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California Legal Ethics

Daughter of “Fortune”: Disbarment Recommendation Reduced to 60 Days Actual

Posted by David Carr | Sep 03, 2019 | 0 Comments

A previous post “Reversal of Fortune” discussed the Review Department's unpublished decision in the Bradshaw matter that reversed a Hearing Judge's recommendation of disbarment and dismissed the matter, finding no culpability.

Now in a similar case, the Review Department has reversed another Hearing Judge's disbarment recommendation and recommended discipline to include 60 days actual suspension, now in a published decision (In the Matter of Lingwood, filed August 27, 2019.) The decision is based on an admission and finding that the respondent violated former Rule of Professional Conduct 3-300 (now Rule 1.8.1.)

Both Bradshaw and Lingwood are cases where a lawyer was serving as trustee of a trust.  Both cases involved allegations that the lawyer engaged in self-dealing and misappropriated funds from the trust, acts of moral turpitude, in violation of Business and Professions Code section 6106.  Both resulted in culpability findings on this issue that were ultimately reversed, based on part of the specfic authorizations in the trust instruments that authorized the trustee to engage in “self dealing” consistent with the trustee's fiduciary responsibility.  The clause in Bradshaw's case provided

As long as the Trustee does not act in bad faith or in disregard of the purposes of the Trust, it is not a breach of the Trust for the Trustee to take any of the following actions: ¶ Employ the Trustee, a relative of the Trustee, or a business in which the Trustee has an interest, to perform needed services for the Trust or any business in which the Trust has an interest and pay compensation not exceeding fair market value . . . .

What can explain the blind spot that has now led to two significant reversals?   Part of the answer may lie with the Review Department's decision in In the Matter of  Schooler (Review Dept. 2016) 5 Cal. State Bar Ct. Rptr.__, 2016 WL 7176690 (filed December 6, 2017.)  Schooler involved a lawyer acting as trustee and conservator of a family trust who committed multiple breaches of fiduciary duty and made misrepresentations to the Court.  Schooler was disbarred after Office of Chief Trial Counsel (OCTC) appealed a hearing recommendation of two years actual suspension.

Schooler was, rightly, regarded as an important opinion.  Published opinions in State Bar Court are meant to provide guidance to the litigants. Unfortunately, Schooler appears to have furnished a convenient prism distorting the view of subsequent cases involving attorney as trustee misconduct.  Precedent is a tricky thing in an environment where the correct decision involves a “on a balanced consideration of the unique factors in each case.”  In the Matter of Van Sickle (Review Dept. 2006) 4 Cal. State Bar Ct. Rptr. 980, 2006 WL 2465633 (pet. review denied.)

Van Sickle is an echo of the same phenomenon.  The opinion on remand came about because OCTC appealed the first Van Sickle decision to the California Supreme Court because it ran afoul of the bright and shiny toy that OCTC thought it had been given by the Supreme Court, In Re Silverton (2005) 36 Cal.4th 81, which was interpreted as making the discipline Standards as binding law.  The Supreme Court sent Van Sickle back for reconsideration in light of Silverton, and the Review Department met the serve with an well researched opinion demonstrating why Silverton was really just a re-cap of existing law and not the revolutionary decision as hailed. But for awhile Silverton was everywhere being cited as authority that the Standards just had to be complied with.

Guidance is especially hard to come by in the murky land of moral turpitude.  The Lingwood Review Department finds it necessary to remind us that “mere negligence in making a representation does not constitute a violation of section 6106″citing In the Matter of Respondent K (Review Dept. 1993) 2 Cal. State Bar Ct. Rptr. 335, 353), in concluding that Lingwood's statements were made with no intent to deceive.  it is a welcome taste of common sense in the face of the elastic concept of “moral turpitude through gross negligence.” (See In Matter of Yee (Review Dept. 2014) 5 Cal. State Bar Ct. Rptr. 330, 2014 WL 3748590 (Remke, PJ, dissenting.)

You might argue that the system worked as it should.  Until you consider the costs to the Respondents for fighing it out. Ms. Lingwood, found culpable on the count she admitted to, will pay the State Bar's costs despite having much of case thrown out.

About the Author

David Carr

Biography David C. Carr ~ Ethics Lawyer   David C. Carr, an attorney in private practice in Las Cruces, New Mexico, specializes in ethics advice to California lawyers, California State Bar discipline defense, and California attorney licensing.

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