IN THE SUPREME COURT OF THE STATE OF OREGON In re: Complaint as to the Conduct of DAVID K. WINTER, Accused. ) ) ) ) ) ) )
Case No. 03-12
Counsel for the Bar:
Douglas G. Combs; Stacy J. Hankin
Counsel for the Accused:
None
Disciplinary Board:
Thomas H. Nelson, Chair
Disposition:
DR 1-102(A)(3). Trial Panel Opinion. Dismissed.
Effective Date of Opinion:
January 22, 2004
DECISION OF TRIAL PANEL
INTRODUCTION AND SUMMARY OF DECISION This proceeding stems from actions the Accused, David K. Winter, committed in the State of Nevada, some of which actions resulted in a public reprimand for the State Bar of Nevada (“Nevada Bar”) and consequent reciprocal public reprimand by the Oregon Supreme Court. In re Winter, SC No. S50087 (2003). The Oregon State Bar (“OSB”) in this matter is seeking to impose additional sanctions on the Accused for conduct alleged to violate Nevada law, which conduct had been a part of the basis for the original complaint to the Nevada Bar, had been brought to the Nevada Bar’s attention during the prior disciplinary proceeding, but which the Nevada Bar declined to prosecute. Because the Nevada Bar knowingly declined to prosecute the
Accused for the conduct challenged in this proceeding and because the OSB is relying on Nevada law in its prosecution in this docket, it appears that the OSB’s prosecution constitutes an attempt to construe Nevada law in a manner inconsistent with Nevada’s own interpretation. In any event, it appears that the OSB has failed to establish by clear and convincing evidence that the Accused’s conduct violates Nevada law. Consequently, the complaint should be dismissed.1
DISCUSSION The Burden of Proof OSB acknowledges that it has the burden of establishing the Accused’s misconduct in this proceeding by clear and convincing evidence. Bar Rules of Procedure (hereinafter “BR”) 5.2. Clear and convincing evidence means that the truth of the facts asserted is highly probable. In re Taylor, 319 Or 595, 600, 878 P2d 1103 (1994). The Facts The Accused represented the Gordon family in various matters. When Mr. Gordon died in 1994, the Accused had been defending him in litigation regarding his business. Thereupon the Accused probated Mr. Gordon’s estate and came to represent Mrs. Gordon, who received almost a million dollars in insurance money. The Accused advised Mrs. Gordon to create an irrevocable trust for her children and she deposited almost $800,000 of the insurance proceeds into the trust with the Accused named as trustee. The Accused at that time had a business, Trust Deeds Investments, Inc., (“TDI”), which invested in relatively illiquid trust deeds. The Accused invested the trust funds in TDI investments, and has acknowledged that he did not disclose his relationship with TDI nor that she might seek independent counsel. Ex. 10, ¶ 4. It also appears that the Accused failed to keep Mrs. Gordon fully advised of his activities on her behalf. Id. ¶ 5. Mrs. Gordon became insistent that the trust money be returned to her, but the Accused was unable or unwilling to do so because liquidating the TDI investments immediately would result in substantial losses. Consequently, Mrs. Gordon commenced a civil action against the Accused which resulted ultimately in a settlement and stipulated judgment against the Accused in the amount of $500,000. Moreover, based upon her prior experience as a bankrupt, Mrs. Gordon was concerned that the Accused might file for bankruptcy protection and discharge any debt he owed to her. Consequently, in
1
The result may have been different if the OSB were relying on Oregon law as the basis for this proceeding.
connection with settling the lawsuit, Mrs. Gordon sought some protection from such a possibility. In general, the bankruptcy code authorizes that debts incurred by wrongful conduct may not be discharged. Specifically, 11 U.S.C. § 523(4) provides that a debtor is not discharged with regard to debts for fraud or defalcation while acting in a fiduciary capacity, embezzlement, or larceny. In order to address Mrs. Gordon’s concern that the Accused seek the protection of the bankruptcy code and discharge the $500,000 debt owed her, the Accused and Mrs. Gordon’s attorney drafted an affidavit for the Accused’s signature which admitted that the Accused’s conduct in creating the debt fell within the parameters of 11 U.S.C. § 523(4) and that consequently the debt could not be discharged in bankruptcy. Exhibit 3. According to the Accused, that affidavit was false when executed and is false today. Also according to the Accused, there was an agreement to the effect that the affidavit would be confidential, could be used only in the case of the Accused’s bankruptcy, and would remain part of a confidential settlement agreement. Tr. 11. The Accused testified that he expected the affidavit to be returned upon his payment of the debt, and that the assets to repay the debt were always in place. Id. The court papers reflecting the California settlement agreement were sealed by the California court. Exhibit 4, p. 2. The California court ordered that “No person shall have access to any court records in this action without first moving this Court for an order unsealing the records and making a showing of good cause to this Court.” Id. Notwithstanding this order, the administrator for the California court provided copies of the file to the OSB at the OSB’s request. Based on the California court’s order, the trial panel excluded from evidence Exhibits 1, 2, and 6, which were the complaint, first amended complaint, and case register in Mrs. Gordon’s litigation against the Accused. All of the rest of the offered exhibits were received into evidence. Analysis There is no question that the Accused’s affidavit was false when it was executed, and there is no question that the affidavit conceivably could have resulted in a bankruptcy court’s being misled had the affidavit been submitted in a bankruptcy proceeding. It is also clear that the affidavit, if submitted to a bankruptcy court, could be highly prejudicial to the Accused and highly advantageous to his former client, Mrs. Gordon. In the event that the affidavit were filed with a bankruptcy court, the Accused would be faced with a dilemma: Tell the truth, disavow the affidavit, and thus obtain a discharge of the debt owing to Mrs. Gordon, or keep silent and tacitly condone a fraud upon both the court and upon himself. Of course, it is intent and not motive that governs legal culpability. However, such culpability first requires a clear exposition of the standard being applied, and it is the standard by which the Accused’s conduct is to be measured that is in question in this case. The Accused is being prosecuted under Rule 203(3) of the Nevada Code of Professional Responsibility. Amended Complaint ¶ 6. While over the years there have
been arguments regarding whether foreign law is a “question of fact” or a “question of law,” in this case there is significant uncertainty regarding whether, under Nevada law, the Accused’s execution of a false affidavit is a violation of Rule 203(3). To the affirmative, the OSB cites a Nevada case, In re Schaefer, 117 Nev. 496, 25 P.3d 191 (2001), for the proposition that execution of a false affidavit is sufficient cause of invoking Rule 203(3). In Schaefer, however, the accused’s conduct was egregious in the extreme and involved multiple – 17 – serious counts. On the issue of the false affidavit itself, in Schaefer that affidavit was publicly released, contained numerous misstatements of fact, and was actually submitted to the decision-maker for consideration in a pro hac vice application. In contrast, in this case the affidavit was never released; rather, it was intended to be kept confidential, and was intended to be somewhat of an insurance policy for Mrs. Gordon, the Accused’s former client. Some courts have the luxury of certifying questions of foreign law to the foreign court. See ORS 28.200 et seq. (certification of questions of law). This trial panel doubts it has any such authority. There are, however, substantial indications in the record of this proceeding that Nevada has determined that the Accused’s execution of the false affidavit does not violate Rule 203(3). Although the OSB in its Trial Memorandum stated that “The Nevada discipline [of the Accused] did not involve any issues concerning the truth of the affidavit [Exhibit 3]”, OSB Trial Memorandum at 7, it appears that the affidavit was in fact called to the attention of the Nevada authorities and that, although they knew it to be false, they took no action based upon such falsity. During the hearing, the Accused and the OSB stipulated to facts concerning Nevada’s disciplinary proceeding. The stipulated facts are reprinted below: 1. The Nevada Bar knew about the June 3, 1999, affidavit when it investigated Ms. Gordon’s complaint. 2. The Nevada Bar considered the affidavit but never pursued any charges based upon it. 3. The Nevada Bar did not pursue discipline against the Accused arising of the affidavit because Ms. Gordon lived in Washington, the Accused repaid her in full pursuant to a settlement agreement between them, affidavit was never filed with the bankruptcy court, and Ms. Gordon did cooperate with the Nevada Bar’s investigation. out had the not
Based upon the quoted stipulation, the trial panel is unable to find that the Accused’s execution of an affidavit that was never publicly released is in fact a violation of Nevada’s Rule 203(3). Indeed, assuming that the question of whether the Accused’s execution of a false affidavit that is never used constitutes a violation of Rule 203(3) could be certified to the Nevada Supreme Court, it seems likely that the Accused there would be in a position to claim that that particular issue must be
resolved in his favor as a matter of res judicata.2 This is because the Nevada Bar could have, but did not, discipline the Accused for violating Rule 203(3) when he executed the false affidavit. Of course, under Oregon law the execution of a false affidavit by itself might very legitimately be deemed a violation of the Oregon Code of Professional Responsibility. If such a case were prosecuted under Oregon law, the trial panel would be in the position to make that initial determination and to have it reviewed judicially by the Oregon Supreme Court. Here, however, the question is one of Nevada law and neither the trial panel nor any reviewing authority in Oregon has the power to announce Nevada law; that function must remain with the Nevada judiciary. In this sense, then, Nevada law is a “question of fact” in this proceeding, and based on the quoted stipulation of facts the trial panel finds that the OSB has not established by a preponderance of the evidence, let alone by clear and convincing evidence, that the Accused’s execution of the false affidavit without more is a violation of Rule 203(3). For this reason the complaint should be dismissed. DATED at Portland, Oregon, this 23rd day of December, 2003 /s/ Thomas H. Nelson Thomas H. Nelson, Trial Panel CERTIFICATE OF FILING AND SERVICE I hereby certify that I filed the foregoing DECISION OF TRIAL PANEL on the 23rd day of December, 2003, by transmitting the original via U.S. Post, first-class postage prepaid, to: Disciplinary Board Clerk Oregon State Bar 5200 S.W. Meadows Road Lake Oswego, OR 97035 I further certify that I served the foregoing DECISION OF TRIAL PANEL on the 23rd day of December, 2003, by transmitting true copies via U.S. Post, first-class postage prepaid, to: Stacy J. Hankin, Esq.
Res judicata encompasses not only matters actually decided but also matters that could have been litigated. Verret v. DeHarpport, 49 Or. App. 801, 621 P.2d 598 (1980). As the Oregon Court of Appeals stated, “* * * the judgment in the first suit not only bars all matters actually determined therein, but also every other matter which might have been litigated and decided as incident to or essentially connected therewith, either as a claim or a defense.” Id. at 809 (citation omitted).
2
Oregon State Bar 5200 S.W. Meadows Road Lake Oswego, OR 97035 David K. Winter, Esq. P.O. Box 12397 Zephyr Cove, NV 89448-4397 Douglas G. Combs, Esq. 1111 Main Street, Suite 610 Vancouver, WA 98660 DATED at Portland, Oregon, this 23rd day of December, 2003.
/s/ Thomas H. Nelson Thomas H. Nelson, OSB 78315 Trial Panel