Conduct of Brandsness, In re

• Decision Date: 09 July 1985
• Docket Number: Nos. OSB,s. OSB
• Citation: 702 P.2d 1098,299 Or. 420
• Parties: In re Complaint as to the CONDUCT OF William BRANDSNESS, Accused. 82-14; SC S30591.
• Court: Oregon Supreme Court

Page 1098

702 P.2d 1098

299 Or. 420

In re Complaint as to the CONDUCT OF William BRANDSNESS, Accused.

Nos. OSB 82-14; SC S30591.

Supreme Court of Oregon.

Argued and Submitted Oct. 9, 1984.

Decided July 9, 1985.

Daniel O'Leary, Portland, argued the cause for the accused. With him on the brief were Robert K. Udziela and Pozzi, Wilson, Atchison, O'Leahy & Conboy, Portland

John P. Cooney, Medford, argued the cause for the Oregon State Bar. With him on the brief was George A. Riemer, Portland.

Before LENT, P.J., and LINDE, CAMPBELL, ROBERTS, CARSON and JONES, JJ., and PETERSON, C.J., by stipulation. ^*

PER CURIAM.

In 1982, ¹ the Oregon State Bar filed a complaint against the accused alleging that his representation of the husband in a dissolution proceeding constituted a conflict of interest in violation of DR 5-105, because the accused formerly had represented both the husband and wife in business matters and in the execution of mutual wills.

BACKGROUND

On April 19, 1979, John Zingg retained the accused. Mr. Zingg, a short time before, together with his wife, Anita, had acquired an option to buy a retail business in Klamath Falls, where the accused practices law. The accused, after meeting with Mr. Zingg, Mrs. Zingg, the seller, the seller's lawyer, and an accountant, restructured the purchase, prepared documents and subsequently assisted in concluding the sale of the business corporation to the Zinggs. Mr. and Mrs. Zingg became jointly and individually liable on the security agreement and loan used to finance the purchase. The cash used to pay the seller was derived almost entirely from Mr. Zingg's earnings; because Mrs. Zingg did not work outside the home, her financial contribution to the purchase cannot be quantified. Mr. Zingg was general manager of the business, and Mrs. Zingg worked as a part-time salesperson. Mr. Zingg served as President of the corporation that ran the business, Mrs. Zingg was Secretary-Treasurer, and their daughter was Vice-President. The three comprised the Board of Directors and the shareholders of the business. ² The accused served as corporate counsel. The accused and Mr. Zingg met occasionally to discuss business. Mrs. Zingg was not present at those meetings.

In December 1979, the accused prepared new wills modifying the simple mutual wills that Mr. and Mrs. Zingg had executed prior to retaining the accused. Apparently, the only modifications he made established the Zingg's oldest child as guardian of the two younger children in the event both parents died during the younger children's minority, and provided for a trust during the minority of each of the younger children. About 10 months later, in October 1980, Mrs. Zingg met with the accused in his office and requested that he change her will without changing Mr. Zingg's. The accused explained that he could not do so without informing Mr. Zingg. When Mrs. Zingg persisted, the accused explained that he could not change her will because he represented Mr. Zingg. He advised Mrs. Zingg to consult another lawyer, which ultimately she did.

In April 1981, Mr. Zingg began to consider expanding the business through a franchising plan. Mrs. Zingg expressed reservations. Mr. Zingg and the accused agreed to call a meeting of the corporate directors to discuss the issue, and the meeting resulted in a unanimous resolution to empower Mr. Zingg to enter into franchise negotiations. The accused had the minutes of the meeting drawn up, but the next day, when asked to sign them, Mrs. Zingg wrote in the space reserved for her signature, "Against my will." At approximately the same time, she told the accused that she had retained her own lawyer. Shortly thereafter, in June 1981, Mrs. Zingg wrote to the accused stating that she had written a will superseding all prior wills, and that the new one was at the offices of another Klamath Falls lawyer. Further, the record clearly shows that at least by October 23, 1981, Mrs. Zingg had retained her own business lawyer.

Domestic relations between the Zinggs deteriorated, and on November 1, 1981, Mr. Zingg asked the accused to represent him in a dissolution proceeding. The accused agreed to do so and the next day filed the initial court documents and obtained a temporary restraining order granting Mr. Zingg the temporary use, possession and control of the business and restraining Mrs. Zingg from encumbering or disposing of the assets of the business. Mrs. Zingg subsequently filed a complaint with the Bar, leading to these proceedings.

The Trial Board found, among other things: that because Mr. Zingg was the alter-ego of the corporation, the accused's representation of the corporation was a representation of Mr. Zingg and not of Mrs. Zingg; that the accused represented Mrs. Zingg in respect only to the will he drafted for her in December 1979; that thereafter, she was not his client; and that in November 1980, when the accused declined to represent her in drafting a revised will, he told her that he represented Mr. Zingg. The Trial Board concluded that the accused therefore did not violate DR 5-105 "in any respect," and recommended that the charges be dismissed.

The Disciplinary Review Board determined that "this case presents a closer question than that indicated by the Trial Board," and determined, among other things: that the accused represented both Zinggs in connection with the purchase and operation of the business; that his refusal to rewrite Mrs. Zingg's will in November 1980, and his statement that he represented Mr. Zingg effectively terminated his professional employment by her; and that thereafter the accused was Mr. Zingg's lawyer, not hers, and she knew it. The Disciplinary Review Board concluded that the Bar did not present clear and convincing evidence of a violation of DR 5-105 by the accused, and recommended that the charges be dismissed. The Bar seeks review.

DISCIPLINARY RULE 5-105

In its complaint, the Bar charges the accused with violating DR 5-105, which provides:

"DR 5-105 Refusing to Accept or Continue Employment if the Interest of Another Client May Impair the Independent Professional Judgment of the Lawyer.

"(A) A lawyer shall decline proffered employment if the exercise of his independent professional judgment in behalf of a client will be or is likely to be adversely affected by the acceptance of the proffered employment * * *.

"(B) A lawyer shall not continue multiple employment if the exercise of his independent professional judgment in behalf of a client will be or is likely to be adversely affected by his representation of another client * * *." ³

Two aspects of the rule are not readily apparent from the precise wording of the rule. First, the words "conflicts of interest" do not appear in the rule; rather the rule is couched in terms of the adverse affect upon the exercise of the lawyer's independent judgment. However, by judicial interpretation, this disciplinary rule has been determined to concern what is commonly referred to as conflicts of interest. See In re Banks, 283 Or. 459, 476-77, 584 P.2d 284 (1978); see also In re Thorp, 296 Or. 666, 677, 679 P.2d 857 (1984).

The second aspect not readily apparent is that this rule does not in terms apply to conflicts generated by the lawyer's representation of a new or present client against a former client. "This befogged area" is one of the complexities of modern practice that the existing Code of Ethics does not cover. Denecke, Complexities of Modern Practice Require Changes in Oregon Ethics Code, 19 Will.L.Rev. 621, 635 (1983). Both the American Bar Association and the Oregon State Bar have proposed rules to cover the situation. ⁴ However, we have held that despite its language, the current version of DR 5-105 does apply to a lawyer's conflict when representing a present client against a former client. In re Banks, supra, 283 Or. at 476-78, 584 P.2d 284; In re Thorp, supra, 296 Or. at 677, 679 P.2d 857.

Thus, DR 5-105, by its terms and by judicial interpretation applies to conflicts generated by the lawyer's simultaneous representation of two current clients (the so-called "open file" conflict) and by representation of a new or present client against a former client (the so-called "closed file" conflict). These two relationships that may give rise to a conflict have been characterized as "professional employment" and "professional relationship," respectively. In re Adams, 293 Or. 727, 737, 652 P.2d 787 (1982). Because, as discussed hereinafter, we conclude that the accused did not have a lawyer-client relationship with Mrs. Zingg at the time of the alleged conflict herein, we do not further examine the particular aspects of a conflict generated by the simultaneous representation of two or more present clients.

The standard to be used in determining whether a "closed file" conflict exists has been variously stated. In In re Banks, supra, 283 Or. at 477-78, 584 P.2d 284, this court said that DR 5-105 prohibited "anything from being done which would tend to affect a former client injuriously in any matter in which the former client has been represented." In commenting on another disciplinary rule (DR 7-101(A)(3)), ⁵ this court, in In re Adams, supra, 293 Or. at 737, 652 P.2d 787, relying on the pre-Code case of In re Nicholas D. Zafiratos, 259 Or. 276, 281, 486 P.2d 550 (1971), approved the following language: " * * * [A] lawyer may not undertake litigation for a subsequent client which, if successful, might reasonably impose liability on a former client by reason of a transaction in which the lawyer represented the former client * * *." We recently quoted with approval the following language from Drinker, Legal Ethics 105 (1953), quoting Morrow, J., in In re Boone, 83 F. 944, 952-53 (CCND Cal 1897):

"The test * * * is whether his accepting the new retainer will require him, in forwarding the interests of his new client, to do anything which will injuriously affect his former client in any matter...