State ex rel. Oklahoma Bar Ass'n v. Perry

• Citation: 936 P.2d 897,1997 OK 29
• Decision Date: 11 March 1997
• Docket Number: Nos. 4164,4201,s. 4164
• Parties: STATE of Oklahoma ex rel. OKLAHOMA BAR ASSOCIATION, Complainant, v. Layton M. PERRY, Jr., Respondent. (Two Cases). S.C.B.D.
• Court: Supreme Court of Oklahoma

Page 897

936 P.2d 897

1997 OK 29

STATE of Oklahoma ex rel. OKLAHOMA BAR ASSOCIATION, Complainant, v. Layton M. PERRY, Jr., Respondent. (Two Cases).

S.C.B.D. Nos. 4164, 4201.

Supreme Court of Oklahoma.

March 11, 1997.

Allen J. Welch, Assistant General Counsel, Oklahoma Bar Association, Oklahoma City, for Complainant,

Layton M. Perry, Jr., Oklahoma City, pro se.

WATT, Justice:

PROCEDURAL HISTORY

In two separate proceedings, the Oklahoma Bar Association filed complaints against respondent, Layton M. Perry, Jr., alleging numerous counts of professional misconduct. The complaint in SCBD No. 4164, filed on March 26, 1996, alleged four counts of misconduct. The complaint in SCBD No. 4201, filed on August 30, 1996, alleged three counts of misconduct. Respondent failed to file an answer to either complaint. In both cases the OBA moved to deem the allegations of the complaints admitted. Pursuant to Rule 6.4 of the Rules Governing Disciplinary Proceedings ("RGDP"), 5 O.S.1991, Ch. 1, App. 1-A, the trial panel in SCBD No. 4164 deemed the allegations admitted. ¹ The panel then conducted a hearing for the purpose of determining the discipline to be imposed. Id. In SCBD No. 4201, the trial panel ordered respondent to file an answer out of time. He complied and a hearing was thereafter held. Respondent appeared pro se at both hearings.

The panel in SCBD No. 4164 recommended that respondent be suspended from the practice of law for a period of two years and one day. The panel in SCBD No. 4201 recommended a suspension of six months. Both panels also recommended that respondent be surcharged the costs of the proceedings. We have consolidated the two cases for review.

In bar disciplinary proceedings, this Court exercises exclusive original jurisdiction as a licensing court. State ex rel. Oklahoma Bar Ass'n. v. Gasaway, 810 P.2d 826, 830 (Okla.1991). Although the trial panels' recommendations are afforded great weight, the ultimate responsibility for deciding whether misconduct has occurred and what discipline is appropriate rests with this Court. Id. "Before we may impose discipline upon an attorney, the charges must be established by clear and convincing evidence." Id., citing RGDP Rule 6.12 and State ex rel. Oklahoma Bar Ass'n v. Braswell, 663 P.2d 1228, 1232 (Okla.1983). Upon de novo review of the two records, we find respondent violated numerous rules of professional conduct and rules governing disciplinary proceedings. The facts in support of each count alleged in the OBA's two complaints, as well as an analysis of each rule violation, is set forth below.

SCBD NO. 4164

FACTS AND RULE VIOLATIONS

COUNT I

Crystal Springs, Inc., was an Oklahoma corporation whose officers were John Huber, president, Virginia Thompson, vice-president, and Janna Meyer, secretary-treasurer. The corporation's shares were owned as follows: 40% by Huber, 10% by Thompson, 40% by Meyer and 10% by the ALKO Trust, a Louisiana trust. Beginning in about July of 1992 and continuing through early 1994, respondent performed various legal and accounting services for Crystal Springs.

Crystal Springs borrowed $200,000.00 from ALKO Trust, as evidenced by a note dated April 1, 1992, and an additional $35,000.00 from Freedom Exploration Company, Inc., a Louisiana corporation, as evidenced by a note dated November 24, 1992. Huber and Meyer signed separate guarantees to Freedom Exploration in the amount of $17,500.00 each.

                Meyer and her husband, Earl, arranged the financing of both loans which Huber believed to be from independent sources.  From December 1993 through February 1994, respondent personally loaned the corporation $43,500.00.  Huber testified that he had not been consulted regarding, nor had he consented to, the loans from respondent. 2  Discovery of the unauthorized loans and of numerous unauthorized expenditures led to a dispute between officers and members of the Board of Directors of Crystal Springs. 3  Respondent aligned himself in the dispute with the Meyers against Huber and Thompson. 4
                

In the course of his representation of Crystal Springs, respondent failed to disclose to the officers or to the Board of Directors that he had become the president of Freedom Exploration, that he was the trustee for the ALKO Trust, that Janna Meyer was the beneficiary of the ALKO Trust, that he represented Janna Meyer in that capacity, and that he was the attorney for the Meyers.

On February 10, 1994, respondent, as president of Freedom Exploration, assigned the Crystal Springs Note and Guaranty Agreement from Freedom Exploration to the ALKO Trust. On February 15, 1994, respondent identified himself as trustee of the Trust and demanded repayment of the $235,000.00 from Huber. On February 28, 1994, respondent filed an action in district court on behalf of the Trust seeking repayment of the loans made to Crystal Springs by the Trust and Freedom Exploration. Neither Huber nor the corporation consented to respondent filing the action. It was not until the action was filed that Huber learned the respondent was president of Freedom Exploration, trustee of ALKO Trust or that he represented interests adverse to those of Crystal Springs.

The case was settled upon the payment of $27,941.55 from Janna Meyer to Huber and Thompson in exchange for their stock. Respondent loaned Meyer all of the settlement funds to facilitate the transaction. ⁵ Shortly thereafter, respondent was named vice-president of Crystal Springs and was elected to its Board of Directors. We find by clear and convincing evidence that respondent's actions constituted violations of Rule 1.8(a) & (e), Rule 1.13(d) & (e), Rule 2.2, and Rule 1.7(a) & (b) of the Oklahoma Rules of Professional Conduct ("ORPC"), 5 O.S.1991, Ch. 1, App. 3-A.

Rule 1.8(a) states:

A lawyer shall not enter into a business transaction with a client or knowingly acquire an ownership, possessory, security or other pecuniary interest adverse to a client unless:

(1) the transaction and terms on which the lawyer acquires the interest are fair and reasonable to the client and are fully disclosed and transmitted in writing to the client in a manner which can be reasonably understood by the client;

(2) the client is given a reasonable opportunity to seek the advice of independent counsel in the transaction; and

(3) the client consents in writing thereto.

When respondent loaned money to Crystal Springs, he entered into a business transaction with the corporation. Whether the terms of the transaction were fair and reasonable to the corporation is not known, because respondent did not disclose them to his client, Crystal Springs. Furthermore, Crystal Springs was not given an opportunity to seek the advice of independent counsel regarding the loans and did not give its consent to the transactions in writing.

Rule 1.8(e) provides in relevant part:

A lawyer shall not provide financial assistance to a client in connection with pending or contemplated litigation, except that a lawyer may advance court costs and expenses of litigation....

Respondent violated this rule by loaning settlement proceeds to Janna Meyer. Her buy-out of Huber and Thompson put an end to their then-pending litigation.

Rule 1.13(d) states:

In dealing with an organization's directors, officers, employees, members, shareholders or other constituents, a lawyer shall explain the identity of the client when it is apparent that the organization's interests are adverse to those of the constituents with whom the lawyer is dealing.

It is readily apparent that the constituent of Crystal Springs with whom respondent was dealing was Janna Meyer. The Board of Directors was deadlocked in a struggle for control of the company. Meyer's interest in demanding repayment on the two notes was clearly adverse to the interests of Crystal Springs and, it appears, was intended to wrest control of the company from Huber and Thompson. As Crystal Springs' attorney, respondent had a professional obligation to inform either Huber, as president, or the Board of Directors of Meyer's interest in ALKO Trust, his position at Freedom Exploration and their plan to call the notes. Not only did respondent fail in this respect, he actively participated in the scheme.

Rule 1.13(e) provides:

A lawyer representing an organization may also represent any of its directors, officers, employees, members, shareholders or other constituents, subject to the provisions of Rule 1.7. If the organization's consent to the dual representation is required by Rule 1.7, the consent shall be given by an appropriate official of the organization other than the individual who is to be represented, or by the shareholders.

Subject to the provisions of Rule 1.7, this rule would have permitted respondent to represent Janna Meyer in her individual capacity. However, for the reasons discussed below, respondent's actions were in blatant violation of Rule 1.7. Respondent claims that Earl Meyer actually ran Crystal Springs and that permission for the dual representation came from the Meyers. We first note that Earl Meyer was neither an officer nor director of the company. ⁶ Moreover, Rule 1.13(e) requires that consent be given by an appropriate official other than the person who is to be represented. Respondent did not receive such consent from either Huber or Thompson, the only officials from whom consent would conceivably have been appropriate.

The same inaction that gave rise to a violation of Rule 1.13(e) also resulted in respondent violating Rule 2.2. Rule 2.2 generally requires that an attorney who seeks to act as an intermediary between clients must consult with, and obtain consent from, each client concerning the dual representation. The rule further provides that common representation is permitted only where it "can be undertaken impartially and without improper effect on other responsibilities the lawyer has to any of the clients." Respondent did not consult with, or obtain consent from, Crystal Springs...