SUPREME COURT OF ARIZONA
En Banc
In the Matter of ) Arizona Supreme Court
) No. SB-03-0113-D
RICHARD E. CLARK, )
Attorney No. 9052 ) Disciplinary Commission
) No. 00-1066
Respondent. )
) O P I N I O N
__________________________________)
REVIEW FROM DISCIPLINARY COMMISSION
REVERSED IN PART; AFFIRMED IN PART; REMANDED
Richard E. Clark Scottsdale
Respondent Pro Se
State Bar of Arizona, Phoenix
by Patricia A. Sallen, Bar Counsel
Attorney for State Bar of Arizona
M c G R E G O R, Vice Chief Justice
¶1 In this lawyer disciplinary proceeding, a hearing
officer concluded that Richard E. Clark violated Rule 42 of the
Rules of the Supreme Court of Arizona, Ethical Rule (ER) 8.4(c)
(stating that it is professional misconduct for a lawyer to
“engage in conduct involving dishonesty, fraud, deceit or
misrepresentation”) and ER 8.4(d) (prohibiting lawyers from
“engag[ing] in conduct that is prejudicial to the administration
of justice”). The hearing officer recommended censure, one year
of probation, and an order of restitution to Clark’s former
client, Edward Kosac, Jr. The Disciplinary Commission expressly
adopted the hearing officer’s findings of fact, but recommended
increased discipline and urged that Clark receive a two-year
suspension, two years of probation, and be ordered to pay
restitution. We granted review to clarify the standard of
review that the Disciplinary Commission must apply when
reviewing factual findings of a hearing officer. We review this
matter pursuant to Article VI, Section 5.3 of the Arizona
Constitution and Rule of the Supreme Court of Arizona 59(a).
I.
¶2 The facts, as found by the hearing officer and adopted
by the Disciplinary Commission, are as follows. Clark began
practicing law in Arizona in 1983 and, in the early 1990s,
represented Kosac in a lawsuit arising out of a real estate
claim (the Kosac lawsuit). The lawsuit resulted in a judgment
against Kosac.
¶3 Because of factors unrelated to the Kosac lawsuit,
Clark filed a petition for bankruptcy. Based upon Clark’s
conduct during the Kosac lawsuit, conduct for which Clark
received an informal reprimand from the State Bar, Kosac filed a
claim against Clark in bankruptcy court. The bankruptcy court
entered a non-dischargeable judgment for Kosac against Clark.
This proceeding arises from Kosac’s attempts to collect that
judgment.
2
¶4 Kosac hired attorney Steven W. Cheifetz to collect the
judgment against Clark. Among other efforts, Cheifetz served
writs of garnishment on three of Clark’s clients, all of whom
denied owing any amounts to Clark. Cheifetz next scheduled a
debtor’s examination and served a subpoena upon Clark. The
subpoena required Clark to bring to Cheifetz’s office records
identifying those clients who owed Clark money and other
financial information related to his legal practice.
¶5 At the judgment debtor’s exam in May 2000, Clark
informed Cheifetz that, on the previous day, he had formed a
professional corporation, Richard Clark, P.C., and had
transferred all of the assets from his sole proprietorship law
practice to his professional corporation. At both the debtor’s
examination and in his testimony during disciplinary
proceedings, Clark stated that he formed the professional
corporation to establish a medical reimbursement plan and to
facilitate payment of income taxes. During disciplinary
proceedings, Clark also testified that he formed the
professional corporation to limit what he believed were
inappropriate contacts between Cheifetz and Clark’s clients. At
the debtor’s examination, Clark indicated that the corporation
had already been garnished by another of Clark’s creditors after
Clark told that creditor about the transfer of assets.
3
¶6 Cheifetz subsequently served a writ of garnishment on
Richard Clark, P.C. in connection with the proceedings in the
United States Bankruptcy Court for the District of Arizona.1 In
the interim, Kosac filed the State Bar complaint that led to
these proceedings.
¶7 The State Bar filed a formal complaint against Clark
in December 2001, charging him with one count of conduct
involving dishonesty, fraud, deceit or misrepresentation in
violation of ER 8.4(c) and one count involving conduct
prejudicial to the administration of justice in violation of ER
8.4(d). After conducting a several-day hearing, the hearing
officer issued his report.
¶8 Before concluding that Clark’s conduct violated the
Arizona Rules of Professional Conduct and recommending
1
Upon the suggestion of the bankruptcy judge, Kosac
transferred his case against Clark from the bankruptcy court to
the superior court. The superior court found that Clark’s
conduct with regard to the transfer of assets constituted a
fraudulent conveyance in violation of Arizona Revised Statutes
(A.R.S.) section 44-1004 (2003). That statute provides:
A transfer made or obligation incurred by a debtor is
fraudulent as to a creditor, whether the creditor’s
claim arose before or after the transfer was made or
the obligation was incurred, if the debtor made the
transfer or incurred the obligation . . . [w]ith
actual intent to hinder, delay, or defraud any
creditor or the debtor.
A.R.S. § 44-1004.A.1. Subsection B lists a number of factors
that the court may consider to determine actual intent. A.R.S.
§ 44-1004.B.
4
discipline, the hearing officer made several findings related to
Clark’s state of mind. Those findings are critical to our
review.
¶9 Throughout his factual findings, both those related to
the alleged misconduct and those related to appropriate
discipline, the hearing officer found that Clark did not
knowingly or intentionally violate his ethical duties. In
evaluating Clark’s motive for transferring property to his
professional corporation, the hearing officer stated that he had
no doubt that Clark, “in his heart of hearts,” believed that the
property he transferred to his professional corporation had no
value. Nevertheless, the hearing officer concluded that Clark’s
conduct constituted a fraudulent transfer in violation of A.R.S.
section 44-1004 because the professional corporation did not
give Clark fair consideration for the transferred property. The
hearing officer also expressly found that Clark’s conduct did
not involve dishonesty, deceit or misrepresentation. In
recommending discipline, the hearing officer stated that Clark
“negligently violated a duty to the courts and to his former
client” and that “his mental state did not demonstrate a state
of mind of maliciousness or avarice.” In determining the
appropriate sanction to impose, the hearing officer looked to
5
the ABA Standards for Imposing Lawyer Sanctions (Standards)2 and
recommended discipline that is appropriate when a lawyer acts
negligently rather than intentionally.3 The mitigating factors
found by the hearing officer included absence of a prior
disciplinary record (Standard 9.32(a)) and absence of a selfish
or dishonest motive (Standard 9.32(b)). In addition, the
hearing officer rejected the State Bar’s argument that he should
find, as aggravating circumstances, prior disciplinary offense
(Standard 9.22(a)), selfish or dishonest motive (Standard
9.22(b)), substantial experience in the practice of law
(Standard 9.22(i)), and indifference to paying restitution
(Standard 9.22(j)).
2
This court has held that the Standards provide
suitable guidelines for determining the appropriate sanctions
for lawyer misconduct. See, e.g., In re Shannon, 179 Ariz. 52,
68, 876 P.2d 548, 564 (1994) (stating that “[w]e look to the
American Bar Association’s Standards for Imposing Lawyer
Sanctions . . . for guidance in determining the appropriate
sanction to impose” (citing In re Tarletz, 163 Ariz. 548, 554,
789 P.2d 1049, 1055 (1990))); In re Kaplan, 179 Ariz. 175, 177,
877 P.2d 274, 276 (1994) (stating that “[i]n determining the
appropriate sanctions, the Court considers the American Bar
Association’s Standards for Imposing Lawyer Sanctions a suitable
guideline” (citing In re Rivkind, 164 Ariz. 154, 157, 791 P.2d
1037, 1040 (1990))).
3
Standard 4.63 provides that “[r]eprimand [censure in
Arizona] is generally appropriate when a lawyer negligently
fails to provide a client with accurate or complete information,
and causes injury or potential injury to the client.” Standard
6.13 provides that “[r]eprimand is generally appropriate when a
lawyer is negligent either in determining whether statements or
documents are false . . . and causes injury or potential injury
to a party to the legal proceeding, or causes an adverse or
potentially adverse effect on the legal proceeding.”
6
¶10 Based on these Standards, the mitigating factors, and
the absence of any aggravating circumstances, the hearing
officer recommended discipline that included censure, one year’s
probation, and restitution.
¶11 The Disciplinary Commission adopted the hearing
officer’s findings of fact in their entirety, but modified de
novo what it described as his conclusions of law. The
Disciplinary Commission held that Clark’s conduct was knowing,
if not intentional, rather than negligent, and caused actual
injury to Kosac and to the legal system. Further disagreeing
with the hearing officer, the Disciplinary Commission found de
novo four aggravating factors: prior disciplinary offenses
(Standard 9.22(a)), dishonest or selfish motive (Standard
9.22(b)), substantial experience in the practice of law
(Standard 9.22(i)), and indifference to making restitution
(Standard 9.22(j)). The Disciplinary Commission also disagreed
with the hearing officer’s finding of two mitigating factors:
absence of a prior disciplinary record (Standard 9.32(a)) and
absence of a selfish or dishonest motive (Standard 9.32(b)).
Considering Clark’s intentional misconduct in conjunction with
the factors present in aggravation and mitigation, the
Disciplinary Commission recommended a two-year suspension, two
years of probation with terms and conditions, and restitution.
7
¶12 This court granted review to determine whether the
Disciplinary Commission may reject a hearing officer’s factual
findings absent a determination that the findings were clearly
erroneous. Based on the analysis below, we conclude that it may
not.
II.
¶13 Clear standards govern the Disciplinary Commission’s
review of a hearing officer’s factual findings and legal
conclusions. In reviewing questions of law, the Disciplinary
Commission applies a de novo standard of review, but “[i]n
reviewing findings of fact made by a hearing officer, the
commission shall apply a clearly erroneous standard.” Ariz. R.
Sup. Ct. 58(b).4 In In re Tocco, 194 Ariz. 453, 456 ¶ 9, 984
P.2d 539, 542 (1999), this court stated: “The Disciplinary
Commission adopted the hearing committee’s findings of fact in
their entirety. It then independently made additional findings.
This it may not do under current rules.” In this action, as in
Tocco, the Disciplinary Commission adopted the hearing officer’s
findings of fact in their entirety. Nevertheless, the
Disciplinary Commission then effectively disregarded the hearing
officer’s findings related to Clark’s state of mind.
4
When the Disciplinary Commission engaged in its review
of the hearing officer’s factual findings and legal conclusions
in this case, this rule was numbered Rule of the Supreme Court
of Arizona 53(d)(2). This change in numbering has no bearing on
our decision.
8
¶14 Determining a person’s mental state requires the
resolution of questions of fact. See Republic Ins. Co. v.
Feidler, 178 Ariz. 528, 531, 875 P.2d 187, 190 (App. 1993)
(stating that “intent to injure is a fact question”). In
disciplinary proceedings, a respondent’s mental state can both
determine whether an ethical violation occurs and affect the
appropriate discipline for a violation.
A.
¶15 The hearing officer’s finding that Clark acted
negligently rather than intentionally or knowingly determines
whether he violated ER 8.4(c). As the State Bar recognizes, a
lawyer cannot violate ER 8.4(c) by acting negligently; a
violation of ER 8.4(c) must rest upon behavior that is knowing
or intentional and purposely deceives or involves dishonesty or
fraud. See Ariz. R. Sup. Ct. 42, ER 1.0(d) (defining “fraud” or
“fraudulent” as conduct that “has a purpose to deceive”); In re
Owens, 182 Ariz. 121, 125, 893 P.2d 1284, 1288 (1995) (stating
that “ER 8.4(c) requires dishonesty, fraud, deceit or
misrepresentation, not just negligence”). Because a violation
of ER 8.4(c) requires knowing or intentional misconduct, the
factual finding that Clark’s conduct was merely negligent
necessarily establishes that both the hearing officer and the
Disciplinary Commission erred in concluding that Clark violated
that ethical rule. The Disciplinary Commission erroneously
9
reasoned that, because ER 8.4(c) requires knowing or intentional
conduct, the hearing officer’s conclusion that Clark violated ER
8.4(c) permitted the Disciplinary Commission to ignore the
factual finding that Clark acted negligently. The factual
finding must precede and support the legal conclusion. We
therefore vacate the Disciplinary Commission’s conclusion that
Clark violated ER 8.4(c).
B.
¶16 Whether Clark’s negligent mental state permits a
conclusion that he violated ER 8.4(d), however, presents a
different question. Although this court has not specifically
addressed the issue of the requisite mental state for ER 8.4(d),
the rule does not require a mental state other than negligent.
If the Ethical Rules require a higher mental state, they usually
specify the mental state required. See, e.g., Ariz. R. Sup.
Ct. 42, ER 8.4(f) (describing misconduct as “knowingly
assist[ing] a judge or judicial officer in conduct that is a
violation of applicable Code of Judicial Conduct or other law”)
(emphasis added).
¶17 In the current action, the hearing officer found that
Clark negligently engaged in conduct prejudicial to the
administration of justice and thus violated ER 8.4(d). Clark’s
act of transferring assets to his professional corporation and
notifying another creditor of the transfer may have deprived
10
Kosac of partial recovery on his judgment. We agree with the
hearing officer and the Disciplinary Commission that Clark’s
negligent conduct and its impact supported a conclusion that his
conduct was prejudicial to the administration of justice in
violation of ER 8.4(d).
C.
¶18 The Disciplinary Commission also erred by effectively,
although not expressly, rejecting the hearing officer’s factual
findings central to determining appropriate discipline.
Although the hearing officer specifically found that Clark
lacked a selfish or dishonest motive and rejected the State
Bar’s argument that Clark exhibited an indifference to affording
restitution, the Disciplinary Commission found Clark’s selfish
or dishonest motive and indifference to restitution to be
aggravating circumstances. Just as the Disciplinary Commission
may not ignore the hearing officer’s findings of fact to support
a different conclusion as to misconduct, it may not reject the
hearing officer’s findings of fact related to discipline unless
it determines that the factual findings are clearly erroneous.5
In determining the appropriate sanction for Clark’s violation of
5
Other aggravating and mitigating circumstances that
the Disciplinary Commission regarded differently than did the
hearing officer, such as the effect of prior disciplinary
proceedings and substantial experience in the practice of law,
did not depend upon factual findings. The Disciplinary
Commission was entitled to weigh or characterize such factors
differently than did the hearing officer.
11
ER 8.4(d), therefore, the Disciplinary Commission must rely upon
the hearing officer’s factual findings related to mitigating and
aggravating circumstances, unless those findings are clearly
erroneous.
III.
¶19 For the foregoing reasons, we reverse the Disciplinary
Commission’s conclusion that Clark violated ER 8.4(c), affirm
its conclusion that Clark violated ER 8.4(d), and remand to the
Disciplinary Commission to consider the appropriate discipline
for Clark’s violation of ER 8.4(d).
____________________________________
Ruth V. McGregor, Vice Chief Justice
CONCURRING:
__________________________________
Charles E. Jones, Chief Justice
__________________________________
Rebecca White Berch, Justice
__________________________________
Michael D. Ryan, Justice
__________________________________
Andrew D. Hurwitz, Justice
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