forwarding
address. I have written to him numerous times to request the settlement
and my records. I went to his office on Mar. 28 and he refused to see me
and ordered his secretary not to release my files.3
(Parenthetical references to enclosures omitted). In due course, Attorney responded to
the First Complaint and, eventually, one of the Board’s disciplinary counsel told Attorney
that he owed Client $16,715.50. The calculations resulting in this perplexing amount are
not in the record.
By this time, Client had retained another lawyer. After being told by the Board
how much it suggested he owed Client, Attorney sent Client’s new lawyer a check in the
recommended amount along with the explanation that the negotiation of the check would
constitute a waiver of all of Client’s claims against Attorney. Client refused the check
and sought additional action from the Board on the First Complaint. On August 25,
2010, the Board responded to Client as follows:
Your complaint filed with this office has been reviewed and
considered. Our inquiry has not revealed sufficient evidence to proceed
3
A copy of the First Complaint was provided to the Panel via a “Notice of Filing” filed by
counsel for Attorney on September 26, 2014, several days after the Panel heard this matter and after one
of the Panel members asked to see the First Complaint after the close of proof. The certificate of service
attached to the Notice of Filing provides that it was sent to each of the Panel members as well as to
counsel for the Board. The record contains no objection by the Board to this document. Indeed, counsel
for the Board told the circuit court that the Board provided a copy of the First Complaint to Attorney
during discovery. The Panel did not file its Order in this matter until December 5, 2014, months after
receiving the copy of the First Complaint. Accordingly, we consider the First Complaint as part of the
record that was before the Panel.
-3-
against the attorney(s) for violations of the Rules of Professional Conduct.
Dismissal of the complaint has been recommended, reviewed and approved
in accordance with the rules and procedures of the Board.
The proposed dismissal will become final in 30 days in the absence
of your written appeal to the Board setting forth specific and detailed
grounds and reasons why the proposed dismissal should not become final.
Client appealed to the Board. On November 3, 2010, the Board responded as follows:
“Your appeal of the previous disposition of your complaint has been reviewed by the
Board. The grounds for your appeal were fully considered. The Board has approved the
prior disposition of your complaint which is now final and closed.”
In March 2011, Client filed a lawsuit against Attorney in an attempt to recover the
money she claimed she was due. Pursuant to the lawsuit, Client’s new lawyer deposed
Attorney in September 2012. During the deposition, and while under oath, Attorney
stated that none of the Litigation Proceeds remained in his trust account. Attorney also
made statements while under oath regarding previous ethical violations, previous
bankruptcies, and IRS liens. Convinced that Attorney had (1) mishandled his trust
account with regard to the Litigation Proceeds and (2) lied under oath during the
deposition, Client’s new lawyer filed a second complaint with the Board on behalf of
Client in November 2012 (“the Second Complaint”).
Following its investigation of the Second Complaint, the Board filed its petition
for discipline in November 2013 (“the Petition”). The Petition alleged that Attorney
violated Tennessee Supreme Court Rule 8, Rule of Professional Conduct (“RPC”) 1.15
by his handling of the Litigation Proceeds; RPC 3.3 and 4.1 by testifying falsely during
his deposition; and RPC 8.4 by engaging in professional misconduct.
In August 2014, prior to the hearing on the Petition, Client and Attorney entered
into a written settlement agreement disposing of the lawsuit that Client filed against
Attorney in 2011 (“the Fee Dispute Settlement”). Pursuant to the Fee Dispute
Settlement, Attorney was to pay Client $18,500 on or before August 12, 2014, followed
-4-
by ten periodic payments of $750 each.4 The payment of these latter sums was to be
postponed if Attorney was suspended, “until six (6) months have passed from when his
law license is reinstated and if it is not reinstated, no additional payments shall be due.”
The Hearing on the Petition
At the hearing before the Panel, Attorney testified and conceded that he had made
errors with respect to his trust account concerning the Litigation Proceeds. However,
when questioned about removing the Litigation Proceeds from his trust account, Attorney
testified, “I still to this day do not agree or admit that I ever converted funds. Whatever
moneys I withdrew for myself, I have always believed that, as I believe today, was
legitimately my money.”
During the hearing, the Board established that the following questions and answers
took place during Attorney’s deposition:
Q. Okay. Any Bar complaints related to your New York license?
A. No.
....
Q. Okay. Any lawsuits whatsoever with clients or former clients
related to your practice in New York?
A. No.
....
Q. Have you or any of your businesses ever filed for bankruptcy
protection?
A. No.
....
4
The circuit court noted in its order disposing of this matter that Attorney had paid Client the
$18,500 called for in the Fee Dispute Settlement.
-5-
Q. Okay. Any liens ever filed against you?
A. Not that I can recall.
Q. Okay. You’d remember that if it had happened.
A. I imagine I would if I knew about it.
Related to this testimony, the Board established during the hearing that Attorney’s license
to practice law in the State of New York had been suspended for a period of five years
commencing in January 1994 for misappropriating funds from an escrow fund in a real
estate transaction and for giving false testimony under oath in connection with the
ensuing investigation; that Attorney had filed for personal bankruptcy protection in 1993
and again in 2003; and that the IRS had filed liens against two parcels of real estate that
Attorney owned in Montgomery County, Tennessee. Attorney had referenced the debt
secured by one of these liens in one of the schedules that he filed in conjunction with his
first bankruptcy.
When questioned during the hearing about his answers to these questions,
Attorney explained that he thought Client’s attorney already knew about the New York
suspension. As to the bankruptcies, Attorney stated that he thought he was being asked
only about business, as opposed to personal, bankruptcies. Attorney maintained that he
had never received notice of the IRS liens.
Attorney called several witnesses to testify on his behalf. Judge John H. Gasaway,
III, a circuit judge in the judicial district in which Attorney practiced, testified about his
experience with Attorney’s conduct in his court. Judge Gasaway testified that Attorney’s
demeanor was appropriate, he came to court prepared, he adduced and objected to
evidence appropriately, and appeared to have good relationships with his clients. Judge
Gasaway stated that he considered Attorney “to be a truthful person.” Judge Gasaway
also explained that Attorney assisted the trial courts by preparing a document that was
helpful in resolving domestic relations matters that involved members of the military.
Timothy K. Barnes, juvenile judge, testified that Attorney was very helpful in
accepting appointments in juvenile court. Attorney had previously assisted Judge Barnes
when Judge Barnes was in private practice, and Judge Barnes had “no reason to believe
that [Attorney] was anything other than . . . an upright, upstanding member of the Bar.”
Wayne Hibbeler testified that he practiced law with Attorney in the same office
for about eighteen months when Mr. Hibbeler was a newly-licensed lawyer. Several
-6-
years later, Mr. Hibbeler began practicing with Attorney again. Mr. Hibbeler stated that
Attorney had been very helpful to him when he began practicing, and he was happy to
begin working with Attorney again later in his career. Mr. Hibbeler described Attorney
as a mentor to younger lawyers.
Ross H. Hicks, also a circuit judge in the judicial district in which Attorney
practiced, testified that he had known Attorney since 2002, when he became a judge.
Judge Hicks stated that he had had some professional contact with Attorney over that
time “at least once a week.” Judge Hicks described Attorney as “very candid.” He had
never known Attorney to misrepresent facts and had had “no occasion to question”
Attorney’s honesty or integrity. Judge Hicks reiterated that Attorney had been very
helpful to the courts dealing with domestic relations matters involving military personnel.
Attorney Gary F. Baumann testified that he worked for the United States Army in
Fort Campbell as “environmental and ethics counsel.” Prior to that position, he was the
“labor and employment counsel” and, in that capacity, had many professional dealings
with Attorney. Mr. Baumann testified that, in all of his dealings with Attorney, Attorney
had “been nothing but truthful and forthcoming.”
Steven Joseph Farkas testified that he hired Attorney to represent him in 2012 on
an employment matter. Mr. Farkas was very pleased with Attorney’s work.
Mark Totten testified that he was the pastor of Attorney’s church. Attorney had
discussed with him Attorney’s dispute with Client, and Mr. Totten described Attorney’s
demeanor as “remorseful.”
After the hearing, the Panel entered the following Findings of Fact:
[Attorney] was licensed to practice law in the State of New York in
1981. In 1993, his New York license was suspended for five years based
on missing funds from his escrow account and giving false testimony in the
course of the investigation.
-7-
[Attorney] has been a licensed attorney in the State of Tennessee
since 2002. His only prior discipline in Tennessee was a private reprimand
related to an overdraft of his Trust account.5
On December 23, 2005, [Client] retained [Attorney] to represent her
in a civil service employment claim against the Department of the Army.
[Client] signed a written fee agreement, which provided that [Attorney] was
to be compensated at the rate of $200.00 [per hour], support staff at $35.00
per hour, and that [Client] was to be responsible for all other expenses.
[Client] paid [Attorney] $5,000.00 towards his retainer fee.
On June 20, 2006, [Client] paid an additional $8,000.00 to
[Attorney], for a total payment of $13,000.00.
The retainer fees paid by [Client] were deposited to [Attorney]’s
firm trust account and drawn down until the retainer was exhausted on July
21, 2006.
[Client] paid an additional $9,000.00 to [Attorney] on or about
September 4, 2006, for a total payment of $22,000.00.
A bench trial was held on [Client]’s employment claim and on or
about June 22, 2007, she was awarded $25,000.00 pursuant to a
Preliminary Decision by an Administrative Law Judge. Such decision also
directed [Client]’s attorney, [Attorney], to file a verified statement of
attorney fees and costs.
[Attorney] prepared a Motion for [Attorney]’s Fees and Expenses
which he filed on July 27, 2007. According to his Motion, [Attorney]’s
fees totaled $49,957.50 and his expenses were $7,120.83 for a total bill of
$57,078.33.
After submission of the Motion for Attorney’s Fees, [Client] and
[Attorney] entered into settlement negotiations with the Army regarding a
5
This private reprimand, issued in 2012, was not related to the Client or the Litigation Proceeds.
-8-
global settlement of the case whereby [Client] would waive her right to
appeal, would be reimbursed her attorney’s fees and expenses, would have
certain compensatory time she had earned restored, and would have a poor
performance review removed from her personnel file.
On September 18, 2007, [Attorney] sent an e-mail to [Client]
explaining how the Army’s global settlement offer of $75,000 would be
divided. He erroneously stated that his total fees and expenses were
$56,358.33 (rather than $57,078.33 as stated in his Motion). He estimated
that the time to finalize the settlement would require additional fees of
$2,000.00, which he added to his fee amount. He then erroneously
deducted $21,000.00 for prior payments by [Client] (rather than
$22,000.00) and summarized that the total of unpaid fees and expenses that
[Client] would owe was $37,642.00. (Technically, the amount that she
would have owed at such time would have been $57,078.33 plus $2,000.00
minus $22,000.00 or $37,078.33). “In an effort to make the settlement
option more appealing,” [Attorney] then offered to compromise and accept
a reduced amount for fees and expenses of $35,000.00, from which he
would pay all expenses, so that [Client] would “get a check for $40,000.00
(even).” [Client] testified that [Attorney] represented to her that she would
owe nothing further to [Attorney] if she accepted the $75,000.00 offer and
paid him $35,000 of the settlement.
[Client] authorized [Attorney] to accept the $75,000.00 settlement
offer on this basis and the parties began to work on a written settlement
agreement.
On September 21, 2007, [Client] and [Attorney] executed a written
negotiated Release and Settlement Agreement which provided for a lump
sum payment of $75,000.00. The Settlement Agreement included
[Client]’s compensatory award of $25,000.00 and reimbursement of the
attorney’s fees and expenses reflected in [Attorney]’s Motion. [Client]
also waived her right of appeal, received 300 hours of compensatory time,
and had the prior performance review removed from her personnel record.
The $75,000 settlement proceeds were deposited into [Attorney]’s
Trust account on October 16, 2007 and [Attorney] sent [Client] an e-mail
confirming the receipt of these funds.
-9-
In his October 16, 2007 e-mail, [Attorney] explained that, when he
ha[d] previously calculated the amount to which he was willing to reduce
his fee, he had failed to include an additional court reporter expense
($1,878.00) that he had paid out of his own pocket. He thereby asked
[Client] to reimburse such expenses by allowing him to keep $36,878.00
rather than the previously reduced amount of $35,000.00[,] which would
result in [Client] receiving $38,122.00 rather than the $40,000.00 proposed
in the earlier e-mail.
On or about Tuesday, October 23, 2007, [Client] sent an e-mail to
[Attorney]’s office in which she stated that she would not accept less than
the amount he had agreed upon in his previous e-mail, and that she “should
not be [sic] pay for bookkeeping errors.” The Panel finds that [Attorney]
received such e-mail no later than October 24, 2007, as he billed [Client]
for reviewing the e-mail.
Less than one week later, on Monday, October 29, 2007, [Client]
wrote a letter to the Administrative Law Judge who had heard the
employment case and stated that she wanted “to repeal the NSA on the
basis that I signed it under duress and financial threats from my
attorney . . . .” No evidence was produced that [Attorney] had made any
financial threats to [Client], nor was there evidence produced that he had
refused to honor her rejection of his request to allow him to keep
$36,878.00 rather than the previously agreed upon fee of $35,000.00.
[Attorney] had not responded to [Client]’s 10/23/07 e-mail prior to
her letter to the Administrative Law Judge. [Attorney] asserts that, after
October 23, 2007, he lost contact with [Client] and that she failed to remain
in contact with his office. There is no dispute that [Client] had moved to
Utah and that, on November 30, 2007, she sent her forwarding address to
the Kennedy Law firm, where [Attorney] had not practiced for
approximately a year. Nor is there dispute that the letter to the Kennedy
Law Firm was returned to [Client].
On November 7, 2007, Administrative Law Judge David R. Teeter
issued a “Notice to Interested Parties” regarding [Client]’s letter and
notified the parties that he lacked jurisdiction to consider the dispute, which
would have to be handled under applicable regulations.
- 10 -
....
On or about January 14, 2008, [Attorney] sent a letter to the Board
of Professional Responsibility. In such letter, [Attorney] stated that [Client]
had moved and that he had been unable to communicate with her. He also
stated that “I am retaining the balance of settlement funds belonging to
[Client] in my IOLTA account until I either hear from her with instructions,
if ever, or with the Board’s or Judge’s advice as to their disposition. I have
prepared her final billing statement but do not have any address to send it or
her check to as yet.”
As early as February of 2008, [Attorney]’s trust account reached
balances less than $40,000.00, when such account’s lowest balance reached
$33,073.06. The Panel was not provided with sufficient information to
determine the extent that funds from other clients, if any, were kept in the
trust account and, therefore, theoretically, [Client]’s portion of the account
could have fallen below the required amount prior to February of 2008.
However, without this additional information, the Panel makes no finding
with regard to any violations prior to February of 2008.
On April 14, 2008, [Client] filed a complaint against [Attorney] with
the Board of Professional Responsibility based on [Attorney]’s failure to
pay her the $40,000.00.
In a letter to the Board on July 14, 2008 requesting advice,
[Attorney] indicated that, by his calculations, the portion of the settlement
proceeds that were due to [Client] totaled approximately $22,000.00, based
upon his assertions that he had incurred additional time since his July 2007
Motion for Attorney’s Fees. In his letter, he indicated that he was holding
“the balance of the settlement funds belonging to [Client] in my IOLTA
account.”
In a revised billing statement from [Attorney] dated on or about
March of 2008, [Attorney] indicated that his total fees for his time had
increased to $67,455.00. Including his previously stated expenses of
$7,120.83, his total bill was represented as $74,575.83.
Much of the additional time included by [Attorney] in his March
2008 billing statement is questionable, including time spent communicating
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with the Board, as well as a portion of his hourly rate that was not
consistent with his July 2007 Motion.
In any event, even in the light most favorable to [Attorney] under the
contractual dispute, the most that [Attorney] could have ever charged under
his Representation Agreement would have been $74,575.83, as represented
by him in Board Exhibit 36. Therefore, after crediting [Client] with prior
payments of $22,000.00, the most that [Attorney] could have ever claimed
as his interest in the settlement funds was $52,575.83, leaving a balance of
at least $22,424.17 that under any set of circumstances would have been the
property of [Client]. This fact was admitted by [Attorney] during his
testimony at the hearing.
Notwithstanding, not only did [Attorney] fail to keep the disputed
funds separate, but starting in March of 2009 his trust account balance fell
below $22,424.17. Based upon [Attorney]’s admission that, under any
scenario, at least $22,424.17 was the property of [Client], the Panel finds
that [Attorney] started converting his client’s property to his own use on or
about March of 2009.
[Attorney]’s trust account thereafter continued to go below the
amount in dispute ($40,000.00) and, under any scenario, the minimum
amount of [Client]’s interest ($22,424.17). For example such trust account
reached a balance as low as $7,979.58 in August of 2009.
On February 24, 2010, [Attorney] sent a check in the amount of
$13,000.83 to the Board made payable to Gayle Connelly and marked
“payment in full.” The Board held the check and notified [Attorney] that
his billed fee appeared to be unreasonable and in violation of Rule 1.5 of
the Rules of Professional Conduct.
In late May or early June of 2010, it appears that a disciplinary
counsel for the Board indicated to [Attorney] that she had determined that
[Client] was owed $16,715.50. In correspondence to [Client]’s attorney,
[Attorney] tendered this sum to her on June 4, 2010. The Panel is unable to
understand how disciplinary counsel made such determination; however,
due to the fact that disciplinary counsel did ma[k]e this determination, the
Panel finds that, to the extent [Attorney] relied on such Board
determination and to the extent that he kept at least $16,715.50 in his trust
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account after June of 2010, the same is a mitigating factor for the time
period thereafter.
[Client] retained an attorney, Timothy Nichols, to represent her in
approximately May of 2010. [Client] testified that she had made many
verbal demands for payment and at least one written demand dated
February 25, 2010, but that all of her demands had been ignored.
On March 25, 2011, [Client] filed suit against [Attorney] in the
Circuit Court for Montgomery County, Tennessee claiming breach of their
agreement regarding division of settlement proceeds. This action was
dismissed as time-barred on or about January 31, 2013. The dismissal was
appealed and, while the appeal was pending, the parties reached a
settlement whereby [Attorney] paid [Client] $18,500.00, with an additional
payment of $7,500.00 conditioned on [Attorney] retaining his license to
practice law. The Panel finds this to be a final resolution of the contractual
dispute between [Attorney] and [Client].
A review of [Attorney]’s trust account records confirms that, after
his letter to the Board of January 14, 2008 stating that he was retaining the
balance of the settlement funds belonging to [Client] in his IOLTA account,
[Attorney] began removing the disputed funds from the trust account.
On February 11, 2008 (approximately four months after receipt of
the settlement funds), the balance in [Attorney]’s trust account fell below
$40,000.00. In 2008, [Attorney] had received no instructions from the
Board or from a Judge regarding the disputed funds. His only instruction
was from his client, [Client], demanding payment of the $40,000.00.
Despite [Attorney]’s assertion to the Board in July of 2008 that
[Client] was due $22,000.00, his trust account balance fell below this
amount by March 31, 2009.
Although [Attorney] told the Board on March 8, 2010 that he
believed [Client] was due $13,000.83, his trust account balance had
dropped below this figure in July of 2009.
[Attorney] stated in his Answer that he removed funds from his trust
account based upon the Board’s determination in May of 2010 that [Client]
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was due $16,715.50. However, this assertion is not credible based on the
fact that his trust account balance fell below $16,000.00 in June of 2009.
By February of 2012, [Attorney]’s trust account balance had reached
a negative figure.
....
[Attorney]’s statements to the Board that he was maintaining
[Client]’s disputed funds in his trust account were patently false.
In the course of [Client]’s Circuit Court litigation, [Attorney]’s
deposition was taken on September 26, 2012 by [Client]’s attorney,
Timothy Nichols.
While under oath, [Attorney] was asked in the deposition if he had
received any bar complaints related to his New York law license and
[Attorney] falsely stated that he had received no complaints. A bar
complaint had been filed against [Attorney] resulting in his suspension
from the practice of law for five (5) years on January 27, 1994 by the New
York Supreme Court Appellate Division for misappropriating $5,000.00
and providing false testimony under oath.
In the same deposition, [Attorney] was asked if he had ever filed a
personal bankruptcy and he stated falsely under oath that he had not filed
bankruptcy. In fact, [Attorney] had filed two (2) separate Chapter 7
Petitions for bankruptcy. The first Petition was filed on December 6, 1993
in the United States Bankruptcy Court for the Middle District of Tennessee.
The second Chapter 7 Petition was filed on July 1, 2003 in the United
States Bankruptcy Court for the Middle District of Tennessee. [Attorney]
received a personal discharge in each bankruptcy.
In his September 26, 2012 deposition, [Attorney] was asked if any
liens had ever been filed against him. [Attorney] testified under oath that he
could not recall any liens being filed against him.
A Notice of Federal Tax Lien was filed against [Attorney] and
recorded in the Office of the Montgomery County Register of Deeds on
August 6, 1993. A second unrelated Notice of Federal Tax Lien was filed
against [Attorney] and recorded in the Office of the Montgomery County
- 14 -
Register of Deeds on February 9, 2007. In his 1993 bankruptcy Petition,
[Attorney] listed an IRS attachment that had been issued within the year.
Schedule E of the Petition lists the amount of the IRS claim as $15,555.28,
which is the amount of the recorded Federal Tax Lien of the same year.
[Attorney]’s assertion that he truthfully could not recall any liens is
not credible.
(Footnote added, paragraph numbers and parenthetical exhibit references omitted).
Based on these findings of fact, the Panel concluded that Attorney had violated
RPC 1.15(a), (b), and (c) (2003)6 and RPC 1.15 (a), (d), and (e) (2011).7 In its Order, the
Panel also set forth the following “Analysis”:
6
These subsections provide as follows:
(a) A lawyer shall hold property and funds of clients . . . that are in a lawyer’s
possession in connection with a representation separate from the lawyer’s own property
and funds. (1) Funds belonging to clients . . . shall be kept in a separate account
maintained in an insured depository institution . . . .
(b) Upon receiving funds or other property in which a client . . . has an interest, a
lawyer shall promptly notify the client . . . . Except as stated in this rule or otherwise
permitted by law or by agreement with the client, a lawyer shall promptly deliver to the
client . . . any funds or other property that the client . . . is entitled to receive . . . .
(c) When in the course of representation a lawyer is in possession of property in
which both the lawyer and another person claim interests, the property shall be kept
separate by the lawyer until there is an accounting and severance of their interests.
Tenn. Sup. Ct. R. 8, RPC 1.15(a), (b), (c) (2003).
7
These subsections provide as follows:
(a) A lawyer shall hold property and funds of clients . . . that are in a lawyer’s
possession in connection with a representation separate from the lawyer’s own property
and funds.
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[Attorney] acknowledges that he did not maintain disputed funds in
his trust account as required by the Rules of Professional Conduct. He also
acknowledges that his anger and frustration with [Client] and her attempt to
repudiate the settlement agreement was not a justification for withdrawing
the disputed money. Whether [Client’s] actions constituted a breach of the
agreement or not, [Attorney] had no basis for taking her money prior to a
final resolution of the dispute. His representations to the Board that he was
holding the disputed funds in his trust account were simply false.
With regard to the false statements made under oath in his
deposition, [Attorney] can have no justification. The questions were
straight-forward, unambiguous, simple questions. There was no way that
the questions could have reasonably been misunderstood.
[Attorney] asserts that the questions were not relevant and that his
answers would not have been admissible in court. [Attorney] is a seasoned
attorney who understands that the relevancy of a question is not for the
witness to decide and that relevancy does not in any [way] justify providing
false answers under oath. His assertion that opposing counsel already knew
about his New York suspension, his bankruptcies, and his tax liens does not
in any way diminish [Attorney’s] duty to answer truthfully.
....
(d) Upon receiving funds or other property in which a client . . . has an interest, a
lawyer shall promptly notify the client or third person. Except as stated in this Rule or
otherwise permitted by law or by agreement with the client, a lawyer shall promptly
deliver to the client or third person any funds or other property that the client . . . is
entitled to receive and, upon request by the client . . ., shall promptly render a full
accounting regarding such funds or other property.
(e) When in the course of representation a lawyer is in possession of property or
funds in which two or more persons (one of whom may be the lawyer) claim interests, the
property shall be kept separate by the lawyer until the dispute is resolved.
Tenn. Sup. Ct. R. 8, RPC 1.15(a), (d), (e) (2011).
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[Attorney] admits that his answers concerning his New York license
and his bankruptcies were false but he claims that he truly could not recall
having two Federal Tax Liens filed against him, even though he
acknowledged the 1993 lien in his bankruptcy. The Panel does not find
[Attorney’s] claims of impaired recollection credible.
As a mitigating factor, [Attorney] argues that his false statements
under oath were not made for personal gain or with an intent to deceive.
Nonetheless, [Attorney] intentionally and knowingly made false statements
under oath in his deposition. The absence of a purpose for lying under oath
is not a particularly mitigating circumstance. Lying under oath for no
purpose, or as a default reaction, or simply for the sport of it does not in any
way make such behavior less reprehensible or concerning. The Panel finds
that [Attorney’s] claims of mitigation or justification for his false swearing
are actually an aggravating factor.
The oath to testify truthfully is serious business and is central to our
legal system. Emotional, upset or distraught litigants are called upon every
day to testify truthfully under oath and are punished if they fail to do so.
When a lawyer swears falsely or violates his oath to testify truthfully, his
conduct “strikes at the heart of our system of justice” and threatens “the
very core of a legal system based on probity and honor.” See Culp v. BPR,
407 S.W.3d 201, 211 (Tenn. 2013).
....
It has been proven by a preponderance of the evidence that
[Attorney] misappropriated his client’s money and that he violated the
Rules of Professional Conduct with regard to maintaining client funds in
his trust account. It has also been proven that [Attorney] testified falsely
under oath on three occasions.
Although the Panel did not refer to the RPC that is violated when a lawyer testifies
falsely, we note that RPC 8.4(c) provides that “[i]t is professional misconduct for a
lawyer to . . . engage in conduct involving dishonesty, fraud, deceit, or
misrepresentation.” Tenn. Sup. Ct. R. 8, RPC 8.4(c) (2012).
For these ethical violations, and after considering mitigating and aggravating
circumstances, the Panel suspended Attorney’s license to practice law for five years,
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probated after one year “conditioned upon his payment of the remaining $7,500.00 owing
to [Client] and restitution to the Board for all costs of this proceeding.” The Panel also
ordered that Attorney “should never have control of his client trust account. Management
and control of [Attorney’s] client trust account must be conducted by an outside certified
public account[ant] or other qualified person who is not employed by [Attorney].”
Finally, the Panel ordered that Attorney perform 100 hours of public service work for
each year that his suspension is probated. One Panel member dissented to the extent of
opining that he “would probate the suspension after 90 days as opposed to after one (1)
year.”
Proceedings before the Circuit Court
Attorney timely filed a petition for writ of certiorari in the Montgomery County
Circuit Court challenging the Panel’s decision. He simultaneously filed a “Motion for
Writ of Supersedeas,” requesting that the court stay the Panel’s order. The Board also
timely filed a separate petition for writ of certiorari, arguing that disbarment was the
appropriate punishment. The Board did not request in its petition that Attorney be
required to pay Client $40,000 in restitution.
This Court appointed Senior Judge Ben H. Cantrell to hear the case in the Circuit
Court of Montgomery County. Judge Cantrell entered a consent order staying the Panel’s
order “pending appeal and until such time as a final judgment is entered by the Tennessee
Supreme Court.”
In January 2016, the circuit court held oral argument in this matter; no further
evidence was adduced. Attorney’s lawyer conceded that Attorney had violated RPC 1.15
in his handling of the Litigation Proceeds in his trust account. Attorney’s lawyer
maintained, however, that the principles of res judicata should be applied and the matter
remanded for a new hearing before a new hearing panel to focus on “facts that are post
the dismissal of the first disciplinary complaint.” Attorney’s lawyer contended that the
vast majority of the Panel’s findings dealt with the fee dispute that was the subject of the
First Complaint and, therefore, should not have factored into the Panel’s decision.
Attorney’s lawyer also argued that the five-year suspension was too harsh and that the
$7,500 ordered to be paid to Client was improper. The Board’s lawyer responded that the
facts regarding the original fee dispute were put before the Panel in order to prove that
Attorney had committed ethical violations regarding his trust account and to demonstrate
that Attorney was not credible. The Board’s lawyer also argued that the Panel should
have disbarred Attorney. The Board’s lawyer did not argue to the circuit court at the
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hearing that Attorney should be ordered to pay Client $40,000 in restitution. However, in
its pre-trial brief, the Board contended that “restitution in the amount of $40,000 should
be imposed upon [Attorney] with credit given for the $18,500 previously paid.” 8 After
hearing argument, the circuit court took the matter under advisement.
In March 2016, the circuit court entered a comprehensive Memorandum and
Order. The court reversed the Panel’s decision that Attorney should never have control
of his trust account on the basis that this aspect of the Panel’s decision “exceeded [its]
jurisdiction.” In all other respects, however, the circuit court affirmed the Panel’s
decision.
Attorney and the Board each filed timely notices of appeal to this Court. Attorney
contends that (1) the circuit court should have ruled that the Petition was, in large part,
barred by principles of res judicata; (2) the circuit court should not have affirmed the
Panel’s order that Attorney pay Client $7,500; (3) the circuit court erred by failing to
expressly exclude from its consideration an implied finding by the Panel that Attorney
violated RPC 8.1, which he was not charged with violating; (4) there is “no substantial
material evidence” to support the Panel’s determination that his testimony about his tax
liens was “knowingly false”; and (5) the length of his suspension is “overly harsh.” The
Board contends that the circuit court should have disbarred Attorney and should have
ordered Attorney to pay Client $40,000 in restitution.
Standard of Review
“As part of our inherent duty to regulate the practice of law in Tennessee, this
Court bears the ultimate responsibility for sanctioning attorneys who violate ethical
rules.” Walwyn v. Bd. of Prof’l Responsibility, 481 S.W.3d 151, 162 (Tenn. 2015)
(citing Bd. of Prof’l Responsibility v. Cowan, 388 S.W.3d 264, 267 (Tenn. 2012)). To
satisfy this responsibility, we have established a system whereby lawyers formally
charged with ethical violations have a right to an evidentiary hearing before a panel of
three attorneys. Id.; Tenn. Sup. Ct. R. 9, § 6.4 (2014). It is the hearing panel’s obligation
to determine the disciplinary penalty. Cowan, 388 S.W.3d at 267.
8
The Board also had argued before the Panel that Attorney should be ordered to pay $40,000 to
Client in restitution.
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“A lawyer dissatisfied with a hearing panel’s decision may prosecute an appeal to
the circuit or chancery court and then directly to this Court, where our review is upon the
transcript of the record from the trial court, including the record of the evidence presented
to the hearing panel.” Walwyn, 481 S.W.3d at 162 (citing Tenn. Sup. Ct. R. 9, § 1.3).
Our standard of review on appeal is the same as the trial court’s, which may not
substitute its judgment for that of the hearing panel’s as to the weight of the evidence on
questions of fact. Long v. Bd. of Prof’l Responsibility, 435 S.W.3d 174, 178 (Tenn.
2014).
Any reversal or modification of a hearing panel’s decision must be based on the
reviewing court’s determination that the decision (1) violated constitutional or statutory
provisions; (2) exceeded the panel’s jurisdiction; (3) was made on unlawful procedure;
(4) is arbitrary, capricious, or characterized by an abuse of discretion or a clearly
unwarranted exercise of discretion; or (5) is unsupported by evidence which is both
substantial and material in light of the entire record. Id.; see also Cowan, 388 S.W.3d at
267; Tenn. Sup. Ct. R. 9, § 1.3 (2013). While we do not substitute our judgment for the
hearing panel’s on questions of fact, we review questions of law de novo with no
presumption of correctness accorded to the conclusions below. Bd. of Prof’l
Responsibility v. Reguli, 489 S.W.3d 408, 417 (Tenn. 2015).
Analysis
Res Judicata
Attorney argues that “[t]he trial court erred by failing to accord res judicata to the
dismissal of [Client’s] first disciplinary complaint against” him. We disagree.
“The doctrine of res judicata, also referred to as claim preclusion, bars a second
suit between the same parties or their privies on the same cause of action with respect to
all issues which were or could have been litigated in the former suit.” Creech v.
Addington, 281 S.W.3d 363, 376 (Tenn. 2009) (citing Massengill v. Scott, 738 S.W.2d
629, 631 (Tenn.1987)). “The primary purposes of the doctrine are to promote finality in
litigation, prevent inconsistent or contradictory judgments, conserve legal resources, and
protect litigants from the cost and vexation of multiple lawsuits.” Id. (citing Sweatt
v. Tenn. Dep’t of Corr., 88 S.W.3d 567, 570 (Tenn. Ct. App. 2002)).
“The party asserting a defense predicated on res judicata must demonstrate (1) that
the underlying judgment was rendered by a court of competent jurisdiction, (2) that the
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same parties or their privies were involved in both suits, (3) that the same claim or cause
of action was asserted in both suits, and (4) that the underlying judgment was final and on
the merits.” Long, 435 S.W.3d at 183 (citing Lien v. Couch, 993 S.W.2d 53, 56 (Tenn.
Ct. App. 1998); Lee v. Hall, 790 S.W.2d 293, 294 (Tenn. Ct. App. 1990)). A trial court’s
decision regarding the application of res judicata presents a question of law which we
review de novo without a presumption of correctness. Id. (citing Jackson v. Smith, 387
S.W.3d 486, 491–92 (Tenn. 2012); In re Estate of Boote, 198 S.W.3d 699, 719 (Tenn. Ct.
App. 2005)).
We hold that the doctrine of res judicata does not apply in this matter.9 The First
Complaint was based on the fee dispute between Client and Attorney. The record
indicates that the only investigation the Board conducted in response to the First
Complaint was related to the size of the fee that Attorney could ethically charge Client.
Significantly, the record contains no indication that the Board considered Attorney’s
handling of his trust account while it investigated the First Complaint. In contrast, the
only ethical violations alleged in the Petition concerned Attorney’s handling of his trust
account and his testimony under oath. The Petition made no allegations of ethical
violations concerning the reasonableness of Attorney’s fees. Moreover, the allegations
that Attorney testified falsely during his deposition arose from actions Attorney took
years after the First Complaint was closed.
We acknowledge that the hearing on the Petition resulted in a great deal of proof
about the details of the original fee dispute, but this proof was adduced in order to
provide a context for Attorney’s actions in dealing with the Litigation Proceeds, i.e.,
removing them from his trust account. The Petition, and the proof adduced in support of
the Petition’s allegations, did not deal with the merits of the original fee dispute. The
Petition dealt with the actions that Attorney took after the Board told him that, by its
unexplained calculations, he owed Client $16,715.50. Accordingly, because the “same
claim or cause of action” was not involved in both complaints before the Board, the
doctrine of res judicata simply does not apply.
9
For the purposes of this decision, we assume, without deciding, that the Board’s action of
dismissing an ethics complaint after an investigation can be considered a judgment sufficient to support a
claim of res judicata if a subsequent ethics complaint otherwise satisfies the criteria for the application of
res judicata.
- 21 -
The actual thrust of Attorney’s argument is that the Panel and the circuit court
erred in considering the facts underlying the fee dispute because the fee dispute was
investigated and dismissed by the Board after the Board told Attorney how much money
he owed Client. Attorney contends that the principles of res judicata require that the
“proceedings in this matter must be limited in scope to events occurring after the August
25, 2010 dismissal of [Client’s] first disciplinary complaint.” Apparently, Attorney
thinks that, if a hearing panel were prevented from hearing about what the circuit court
described as the “troubled relationship” between Attorney and Client, his punishment
would be less. We disagree. Regardless of the long and winding route that Attorney and
Client followed, the gist of the Petition and the punishment imposed were for Attorney’s
misconduct relative to his trust account and for his lying under oath during his deposition.
While prejudice to the party asserting res judicata is not an element of that defense, we
emphasize that, as set forth in more detail below, the Panel’s punishment of Attorney was
appropriate regardless of the initial course of events that eventually arrived at Attorney
converting his client’s monies and lying under oath.
We hold that Attorney is entitled to no relief on the basis of the doctrine of res
judicata.10
10
Additionally, although we have chosen to address this issue on the merits, we note that
Attorney arguably waived the defense of res judicata because he did not raise it as an affirmative defense
in his answer to the Petition. As this Court noted recently, “[r]es judicata is one of the affirmative
defenses that must be included in the defendant’s answer.” Jackson v. Smith, 387 S.W.3d 486, 491
(Tenn. 2012) (citing Tenn. R. Civ. P. 8.03). “As a general rule, a party waives an affirmative defense if it
does not include the defense in an answer or responsive pleading.” Pratcher v. Methodist Healthcare
Memphis Hosps., 407 S.W.3d 727, 735 (Tenn. 2013) (citing Tenn. R. Civ. P. 12.08; Estate of Baker v.
King, 207 S.W.3d 254, 265 (Tenn. Ct. App. 2006); Thompson, Breeding, Dunn, Creswell & Sparks v.
Bowlin, 765 S.W.2d 743, 744 (Tenn. Ct. App. 1987)).
We also note, however, that Attorney argued the doctrine of res judicata at length before the
Panel, and the Board did not object on the basis of waiver. Nor does the Board argue in its brief to this
Court that Attorney waived his res judicata argument because he failed to raise it in his answer to the
Petition. As a result, we have chosen to address this issue on its merits.
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Order that Attorney Pay Client $7,500
Attorney argues that the Panel’s order, affirmed by the circuit court, that he pay
Client $7,500 in restitution11 as a condition to his suspension being probated is not
restitution but rather an unauthorized punitive monetary sanction based on the Panel’s
“attempt to rewrite the terms of a settlement agreement between” himself and Client,
referring to the Fee Dispute Settlement. The Board contends that Attorney should be
required to pay restitution of $40,000 because the 2007 Fee Agreement between Attorney
and Client regarding the Litigation Proceeds called for Client to receive $40,000 of the
$75,000 amount. The circuit court affirmed the Panel’s order of $7,500 in restitution on
the basis that the sum was “apparently the balance” of the Fee Dispute Settlement amount
that Client and Attorney “arrived at by negotiation.” The circuit court rejected the
Board’s argument, stating that it was “not persuaded to try [to] make any sense out of the
labyrinth created by the parties during their troubled relationship.”
Tennessee Supreme Court Rule 9, section 12.7, provides as follows:
Upon order of a hearing panel, panel or court, or upon stipulation of
the parties, and in addition to any other type of discipline imposed, the
respondent attorney may be required to make restitution to persons or
entities financially injured as a result of the respondent attorney’s
misconduct.
Tenn. Sup. Ct. R. 9, § 12.7 (2014) (emphasis added). As this provision makes clear,
restitution is a form a discipline, not merely a method of assessing monies due under a
pre-existing fee agreement.
Attorney seeks to overturn the disciplinary sanction of $7,500 restitution to Client
on the basis of a contractual provision contained in the Fee Dispute Settlement. That
provision requires Attorney to pay Client $7,500 only after his license is reinstated.
However, neither the Panel, the circuit court, nor this Court is subject to the Fee Dispute
Settlement. Because the contractual provision is not binding on anyone other than the
parties to the contract, and because the contractual provision is not the sole basis upon
11
Although the Panel did not label the $7,500 payment as “restitution,” the circuit court did. We
agree with the circuit court that the Panel’s order that Attorney pay Client $7,500 was for restitution.
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which an award of restitution may be made, we hold that Attorney is not entitled to relief
from the order of restitution on this basis.
Attorney also argues that the Board should be estopped from seeking restitution
that would result in Client receiving more than the $16,715.50 that the Board previously
concluded was owed to Client upon review of the First Complaint. Again, this argument
misses the mark. It is the Panel that ordered restitution, as the Panel was authorized to
do. The Panel was within its authority to order restitution even if the Board did not
specifically seek it.
Moreover, Attorney’s implication that the order of $7,500 restitution also violates
principles of res judicata is without merit. After investigating the First Complaint, the
Board determined that Attorney’s calculation of what he owed Client resulted in Attorney
receiving an unreasonable fee, potentially an ethical violation. See Tenn. Sup. Ct. R. 8,
RPC 1.5(a) (2008) (“A lawyer’s fee and charges for expenses shall be reasonable.”). The
Board suggested to Attorney what it considered he should pay to Client so as to leave him
a fee that would not result in an ethical violation. The Board’s calculation of a fee that
Attorney could charge without committing an ethical violation was not a determination of
restitution.
After Attorney tendered the suggested amount to Client, the Board dismissed the
First Complaint. Thus, the only matter that was settled by the Board’s dismissal of the
First Complaint was that, following Attorney’s tender of the suggested amount to Client,
Attorney satisfied the ethical rule under consideration: whether Attorney’s fee was
unreasonable. Significantly, the Board’s calculation of a fee that did not result in an
ethical violation was not binding on Client. Indeed, after the Board dismissed the First
Complaint, Client undertook legal proceedings in an effort to recoup that portion of the
Litigation Proceeds that Attorney initially agreed to pay her, as she was entitled to do. In
doing so, Client incurred additional expenses12 and had to wait additional time to be paid.
All of these factors were appropriate for the Panel to consider when deciding to order
restitution.
12
Client’s new attorney testified before the Panel that Client had paid him almost $25,000 in her
efforts to collect from Attorney.
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In sum, we hold that the Panel’s order of $7,500 restitution did not violate a
constitutional or statutory provision; did not exceed its jurisdiction; was not made upon
unlawful procedure; was not an abuse of discretion; and is not unsupported by substantial
or material evidence. Accordingly, we hold that Attorney is entitled to no relief from the
order of $7,500 restitution.
We also reject the Board’s argument that Attorney should be ordered to pay
$40,000 in restitution (less the $18,500 Attorney has already paid Client). Client has
indicated in the Fee Dispute Settlement that the total sum of $26,000 is sufficient to
satisfy her claim against Attorney. While we are not bound by Client’s determination of
the sum owed to her by Attorney, the Board has failed to persuade us that the Panel
abused its discretion by ordering restitution of $7,500. We point particularly to the
Board’s prior determination that, in spite of the 2007 Fee Agreement calling for Attorney
to pay Client $40,000, the Board concluded that, as of the fall of 2010, Attorney owed
Client less than $20,000. The Board has not explained sufficiently its inconsistent
positions on this issue nor has it demonstrated that either the Panel or the circuit court
erred in concluding that an award of $7,500 restitution is appropriate.
Accordingly, we hold that neither Attorney nor the Board is entitled to relief from
the Panel’s order that Attorney pay Client the sum of $7,500 as restitution.
Implied Violation of RPC 8.1
Attorney claims in his brief to this Court that the circuit court may have
erroneously considered “aspects of the . . . Panel’s findings that involved conduct for
which no allegations were ever set forth in any of the pleadings against [him].” Attorney
then refers to a letter he wrote to the Board in January 2008, prior to the First Complaint.
In this letter, Attorney sought advice from the Board about how to handle his fee dispute
with Client. The record contains no response from the Board to this January 2008 letter,
and Attorney states in his brief that he never received a response to this letter.
Attorney appears concerned that both the Panel and the circuit court may have
used a statement that Attorney made in this letter against him, thereby impliedly finding
him to have violated RPC 8.1. Tennessee Supreme Court Rule 8, RPC 8.1 provides, in
pertinent part, that “a lawyer . . . in connection with a disciplinary matter, shall not . . .
[k]nowingly make a false statement of material fact.” Tenn. Sup. Ct. R. 8, RPC 8.1(a)
(2008) (emphasis added). The Petition does not allege a violation of RPC 8.1.
- 25 -
In his January 2008 letter to the Board, Attorney stated that he was “retaining the
balance of settlement funds belonging to [Client] in [his] IOLTA account until [he] either
hear[s] from her with instructions, if ever, or with the Board’s or Judge’s advice as to
their disposition.” Attorney appears concerned that both the Panel and the circuit court
considered this statement to the Board to have been false in light of Attorney’s later
withdrawal of the balance of the Litigation Proceeds from his trust account. Attorney,
therefore, is concerned that he was sanctioned for violating RPC 8.1 in spite of the fact
that no violation of RPC 8.1 was alleged in the Petition.
Our review of the Panel’s order, however, makes it clear that Attorney was not
punished for violating RPC 8.1. Rather, in its findings of fact, the Panel traces the history
of Attorney’s handling of the Litigation Proceeds in its effort to discern whether Attorney
committed violations of Tennessee Supreme Court Rule 8, RPC 1.15, which Attorney
was charged with violating.13 Relevant to this effort, the Panel specifically found that
Attorney began “converting his client’s property to his own use on or about March of
2009,” when his trust account balance fell below the amount that Attorney had himself
calculated as owed to Client.
The Panel later referred to Attorney’s representations made in response to the
Petition: “[Attorney] stated in his Answer [to the Petition] that he removed funds from
his trust account based upon the Board’s determination in May of 2010 that [Client] was
due $16,715.50. However, this assertion is not credible based on the fact that his trust
account balance fell below $16,000.00 in June of 2009.” This finding is pointed
specifically at Attorney’s credibility, not at whether Attorney “knowingly ma[d]e a false
statement of material fact” “in connection with a disciplinary matter” in his Answer to the
Petition. Tenn. Sup. Ct. R. 8, RPC 8.1(a).
The Panel also noted in its Findings of Fact that Attorney’s “statements to the
Board that he was maintaining [Client’s] disputed funds in his trust account were patently
false.” Taken in context, and in light of the Panel’s “Analysis,” we view this finding as
also directed at Attorney’s credibility, not as an implied conclusion that Attorney violated
RPC 8.1. Moreover, the Panel considered Attorney’s false statements to the Board,
13
As set forth above, RPC 1.15 deals with how an attorney should handle a client’s funds in the
attorney’s possession.
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which the Panel characterized as Attorney’s “lack of candor,” to be an aggravating factor,
rather than an ethical violation.
Finally, the “Analysis” section of the Panel’s order makes clear that the Panel’s
focus in terms of ethical violations arising from false statements was on the false answers
that Attorney gave to questions while under oath during his deposition, not on whether
Attorney misled the Board during its investigation of either complaint. Given our
conclusion that the Panel’s findings did not implicate RPC 8.1, we also conclude that the
circuit court did not impliedly rely on RPC 8.1 in affirming the Panel’s sanctions. We
hold that Attorney is entitled to no relief on this basis. Moreover, even if we were to
conclude that the Panel incorrectly relied upon RPC 8.1, that would not change our
conclusion affirming the Panel’s decision in this case. In this regard, we emphasize that
Attorney’s lying under oath during his deposition was an egregious ethical violation of
RPC 8.4(c), which provides that “[i]t is professional misconduct for a lawyer to . . .
engage in conduct involving dishonesty, fraud, deceit, or misrepresentation.”
Knowingly False Testimony About Tax Liens
During his deposition, Attorney was asked if any liens had ever been filed against
him. Attorney responded, “Not that I can recall.” When prompted, “You’d remember
that if it had happened,” Attorney testified, “I imagine I would if I knew about it.”
During the hearing on the Petition, the Board introduced proof that the IRS had filed two
liens on real property that Attorney owned in Montgomery County, Tennessee, the
county in which Attorney practiced law. The Board also introduced proof that, in
conjunction with his first bankruptcy, Attorney listed a debt in the same dollar amount as
one of the debts secured by one of the IRS liens. Attorney maintained at the hearing
before the Panel that he knew nothing about the IRS liens at the time he was deposed.
The Panel specifically rejected Attorney’s claim of ignorance, finding that his “assertion
that he truthfully could not recall any liens is not credible.”
This Court has made clear that, while the fact-finder is permitted to disbelieve a
witness’ testimony, “it may not construct a theory based on no evidence at all.” State v.
West, 844 S.W.2d 144, 148 (Tenn. 1992); see also, e.g., Bose Corp. v. Consumers Union
of U.S., Inc., 466 U.S. 485, 512 (1984) (“When the testimony of a witness is not
believed, the trier of fact may simply disregard it. Normally, the discredited testimony is
not considered a sufficient basis for drawing a contrary conclusion.”) (citing Moore v.
Chesapeake & Ohio R. Co., 340 U.S. 573, 575 (1951)). However, we agree with the
- 27 -
Board that Attorney’s reference in his bankruptcy filing to the IRS debt secured by the
lien provided the Panel a reasonable basis to infer that Attorney, in fact, was aware of the
IRS lien at the time he testified at his deposition.
Moreover, the proof overwhelmingly supports the Panel’s conclusion that
Attorney testified falsely on two other occasions during his deposition, thereby
committing professional misconduct by “engag[ing] in conduct involving dishonesty,
fraud, deceit, or misrepresentation.” RPC 8.4(c). Even if the proof did not support the
Panel’s conclusion regarding Attorney’s testimony about the IRS liens, Attorney’s other
blatantly false testimony supports the sanctions imposed by the Panel.
We hold that Attorney is entitled to no relief on this basis.
Punishment
Attorney contends that the length of his suspension “is overly harsh and not
supported by reference to comparable prior precedent.” He also argues that the Panel
applied the wrong ABA standards and ignored “pertinent mitigating factors” in assessing
his punishment. The Board, in contrast, argues that the Panel should have ordered
Attorney disbarred.
“A hearing panel must consider the applicable provisions of the ABA Standards
when imposing discipline.” Walwyn, 481 S.W.3d at 166 (citing Tenn. Sup. Ct. R. 9, §
8.4; Sneed v. Bd. of Prof’l Responsibility, 301 S.W.3d 603, 617 (Tenn. 2010)). These
ABA Standards provide “‘guideposts’” rather than bright-line rules. Reguli, 489 S.W.3d
at 424 (quoting Bailey v. Bd. of Prof’l Responsibility, 441 S.W.3d 223, 232 (Tenn.
2014)). ABA Standard 3.0 sets forth four factors the hearing panel should consider when
deciding upon the severity of the discipline to be imposed: “(a) the duty violated; (b) the
lawyer’s mental state; (c) the potential or actual injury caused by the lawyer’s
misconduct; and (d) the existence of aggravating or mitigating factors.” ABA Std. 3.0.
ABA Standard 9.22 sets forth a number of aggravating factors, including prior
disciplinary offenses; dishonest or selfish motive; the submission of false statements
during the disciplinary process; refusal to acknowledge the wrongful nature of the
conduct; substantial experience in the practice of law; and illegal conduct. ABA Std.
9.22(a), (b), (f), (g), (i), and (k). ABA Standard 9.32 sets forth a number of mitigating
factors, including the timely good faith effort to make restitution; the full and free
disclosure to the disciplinary board or cooperative attitude toward the proceedings; the
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attorney’s character or reputation; remorse; and the remoteness of prior offenses. ABA
Std. 9.32(d), (e), (g), (l), and (m).
“When reviewing disciplinary sanctions, this Court reviews comparable cases to
ensure consistency in discipline.” Reguli, 489 S.W.3d at 424 (citing Bailey, 441 S.W.3d
at 236).
In its Order, the Panel considered ABA Standards 4.11,14 4.61,15 5.11,16 6.11,17
and 8.1.18 The Panel then considered six aggravating factors: (1) Attorney’s previous
five-year suspension in New York for similar violations; (2) his motive of personal gain
in appropriating Client’s funds; (3) his “lack of candor with the Board in his repeated
claims that he was maintaining the disputed [Client] funds in his trust account”; (4) his
“outright perjury” during his deposition; (5) his “unwillingness or inability to
acknowledge the gravity of his perjury indicating only that he was sorry he had ‘shot
14
“Disbarment is generally appropriate when a lawyer knowingly converts client property and
causes injury or potential injury to a client.”
15
“Disbarment is generally appropriate when a lawyer knowingly deceives a client with the intent
to benefit the lawyer or another, and causes serious injury or potential serious injury to a client.”
16
“Disbarment is generally appropriate when:
(a) a lawyer engages in serious criminal conduct a necessary element of which
includes intentional interference with the administration of justice, false swearing,
misrepresentation, fraud, extortion, misappropriation, or theft; . . . ; or
(b) a lawyer engages in any other intentional conduct involving dishonesty,
fraud, deceit, or misrepresentation that seriously adversely reflects on the lawyer’s fitness
to practice.”
17
“Disbarment is generally appropriate when a lawyer, with the intent to deceive the court, makes
a false statement, submits a false document, or improperly withholds material information, and causes
serious or potentially serious injury to a party, or causes a significant or potentially significant adverse
effect on the legal proceeding.”
18
“Disbarment is generally appropriate when a lawyer: . . . (b) has been suspended for the same
or similar misconduct, and intentionally or knowingly engages in further similar acts of misconduct that
cause injury or potential injury to a client, the public, the legal system, or the profession.”
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from the hip’ in his sworn [deposition] testimony”; and (6) his “significant and
substantial experience in the practice of law.” The Panel also considered four mitigating
factors: (1) the “high opinion [that] local judges and members of the bar have of
[Attorney] in terms of his legal skills, his trial preparation, his helpfulness to the Courts,
and his assistance to younger attorneys”; (2) Attorney’s Fee Dispute Settlement
agreement with Client regarding the disputed funds, which Attorney had “thus far
fulfilled”; (3) the fact that Attorney’s misconduct did not involve multiple clients; and (4)
Attorney’s acknowledgment that his misappropriation of Client’s funds was wrong.
After considering and distinguishing relevant precedent, the Panel expressed
concern that, given his prior suspension for similar conduct, Attorney “would have any
issues related to impropriety vis a vis handling client funds and being truthful.”
Nevertheless, the Panel declined to disbar Attorney on the basis that he “is a competent
attorney who does good legal work, is consistently prepared, and does not neglect his
cases. He assists the courts in which he practices and mentors younger lawyers in trial
practice skills.”
As set forth above, we will not change the Panel’s decision to impose a five-year
suspension unless the suspension (1) violates a constitutional or statutory provision; (2)
exceeds the Panel’s jurisdiction; (3) results from an unlawful procedure; (4) is arbitrary,
capricious, or characterized by an abuse of discretion or a clearly unwarranted exercise of
discretion; or (5) is unsupported by evidence which is both substantial and material in
light of the entire record. Both parties contend that the Panel’s decision was arbitrary,
capricious, and/or an abuse of discretion.
Attorney argues that the Panel erred in considering ABA Standards 4.61 and 6.11.
We agree. ABA Standard 4.61 provides that “[d]isbarment is generally appropriate when
a lawyer knowingly deceives a client with the intent to benefit the lawyer or another, and
causes serious injury or potential serious injury to a client.” The gist of the Board’s case
against Attorney was not that Attorney deceived Client, but that he failed to maintain her
funds in his trust account as he was required to do and that he converted those funds.
ABA Standard 6.11 provides that “[d]isbarment is generally appropriate when a
lawyer, with the intent to deceive the court, makes a false statement, submits a false
document, or improperly withholds material information . . . .” While the record
certainly supports the Panel’s finding that Attorney lied under oath during his deposition,
the record does not support the inference that Attorney’s false testimony was given with
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the intent to deceive a court. The deposition was taken for discovery purposes in
conjunction with Client’s lawsuit against Attorney for breach of their 2007 Fee
Agreement. The deposition questions which Attorney answered falsely were not relevant
to the substantive merits of that action. Accordingly, it does not appear to us that
Attorney falsely testified in order to deceive in some way the court adjudicating the
lawsuit.
However, given that the Panel declined to impose the disbarment that both of these
ABA Standards consider to be “generally appropriate,” the Panel’s consideration of them,
in our view, does not appear to have prejudiced Attorney. Accordingly, we hold that
Attorney is not entitled to relief on this basis.
Attorney also complains that the Panel should not have considered ABA Standard
4.11, which provides that “[d]isbarment is generally appropriate when a lawyer
knowingly converts client property and causes injury or potential injury to a client.”
Attorney appears to take issue with the Panel’s conclusion that he “knowingly
convert[ed]” Client’s property when he removed all of the Litigation Proceeds from his
trust account, claiming that he merely exercised “extremely poor judgment” after the
“statute of limitations had run on any civil cause of action.” We disagree that the Panel
erred in considering ABA Standard 4.11. The Panel found that Attorney’s trust account
had reached a negative balance by February 2012. The lawsuit that Client filed against
Attorney was not dismissed as time-barred until January 2013. Attorney is not entitled to
relief on this basis.
Attorney also contends that the Panel ignored certain mitigating factors,
specifically the length of time that had passed since Attorney’s New York suspension;
Attorney’s two attempts to tender checks to Client, the first in the amount of $13,000.83,
and the second in the amount of $16,715.50; and Attorney’s “truthful and cooperative
[conduct] in this proceeding.” Respectfully, we disagree that these factors entitle
Attorney to a reduction of his suspension.
Finally, Attorney argues that “comparable prior precedent does not support a five-
year suspension.” The Board, on the other hand, points to the ABA Standards applied by
the Panel in this case, all of which provide that disbarment is generally appropriate for the
ethical violations that Attorney committed. The Board asserts, repeatedly, that “there is
simply no reasonable argument against” the penalty of disbarment in this matter. The
Board does not refer us to any comparable cases.
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We disagree with both parties that the Panel erred when it imposed a five-year
suspension on Attorney. As set forth above, we agree with Attorney that the Panel erred
when it considered ABA Standards 4.61 and 6.11. This error cuts in Attorney’s favor and
against the Board’s position. Attorney also adduced significant favorable testimony from
respected members of the bench and bar attesting to his excellent advocacy skills as well
as to his willingness to assist the courts and to mentor young lawyers. Nevertheless,
Attorney’s conduct in removing disputed funds from his trust account when he knew that
his dispute with Client was ongoing was a blatant violation of Attorney’s ethical
obligations. Moreover, Attorney’s false testimony during his deposition was an
especially egregious ethical violation. While we disagree that the Panel committed
reversible error when it refrained from disbarring Attorney, we agree that a significant
suspension was in order in light of the severity of Attorney’s misconduct, particularly in
light of his previous suspension for similar misconduct.
We have reviewed the decisions relied upon by Attorney as indicating that a
shorter suspension should be imposed. In our view, however, those decisions are
sufficiently distinguishable from Attorney’s case that they do not require us to conclude
that the Panel erred by imposing a five-year suspension. In re Darren T. Cole, No.
M2015-00126-SC-BAR-BP (Tenn. Feb. 3, 2015) (Order), dealt with a lawyer who was
suspended for three years for various ethical infractions, none of which included the
conversion of client property or lying under oath. Similarly, neither Board of Prof’l
Responsibility v. Allison, 284 S.W.3d 316 (Tenn. 2009) (sixty-day suspension), nor
Nevin v. Bd. of Prof’l Responsibility, 271 S.W.3d 648 (Tenn. 2008) (six-month
suspension), involved a lawyer who had converted client monies or who had lied under
oath. Milligan v. Bd. of Prof’l Responsibility, 166 S.W.3d 665 (Tenn. 2005), and
Dockery v. Bd. of Prof’l Responsibility, 937 S.W.2d 863 (Tenn. 1996), both dealt with
lawyers who did misappropriate client funds, and both lawyers were suspended for two
years. Neither of these cases involved the same lawyer giving false testimony during a
deposition, however.
While not cited by either Attorney or the Board, we think the case of Board of
Prof’l Responsibility v. Bonnington, 762 S.W.2d 568 (Tenn. 1988), is instructive. In that
case, the attorney repeatedly misappropriated funds belonging to an estate. Id. at 569.
Eventually, the attorney self-reported his transgressions and repaid the converted monies.
Id. Nevertheless, the attorney received a four-year suspension. Id. at 568. One of the
justices dissented, arguing that the attorney should have been disbarred. Id. at 571
(Harbison, C.J., concurring in part and dissenting in part). The case did not involve the
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attorney also lying under oath during a deposition, nor had the attorney been disciplined
earlier for similar transgressions.
As this Court stated in Bonnington, “the objective of achieving uniformity of
punishment in disciplinary proceedings does not require that every named offense be
accorded identical punishment. Like murder in the first degree, lawyer misappropriation
of funds is subject to more than one punishment.” Id. at 570–71. We hold that neither
Attorney nor the Board is entitled to relief from the Panel’s imposition of a five-year
suspension.
Conclusion
The circuit court affirmed the Panel’s decision with the exception of the Panel’s
order that Attorney “never have control of his client trust account.” The Board conceded
that the Panel exceeded its jurisdiction in that regard, and the circuit court reversed that
portion of the Panel’s order. However, the circuit court failed to impose any
requirements for a practice monitor in the event Attorney is successful in having his law
license reinstated after serving his one year of active suspension. We hold that, in the
event Attorney is successful in having his law license reinstated after serving his first
year of suspension, he must have a practice monitor for the remaining years that his
suspension is probated. The practice monitor shall supervise Attorney’s compliance with
trust account rules and accounting procedures. See Tenn. Sup. Ct. R. 9, § 12.9 (2016).
In sum, we affirm and modify the circuit court’s judgment. Attorney is suspended
for a period of five years, probated after a period of one year, conditioned upon his
payment of $7,500 restitution to Client and the payment to the Board for all of its costs in
this proceeding. For each year that his suspension is probated, Attorney shall perform
one hundred hours of public service work. Moreover, for each year that his suspension is
probated, Attorney is required to have a practice monitor, who shall supervise Attorney’s
compliance with trust account rules and accounting procedures. See Tenn. Sup. Ct. R. 9,
§ 12.9 (2016).
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The costs of this cause are taxed to Attorney, for which execution may issue if
necessary.
______________________________________
JEFFREY S. BIVINS, CHIEF JUSTICE
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