Schlossberg v. State Bar Grievance Bd., 3

CourtSupreme Court of Michigan
Citation200 N.W.2d 219,388 Mich. 389
Docket NumberNo. 3,3
PartiesStephen I. SCHLOSSBERG, Complainant-Appellant, v. STATE BAR GRIEVANCE BOARD, Respondent-Appellee.
Decision Date26 July 1972

Page 219

200 N.W.2d 219
388 Mich. 389
Stephen I. SCHLOSSBERG, Complainant-Appellant,
No. 3.
Supreme Court of Michigan.
July 26, 1972.

[388 Mich. 393]

Page 220

Dykema, Gossett, Spencer, Goodnow & Trigg, Dertroit (William T. Gossett, Donald S. Young and Michael B. Staebler, Detroit, of counsel), and Stephen I. Schlossberg, Jordan Rossen, Detroit, for complainant-appellant.

Louis Rosenzweig, Detroit, for State Bar Grievance Board.

Frank J. Kelley, Atty. Gen., Robert A. Derengoski, Sol. Gen., Solomon Bienenfeld, Asst. Atty. Gen., Lansing, for amicus curiae.

Ivan E. Barris, Detroit, for appellee in Supreme Court Case No. 53217.

Peter E. O'Rourke, in pro. per.

Rothe, Marston, Mazey, Sachs, O'Connell, Nunn & Freid, by Theodore Sachs, Detroit, for intervening plaintiffs-appellants.

Before the Entire Bench.

WILLIAMS, Justice.

This case places one basic issue before this Court: Is it an unlawful conflict of [388 Mich. 394] interests for an attorney to act as a member of a quasi-judicial board hearing cases involving emplyees of a particular corporation and at the same time be a member of a law firm representing wholly owned subsidiaries of that corporation?

This case comes to us on appeal from the State Bar Grievance Board and is Supreme Court No. 53,295. For purposes of convenience on appeal it was argued with the case of International Union v. Milliken and O'Rourke, Supreme Court No. 53,217, brought in the Court of Appeals, which arose from the same factual situation. This opinion, however, deals only with the legal issues presented in the State Bar Grievance Board case of Schlossberg v. O'Rourke, Supreme Court No. 53,295.

The Grievance Board without an evidentiary hearing rendered its opinion on the following pled facts: The law firm of Elsman, Young and O'Rourke, in which Mr. O'Rourke is a partner, derives income from its representation of certain wholly owned subsidiaries of Chrysler Corporation, 1 namely Chrysler Financial Corporation,

Page 221

Chrysler Credit Corporation, and Car City Insurance Company. At the same time Mr. O'Rourke did not disqualify himself as a member of the Michigan Employment Security Commission (MESC) Appeal Board in the consideration of some claims against the Chrysler Corporation brought before that quasi-judicial body. The Grievance Board concluded that such failure to disqualify himself did not as a matter of law constitute professional misconduct on the part of Mr. O'Rourke and dismissed appellant's complaint. We cannot agree.

Article 6, § 5 of our 1963 Constitution states that 'The supreme court shall by general rules establish, modify, amend and simplify the practice and procedure in all courts of this state.' Therefore we have the implied power to regulate and discipline the bar of this state. As early as 1850, this Court recognized and exercised its power to regulate members of our state bar. In the Matter of Mills, An Attorney, 1 Mich. 392 (1850), cited with approval in In re Hartford, 282 Mich. 124, 275 N.W. 791 (1937).

This Court has recently adopted a new Code of Professional Responsibility, Canons and Disciplinary Rules. 2 Actions such as those with which Mr. O'Rourke is charged would constitute professional misconduct even prior to the adoption of this Code, 3 and it is alleged he has also persisted in this type of conduct subsequent to the adoption of the new Code. 4

Canon 5 reads: 'A Lawyer Should Exercise Independent Professional Judgment on Behalf of a Client.' If as alleged Mr. O'Rourke represented Chrysler wholly owned subsidiaries through his law firm and at the same time decided claims before the MESC involving the parent corporation, Mr. O'Rourke was serving conflicting interests. Such a situation could affect his independent professional judgment in violation of Canon 5.

Canon 9 of the Code reads: 'A Lawyer Should Avoid Even the Appearance of Professional Impropriety.' If, as alleged, Mr. O'Rourke failed to disqualify himself from the consideration of the MESC Appeal Board cases involving Chrysler Corporation 5 or to disassociate himself from his law firm while that firm represented the Chrysler wholly owned subsidiaries, Chrysler Financial Corporation, Chrysler Credit Corporation and Car City Insurance Company, there would be an apparent conflict of interests and the appearance of professional impropriety. This would constitute a violation of Canon 9.

This Court has already ruled in an opinion independent of, but supportive of, the Canons that a conflict of interest of the nature of that charged to Mr. O'Rourke is a violation of a fair trial in a fair tribunal as basically required by due process. In

Page 222

Glass v. State Highway Commissioner, 370 Mich. 482, 122 N.W.2d 651 (1963) this Court held that an employee of the State Highway Commissioner should have disqualified himself from conducting a hearing on the necessity of taking certain property for highway purposes. Writing for a unanimous court, Justice Eugene F. Black, stated that the employee was an interested party to the extent of keeping his job by implementing the highway planning of his superior, and concluded that public officials must avoid even the appearance of injustice. 6

Canon 9 and Glass v. State Highway Commissioner, Supra, stand for the rule that a public employee and a lawyer cannot lawfully act in judgment where one of the parties may affect his economic interests or may have the appearance of affecting his economic interests.

As the state highway department employee was 'an interested 'person'; interested to the extent of keeping his job' it may be said that under the alleged facts Mr. O'Rourke had an interest that his firm keep or enlarge the wholly owned Chrysler subsidiaries' retainer. This is not to say that Mr. O'Rourke was or would be tempted or that the Chrysler Corporation would or could change the retainer. The rule does not require that. The rule strictly requires that there be No appearance that such things could happen.

Justice Black in Glass v. State Highway Commissioner, Supra, 487, emphasized this rule by quoting from In re Murchison, 349 U.S. 133, 136, 75 S.Ct. 623, 625, 99 L.Ed. 942 (1955) as follows:

'Such a stringent rule may some times bar trial by judges who have no actual bias and who would do their very best to weigh the scales of justice equally between contending parties. But to perform its high function in the best way 'justice must satisfy the appearance of justice.' Offutt v. United States, 348 U.S. 11, 75 S.Ct. 11, 99 L.Ed. 11.'

The fact that Mr. O'Rourke's law firm represented Chrysler Corporation wholly owned subsidiaries rather than the parent corporation itself does not eliminate the conflict of interest. The State Bar Grievance Board Opinion and Brief in holding that this fact makes a difference miss the big picture and the major thrust of the Canon 9--Glass v. State Highway Commissioner rule by looking through the wrong end of the telescope.

That rule looks to whether Chrysler Corporation can reach, or whether there is the appearance that Chrysler Corporation can reach, Mr. O'Rourke's livelihood. The Grievance Board looks rather to whether Mr. O'Rourke can reach Chrysler Corporation through a law suit. Not only is this looking at the matter backwards, but certainly the facts of life are that it is a very different matter whether an outsider can pierce the corporate veil from whether the parent corporation can use its own corporate structure to accomplish its own purposes. 7

Page 223

If such conflict of interests exist it can be purged in several different ways: 1) Mr. O'Rourke may disqualify himself from all cases before the MESC Appeal Board involving Chrysler Corporation or its subsidiaries; 2) He may disassociate himself from the law firm of Elsman, Young and O'Rourke; 3) The law firm of Elsman, Young and O'Rourke may terminate its legal representation of the various Chrysler subsidiaries. Any of these three alternatives would terminate the conflict of interests.

In passing, we note that the appellant's other allegations are either moot or without sufficient merit to require consideration at this time.

The order of the Grievance Board dismissing the complaint and request for investigation is reversed. The Grievance Board is instructed to proceed under Rule 15 to conduct such hearing and examine such proofs as appropriate and test whatever decision it decides to render in light of this opinion and the authorities cited, namely Canons 5 and 9, and Glass v. State Highway Commissioner, Supra, Offutt v. United States, Supra, and In re Murchison, Supra.

Reversed and remanded pursuant to instructions contained herein. Costs to abide final result in this case.

T. M. KAVANAGH, C.J., and SWAINSON and T. G. KAVANAGH, JJ., concur.

BLACK, Justice (for order of remand with instructions).

I agree that the majority has laid down correctly the legal principles that should be applied to the conduct of defendant O'Rourke as charged by plaintiff and denied by defendant, provided those charges or some controlling portion thereof come to substantiation 'by a preponderance of the

Page 224

evidence' as in State Bar Grievance Rule 15.13 provided (383 Mich. xlvii-lxv). But those charges have not as yet been heard upon what I believe are necessary proofs. Accordingly, I find myself in agreement with Justice Brennan's criticism that Mr. O'Rourke has not as yet been accorded that hearing which due process requires.

Defendant O'Rourke's counsel forensically concludes his brief, with no traverse by any original party or party Amicus:

'In the appellants' brief is the suggestion that not only should the determination of the Court of Appeals be reversed and not only should the action of the grievance administrator be reversed, but also that this Honorable Court, without even affording an opportunity to the appellee to have his 'day in court', should grant relief in both causes, to-wit,...

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