In re Ellis, (OSB No. 09–54

CourtSupreme Court of Oregon
Writing for the CourtPER CURIAM.
Citation344 P.3d 425
Decision Date20 February 2015
Docket Number)(OSB No. 09–55,(OSB No. 09–54,SC S061385).,SC S061385
PartiesIn re Complaint as to the CONDUCT OF Barnes H. ELLIS, Accused. In re Complaint as to the Conduct of Lois O. Rosenbaum, Accused.

344 P.3d 425

In re Complaint as to the CONDUCT OF Barnes H. ELLIS, Accused.
In re Complaint as to the Conduct of Lois O. Rosenbaum, Accused.

(OSB No. 09–54; SC S061385)(OSB No. 09–55; SC S061385).

Supreme Court of Oregon.

Argued and Submitted March 4, 2014.
Decided Feb. 20, 2015.

Complaints dismissed.

[344 P.3d 427]

On review of the decision of the trial panel of the Disciplinary Board.
W. Michael Gillette, Schwabe Williamson & Wyatt PC, Portland, argued the cause and filed the briefs for the Accuseds.

Mary A. Cooper, Assistant Disciplinary Counsel, Tigard, argued the cause and filed the brief for the Oregon State Bar.

Before Balmer, Chief Justice, and Walters, Linder, Landau, Brewer, and Baldwin, Justices.** PER CURIAM.

This lawyer disciplinary proceeding involves several allegations under the former Code of Professional Responsibility.1 The accuseds (also individually referred to as Ellis or Rosenbaum in this opinion) represented a public company involved in various protracted proceedings over several years and also represented some company directors, officers, and managers during some of those same proceedings. The Bar charged the accuseds in separate complaints with multiple violations of several former Disciplinary Rules, including former DR 5–105(C) (waivable former-client conflicts with insufficient disclosure); former DR 5–105(E) (nonwaivable current-client conflicts and waivable current-client conflicts with insufficient disclosure); and former DR 1–102(A)(3) (misrepresentation by omission). A trial panel of the Disciplinary Board concluded that, although the Bar had not proved most of the charged violations, it did sufficiently prove that some client conflicts of interest had existed, that the accuseds had made insufficient disclosures as to those conflicts, and that the accuseds had made related misrepresentations by omission in a particular conflict disclosure letter. The panel determined that a public reprimand was the appropriate sanction. The accuseds sought review as to all allegations that the panel determined that the Bar had proved, and the Bar sought review as to some additional allegations that the panel determined had not been proved. For the reasons explained below, we dismiss the amended complaints.


We review the record de novo. Bar Rule of Procedure (BR) 10.6. The Bar must prove its allegations by clear and convincing evidence. BR 5.2. “Clear and convincing evidence” means that “the truth of the facts asserted is highly probable.” In re Phinney, 354 Or. 329, 330, 311 P.3d 517 (2013) (internal quotation marks omitted). We set out a general factual summary below and discuss later in this opinion additional facts that relate to particular issues on review. We draw all facts from the testimony and record before the trial panel, and from public court records in related proceedings.2

A. Company Background, Accounting Issues, and Class Action Litigation

FLIR Systems, Inc. (FLIR) is a publicly traded Portland, Oregon, company that manufactures and sells thermal imaging equipment and broadcast camera systems, including to governmental entities. In early 2000, key FLIR directors, officers, and managers included Daltry (Board of Directors Chair), Wynne (board member), Stringer (President and Chief Executive Officer (CEO)), Samper (Chief Financial Officer (CFO)), Martin (Vice President of Sales (Worldwide)), Fitzhenry (General Counsel), and Eagleburger (Director of Sales Operations and Senior Vice President for Sales and Marketing). As CFO, Samper was responsible for FLIR's

[344 P.3d 428]

accounting and preparation of its financial statements.

As the 1990s ended, FLIR's corporate accounting grew more complicated, in part due to recent mergers and acquisitions, and installation of a new enterprise reporting system. In 1999, FLIR had difficulty completing its financial statements on time. At a February 2000 Board of Directors meeting, Samper reported that FLIR's financial statements again would not be prepared on time. By that point, at least some board members began to doubt the competency of management, including Samper's ability to serve as CFO. Samper resigned shortly thereafter.

FLIR then discovered several accounting errors, including improperly claimed revenue in 1998 and 1999 for several transactions that appeared to be without sufficient foundation.3 As a result of that review, FLIR decided to restate certain 1998 and 1999 financial statements previously filed with the Securities and Exchange Commission (SEC). In doing so, FLIR's independent auditor instructed FLIR to apply retroactively to the past 1998 and 1999 transactions a new SEC directive, which dictated a delay as to when certain revenue could be recognized in a company's financial statements. The underlying restatement calculations, combined with retroactive application of the new directive, ultimately caused a notable drop in FLIR's reported revenue for the identified time frame.

FLIR publicly announced its intent to restate. FLIR's stock price dropped, and, in early March 2000, several shareholders filed class action securities litigation against FLIR, Stringer, Samper, and eventually Daltry.

Later in March 2000, FLIR retained the accuseds, both partners at Stoel Rives LLP, in the class action litigation, and it informed Stringer and Samper that it would pay for their representation by the accuseds or other counsel. The accuseds sent engagement letters to FLIR, Stringer, and Samper, stating that a unified defense was advantageous and that they did not anticipate that any conflict would arise, but that each individual defendant might wish to consult with independent counsel for monitoring purposes; the letter also recommended consultation before consenting to the joint representation. Stringer declined and retained outside counsel. Samper already had retained outside counsel, Glade and Kaner, but decided in consulting with them to agree to have the accuseds serve as co-counsel. Glade accepted the joint representation on Samper's behalf, noting that—in the unlikely event that an actual conflict arose—Samper reserved his rights regarding his consent to the accuseds' continued representation of FLIR. After Daltry became a defendant in the class action, he also agreed to the joint representation, and he signed a similar consent letter. Fitzhenry consented on FLIR's behalf. When the accuseds began representing FLIR, Daltry, and Samper in the class action, they understood FLIR's accounting issues to be the result of possible management competency issues and an overworked and underesourced accounting staff, but not fraudulent actions by any FLIR officer or manager.

FLIR ultimately filed three SEC restatements between April 2000 and March 2001. The class action litigation eventually settled in April 2001, before discovery, with payment by both FLIR's insurer and FLIR. No allegations in this proceeding concern the class action litigation.

At about the time that FLIR retained the accuseds, FLIR's board appointed a special committee, which included Wynne, to examine more closely the 1998 and 1999 financial misstatements and underlying accounting problems. In working with a prospective new independent auditor, the committee determined that it should assess the integrity of current management, which at that time included Daltry and Stringer (but not Samper, who had resigned, although the board had approved retaining him as an independent

[344 P.3d 429]

consultant to assist with the restatements). The committee determined that Stringer had engaged in misrepresentations, and the board later decided that he should resign. Stringer was placed on administrative leave in May 2000 and later terminated; Daltry also resigned. By then, Wynne had come to question Stringer's integrity, but not Samper's; instead, he continued to view Samper as having competency issues only, and he did not think at this time that FLIR's management had engaged in any fraud.

B. SEC Investigation

Meanwhile, the SEC had begun investigating FLIR's accounting, arising from the same general facts and issues alleged in the class actions. The SEC began issuing subpoenas to FLIR officers, managers, and employees in late June 2000. At FLIR's request, the accuseds' joint representation—initially formed for the class action litigation—expanded to include any current or former FLIR officer, manager, or employee who received an SEC subpoena and who consented to be included in the joint representation. The accuseds continued their joint representation of FLIR, Daltry (for purposes of his SEC interview only), and Samper (who also continued to be separately represented by Glade and Kaner); they also began representing Wynne, Fitzhenry, and Eagleburger for purposes of the SEC investigation. The accuseds ultimately represented about 35 to 40 individuals, slightly more than half the witnesses that the SEC examined.

Although the accuseds represented many individuals in the SEC investigation, they sent only eight engagement letters, directed to the individual clients who they thought had the greatest potential for future possible conflicts, including members of the board, Daltry, and Eagleburger. Those letters requested consent to the joint representation by using similar wording as the earlier class action letters; they did not include any new wording relating to the SEC investigation. The accuseds did not send a letter to Samper, because he only recently had signed a similar letter in the class action involving the same facts. For his part, Glade did not necessarily expect the accuseds to send a separate engagement letter to Samper, because he assumed that the SEC representation would proceed in the same fashion as the class action litigation—that is, he and Kaner would remain knowledgeable so as to provide independent advice to Samper and be available to take over responsibility for him as necessary.4 The accuseds agreed with each other to watch for emerging...

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