Attorney Grievance v. Bear

• Decision Date: 08 December 2000
• Docket Number: Misc. AG No. 32
• Citation: 362 Md. 123,763 A.2d 175
• Parties: ATTORNEY GRIEVANCE COMMISSION OF MARYLAND v. Robert Harley BEAR.
• Court: Maryland Court of Appeals

763 A.2d 175

362 Md. 123

ATTORNEY GRIEVANCE COMMISSION OF MARYLAND v. Robert Harley BEAR.

Misc. AG No. 32, Sept. Term, 1999.

Court of Appeals of Maryland.

December 8, 2000.

Melvin Hirshman, Bar Counsel and John C. Broderick, Asst. Bar Counsel for the Attorney Grievance Com'n of Maryland, for Petitioner.

Joseph R. Whaley, Rockville, for Respondent.

Argued before BELL, C.J., and ELDRIDGE, RODOWSKY¹, RAKER, WILNER, CATHELL and HARRELL, JJ.

RODOWSKY, Judge.

In this attorney grievance matter Bar Counsel's entire case consisted of introducing into evidence the opinion by the Superior Court of the District of Columbia (the Superior Court) in Maxwell v. Gallagher, Civil Action No. 88-10687, and the opinion by the District of Columbia Court of Appeals in Maxwell v. Gallagher, 709 A.2d 100 (D.C.1998). The latter affirmed that part of the judgment of the Superior Court which ordered, based on conflict of interests, rescission against two attorneys of a corporate stock issuance. The principal question presented here is whether Bar Counsel may make offensive use of nonmutual collateral estoppel where the original findings of fact to which preclusive effect is sought to be given were made under a less stringent standard of proof than is required in an attorney disciplinary action. As explained below we shall hold that collateral estoppel, i.e., issue preclusion, may not be based on the Superior Court judgment. Further, we shall hold that the opinions of the District of Columbia courts were not admissible in evidence, on the ground on which they were admitted over objection, to prove the facts which the Superior Court found based on disputed testimony.

Maxwell in the caption of the Superior Court action is James S. Maxwell (Maxwell). At the time of the events with which we are concerned here, Maxwell and the respondent, Robert H. Bear (Bear), were partners in the practice of law in the District of Columbia. Both were also admitted to the bar of this Court. Bar Counsel brought charges against both, arising out of their firm's having acquired eleven of the one hundred outstanding shares of the stock of Gallagher & Company, a District of Columbia corporation that was engaged in the real estate brokerage business. Violation of Maryland Rule of Professional Conduct (MRPC) 1.8(a) was the principal charge brought by Bar Counsel against Maxwell and Bear. MRPC 1.8(a) states:

"A lawyer shall not enter into a business, financial or property transaction with a client unless:

"(1) The transaction is fair and equitable to the client; and

"(2) The client is advised to seek the advice of independent counsel in the transaction and is given a reasonable opportunity to do so."

No disciplinary proceedings have been brought in the District of Columbia based on the transaction that is the subject of the Maryland charges.²

Our tale begins in 1984 when Eugene Gallagher (Gallagher), a real estate broker then employed at Merrill Lynch, and Maxwell met in connection with the latter's purchase of investment properties. In 1986 they formed, but never funded, a corporation that was to serve as the general partner in limited partnerships created to buy and sell apartment buildings. Gallagher subsequently decided to set up his own real estate brokerage business, and in July 1986 he, Maxwell, and Bear leased offices on McKinley Street in the District of Columbia for the real estate business and for the law practice. The law firm anticipated being engaged to handle legal work generated by the real estate transactions.

Gallagher & Company was incorporated in October 1986 with Gallagher, Maxwell, and Bear serving as the interim directors, pending the organizational meeting of shareholders. That meeting was not formally held until March 23, 1988.

In the interim, two real estate brokers, Daniel O'Lone (O'Lone) and William Pollard (Pollard), left Merrill Lynch and joined Gallagher & Company. Each expected to become a shareholder in Gallagher & Company. Pollard had legal troubles of a civil and potentially criminal nature. Also during this period Maxwell and Bear, either individually or through their partnership, represented Gallagher & Company, Gallagher individually, O'Lone, and Pollard in various legal matters.³ With respect to the stock, Maxwell arranged for a meeting attended by Gallagher, Pollard, O'Lone, Maxwell, and Bear on December 18, 1987. Gallagher was under the impression that the purpose of the meeting was to discuss one or more disputes with Merrill Lynch concerning commissions in which the law firm was representing Gallagher & Company. The meeting actually involved the division of ownership in Gallagher & Company, and discussions at the meeting became very heated. The Superior Court found that "Mr. Bear asked Mr. Maxwell why their presence at the meeting was necessary, to which Mr. Maxwell replied that they were there to ensure that the law firm got business." The Superior Court also found an absence of any "evidence that the option of securing new and independent counsel was discussed to protect the interest of the named persons and corporate entity." It was Maxwell, in the view of the Superior Court, who was "the more active partner in this scenario and throughout the events which [gave] rise to [the] action." Further describing these events the Superior Court said that "[t]o insure its relative position in the corporation, the law firm, more specifically, Mr. Maxwell, helped to draw the battle lines between Mr. Gallagher and Messrs. Pollard and O'Lone."

On January 28, 1988, the five individuals again met and signed a document dividing the stock in Gallagher & Company as follows: Gallagher, forty-nine shares; Pollard, twenty shares; O'Lone, twenty shares; Maxwell & Bear, eleven shares. O'Lone and Pollard each paid between $10,000 and $11,000 for their stock. Although the law firm took the position in the Superior Court that its stock was issued in payment for legal services, neither those services nor the stock were ever valued.

The District of Columbia Court of Appeals selected for inclusion in its opinion what the Superior Court had found to be "one of `the most blatant examples'" of breach of fiduciary duty in these relationships. Maxwell, 709 A.2d at 103 n. 6. It "was Maxwell's first `advis[ing] Mr. Gallagher that resolution of Mr. Pollard's ownership interest ... should await resolution of [Mr. Pollard's] legal difficulties,' then `in an about face' providing `contrary advice to Mr. Pollard to move with dispatch in obtaining an interest in the corporation' by which Pollard became beholden to Mr. Maxwell." Id.

Stock in Gallagher & Company was issued in March 1988 in the proportions that had been agreed upon in January. The Superior Court found that thereafter, "Mr. Maxwell belatedly advised Mr. Gallagher in late March 1988 that [Mr. Gallagher] should acquire independent legal counsel." The District of Columbia trial court also found that Maxwell told O'Lone that Maxwell had recommended a specific attorney to Gallagher because Maxwell could control that attorney.

In May 1988, Pollard's legal difficulties led to the sale of his stock in Gallagher & Company to O'Lone for $35,000. The purchase money was obtained by a bank loan to Gallagher & Company which was personally guaranteed by Gallagher and O'Lone. Gallagher & Company then loaned that money to O'Lone to enable him to purchase Pollard's stock. Following the sale, Gallagher held forty-nine percent of the corporation, O'Lone held forty percent, and the firm of Maxwell & Bear held eleven percent. The Superior Court found that "Mr. Maxwell told Mr. O'Lone that they were now in control of the company and had the necessary voting power to block any effort of Gallagher & Company to recover from Mr. O'Lone if he did not pay back the money he owed to the company for the purchase of Mr. Pollard's stock."

In October 1988 Gallagher & Company demanded the return of the stock issued to Maxwell & Bear. This prompted Maxwell and the law firm to file a declaratory judgment action in the Superior Court seeking confirmation of the law firm's right to retain ownership of the shares issued to it. Gallagher & Company, Gallagher, and O'Lone counterclaimed, "adding Bear as a counter-defendant." Maxwell, 709 A.2d at 101.

The Superior Court filed a sixty-one page opinion in the action containing fifty-six paragraphs of fact-findings. That court ordered that the "defendant/counter-plaintiffs are entitled to the return of the eleven (11) shares of stock" and that they "may by this Order take the steps necessary to void the stock certificates issued to the law firm." The Superior Court further concluded that there were no compensatory damages, but it awarded punitive damages against Maxwell, Bear, and the law firm in the amount of $75,000. In a footnote to the conclusions of law portion of its opinion, the Superior Court said with respect to Bear:

"Throughout the events which are the subject of this action, Mr. Maxwell was the primary actor; however, his acts are imputed to the law firm and the remaining partner, Mr. Bear. The evidence of record further demonstrates that Mr. Bear had knowledge of the activities of Mr. Maxwell, and even on one (1) occasion questioned the presence and participation of the firm in the stock distribution discussions; however, he neither withdrew from the fracas nor required that the firm adhere to the mandatory requirements of the Code of Professional Responsibility as discussed herein."

The District of Columbia Court of Appeals affirmed that portion of the judgment voiding the stock issuance to Maxwell & Bear based on breach of the duty of loyalty, but the appellate court reversed the punitive damages award. Maxwell, 709 A.2d at 101.

Thereafter Bar Counsel brought the instant disciplinary proceeding against Maxwell and against Bear. Maxwell consented to a reprimand so that this action continues only as to Bear. We referred the matter for hearing to Judge D....