Matter of Sealed Appellant, 98-31006

• Decision Date: 11 November 1999
• Docket Number: No. 98-31006,98-31006
• Parties: (5th Cir. 1999) In the Matter of: SEALED APPELLANT, Appellant,
• Court: U.S. Court of Appeals — Fifth Circuit

Page 666

194 F.3d 666 (5th Cir. 1999)

In the Matter of: SEALED APPELLANT, Appellant,

No. 98-31006

UNITED STATES COURT OF APPEALS FOR THE FIFTH CIRCUIT

November 11, 1999

[Copyrighted Material Omitted] Appeal from the United States District Court For the Eastern District of Louisiana

Before POLITZ, HIGGINBOTHAM, and DAVIS, Circuit Judges.

POLITZ, Circuit Judge:

Stephen F. Hurstell, an attorney at law, appeals an order disbarring him from practice in the United States District Court for the Eastern District of Louisiana. Hurstell contends that the district court denied him due process, erred in interpreting and applying the Louisiana Rules of Professional Conduct, and abused its discretion by resorting to the extreme sanction of disbarment. For the reasons assigned, we affirm.

BACKGROUND

In December 1996, Chief Judge Sear received a letter from Loretta Argrett, Assistant Attorney General for the Tax Division of the Department of Justice, charging that Stephen Hurstell engaged in professional misconduct in connection with cases in that court, namely The Adrian Le Boeuf, Sr. Family Trust v. United States ¹ and Le Boeuf v. Richard v. United States.² The letter stated that Hurstell backdated the endorsement of a stock certificate to reflect an earlier transfer of the certificate from a client, Adrian Le Boeuf, to the client's trust, Le Boeuf Family Trust. The letter also stated that Hurstell lied or was deliberately misleading under oath when deposed by the government about the date of the endorsement.

The stock certificate in question was for shares in Gulf South Marine Transportation, Inc., a tug-boat company in which Le Boeuf owned a one-half interest. In 1987, Le Boeuf pled guilty to smuggling marihuana aboard vessels owned by his company and consulted Hurstell about an IRS tax audit. In an effort to shelter Le Boeuf's assets before any IRS assessment was made, Hurstell set up a trust for Le Boeuf dated September 1, 1987. Hurstell used two authentic form donations in his effort to transfer Le Boeuf's property -- the shares in Gulf South and some immovable property -- into the trust. The text of the forms did not specifically identify the property to be donated. For the form dealing with the immovable property, an Exhibit A was attached that was incorporated by reference and described the immovable property. For the form that purportedly dealt with the stock, an Exhibit A was incorporated by reference but no Exhibit A was attached. Though a copy of the front of the Gulf South certificate was attached,³ there was no notation that it was Exhibit A.

In 1989, the IRS fixed Le Boeuf's assessment at over $100,000. In 1991, Le Boeuf filed for bankruptcy and received a discharge of his federal tax liability for penalties and interest. Neither the stock nor the immovable property was listed as an asset in Le Boeuf's bankruptcy schedules.

In March 1995, Hurstell, on behalf of the trust, sought to inspect Gulf South's books and records. The company refused, contending that the trust was not the record owner. Le Boeuf joined the suit as the record owner. The suit was settled by a consent order requiring the trust to produce the original trust document, the original donation, and the original stock certificate. Gulf South informed an IRS collection officer that Le Boeuf was the owner of the stock, and the IRS attached the stock certificate on the theory that Le Boeuf owned the stock in 1989, making it subject to the IRS's levy or, alternatively, that if there was a transfer of stock, it was subject to revocation.

In June 1995, the trust filed suit against the United States in the Eastern District of Louisiana, alleging wrongful levy on the trust's Gulf South stock. In the complaint, the trust asserted that "[s]aid shares of stock were endorsed over to the Adrian Le Boeuf, Sr. Family Trust on September 1, 1987." Attached to the complaint was an affidavit signed by Hurstell in which he swore that the factual assertions of the complaint were accurate, true, and complete to the best of his knowledge, information, and belief. In September 1995 an attorney with the Tax Division of the DOJ deposed Hurstell as a witness to the relevant documents. When questioned about the execution of the stock transfer, Hurstell testified that, to the best of his recollection, he signed the back of the certificate in the presence of Adrian Le Boeuf on September 1, 1987. Before the deposition took place, the National Forensic Laboratory of the IRS performed an ink analysis that established that Hurstell signed the back of the stock certificate in ink not manufactured until 1994.

Confronted with the ink analysis, Hurstell conferred with Le Boeuf, who reminded him that Hurstell had completed the back of the stock certificate sometime in 1995 to comply with the consent order. Hurstell's attorney wrote to the DOJ and explained that Hurstell's recollection was refreshed and that his deposition testimony may have been unintentionally confusing or inaccurate. Hurstell's counsel explained that the endorsement on the stock certificate may not have been signed by Hurstell on September 1, 1987, but, rather, at a later date. Hurstell's counsel offered to have him redeposed. In response, the DOJ filed the complaint letter that initiated disciplinary proceedings.

The district court, acting en banc, voted unanimously that the complaint should be docketed and allotted. The case was allotted to Judge Vance who appointed George Domas to investigate the disciplinary complaint and to issue a report as required by Rule III.B.1 of the Eastern District's Rules of Disciplinary Enforcement. Hurstell was served with copies of the complaint letter and the order noting that the disciplinary complaint would be investigated by Domas. After completing his investigation, Domas filed a report concluding that Hurstell's backdating conduct violated Rule 4.1(a) ⁴ and Rule 8.4(c) ⁵ of the Louisiana Rules of Professional Conduct. According to the report, the evidence was inconclusive as to whether Hurstell lied or was deliberately misleading under oath concerning the date of the transfer of the stock certificate.

The full court reviewed the report and voted unanimously that Hurstell should be served a copy thereof and should be ordered to show cause as to why he should not be disciplined. Hurstell requested a hearing and filed a written response addressing both charges - the backdating of the endorsement of the stock certificate and the lying or being deliberately misleading while under oath.

Hurstell admitted at the disciplinary hearing that he did not attach the original stock certificate to the original donation, and that he did not complete the stock transfer form on the back of the original stock certificate at the time the donation was signed. He explained that he prepared two separate donations because he did not want everyone to know Le Boeuf's business, and that a donation of stock did not require recordation to affect third parties. The stock certificate was not presented to the company, and Le Boeuf's name remained on the company books until 1995.

Hurstell's principal defenses were that backdating the endorsement was immaterial because all that was legally necessary to accomplish the donation was an act of donation in authentic form, and that he had a memory lapse when he gave the incorrect testimony at his deposition. He also advanced his psychiatric problems and alcoholism as mitigating factors, stating that, when he was under the influence of alcohol, he sometimes had memory lapses and blackouts. He did not testify that he was under the influence of alcohol either when he executed the document in issue in 1995 or when he gave his deposition.

The district court determined that there was clear and convincing evidence that Hurstell violated Rules 4.1(a) and 8.4(c), finding that his conduct in backdating the endorsement of the stock certificate was a material misrepresentation and that his "refreshed" memory was the product of being confronted by the ink analysis. The court also found that Hurstell was intentionally deceptive when responding to questions during his deposition. The court was unpersuaded by Hurstell's mitigating evidence and rejected his constitutional claims of denial of due process. Meeting en banc, the judges of the district court voted unanimously to disbar Hurstell from practicing before it. Hurstell timely appealed.

ANALYSIS

Standard of Review

Disbarment cases are quasi-criminal proceedings, and any disciplinary rules employed to impose disbarment must be strictly construed, resolving ambiguities in favor of the attorney charged. ⁶ A federal court may disbar an attorney only upon presentation of clear and convincing evidence sufficient to support the finding of one or more violations warranting this sanction.⁷ We review de novo whether an attorney's conduct is subject to sanction.⁸ A district court's imposition of a particular sanction is reviewed for an abuse of discretion.⁹ A district court abuses its discretion when its ruling is based on an erroneous view of the law or a clearly erroneous assessment of the evidence.¹⁰

Due Process

An attorney subject to disciplinary proceedings is entitled to due process.¹¹ Hurstell contends that the district court denied him procedural due process by failing to provide him notice of the specific charges against him, and by failing to find specifically that he was not morally fit to practice.

First, Hurstell maintains that he was not given adequate notice that he was under investigation for the alleged backdating of the stock certificate. He cites the letter of complaint, which states that "one of the instances of misconduct occurred in connection with cases pending in this court." And, according to Hurtsell, the one instance of misconduct that occurred in connection with cases pending in that court and about which he was on notice was his deposition testimony, testimony determined by the...