F. Lee Bailey v.

United States Court of Appeals
For the First Circuit

No. 05-2779

IN RE: F. LEE BAILEY,

Appellant.

APPEAL FROM A PANEL OF THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF MASSACHUSETTS

[Hon. Patti B. Saris, U.S. District Judge]
[Hon. George A. O'Toole, Jr., U.S. District Judge]
[Hon. Morris E. Lasker,* Senior U.S. District Judge]

Before

Selya, Circuit Judge,

Hug,** Senior Circuit Judge,

and Howard, Circuit Judge.

Joseph J. Balliro, with whom Balliro & Mondano was on brief,
for respondent.

June 9, 2006

*
Of the Southern District of New York, sitting by
designation.
**
Of the United States Court of Appeals for the Ninth
Circuit, sitting by designation.
 Per Curiam. The State of Florida and the Commonwealth of

Massachusetts have stricken from the roll of lawyers admitted to

practice before the court Attorney F. Lee Bailey for, inter alia,

misappropriating client funds. See In re Bailey, 786 N.E.2d 337

(Mass. 2003); Fla. Bar v. Bailey, 803 So.2d 683 (Fla. 2001). A

three-judge panel of the United States District Court for the

District of Massachusetts subsequently ordered Bailey disbarred

under its reciprocal discipline rule. See Mass. L.R. 83.6(2)(D).

We affirm.

Before addressing the merits of Bailey's appeal, we

briefly consider the basis for appellate jurisdiction over a

district court's decision to discipline a member of its bar. See

Garcia-Velazquez v. Frito Lay Snacks Caribbean, 358 F.3d 6, 8 (1st

Cir. 2004) (stating that an appellate court has a duty in every

case to satisfy itself of subject matter jurisdiction). An

attorney discipline proceeding under a reciprocal discipline rule

is a case or controversy under Article III. See In re Calvo, 88

F.3d 962, 965-66 (11th Cir. 1996); In re Palmisano, 70 F.3d 483,

484-85 (7th Cir. 1995). Moreover, a district court's decision

disbarring an attorney from practice is a final judgment as it

"ends the litigation on the merits and leaves nothing for the court

to do but execute the judgment." Catlin v. United States, 324 U.S.

229, 233 (1945). We therefore join other circuits in concluding

that we have jurisdiction under 28 U.S.C. § 1291 to review a final

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order disbarring an attorney. See In re Martin, 400 F.3d 836, 840

(10th Cir. 2005); In re North, 383 F.3d 871, 874-75 (9th Cir.

2004); In re Surrick, 338 F.3d 224, 229 (3d Cir. 2003).

Turning to the merits, Bailey argues that the district

court erred by declining to convene a hearing to allow him to

present new evidence. He contends that the court should have

accepted his new evidence because it undermines the factual

predicate for the state court disbarment orders. The district

court declined to convene such a hearing on the ground that, even

if it accepted the new evidence, the evidence would not

sufficiently undermine the state court rulings to warrant relief.

Bailey's discipline proceeding was governed by Local Rule

83.6(2)(D) which provides:

[The district court] shall impose the identical
discipline unless the respondent-attorney
demonstrates, or [the district court] finds,
that upon the face of the record upon which the
discipline in another jurisdiction is
predicated it clearly appears:

(i) that the proceeding was so lacking in
notice or opportunity to be heard as to
constitute a deprivation of due process; or
(ii) that there was such an infirmity of proof
establishing the misconduct as to give rise to
the clear conviction that [the district court]
could not, consistent with its duty, accept as
final the conclusion on the subject;
(iii) that the imposition of the same
discipline by this court would result in grave
injustice; or
(iv) that the misconduct established is deemed
by [the district court] to warrant
substantially different discipline.

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This rule recognizes that "disbarment by [a state] does not result

in automatic disbarment by the federal court." In re Ruffalo, 390

U.S. 544, 547 (1968). But, in the interest of avoiding relitigation

of matter previously adjudicated by other tribunals, it also

provides appropriate deference to the original state proceeding by

limiting federal court review to determining only that the state

proceeding complied with due process, that there was adequate proof

of misconduct, and that imposing reciprocal discipline would not

result in a grave injustice. See Theard v. United States, 354 U.S.

278, 282 (1957). Given the limited nature of a reciprocal

discipline proceeding in federal court, "there is no entitlement to

a de novo trial . . . ." Surrick, 338 F.3d at 232.

The Local Rule provides that a reciprocal discipline

proceeding is based on "the record upon which the discipline in

another jurisdiction is predicated." Mass. L.R. 83.6(2)(D). The

Rule does not explicitly provide for an evidentiary hearing. We

therefore agree with the district court that holding such a hearing

in a reciprocal discipline matter would be "extraordinary." In re

Bailey, No. 02-10093, 2005 WL 2901885, at *3 (D. Mass. Nov. 1,

2005). We review the district court's decision not to hold an

evidentiary hearing for an abuse of discretion. Cf. United States

v. Jimenez, 419 F.3d 34, 42 (1st Cir. 2005) (reviewing district's

order declining to hold evidentiary hearing on a motion to suppress

for an abuse of discretion); Bank One Texas, N.A. v. Montle, 964

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F.2d 48, 51-52 (1st Cir. 1992) (reviewing district court's order

declining to hold an evidentiary hearing on motion to dismiss for

lack of subject matter jurisdiction for an abuse of discretion);

United States v. Garcia, 954 F.2d 12, 19 (1st Cir. 1992) (reviewing

district court's denial of motion for an evidentiary hearing in

sentencing proceeding for an abuse of discretion); Jackson v. Fair,

846 F.2d 811, 819 (1st Cir. 1988) (reviewing district court's denial

of a motion to hold evidentiary hearing on a request for a

preliminary injunction for a clear abuse of discretion).1

Summarized succinctly, the evidence that Bailey

misappropriated client funds is as follows. In 1994, Claude Duboc

was indicted by a federal grand jury for drug smuggling and money

laundering. Duboc earned hundreds of millions of dollars by running

drugs, and the government sought forfeiture of all of Duboc's drug

proceeds as part of the prosecution. Duboc's assets included two

mansions in France.

Duboc hired Bailey to represent him in the criminal

matter. Recognizing the strength of the government's case against

his client, Bailey pursued a strategy of pledging Duboc's utmost

cooperation in forfeiting his assets in the hope that the court

would credit him at sentencing for his cooperation. It soon became

apparent that there would be difficulty in forfeiting the French

2
Bailey argues for de novo review but cites no supporting
authority.

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mansions because the federal government could not undertake to

maintain the properties pending their sale. To facilitate the

forfeiture, Bailey volunteered to maintain the properties, arrange

for their sale, and turn the sale proceeds over to the government.

To provide Bailey with the requisite funds to maintain the

properties and to establish a potential pool of money from which

Bailey could recover his fees, the prosecutors proposed that one of

Duboc's cash accounts (which held approximately $3.5 million) be

turned over to Bailey.

Simultaneously, questions arose over the forfeiture of

602,000 shares of stock that Duboc owned in a company called Biochem

Pharma (Biochem). At the time, Biochem was involved in promising

drug research that could result in the stock increasing in value.

But there was concern that the immediate liquidation of Duboc's

substantial holdings of the company could depress its value. To

avoid this problem, Bailey and the prosecutors agreed that, instead

of the cash account, the Biochem stock would be transferred to

Bailey to pay for the upkeep of the mansions and to provide a source

from which he could draw fees. It was also understood, however,

that Bailey would not be entitled to fees without approval from the

court and that Bailey bore the risk that the Biochem stock would

decrease in value, which, if it occurred, would deprive Bailey of

assets to maintain the mansions or to collect his fees. In accord

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with these understandings, the Biochem stock (then valued at about

$6 million) was transferred to Bailey's Swiss bank account.

Approximately a week after the transfer, Bailey borrowed

over $4 million against the Biochem shares. He then proceeded to

transfer all but $350,000 from that account to his personal checking

account. He used these proceeds to spend over $2.2 million on his

private businesses and personal expenses. This commingling of the

Biochem stock proceeds with his personal assets was the basis for

the finding that Bailey misappropriated client funds.

Bailey contends that his deal with the government allowed

him to keep the value of the stock's appreciation that occurred

after the date of transfer, and therefore he was responsible only

to maintain the initial $6 million value of the stock.2 Bailey

argues that he could introduce evidence that the stock was not given

to him to hold in "formal trust," which he claims would support his

argument that he owned the appreciated value of the Biochem stock

in fee simple absolute.

The record contains documentary evidence to support the

conclusion that Bailey was not entitled to the personal use of the

stock on the date of the transfer. Most damaging to Bailey is his

acknowledgment that he was only entitled to fees that were approved

by the court. When a dispute arose between Bailey and his co-

2
Two years after the transfer, the stock had increased in
value by $4 million.

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counsel, Bailey wrote to co-counsel, "I could have at this point

rejected the silly conditions offered by [co-counsel] and applied

for a healthy fee to [the court] and turned the balance of the

Biochem stock back to the Government." He also told Duboc that he,

Bailey, "would be paid with [the court's] approval only that amount

which is commensurate with the result achieved in your case, and the

amount of the work that went into it." Even subsequent to the

criminal proceedings, Bailey continued to acknowledge that the

district court had "the final say on fees." Yet the evidence is

undisputed that Bailey took possession of the stock as his personal

property well in advance of any fee award by the court and that he

never told anyone that he was entitled to the appreciated value of

the stock in addition to the judicially-approved fees.

As mentioned above, Bailey seeks to undermine this

evidence of misappropriation by presenting proof that there was no

"formal trust" for his possession of the stock.3 But, even assuming

that Bailey could prove that the stock was not transferred to him

in trust, such proof would not adequately undermine the states'

rationale for disbarment. The district court declined to hold a

hearing to consider Bailey's new evidence because it correctly

3
Bailey says that he could produce testimony from government
attorneys involved in the Duboc prosecution that the word "trust"
was not used in arranging the stock transfer and that the Internal
Revenue Service has since characterized the stock as "income" on
the date of the transfer which, Bailey argues, is inconsistent with
a finding that the stock was held in trust.

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recognized that neither the Florida nor Massachusetts decisions

"hinged on the creation of a formal trust." Bailey, 2005 WL

2901855, at *3; see also Bailey, 786 N.E2d at 347-48; Bailey, 803

So.3d at 692. Instead, these decisions were predicated on the

determination that "Bailey had no reasonable basis to believe that

he could draw the value of the shares to pay attorneys fees as the

case went on without prior court approval." Id.; see also Bailey,

786 N.E.2d at 348 n.17 (rejecting Bailey's request for an

evidentiary hearing on similar basis). Given that the evidence

provides a sound basis for concluding that Bailey used the stock

proceeds for personal use without the required court approval, the

district court was within its discretion in concluding that no

evidentiary hearing was necessary because the new evidence would not

establish such an "infirmity of proof" that relief would be

available under Local Rule 83.6(2)(D).4

Affirmed.

4
Bailey's argument that he owned the appreciated value of the
stock is also inconsistent with his actual dealings with the stock.
Bailey acknowledges that, in the initial months after he received
the stock, its value did not increase. "If the understanding had
been that any appreciation in value was Bailey's own money, that
would mean that Bailey could not withdraw any proceeds for himself
until at least such time as some appreciation occurred." Bailey,
786 N.E.2d at 347. Yet, "from the day the Biochem stock was
transferred to him, Bailey treated the money as his own." Id.

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