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

Decision Date14 July 1992
Docket NumberNo. 1029,No. 3778,1029,3778
PartiesSTATE of Oklahoma, ex rel. OKLAHOMA BAR ASSOCIATION, Complainant, v. Donald E. SMOLEN, Respondent. OBADSCBD
CourtOklahoma Supreme Court

This matter is before us for imposition of final discipline. Proposed Agreed Stipulations of Fact and Conclusions of Law with Agreed Recommendation for Discipline have been entered into by complainant and respondent. The stipulations and recommendation have been accepted and approved by the Trial Panel of the Professional Responsibility Tribunal (PRT). The parties have filed a joint waiver of briefs and have requested this Court to follow the recommendation of the PRT.

By virtue of a two (2) count complaint and amended complaint respondent was charged with misconduct warranting professional discipline. The stipulations respondent agreed to are substantially as follows:

AGREED FINDINGS OF FACT AS TO COUNT I

1. Between June 6, 1989 and December 28, 1990, respondent loaned $79,304.00 to 161 clients.
2. During this same time respondent earned $1,481,000 on gross receipts of $5,778,000, including client's share, and represented more than 1,600 clients.

AGREED CONCLUSIONS OF LAW AS TO COUNT I

Respondent's conduct constitutes grounds for professional discipline and violated the mandatory provisions of Rule 1.8(e), Oklahoma Rules of Professional Conduct, 5 O.S.1991, Ch. 1, App. 3-A, to wit:

(e) While representing a client in connection with contemplated or pending

litigation, a lawyer shall not advance or guarantee financial assistance to a client, except that a lawyer may advance or guarantee the expenses of litigation, including court costs, expenses of investigation, expenses of medical examination, and costs of obtaining and presenting evidence, provided the client remains ultimately liable for such expenses.

AGREED FINDINGS OF FACT AS TO COUNT II

1. On August 11, 1987, in OBAD # 758, SCBD # 3382, respondent was suspended by this Court for eight (8) months for violating provisions of DR 1-102(A)(3) and (4) and DR 9-102(B), Code of Professional Responsibility, 5 O.S.1981, Ch. 1, App. 3 and Rule 1.3 of the Rules Governing Disciplinary Proceedings, 5 O.S.1981, Ch. 1, App. 1-A.

AGREED MITIGATION

1. The loans made by respondent were non-interest bearing. Respondent loaned money for humanitarian reasons to clients who were destitute, without other means and resources or credit to obtain loans for sustenance during the pendency of their disability and in many cases could not work because of their injury.

AGREED RECOMMENDATION FOR DISCIPLINE

As discipline respondent should receive a public censure from the Oklahoma Supreme Court.

Our review of the matter indicates respondent voluntarily of his own free will and knowingly agreed to the proposed stipulations and there is a factual basis therefore. No contention was made by the parties that Rule 1.8(e) is unconstitutional. After independent review of the matter we determine respondent has engaged in professional misconduct warranting discipline and that the recommendation of the PRT should be followed.

IT IS THEREFORE ORDERED that the proposed Agreed Stipulations of Fact and Conclusions of Law with Agreed Recommendation for Discipline, be hereby approved and respondent, Donald E. Smolen, upon publication of this Order Imposing Discipline in the official reporter shall stand publicly censured.

IT IS FURTHER ORDERED respondent pay the costs of this matter in the amount of $281.75 within thirty (30) days from the date this order becomes final as a condition precedent to his continued right to practice law.

OPALA, C.J., HODGES, V.C.J., and LAVENDER, SIMMS and HARGRAVE, JJ., concur.

ALMA WILSON and KAUGER, JJ., concur in part; dissent in part.

SUMMERS, J., dissents.

KAUGER, Justice, concurring in part, dissenting in part:

This Court's duty in disciplinary proceedings is to protect the public and to preserve its confidence in the legal profession and in the judiciary which licenses it. We should tolerate nothing less than the highest degree of integrity and fidelity in the lawyer-client relationship. 1 Disciplinary proceedings are instituted to safeguard the interest of the public, to protect it, and to preserve the public confidence in the legal profession and the entire judicial system, not to punish a legal practitioner. 2 We must zealously promote regulation of the bar without forgetting that lawyers are also entitled to due process during the course of disciplinary proceedings. 3 Overreaching for pecuniary gain by an attorney should be vigorously investigated and discipline imposed if warranted. I would ensure this result by returning to the rules existing before January 1, 1970, which pass constitutional muster. 4 However, the majority opinion imposes a public censure on the respondent, Donald E. Smolen (Smolen/attorney), for providing humanitarian, non-interest bearing loans to destitute clients. 5 Because the only difference between courting clients with receptions and dinner parties and helping a destitute client through a non-interest bearing loan is one of compassion, and because it appears that Rule 1.8(e) of the Oklahoma Rules of Professional Conduct 6 violates both the Oklahoma and the United States Apparently, rule 1.8(e) is grounded in the doctrines of champerty and maintenance. A brief discussion of these concepts is necessary to an understanding of the rule. The common law roots of the doctrines of maintenance and champerty are deeply embedded. The basic notions were present in the legal development of ancient Greeks and Romans, and they became deeply ingrained in the medieval law of England. Movements against the use of champerty and maintenance were a revolt against feudal institutions which required support to the retainers of a feudal magnate despite the justification of a particular action. 8 A champertous agreement is one in which a person lacking an interest in another's litigation finances the suit for personal gain. Champerty is officious intermeddling in litigation in which one has no interest by assisting its prosecution with the intent to derive compensation from the proceeds of the suit. 9

Constitutions and the proposed draft of § 48 to the Restatement (Third) Governing Lawyers, 7 I dissent.

As early as 1275, the prohibition against maintenance and champerty was applied to royal officers. 10 These restrictions were imposed to check despotism. 11 Lords and other large land holders purchased contested claims against one another, or against commoners. As a defense, the commoners conveyed a portion of their interest in land to some powerful lord to maintain their suit. The nobles' powers grew, 12 they paid far below the bona-fide sale price reducing the tenant's profits. As tenants by champert, the nobles were entitled to share in the rents and profits with the grantor. 13 The laws of maintenance and champterty were introduced to protect the commoner against the growing power of the nobles. 14 However, it was not considered maintenance for a rich man to assist a poor man with money or advice in order to enable him to bring or defend an action, provided the assistance was given out of charity. 15 It was not maintenance for an attorney to take money for his advice or to expend money for his client, if it was to be repaid. 16 The prohibitions against maintenance and champterty were instituted to prevent the churning up of litigation, the clogging of the courts, and to protect the people. In a strange convolution, the prohibition of Rule 1.8(e) against a lawyer providing financial assistance to a client now places the client at the mercy of more wealthy opponents and of the system. Instead of being forced into rendering up a portion of land to a lord, a modern-day litigant may be forced into an unfair settlement by economic pressures.

Title 21 O.S.1991 § 554 17 prohibits attorneys from engaging in champertous acts by purchasing any evidence of debt with the intent to sue on the instrument. However, loans to destitute clients for living expenses pending the outcome of litigation have been found not to constitute champerty 18 especially if the loan occurs after the In Louisiana State Bar Ass'n v. Edwins, 329 So.2d 437, 445 (La.1976), the Louisiana Supreme Court considered whether a disciplinary rule 22 identical to Rule 1.8(e) prevented a retained attorney from advancing money to a client. In Edwins, the attorney had advanced approximately $3,000.00 to a client who used the money for living expenses, to prevent a foreclosure, and to pay for medical treatment. The Louisiana Supreme Court found that neither the spirit nor the intent of the disciplinary rule was violated by the advance or guarantee by a retained lawyer to a client of minimal living expenses, of minor sums necessary to prevent foreclosures, or of necessary medical treatment. The Court went on to find that a construction of the statute which led to a holding that the advances were prohibited would put the rule in constitutional jeopardy. It held that a court-adopted bar disciplinary rule which placed an unreasonable burden upon an individual's right to enforce claims allowed by law might violate the constitutional guarantee of access to courts. 23

attorney-client relationship has been established. 19 Making a loan to a client to cover necessary living expenses is not against public policy 20 or necessarily unethical conduct, per se. 21

The California Supreme Court has adopted a rule which expressly adopts the position taken by the Louisiana Supreme Court in Edwins. RULE 5-104 OF THE CALIFORNIA RULES OF PROFESSIONAL CONDUCT24 provides that an attorney is not prohibited from loaning money to a client upon the promise of the client to repay the loan once the attorney has been employed. 25 Minnesota has adopted a rule most suited to the protection of the client. Rule 1.8 of the Minnesota Rules of Professional Conduct provides in pertinent...

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  • State v. Brantley
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    ...rights, we allow him or her the opportunity to address the question involved. Cf. State ex rel. Oklahoma Bar Ass'n v. Smolen, 837 P.2d 894, 903 (Okla.1992) (Opala, C.J., concurring) ("If no constitutional challenge has been advanced, the dictates of fairness are not impugned by the court's ......
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    ...over any pending matter. Stites v. DUIT Const. Co., Inc., 1995 OK 69, 903 P.2d 293, 297 n. 10; State ex rel. Oklahoma Bar Ass'n v. Smolen, 1992 OK 116, 837 P.2d 894, 903 (Opala, C.J., concurring); Cate v. Archon Oil Co., Inc., 1985 OK 15, 695 P.2d 1352, 1356; Spain v. Kernell, 1983 OK 105, ......
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