Disciplinary Bd. of the Supreme Court of State v. Johnston (In re Johnston)

• Decision Date: 01 December 2015
• Docket Number: No. 20150048.,20150048.
• Parties: In the Matter of the Application for DISCIPLINARY ACTION AGAINST DeWayne Alan JOHNSTON, a Member of the Bar of the State of North Dakota. Disciplinary Board of the Supreme Court of the State of North Dakota, Petitioner v. DeWayne Alan Johnston, Respondent.
• Court: North Dakota Supreme Court

872 N.W.2d 300

In the Matter of the Application for DISCIPLINARY ACTION AGAINST DeWayne Alan JOHNSTON, a Member of the Bar of the State of North Dakota.Disciplinary Board of the Supreme Court of the State of North Dakota, Petitioner

v.DeWayne Alan Johnston, Respondent.

No. 20150048.

Supreme Court of North Dakota.

Dec. 1, 2015.

Brent J. Edison (argued), Fargo, N.D., for petitioner.

Kara J. Johnson, Disciplinary Counsel, Bismarck, N.D., for petitioner.

DeWayne A. Johnston (argued) and Jacey L. Johnston (appeared), Grand Forks, N.D., for respondent.

REPRIMAND ORDERED

PER CURIAM.

[¶ 1] Attorney DeWayne A. Johnston objects to a report of a hearing panel of the Disciplinary Board recommending that he be reprimanded, that he refund certain amounts billed to a client, that he complete six hours of continuing legal education, and that he pay the costs and expenses of the disciplinary proceeding in the amount of $8,285.61. We conclude clear and convincing evidence establishes Johnston violated N.D.R. Prof. Conduct 5.3, responsibilities regarding nonlawyer assistants. We order Johnston be reprimanded, complete six hours of Continuing Legal Education on conflicts of interest in addition to the mandatory requirements, and pay partial costs and expenses for the disciplinary proceeding of $5,523.74.

I

[¶ 2] DeWayne Johnston has been licensed as a lawyer in North Dakota since September 2000. In 2008, Darrin West retained Johnston and his law firm to recover West's $15,000 investment in a business partnership with Corey Hanson and Stacey Hanson. In August 2008, Johnston sued the Hansons on behalf of West. In March 2009, however, the lawsuit was stayed after the Hansons filed for bankruptcy in Minnesota. The Hansons employed attorney Richard Farroh to file their bankruptcy and listed the debt owed to West as an item of debt to discharge. At the time, Farroh employed Todd Chrzanowski as a paralegal. Chrzanowski was admitted to the bar in Minnesota in 1999, but was not licensed to practice law in Minnesota when he assisted Farroh as a paralegal. Chrzanowski has never been licensed to practice law in North Dakota.

[¶ 3] In June 2009, Johnston began an adversary proceeding in the bankruptcy court on West's behalf, seeking an order that the Hansons' debt to West was nondischargeable. In August 2010, the bankruptcy court ruled the Hansons' debt to West was excepted from a general discharge. In October 2010, the bankruptcy court ordered costs be inserted into the judgment in the August 2010 proceeding. In 2011, Johnston initiated a second lawsuit in the state court on West's behalf against Corey Hanson, seeking to collect the debt.

[¶ 4] In January 2011, the Johnston Law Office hired Chrzanowski as a paralegal. Johnston made no effort to screen Chrzanowski from the West matter, despite his prior work on the Hansons' behalf as attorney Farroh's paralegal. Rather, Chrzanowski worked directly on West's case against Hanson, serving as a primary contact with West, meeting and exchanging emails with West, discussing litigation strategy, and drafting pleadings that were subsequently signed by Johnston.

[¶ 5] Johnston ultimately secured a judgment in West's favor for more than $40,000. The Johnston law office had billed West over $24,000, which was paid by West's father. Despite Johnston's collection efforts, West did not recover any portion of the $15,000 investment from Hanson. Evidence introduced at the hearing showed Hanson was on housing assistance, fuel assistance, and Medicaid and had qualified for the earned income credit for tax years 2007 through 2009. Chrzanowski left the Johnston law firm in December 2012. Johnston's law firm continued limited work on West's collection efforts until approximately August 2013.

[¶ 6] In May 2014, a petition for discipline was brought against Johnston alleging violations of N.D.R. Prof. Conduct 1.5(a), fees; N.D.R. Prof. Conduct 1.7(a) and (c), conflict of interest: general rule; N.D.R. Prof. Conduct 1.9, duties to former client; N.D.R. Prof. Conduct 5.3(a), (b), and (c), responsibilities regarding nonlawyer assistants; and N.D.R. Prof. Conduct 5.5(a), (d), and (e), unauthorized practice of law. Johnston denied the allegations. In October 2014, a hearing was held before a hearing panel of the Disciplinary Board. The hearing panel ruled Johnston had violated the professional conduct rules alleged and issued findings of fact, conclusions of law, and recommendations for discipline. Johnston filed objections to the hearing panel's report.

[¶ 7] The hearing panel had jurisdiction under N.D.R. Lawyer Discipl. 3.1(E). Johnston filed timely objections to the hearing panel's report under N.D.R. Lawyer Discipl. 3.1(F). This Court has jurisdiction under N.D. Const. art. VI, § 3, N.D.C.C. § 27–14–01, and N.D.R. Lawyer Discipl. 3.1(F).

II

[¶ 8] Our standard for reviewing disciplinary proceedings is well-established:

We review disciplinary proceedings de novo on the record. Disciplinary counsel must prove each alleged violation by clear and convincing evidence, which means the trier of fact must be reasonably satisfied with the facts the evidence tends to prove and thus be led to a firm belief or conviction. We give the Disciplinary Board's findings, conclusions, and recommendations due weight, but we do not act as a mere rubber stamp. We consider each disciplinary matter on its own facts to decide which sanction, if any, is appropriate.

In re Disciplinary Action Against Hoffman, 2013 ND 137, ¶ 5, 834 N.W.2d 636 (quoting In re Disciplinary Action Against Hann, 2012 ND 160, ¶ 14, 819 N.W.2d 498 ). This Court accords special deference to the hearing panel's findings on matters of conflicting evidence and witness credibility because the panel has the opportunity to hear witnesses and observe their demeanor. See In re Disciplinary Action Against Askew, 2010 ND 7, ¶ 9, 776 N.W.2d 816.

III

[¶ 9] The hearing panel found Johnston violated N.D.R. Prof. Conduct 5.3(a), (b), and (c) by failing to adequately supervise paralegal Chrzanowski when Johnston failed to screen Chrzanowski from Johnston's litigation on behalf of West involving the same or a substantially related matter in violation of N.D.R. Prof. Conduct 1.7(a) and (c), and 1.9 ; and when Johnston purportedly held Chrzanowski out as a lawyer and turned West's legal matter over to Chrzanowski in violation of N.D.R. Prof. Conduct 5.5(a) and (d). The hearing panel also found Johnston violated N.D.R. Prof. Conduct 1.5(a) by charging an unreasonable fee in the unsuccessful attempt to recover the client's investment from an insolvent individual. Johnston objected and raises three main issues to this Court in response to the Board's recommendations.

A

[¶ 10] The hearing panel found, and disciplinary counsel contends, Johnston failed to screen Chrzanowski from involvement in litigation involving the same or a substantially related matter and, essentially, allowed Chrzanowski to "switch sides," in violation of N.D.R. Prof. Conduct 1.7(a) and (c), 1.9, and 5.3(a), (b), and (c).

[¶ 11] Rule 5.3, N.D.R. Prof. Conduct, addressing a lawyer's responsibilities regarding nonlawyer assistants, states:

With respect to a nonlawyer employed or retained by or associated with a lawyer:

(a) a partner, and a lawyer who individually or together with other lawyers has comparable managerial authority in a law firm, shall make reasonable efforts to ensure that the firm has in effect measures giving reasonable assurance that the nonlawyer's conduct is compatible with the professional obligations of the lawyer;

(b) the lawyer having direct supervisory authority over the nonlawyer shall make reasonable efforts to ensure that the nonlawyer's conduct is compatible with the professional obligations of the lawyer; and

(c) a lawyer shall be responsible for conduct of a nonlawyer that would be a violation of these Rules if:

(1) the lawyer orders or, with knowledge of the specific conduct, ratifies the conduct involved; or

(2) the lawyer is a partner or has comparable managerial authority in the law firm in which the nonlawyer is employed, or has direct supervisory authority over the nonlawyer, and knows of the conduct at a time when its consequences can be avoided or mitigated, but fails to take reasonable action.

(d) In addition to paragraphs (a), (b) and (c), the following apply with respect to a legal assistant employed or retained by or associated with a lawyer:

(1) A lawyer may delegate to a legal assistant any task normally performed by the lawyer except those tasks proscribed to one not licensed as a lawyer by statute, court rule, administrative rule or regulation, controlling authority, or these Rules.

(2) A lawyer may not delegate to a legal assistant:

(i) responsibility for establishing a lawyer-client relationship;

(ii) responsibility for establishing the amount of a fee to be charged for a legal service;

(iii) responsibility for a legal opinion rendered to a client; or

(iv) responsibility for the work product.

(3) The lawyer shall make reasonable efforts to ensure that clients, courts, and other lawyers are aware that a legal assistant is not licensed to practice law.

(Emphasis added.) Comments 1 and 2 to N.D.R. Prof. Conduct 5.3 further explain:

Lawyers generally employ nonlawyers in their practice, including secretaries, legal assistants, investigators, law student interns, and paraprofessionals. These individuals, whether employees or independent contractors, act for the lawyer in rendition of the lawyer's professional services. A lawyer must give such nonlawyers appropriate instruction and supervision concerning the ethical aspects of their employment, particularly regarding the obligation not to disclose information relating to representation of the client, and is responsible for their work product. The measures employed in supervising nonlawyers should take account of the fact that they do not have legal training and are not subject to professional discipline.

Paragraph (a) requires lawyers with managerial authority

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