In re Petition for Disciplinary Action Against Butler

• Decision Date: 12 August 2015
• Docket Number: No. A14–0834.,A14–0834.
• Citation: 868 N.W.2d 243
• Parties: IN RE Petition for DISCIPLINARY ACTION AGAINST William Bernard BUTLER, a Minnesota Attorney, Registration No. 227912.
• Court: Minnesota Supreme Court

868 N.W.2d 243

IN RE Petition for DISCIPLINARY ACTION AGAINST William Bernard BUTLER, a Minnesota Attorney, Registration No. 227912.

No. A14–0834.

Supreme Court of Minnesota.

Aug. 12, 2015.

Martin A. Cole, Director, Timothy M. Burke, Senior Assistant Director, Office of Lawyers Professional Responsibility, Saint Paul, Minnesota, for petitioner.

William Bernard Butler, Minneapolis, Minnesota, pro se.

OPINION

PER CURIAM.

The Director of the Office of Lawyers Professional Responsibility filed a petition for disciplinary action against respondent William Bernard Butler on May 20, 2014.¹ On June 5, 2014, we referred the matter to a referee, who heard the matter on September 29, 2014. Following the hearing, the referee found that Butler pursued a pattern of frivolous litigation, fraudulently joined law firms and attorneys as defendants, refiled previously dismissed matters, and failed to pay sanctions imposed by the United States District Court for the District of Minnesota, in violation of Minn. R. Prof. Conduct 3.1, 3.2, and 3.4(c). The referee recommended that we indefinitely suspend Butler from the practice of law for a minimum of 2 years. We conclude that the referee did not clearly err in his findings of fact and conclusions that Butler violated the Minnesota Rules of Professional Conduct. We also agree with the referee's recommended discipline. We, therefore, indefinitely suspend Butler from the practice of law with no right to petition for reinstatement for a minimum of 2 years.

I.

Butler was admitted to the practice of law in Minnesota in 1992. He has not been the subject of prior discipline. The present disciplinary action involves professional misconduct in more than 40 matters. The referee found that Butler filed frivolous lawsuits, fraudulently joined defendants, refiled previously dismissed cases, and failed to pay sanctions.² The referee concluded that Butler's conduct violated Minn. R. Prof. Conduct 3.1, 3.2, and 3.4(c).

We first address Butler's challenges to the referee's findings of fact and conclusions that Butler violated the Minnesota Rules of Professional Conduct. Because Butler ordered a transcript of the disciplinary hearing, the referee's findings of fact and conclusions are not conclusive. Rule 14(e), Rules on Lawyers Professional Responsibility (RLPR); In re Ulanowski, 800 N.W.2d 785, 793 (Minn.2011). We “give great deference to the referee's findings of fact and will not reverse those findings if they have evidentiary support in the record and are not clearly erroneous.” In re Coleman, 793 N.W.2d 296, 303 (Minn.2011) (citation omitted). A finding is “clearly erroneous” when we are “left with the definite and firm conviction that a mistake has been made.” In re Lyons, 780 N.W.2d 629, 635 (Minn.2010). With regard to the referee's conclusions, we review de novo the interpretation of the Minnesota Rules of Professional Conduct, and we review for clear error the application of the rules to the facts of the case. In re Aitken, 787 N.W.2d 152, 158 (Minn.2010).

A.

We begin by considering the referee's findings of fact and conclusions regarding Butler's pattern of frivolous litigation. The referee found that Butler filed more than 40 lawsuits on behalf of homeowners, claiming that the foreclosures of their properties were invalid. A main theory of Butler's mortgage litigation was that, in order to foreclose on a property, the mortgagee (frequently a bank or the Mortgage Electronic Registration System (MERS)) must hold both the mortgage, which allows the mortgagee to foreclose, and the underlying promissory note, which grants the mortgagee (or other payee) the right to receive payments from the mortgagor.

The referee found that Butler's theory is contrary to Minnesota law and was expressly rejected by our court in Jackson v. MERS, 770 N.W.2d 487, 501 (Minn.2009), as well as by the Eighth Circuit and the federal district court. In Jackson, the plaintiffs argued that “a mortgagee cannot hold legal title to a mortgage unless that mortgagee also has at least some interest in the underlying indebtedness.”³ Id. at 499. Thus, according to the plaintiffs' theory in Jackson, a mortgagee would need to have legal title⁴ to the mortgage and hold the promissory note underlying the mortgage in order to foreclose by advertisement. Id. at 498–99. We rejected this argument and concluded that a mortgagee does not need to have an interest in the underlying debt in order to have legal title to the mortgage and the right to foreclose. Id. at 501. In Stein v. Chase Home Finance, LLC, 662 F.3d 976, 980 (8th Cir.2011), the Eighth Circuit expressly adopted our holding in Jackson.

The referee also found that Butler advanced frivolous claims by arguing repeatedly that the federal district courts should apply the “possibility” pleading standard to his clients' claims, rather than the “plausibility” pleading standard articulated in Ashcroft v. Iqbal, 556 U.S. 662, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) and Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007).⁵ Federal pleading standards apply to claims in federal court even when those claims are based on Minnesota law. See Council Tower Ass'n v. Axis Specialty Ins. Co., 630 F.3d 725, 730 (8th Cir.2011). The federal district court and the Eighth Circuit rejected Butler's pleading argument as well. See, e.g., Karnatcheva v. JPMorgan Chase Bank, N.A., 704 F.3d 545, 548 (8th Cir.2013) (affirming the district court's dismissal of state law claims because the plaintiffs did not sufficiently plead them according to federal pleading standards).

The record supports the referee's findings concerning Butler's arguments as to the validity of the foreclosures at issue and the applicable pleading standard. Therefore, these findings are not clearly erroneous. The referee identified more than 40 mortgage-related cases in which Butler advanced legal theories that mortgage foreclosures were defective because the mortgagees did not possess the promissory notes associated with the mortgages or because the federal court applied the wrong pleading standard. Each case was filed after our decision in Jackson, 770 N.W.2d 487, and approximately 30 of them were filed after the Eighth Circuit's decision in Stein, 662 F.3d 976. All were filed after Iqbal, 556 U.S. 662, 129 S.Ct. 1937. Butler also filed more than 20 cases after he was first sanctioned by the federal district court for his “unreasonable and vexatious conduct” in bringing these types of claims, which, based on the federal pleading standard, were dismissed for failure to state a claim on which relief can be granted.

Based on his factual findings, the referee concluded that Butler's conduct violated Minn. R. Prof. Conduct 3.1, which provides that a lawyer will not bring a proceeding “unless there is a basis in law and fact for doing so that is not frivolous.” This rule does not prohibit “a good faith argument for an extension, modification, or reversal of existing law.” Minn. R. Prof. Conduct 3.1. The relevant standard for determining whether an argument has a good-faith basis in law and fact is an objective standard that requires us to consider what a reasonable attorney, in light of that attorney's professional duties, would do under similar circumstances. In re Michael, 836 N.W.2d 753, 762 (Minn.2013). We have concluded that an attorney violated Rule 3.1 by engaging in a pattern of bad-faith litigation, In re Nett, 839 N.W.2d 716, 717–18 (Minn.2013), filing lawsuits that lacked a good-faith basis in law or fact, In re Van Sickle, 744 N.W.2d 374, 374 (Minn.2008), or filing frivolous motions as part of a “pattern of harassing and frivolous litigation,” In re Nathan, 671 N.W.2d 578, 580, 584 (Minn.2003).

Butler's arguments regarding a foreclosure's validity and the appropriate pleading standard were rejected by multiple federal district court judges and the Eighth Circuit. See, e.g., Karnatcheva, 704 F.3d at 548. By ignoring precedent that was clearly contrary to his arguments and failing to make a good-faith argument for the modification or reversal of that law, Butler has not acted as a reasonable attorney would under the same or similar circumstances. Michael, 836 N.W.2d at 762.

His arguments completely lacked any good-faith basis in law. See id. Therefore, the referee did not clearly err when he concluded that Butler repeatedly violated Minn. R. Prof. Conduct 3.1.

B.

We next consider the referee's findings and conclusions regarding Butler's fraudulent joinder of defendants. The referee found that Butler fraudulently joined Minnesota law firms and attorneys in approximately 20 cases without any good-faith basis to assert claims against them in an attempt to obstruct the exercise of federal jurisdiction. During the course of this fraudulent joinder scheme, Butler repeatedly moved to remand these cases to state court for lack of diversity jurisdiction.

The federal district court denied all but one motion for remand, consistently concluding that Butler had no good-faith basis for the claims against the Minnesota law firms and attorneys. The referee explained that “[t]here is no evidence of any case in which the joinder of the Minnesota attorneys was found not to be fraudulent.” The referee concluded that Butler's repeated fraudulent joinder of Minnesota law firms and attorneys violated Rule 3.1 because there is “no evidence of any good faith argument for modification or reversal of existing law to allow such a joinder.”

The record supports the referee's findings of fact and conclusion that Butler repeatedly violated Minn. R. Prof. Conduct 3.1. According to federal court documents, in numerous cases the federal district court found that Butler's joinder of Minnesota law firms and attorneys was fraudulent and without a factual basis. Therefore, the referee did not clearly err in his findings or conclusions regarding Butler's fraudulent joinder of parties.

C.

We next review the referee's findings and conclusions regarding...