Cincinnati Bar Ass'n v. Wiest

• Decision Date: 19 December 2016
• Docket Number: No. 2016–0263.,2016–0263.
• Citation: 72 N.E.3d 621,2016 Ohio 8166,148 Ohio St.3d 683
• Parties: CINCINNATI BAR ASSOCIATION v. WIEST.
• Court: Ohio Supreme Court

148 Ohio St.3d 683

72 N.E.3d 621

2016 Ohio 8166

CINCINNATI BAR ASSOCIATION

v.WIEST.

No. 2016–0263.

Supreme Court of Ohio.

Submitted May 4, 2016.

Decided Dec. 19, 2016.

Ann Lugbill, James F. Brockman, and Edwin W. Patterson III, General Counsel, for relator.

Montgomery, Rennie & Jonson, L.P.A., and George D. Jonson, Cincinnati, for respondent.

PER CURIAM.

{¶ 1} Respondent, Christopher D. Wiest of Fort Mitchell, Kentucky, Attorney Registration No. 0077931, was admitted to the practice of law in Ohio in 2004 and in Kentucky in 2005. He was employed by Thompson Hine, L.L.P., from September 2005 through July 2012 and throughout the course of his employment performed environmental due-diligence services¹ for firm client Stanley Works, later known as Stanley Black and Decker ("Stanley"), a publicly traded company. Those services were typically related to Stanley's proposed mergers, acquisitions, or divestitures.

{¶ 2} In December 2014, relator, Cincinnati Bar Association, filed a complaint with the Board of Commissioners on Grievances and Discipline (now known as the Board of Professional Conduct), alleging that Wiest violated his oath of office and the Rules of Professional Conduct by using confidential information he obtained during the course and scope of representing Stanley in his personal purchase of 35,000 shares of InfoLogix, Inc., a company that Stanley sought to acquire. The panel of the board appointed to hear the matter granted relator leave to amend its complaint to allege additional facts and ethics violations—all of which arose from Wiest's trading in InfoLogix stock. At the hearing, however, relator's focus shifted from Wiest's trading in InfoLogix stock to his alleged disclosure of Stanley's confidential documents and information to the United States Securities and Exchange Commission ("SEC") during its investigation of his trading activities.

{¶ 3} Having considered the testimonial and documentary evidence submitted by the parties, the panel unanimously dismissed an alleged violation of Prof.Cond.R. 1.6(a) (prohibiting a lawyer from revealing confidential client information without informed consent) on the ground that relator's complaint failed to provide Wiest notice that his conduct during the SEC investigation was at issue, and an alleged violation of Prof.Cond.R. 1.8(b) (prohibiting a lawyer from using information relating to the representation of a client to the client's disadvantage without first obtaining the client's informed consent) based on the insufficiency of the evidence regarding the requirement that the lawyer's conduct disadvantaged the client. But the panel and board both found by clear and convincing evidence that Wiest had violated Prof.Cond.R. 8.4(b) (prohibiting a lawyer from committing an illegal act that reflects adversely on the lawyer's honesty or trustworthiness) and 8.4(c) (prohibiting a lawyer from engaging in conduct involving dishonesty, fraud, deceit, or misrepresentation). Based on that misconduct, the panel and board recommended that Wiest be suspended from the practice of law for two years with the final 18 months stayed on the condition that he engage in no further misconduct.

{¶ 4} Both Wiest and relator raise multiple objections to the board's findings of fact and misconduct, and Wiest also objects to the recommended sanction.

{¶ 5} For the reasons that follow, we sustain Wiest's first objection and dismiss the alleged violation of Prof.Cond.R. 8.4(b) on due-process grounds, overrule the parties' remaining objections, and suspend Wiest from the practice of law for two years with the second year stayed on the condition that he engage in no further misconduct.

Stipulated Facts

{¶ 6} On October 21, 2010, in the course and scope of his employment, Wiest received an e-mail from WSP Environmental and Energy, Inc. ("WSP"), an environmental consultant group that collaborated with Thompson Hine on various Stanley projects. The e-mail requested that Wiest perform due-diligence services for the potential acquisition by Stanley of InfoLogix, Inc. Attached to the e-mail was a document prepared by or for Stanley that provided details of the proposed acquisition, including Stanley's willingness to pay $4.75 a share for InfoLogix stock.

{¶ 7} Wiest had never heard of InfoLogix before he received the October 21, 2010 e-mail. Wiest understood that Stanley's interest in acquiring InfoLogix was nonpublic and confidential information from the time he received the e-mail until the acquisition was made public on December 15, 2010. He stipulated that at no time from September 2010 to December 15, 2010, did any agent of Stanley inform him that the information provided to him on October 21, 2010, ceased to be nonpublic and confidential. And at no time from October 21, 2010, through December 15, 2010, did he seek permission from anyone at Stanley, WSP, or Thompson Hine to use any nonpublic or confidential client information for securities-trading purposes.

{¶ 8} On October 21, 2010, InfoLogix publicly disclosed that its stock had been delisted from the NASDAQ stock market effective at the open of trading that day. The delisting was due to the company's failure to satisfy a minimum $2,500,000 stockholder's equity requirement. InfoLogix shares began trading over the counter with another electronic quotation service. Wiest learned of these developments shortly after they were announced but did not inquire as to whether they would have any impact on Stanley's proposed acquisition of InfoLogix. After receiving an October 26, 2010 inquiry from WSP about the status of the environmental due diligence for the proposed acquisition, Wiest completed the task and provided the results to both WSP and Stanley.

{¶ 9} On October 28, 2010, Wiest placed a market order to purchase 10,000 shares of InfoLogix common stock using his Thompson Hine 401K account. His broker purchased 9,500 shares at $2.84 each and 500 shares at $2.77 each. From November 8 through November 16, Wiest acquired an additional 25,000 shares at prices ranging from $1.95 to $2.15 a share. On November 18, as the price continued to drop, Wiest placed a day-limit order to sell 25,000 shares of the stock at a limit price of $1.35 a share. That order resulted in the sale of 13,510 shares at $1.35 a share, for a loss of $17,701.36, and left Wiest with 21,490 shares of InfoLogix stock.

{¶ 10} After the stock market closed on December 15, 2010, Stanley publicly announced that it was acquiring InfoLogix for $4.75 a share. The next day, Wiest searched the Internet for a lawyer with expertise in SEC matters and contacted an attorney in Fort Lauderdale, Florida, for advice. On the advice of that counsel, he sold his remaining shares of InfoLogix stock for a pretax profit of $56,291.97.

Panel Dismissal of Some Allegations of Misconduct Based on Lack of Notice and Insufficiency of the Evidence

The Panel Unanimously Dismissed an Alleged Violation of Prof.Cond.R. 1.6(a) on Due–Process Grounds

{¶ 11} At the hearing and in posthearing briefs, relator argued that Wiest violated Prof.Cond.R. 1.6(a) by providing confidential client information to the SEC and by testifying before the SEC without first seeking Stanley's informed consent. Wiest urged the panel to dismiss this alleged violation on the ground that relator did not provide him with adequate notice of the charge against him. He argued that in each of its complaints (its original complaint and three amended complaints), relator alleged that Wiest's misconduct occurred in the context of his trading in InfoLogix shares—not in his alleged disclosure of Stanley's confidential information to the SEC, as relator argued at the hearing.

{¶ 12} In its written report, the panel unanimously dismissed the alleged violation of Prof.Cond.R. 1.6(a) on the ground that none of relator's complaints provided Wiest with sufficient notice of the activity upon which relator intended to base the charge—i.e., that his misconduct was alleged to have occurred in the context of disclosing Stanley's confidential information to the SEC. The panel found that relator had not alleged any facts regarding Wiest's disclosure of confidential client information to the SEC in any of the complaints that it filed in this case or even in its prehearing discovery correspondence with Wiest's counsel. The panel therefore concluded that the complaint did not give Wiest sufficient notice that it was that alleged conduct—rather than his trading in InfoLogix stock—that formed the basis of his alleged ethics violation. Neither party has objected to the panel's dismissal of the alleged violation of Prof.Cond.R. 1.6(a).

We Dismiss an Alleged Violation of Prof.Cond.R. 8.4(b)

{¶ 13} Despite having found that Wiest had no notice that his alleged disclosure of Stanley's confidential information to the SEC was at issue, the panel and board found that by engaging in that conduct, Wiest violated R.C. 1333.81 (prohibiting an employee from knowingly disclosing without the employer's consent confidential information obtained in the course and scope of employment) and Prof.Cond.R. 8.4(b).

{¶ 14} Wiest objects to these findings on the ground that relator's eleventh-hour change in the theory of its case deprived him of due process. He argues that none of relator's four complaints alleged any factual allegations that would put him on notice that he was expected to defend his disclosure of information to the SEC—rather than his alleged trading activity—before the day of the hearing. He therefore contends that he did not have an adequate opportunity to prepare his defense against these allegations.

{¶ 15} In disbarment proceedings, an attorney accused of misconduct is "entitled to procedural due process, which includes fair notice of the charge." In re Ruffalo, 390 U.S. 544, 550, 88 S.Ct. 1222, 20 L.Ed.2d 117 (1968), citing In re Oliver, 333 U.S. 257, 273, 68 S.Ct. 499, 92 L.Ed. 682 (1948). "The charge must be known before the proceedings commence. [The proceedings] become a trap when,...