ORDER
W. WATKINS, District Judge
Before the court are three motions to dismiss: one filed by Defendant Donald Hutchinson (Doc. # 20), as amended (Doc. # 35); one filed by Defendant David A. McDowell ("McDowell") (Doc. # 24); and one filed by Defendants Donald Hutchison and George Hutchison, in which they adopt the arguments made by Mr. McDowell (Doc. # 26), as amended (Doc. # 30). Plaintiff Crooked Creek Properties, Inc. ("Crooked Creek"), opposes the motions (Doc. # 29), and Mr. McDowell filed a reply (Doc. # 31). Because this action is barred by res judicata, the motions are due to be granted and this action dismissed with prejudice.
The motions have been evaluated in light of Rule 12(b)(6)'s standard. See Fed.R.Civ.P. 12(b)(6); see generally Ashcroft v. Iqbal, 129 S. Ct. 1937, 1949 (2009) (discussing the Rule 12(b)(6) standard). There is no need to convert the motions to ones for summary judgment, as suggested by Mr. McDowell (Doc. # 34, at 2), for substantially the same reasons discussed by this court in Crooked Creek Props, Inc. v. Ensley, No. 2:08cv1002-WKW, 2009 WL 3644835 at *8 n. 16 (M.D. Ala. Oct. 28, 2009) (order granting motions to dismiss).
This lawsuit is but one more chapter arising from protracted and serial litigation in the circuit courts of Montgomery and Autauga counties concerning disputed ownership of Danya Park Apartments in Autauga County. The court has extensive knowledge of the procedural and factual underpinnings of this long-running state court litigation because this action is the second one Crooked Creek has filed in this court. See Crooked Creek Props., Inc. v. Ensley, No. 2:08cv1002-WKW, 2009 WL 3644835 (M.D. Ala. Oct. 28, 2009) ("Crooked Creek I") (order granting motions to dismiss), aff'd, No. 09-15988, 2010 WL 2136027 (11th Cir. May 29, 2010). Although the defendants named in this lawsuit are different from those in Crooked Creek I, both Crooked Creek I and this suit are the product of Crooked Creek's frustration with the results of the Autauga County Suit judgment. The defendants in Crooked Creek I will be referred to as the Ensley defendants.
Judicial notice is taken of the proceedings in Crooked Creek I and certain pleadings filed in the state court for the limited purpose of determining the applicability of res judicata. See ITT Rayonier Inc. v. United States, 651 F.2d 343, 345 n. 2 (5th Cir. 1981) ("A court may . . . take judicial notice of its own records."); see also Fed.R.Evid. 201. Certified copies of the relevant state court pleadings were submitted in Crooked Creek I.
The procedural history and factual background of the Montgomery County and Autauga County suits are set out in more detail in the October 28, 2009 order entered in Crooked Creek I and will not be repeated here except as necessary. Briefly, Crooked Creek insists that, as a result of prior judgments its predecessor-in-interest (Willadean Walden) obtained in the Montgomery County Suit, it is the owner of all of the common stock in a corporation that has as its sole asset Danya Park Apartments. Ms. Walden later learned, however, that a quitclaim deed and a separate mortgage on Danya Park Apartments had been recorded in the Autauga County Probate Court. The mortgage had been recorded by the Ensley defendants, and the quitclaim deed by George Hutchison. As to the quitclaim deed, George Hutchison claimed that in 1998, he was given a quitclaim deed to Danya Park Apartments from the prior owner, and that in 1999, he transferred the quitclaim deed to a trust that he created for the benefit of his son (the "George Hutchison Jr. Trust"). Hence, Ms. Walden commenced proceedings in the Autauga County Circuit Court to remove these clouds on her title.
All references to the Autauga County Suit and the Montgomery County Suit are to the state court proceedings. Gatewood Walden, Esq., who is counsel of record in this action, represented Crooked Creek in Crooked Creek I. He also is the son of Willadean Walden, and represented her in the Autauga County Suit.
This is one of several rulings in the Montgomery County Suit. Initially, the Montgomery County Circuit Court entered a judgment in 2000 vesting Ms. Walden with ownership of all of the common stock in the corporation that owned Danya Park Apartments. In 2002, however, the Montgomery County Circuit Court vacated that judgment and instead awarded Ms. Walden a lien on the common stock. That judgment was affirmed by the Alabama Court of Civil Appeals in 2003, and the Supreme Court of Alabama denied Ms. Walden's certiorari petition in April 2004. Thereafter, also in 2004, the parties to the Montgomery County Suit consented to the entry of judgment, vacating the 2002 judgment and reinstating the 2000 judgment that Ms. Walden owned the common stock in the corporation which owned Danya Park Apartments. According to Crooked Creek, after the entry of the 2004 judgment, Ms. Walden "was the [undisputed] lawful equitable owner of Danya Park Apartments." (Pl. Resp. 5 (Doc. # 29).)
It is notable also that on May 17, 2010, which was after this lawsuit was filed, the Montgomery County Circuit Court entered an order, declaring the validity of its prior judgments entered in 2000 and 2004 and reasserting that Ms. Walden is the "equitable owner of Danya Park Apartments." Walden v. Smith, No. CV-95-1093 (Montgomery County, Ala., Circuit Court, May 17, 2010) (Ex. to Doc. # 33). The May 17, 2010 order has spawned yet more litigation in the Autauga County Circuit Court, with that court entering an order granting a preliminary injunction in favor of the George Hutchison Jr. Trust and two of the Ensley defendants. The order enjoins Ms. Walden and Crooked Creek from "faxing, mailing delivering by hand or serving a copy of the Order of the Circuit Court of Montgomery County dated May 17, 2010 upon the Sheriff of Autauga County or in any way attempting to interfere with the ownership or management of Danya Park . . . Apartments." E.S. Capital, LLC. v. Walden, No. CV-10-900098 (Autauga County, Ala. Circuit Court, June 11, 2010 (Ex. to Doc. # 34)). It also enjoins them "from entering upon or having anyone enter upon the property of Danya Park Apartments to assert any ownership of the Apartments or attempt to exercise any control over the Apartments," except that the order "is not intended to disallow the defendants any rights of redemption from the . . . foreclosure to which they might be entitled under Alabama law." Id.
In 2006, the Autauga County Circuit Court disagreed with Ms. Walden's claim to ownership of Danya Park Apartments, finding that the 2002 judgment in the Montgomery County Suit giving Ms. Walden only a lien was the "`law of the case.'" Crooked Creek I, 2009 WL 3644835, at *4 (quoting Autauga County Suit, Summ. J. Op. 5, dated Dec. 2006). The Autauga County Circuit Court judgment awarded the Ensley defendants a first mortgage on Danya Park Apartments superior to Ms. Walden's lien, and rendered enforceable and valid a management agreement governing the Ensley defendants' operation of Danya Park Apartments and the collection of rent. The Autauga County Circuit Court also found that the quitclaim deed was in fact an equitable mortgage and amounted to a secondary lien ("equitable second mortgage") subject only to the Ensley defendants' first mortgage lien. The Supreme Court of Alabama agreed insofar as it held that the George Hutchison Jr. Trust had a valid secondary lien on Danya Park Apartments. It held, however, that George Hutchison was judicially estopped (for reasons not pertinent to the present analysis) from claiming any interest in the quitclaim mortgage on Danya Park Apartments. Walden v. Hutchinson, 987 So. 2d 1109, 1117-19 (Ala. 2007). Hence, as a result of the Autauga County Suit judgment, Crooked Creek's interest in Danya Park Apartments was subordinate to both the Ensley defendants' first mortgage lien and the George Hutchison Jr. Trust's equitable second mortgage.
The judgment rendered as a result of the Autuaga County Suit was the catalyst for Crooked Creek I, which was filed in this court by Crooked Creek, as the successor-in-interest to Ms. Walden's ownership interest in Danya Park Apartments. The Ensley defendants and their attorney were among the defendants. In Crooked Creek I, the Ensley defendants argued that, under the doctrine of res judicata, the Autauga County Suit judgment foreclosed Crooked Creek from reigniting the ownership dispute over Danya Park Apartments in federal court. The facts and causes of action in Crooked Creek I all pertained to the validity of the Ensley defendants' first mortgage and the management agreement. Applying Alabama res judicata principles, this court found that the Autauga County Suit judgment was a prior judgment on the merits, rendered by a court of competent jurisdiction, and that it involved the same subject matter and the same parties (or their privies) as were then before it. The Eleventh Circuit affirmed the judgment. See Crooked Creek Props., Inc. v. Ensley, No. 09-15988, 2010 WL 2136027 (11th Cir. May 29, 2010).
Crooked Creek alleges that "it acquired fee simple title to Danya Park Apartments . . . from [Ms.] Walden." (Compl. ¶ 8; see also Compl. ¶¶ 17, 86.)
George Hutchison, Donald Hutchison and Mr. McDowell were not named in Crooked Creek I.
Undeterred, in this lawsuit, Crooked Creek sues (1) George Hutchison, (2) Donald Hutchison, individually and in his capacity as the trustee of the George Hutchison Jr. Trust, and (3) Mr. McDowell, George Hutchison's attorney. The first twenty-eight pages of the Complaint recite the history of the Montgomery County Suit and the Autauga County Suit. The claims in the present action allegedly arose in the "aftermath of the state court litigation" (Compl. 28), when George Hutchison, represented by Mr. McDowell, initiated foreclosure proceedings on the equitable second mortgage on Danya Park Apartments held by the George Hutchison Jr. Trust. George Hutchison allegedly did so without giving actual notice to Crooked Creek as the "fee simple" owner of Danya Park Apartments, and notwithstanding that the George Hutchison Jr. Trust had not "acquired any proprietary interest in Danya Park Apartments." (Compl. ¶¶ 8, 17, 86, 111.) Crooked Creek avers that the "underlying purported quitclaim deed" transferred from George Hutchison to the George Hutchison Jr. Trust is void for a number of reasons previously litigated in the Autauga County Suit and also because the Autauga County Suit judgment giving the George Hutchison Jr. Trust an equitable second mortgage on Danya Park Apartments is void. And, if the Autauga County Suit judgment that validates the George Hutchison Jr. Trust's equitable second mortgage "is itself invalid," then the "mortgage foreclosure sale is invalid and is due to be set aside." (Pl. Resp. 42-43 (Doc. # 29); see also Compl. ¶ 17.)
By these arguments, Crooked Creek clings to the Montgomery County Circuit Court judgments giving it, in effect, ownership of Danya Park Apartments. As Crooked Creek admits, "at the heart of this complaint is Crooked Creek's belief and contention that the judgments of the Montgomery [County] Circuit Court are valid, while the judgments of the Autauga [County] Circuit Court and the state appellate court are . . . void." (Compl. ¶ 14; see also Compl. ¶ 3 (As a result of the 2004 "unappealed, unreversed, consent judgment Mrs. Walden became . . . the equitable owner of Danya Park Apartments."); Pl. Resp. 41.)
Crooked Creek brings claims to set aside the foreclosure sale (Count One), for conspiracy to wrongfully foreclose on its property (Count Two), for intentional interference with Crooked Creek's business relations with Danya Park Apartments' tenants (Count Three), for cancellation of the quitclaim deed (Count Four), for damages flowing from the wrongful foreclosure (Count Five), and for conspiracy to obtain unjust enrichment (Count Six).
Defendants argue that the doctrine of res judicata again precludes Crooked Creek from litigating the matters decided adversely to its predecessor-in-interest (Ms. Walden) in the Autauga County Suit. Alabama's law on res judicata applies. See Crooked Creek I, 2009 WL 3644835, at *7-8. "The elements of res judicata, or claim preclusion, are (1) a prior judgment on the merits, (2) rendered by a court of competent jurisdiction, (3) with substantial identity of the parties, and (4) with the same cause of action presented in both suits." Dairyland Ins. Co. v. Jackson, 566 So. 2d 723, 725 (Ala. 1990). "If those four elements are present, then any claim that was, or that could have been, adjudicated in the prior action is barred from further litigation." Chapman Nursing Home, Inc. v. McDonald, 985 So. 2d 914, 919 (Ala. 2007).
The doctrine of res judicata clearly bars Crooked Creek's action for substantially the same reasons espoused in Crooked Creek I. That reasoning is incorporated here so as to avoid needless repetition. See Crooked Creek I, 2009 WL 3644835, at *7-21. The reasoning will be summarized.
First, the Autauga County Suit resulted in a valid, final judgment on the merits. The judgment gave the George Hutchison Jr. Trust an equitable second mortgage on Danya Park Apartments.
Second, Alabama's courts are courts of competent jurisdiction. Nonetheless, Crooked Creek spends much of its brief arguing that the Autauga County Suit judgment is void for lack of subject matter jurisdiction and is based upon a misunderstanding of procedural and substantive rules of law; hence, Crooked Creek contends that the jurisdiction of the Autauga County Circuit Court (and of the reviewing appellate courts) was not competent. In fact, the sole argument against the application of the doctrine of res judicata urged by Crooked Creek is that the doctrine is "inapplicable to void judgments." (Pl. Resp. 38-40.) This argument was, however, considered and rejected in Crooked Creek I, and on appeal. See Crooked Creek, 2010 WL 2136027, at *2 (explaining that the action to quiet title in the Autauga County Suit gave the circuit court jurisdiction to establish title and that, "even if it were true that the Autauga Court erred" in its analysis, under Alabama law, "`the simple fact that a court has erroneously applied the law does not render its judgment void.'" (quoting Neal v. Neal, 856 So. 2d 766, 781 (Ala. 2002)); see also Crooked Creek I, 2009 WL 3644835, at *10 (distinguishing between a "void judgment" and an "erroneous judgment" and discussing the Autauga County Circuit Court's jurisdiction). For the same reasons, the argument is again rejected here.
Third, Alabama's law on privity, for purposes of res judicata, is elaborated upon in Crooked Creek I. See 2009 WL 3644835, at *13-18. Based upon application of those principles here, Crooked Creek and Defendants in this action were parties or privies in the Autauga County Suit. Crooked Creek has not argued to the contrary.
Fourth, in this action and in the Autauga County Suit, the primary right asserted by Crooked Creek and Ms. Walden is the alleged right to unencumbered ownership of Danya Park Apartments, while the primary wrong centers on Defendants' interference with that ownership. The interference in this case, as in the Autauga County Suit, includes the quitclaim deed ( i.e., the equitable second mortgage) on Danya Park Apartments, and the principal contention is that the quitclaim deed is void. ( Compare Autauga County Suit, Compl. ¶ 24 ("Hutchison's quitclaim deed is absolutely void."), with Compl. ¶ 6 (enumerating six reasons why the quitclaim deed is void).) Parallel relief also is sought. In this case, "Crooked Creek . . . seeks to cancel defendants' unlawful and illegal `equitable mortgage' or to have it declared inoperative and void." (Compl. ¶ 6.) Similarly, the Autauga County Suit complaint sought a judgment declaring that Ms. Walden "ha[d] the entire undivided fee simple interest in and to [Danya Park Apartments] with no restrictions thereon." (Autauga County Suit Compl. 20.) While Crooked Creek crafts some of its legal theories differently in this lawsuit (focusing on an alleged wrongful foreclosure), it merely is attempting to do indirectly what it cannot do directly — attack the validity and enforceability of the quitclaim deed held by the George Hutchison Jr. Trust. Both lawsuits concern the same subject matter ( i.e., ownership control of Danya Park Apartments), and revolve around the same nucleus of operative facts. For these reasons, the causes of action are the same for res judicata purposes.
Accordingly, all of the res judicata elements under Alabama law are satisfied, and Crooked Creek is precluded from relitigating the claims it has brought in this suit. Defendants' arguments for dismissal on the merits, therefore, need not be addressed, although they are persuasive.
For the foregoing reasons, it is ORDERED that Defendants' motions to dismiss (Docs. # 20, 24, 26, 30, 35) are GRANTED, and that this action is DISMISSED with prejudice, as barred by the doctrine of res judicata.
All remaining motions are DENIED as moot.
An appropriate judgment will be entered.
DONE this 10th day of September, 2010.
A copy of this checklist is available at the website for the USCA, 11th Circuit at www.ca11.uscourts.gov Effective on April 9, 2006, the new fee to file an appeal will increase from $255.00 to $455.00.
CIVIL APPEALS JURISDICTION CHECKLIST
1. Appealable Orders : Courts of Appeals have jurisdiction conferred and strictly limited by statute: (a) Appeals from final orders pursuant to 28 U.S.C. § 1291: Only final orders and judgments of district courts, or final orders of bankruptcy courts which have been appealed to and fully resolved by a district court under 28 U.S.C. § 158, generally are appealable. A final decision is one that "ends the litigation on the merits and leaves nothing for the court to do but execute the judgment." Pitney Bowes, Inc. v. Mestre, 701 F.2d 1 365, 1 368 (11th Ci r. 1 983). A magistrate judge's report and recommendation is not final and appealable until judgment thereon is entered by a district court judge. 28 U.S.C. § 636(c). (b) In cases involving multiple parties or multiple claims, a judgment as to fewer than all parties or all claims is not a final, appealable decision unless the district court has certified the judgment for immediate review under Fed.R.Civ.P. 54(b). Williams v. Bishop, 732 F.2d 885, 885-86 (11th Cir. 1984). A judg ment which resolves all issues except matters, such as attorneys' fees and costs, that are collateral to the merits, is immediately appealable. Budinich v. Becton Dickinson Co., 486 U.S. 196, 201, 108 S.Ct. 1717, 1721-22, 100 L.Ed.2d 178 (1988); LaChance v. Duffy's Draft House, Inc., 146 F.3d 832, 837 (11th Cir. 1998). (c) Appeals pursuant to 28 U.S.C. § 1292(a): Appeals are permitted from orders "granting, continuing, modifying, refusing or dissolving injunctions or refusing to dissolve or modify injunctions . . ." and from "[i]nterlocutory decrees . . . determining the rights and liabilities of parties to admiralty cases in which appeals from final decrees are allowed." Interlocutory appeals from orders denying temporary restraining orders are not permitted. (d) Appeals pursuant to 28 U.S.C. § 1292(b) and Fed.R.App.P. 5: The certification specified in 28 U.S.C. § 1292(b) must be obtained before a petition for permission to appeal is filed in the Court of Appeals. The district court's denial of a motion for certification is not itself appealable. (e) Appeals pursuant to judicially created exceptions to the finality rule: Limited exceptions are discussed in cases including, but not limited to: Cohen v. Beneficial Indus. Loan Corp., 337 U.S. 541, 546, 69S.Ct. 1221, 1225-26, 93 L.Ed. 1528 (1949); Atlantic Fed. Sav. Loan Ass'n v. Blythe Eastman Paine Webber, Inc., 890 F.2d 371, 376 (11th Cir. 1989); Gillespie v. United States Steel Corp., 379 U.S. 148, 157, 85 S.Ct. 308, 312, 13 L.Ed.2d 199 (1964). Rev.: 4/04 2. Time for Filing : The timely filing of a notice of appeal is mandatory and jurisdictional. Rinaldo v. Corbett, 256 F.3d 1276, 1278 (11th Cir. 2001). In civil cases, Fed.R.App.P. 4(a) and (c) set the following time limits: (a) Fed.R.App.P. 4(a)(1): A notice of appeal in compliance with the requirements set forth in Fed.R.App.P. 3 must be filed in the district court within 30 days after the entry of the order or judgment appealed from. However, if the United States or an officer or agency thereof is a party, the notice of appeal must be filed in the district court within 60 days after such entry. THE NOTICE MUST BE RECEIVED AND FILED IN THE DISTRICT COURT NO LATER THAN THE LAST DAY OF THE APPEAL PERIOD — no additional days are provided for mailing. Special filing provisions for inmates are discussed below. (b) Fed.R.App.P. 4(a)(3): "If one party timely files a notice of appeal, any other party may file a notice of appeal within 14 days after the date when the first notice was filed, or within the time otherwise prescribed by this Rule 4(a), whichever period ends later." (c) Fed.R.App.P. 4(a)(4): If any party makes a timely motion in the district court under the Federal Rules of Civil Procedure of a type specified in this rule, the time for appeal for all parties runs from the date of entry of the order disposing of the last such timely filed motion. (d) Fed.R.App.P. 4(a)(5) and 4(a)(6): Under certain limited circumstances, the district court may extend the time to file a notice of appeal. Under Rule 4(a)(5), the time may be extended if a motion for an extension is filed within 30 days after expiration of the time otherwise provided to file a notice of appeal, upon a showing of excusable neglect or good cause. Under Rule 4(a)(6), the time may be extended if the district court finds upon motion that a party did not timely receive notice of the entry of the judgment or order, and that no party would be prejudiced by an extension. (e) Fed.R.App.P. 4(c): If an inmate confined to an institution files a notice of appeal in either a civil case or a criminal case, the notice of appeal is timely if it is deposited in the institution's internal mail system on or before the last day for filing. Timely filing may be shown by a declaration in compliance with 28 U.S.C. § 1746 or a notarized statement, either of which must set forth the date of deposit and state that first-class postage has been prepaid. 3. Format of the notice of appeal : Form 1, Appendix of Forms to the Federal Rules of Appellate Procedure, is a suitable format. See also Fed.R.App.P. 3(c). A pro se notice of appeal must be signed by the appellant. 4. Effect of a notice of appeal : A district court loses jurisdiction (authority) to act after the filing of a timely notice of appeal, except for actions in aid of appellate jurisdiction or to rule on a timely motion of the type specified in Fed.R.App.P. 4(a)(4).
ourt. In at least two instances, Porter actually removed cases to State or Federal court, without the respondent's knowledge. The record does not show whether Porter ever appeared at an oral argument or before any State or Federal court.
In June, 2003, the MCAD assessed sanctions against the respondent, as attorney of record, in connection with misconduct by Porter. The respondent learned of the sanctions in June, but took no action. Porter subsequently concealed a September, 2003, warning that the respondent's failure to pay sanctions would result in his suspension from practice before the MCAD. In November, 2003, the respondent received a notice from the MCAD suspending the respondent, his firm, and Porter from practice before the MCAD for one year for failure to pay the sanctions. The order required the respondent to withdraw as counsel or remove all cases to a court within twenty-one days. The respondent did not investigate the charges, review Porter's case files, withdraw his appearances in any cases, or notify Porter's clients that the firm had been suspended from practice before the MCAD. Approximately forty cases were pending at the time of the suspension, and the respondent did not instruct Porter to take any action in response to the order. The respondent did not do anything at this time to protect the rights of the firm's discrimination clients.
In light of the notice, the respondent did request hearings before the MCAD and the office of Bar Counsel (bar counsel). The MCAD did not grant a hearing.
Despite the sanctions, the respondent did not terminate his relationship with Porter. Around the same time, the respondent learned that Porter had removed a case from the MCAD to Federal court, under the respondent's name. The respondent reprimanded Porter, but did not terminate the relationship or investigate whether other suits were filed in court under his name. In early October, 2004, the respondent learned that Porter had filed an untimely complaint in Federal court under the respondent's name, without the respondent's authority. In addition, between February and October, 2004, the respondent received multiple complaints of neglect, lack of communication, misrepresentation, and other misconduct by Porter, including complaints filed by clients with the office of Bar Counsel (bar counsel).
In October, 2004, the respondent learned from bar counsel that Porter had not remitted a client's fee payment and he fired Porter in response, for violating their agreement that Porter would run all fees through the respondent's accounts. At this point, the respondent notified Porter's clients of the termination, refunded retainer fees to some of them, and acknowledged that in a number of cases, the firm had missed key deadlines and otherwise mismanaged the cases. He directed an associate to review the files to determine which claims were viable, and contacted outside attorneys to see if they would be interested in taking some of the cases.
2. Procedural history. Bar counsel's third amended petition for discipline brought eight counts against the respondent. Count I set out general charges arising from the respondent's alleged misconduct. Counts II through VI alleged misconduct specific to five clients, all as a result of Porter's mismanagement of their cases. In each of those cases, Porter failed to meet mandatory filing deadlines, which resulted in dismissal of the clients' underlying claims. Counts VII and VIII concerned unrelated violations of the rules regarding IOLTA accounts and the provision of financial assistance to clients.
The case was heard by a hearing committee in April, 2008, and the hearing committee recommended that the respondent be suspended for six months and one day. The hearing committee determined that the respondent improperly split fees with Porter, failed to supervise Porter, failed to communicate adequately with the discrimination clients, failed to provide competent and diligent representation to those clients, failed to keep adequate trust records, advanced financial assistance to clients, and entered into a business transaction with one client.
On appeal, the board adopted the hearing committee's subsidiary findings, but modified the report by adding conclusions that the respondent had assisted in unauthorized practice, formed a business entity with Porter, made false, deceptive, or misleading communications, and made unauthorized disclosure of confidential client information. The board recommended that the respondent be suspended for one year and one day.
3. Standard of review. "In bar discipline cases that have been reserved and reported, we `review the board's findings and reach our own conclusion.'" Matter of Wainwright, 448 Mass. 378, 384 (2007), quoting Matter of Fordham, 423 Mass. 481, 487 (1996), cert. denied, 519 U.S. 1149 (1997). We accept "subsidiary facts found by the board" if they are "supported by substantial evidence, upon consideration of the record." S.J.C. Rule 4.01, § 8 (4), as appearing in 425 Mass. 1309 (1997). The findings and recommendations of the board, although not binding on this court, are entitled to great weight. Matter of Murray, 455 Mass. 872, 879 (2010), and cases cited. The board's findings here, adopting all the hearing committee's findings, are supported by the evidence, and we accept those findings.
4. Assistance in the unauthorized practice of law. The respondent argues that he did not assist in the unauthorized practice of law, but instead failed to supervise Porter adequately, a lesser violation of the Massachusetts Rules of Professional Conduct. The respondent argues that assistance in the unauthorized practice of law requires more than the negligence or omissions present in this case and also requires the lawyer to possess a specific intent to assist in the unauthorized practice of law. Bar counsel argues that, not only did Porter engage in the unauthorized practice of law, the respondent assisted him in such practice.
Rule 5.5 (b) of the Massachusetts Rule of Professional Conduct, 426 Mass. 1410 (1998), which was in effect through December 31, 2006, prohibits an attorney from "assist[ing] a person who is not a member of the bar in the performance of activity that constitutes the unauthorized practice of law." Only attorneys may represent parties in court and give legal advice. See Goldblatt v. Corporation Counsel of Boston, 360 Mass. 660, 665 (1971); Opinion of the Justices, 289 Mass. 607, 613-614 (1935). Although this court has observed that "[i]t is not easy to define the practice of law," Lowell Bar Ass'n v. Loeb, 315 Mass. 176, 180 (1943), we have stated that the practice of law includes:
Effective January 1, 2007, the rule was reworded and restructured, but its substance is unchanged. See Mass. R. Prof. C. 5.5 (a), as appearing in 447 Mass. 1302 (2007). In this opinion, we cite to the former rule, as it was in effect during the incidents at issue.
"directing and managing the enforcement of legal claims
and the establishment of the legal rights of others, where it is necessary to form and to act upon opinions as to what those rights are and as to the legal methods which must be adopted to enforce them, the practice of giving or furnishing legal advice as to such rights and methods and the practice, as an occupation, of drafting documents by which such rights are created, modified, surrendered or secured."
Matter of an Application for Admission to the Bar of the Commonwealth, 443 Mass. 1010, 1012 n. 4 (2005), quoting
Matter of the Shoe Mfrs. Protective Ass'n, 295 Mass. 369, 372 (1936). We also have held that the practice of law may involve "either rendering legal advice to or soliciting . . . clients, or . . . engaging in a legal contest in a Massachusetts forum."
Matter of Chimko, 444 Mass. 743, 752 (2005). Finally, we have held that "an attorney should not permit lay persons even to appear to form the attorney-client relationship with a prospective client, because that is part of the practice of law."
DeVaux v. American Home Assurance Co., 387 Mass. 814, 820 (1983). The appropriate inquiry is whether the actions by Porter, "viewed individually or as a whole, are actions only a lawyer is entitled to perform on behalf of another in the circumstances." See
Matter of the Shoe Mfrs. Protective Ass'n, supra.
Here, Porter's discrimination practice included determining fee arrangements and executing fee agreements, counselling clients about their legal rights, drafting and filing pleadings, conducting discovery, negotiating settlements, and deciding whether and when to remove cases from the MCAD or EEOC for filing in State or Federal court. In Matter of Jackman, 20 Mass. Att'y Discipline Rep. 263, 267-268 (2004), S. C., 444 Mass. 1013 (2005), the single justice determined that the unauthorized practice of law occurred when an attorney's staff member handled and settled personal injury cases with inadequate supervision or oversight. Similarly, many of the activities undertaken by Porter in this case fall within the definition of the "practice of law."
The respondent argues that "the vast majority of Porter's activities fall within the ambit of permissible paralegal work." While many tasks performed by an attorney may also be performed by a paralegal, we require that an attorney supervise a paralegal's performance of such work. See comment 1 to Mass. R. Prof. C. 5.5(b) (rule "does not prohibit a lawyer from employing the services of paraprofessionals and delegating functions to them, so long as the lawyer supervises the delegated work and retains responsibility for their work"). Here, respondent did not supervise Porter in Porter's discrimination law practice. In addition, much of Porter's practice of law before the MCAD was unauthorized, as practice by nonlawyers before the MCAD is confined to the filing of complaints by a qualifying organization and participation in some informal conferences. See 804 Code Mass. Regs. § 1.10 (1)(c) (1999) (allowing MCAD complaints to be filed by nonprofit organizations "whose purposes include the elimination of the unlawful practice[s]"); 804 Code Mass. Regs. § 1.13(5)(b) (1999) (claimant may be accompanied to an informal investigative conference "by his or her attorney or other representative"). Porter's discrimination law practice at the respondent's firm was not covered under the regulation regarding nonprofit organizations, as he was not acting on behalf of a qualified organization; accordingly, Porter handled each of his cases at the MCAD under the appearances he filed in respondent's name, but without any supervision from the respondent or another attorney at respondent's firm. In addition, Porter's unsupervised activity at the MCAD went far beyond appearing at informal investigative conferences.
The respondent relies on testimony by a former MCAD commissioner to support his argument that Porter was authorized to practice before the MCAD. The former commissioner testified that, while there was no regulation allowing law firm paralegals to engage in the practice of law at the MCAD, it was common for paralegals to engage in some activities at the MCAD during his tenure. See 804 Code Mass. Regs. § 1.13(5)(b) (claimant may be accompanied to an informal investigative conference "by his/her attorney or other representative"). He did testify that hearings on probable cause, interrogatories, depositions, and public hearings at the MCAD were expected to be handled by attorneys.
The respondent argues that, even if Porter's activities consisted of the unauthorized practice of law, he did not offer any assistance to Porter in violation of Mass. R. Prof. C. 5.5 (b). Specifically, the respondent contends that (1) because the hearing committee determined his conduct was negligent, and consisted mostly of omissions, the more accurate violation is failure to supervise under Mass. R. Prof. C. 5.3 (b), 426 Mass. 1408 (1998); and (2) in order to have assisted in the unauthorized practice of law, the respondent must have had a more active role and the specific intent to assist in practice which he knows to be unauthorized. Despite the respondent's arguments, we conclude that the total effect of his conduct was to assist Porter in the unauthorized practice of law.
The hearing committee determined that the respondent merely failed adequately to supervise a nonlawyer assistant under Mass. R. Prof. C. 5.3 (b), which states that "a lawyer having direct supervisory authority over the nonlawyer shall make reasonable efforts to ensure that the person's conduct is compatible with the professional obligations of the lawyer." In support of this theory, the respondent relies on Matter of Holzberg, 15 Mass. Att'y Discipline Rep. 264, 266 (1999) ( Holzberg), wherein an attorney was held to have failed to supervise his support staff, but not to have assisted in the unauthorized practice of law, when he allowed a paralegal to handle a client's tort claim. Holzberg can be distinguished in that it only involved a single instance of misconduct, and the paralegal was not responsible for an unsupervised ongoing practice. Id. Moreover, the attorney in Holzberg did not allow the paralegal to file actions in court under his name. Id. The facts here go far beyond those presented in Holzberg, and support the board's finding that the respondent not only failed to supervise Porter adequately, but also assisted Porter in the unauthorized practice of law.
Lawyers who employ nonattorneys are required to supervise the delegated work and retain responsibility for the nonattorney's work. The Massachusetts Rules of Professional Conduct indicate that failure to do so could result in a charge of assistance in the unauthorized practice of law. See comment 1 to Mass. R. Prof. C. 5.5. See also Restatement (Third) of the Law Governing Lawyers § 4 comment g (2000) ("[L]awyers and law firms are empowered to retain nonlawyer personnel to assist firm lawyers in providing legal services to clients. In the course of that work, a nonlawyer may conduct activities that, if conducted by that person alone in representing a client, would constitute unauthorized practice. Those activities are permissible and do not constitute unauthorized practice, so long as the responsible lawyer or law firm provides appropriate supervision . . . and so long as the nonlawyer is not permitted to . . . split fees . . ."). In Matter of DiCicco, 6 Mass. Att'y Discipline Rep. 83, 89-91 (1989), the single justice held that, where an attorney formed a business with a paralegal to represent prison inmates experiencing administrative problems and listed the paralegal on letterhead as "Of Counsel," and then failed to supervise the paralegal's activities, the attorney assisted in the unauthorized practice of law. Similarly, in Matter of Jackman, 20 Mass. Att'y Discipline Rep. 263, 267-268 (2004) ( Jackman), the respondent was held to have provided the "necessary `assistance'" to a nonmember of the bar to conduct the unauthorized practice of law when he agreed to allow the nonlawyer to manage the day-to-day operations of an office in which nonlawyers handled and settled personal injury cases, arranged to split legal fees from the business with the nonlawyer, and then failed to provide adequate supervision or oversight. The differences between Jackman and this case are minor: in Jackman, the nonlawyers operated from a separate office; here, Porter ran a separate practice within the respondent's office. In addition, the respondent allowed Porter to run his own unsupervised discrimination law practice from the respondent's law office, understanding that people would "assume that Porter was employed by [the firm] as a paralegal, despite the reality that Porter was carrying on his own practice." The total effect of the respondent's conduct was to facilitate Porter's unauthorized practice of law by creating an environment in which it could exist. Here, the respondent allowed it to flourish.
The respondent's efforts to curb Porter's conduct, by holding Porter out as a paralegal, instructing Porter on fee agreements, requiring Porter to turn over all fee payments to the firm, and minimally reprimanding Porter when he was informed of Porter's missteps, are not sufficient to avoid a charge of assistance in the unauthorized practice of law. See, e.g., Matter of Jackman, supra at 268 (finding it immaterial that nonattorneys did not hold themselves out as members of bar).
The respondent's final argument is that, because he had no specific intent to assist Porter in the unauthorized practice of law, the decision by the board cannot stand. The hearing committee found that the respondent had a good faith belief that Porter was permitted to practice before the MCAD, based on an unidentified regulation that he believed permitted such practice; therefore, the respondent argues that he had no specific intent to assist Porter in the unauthorized practice of law. The board rejected this argument, noting that nothing in Mass. R. Prof. C. 5.5 suggests a requirement of specific intent, in contrast with other rules that explicitly require that a lawyer "knowingly" engage in prohibited conduct before receiving disciplinary sanctions. It is clear that the respondent was aware of the nature and the extent of Porter's unsupervised discrimination practice, which was unauthorized. Our caselaw has not addressed specifically the issue of the necessary intent, and we need not address it in this case. However, no cases support the addition of a requirement that the attorney know that the practice is unauthorized. See Matter of Jackman, supra at 264 (merely stating that Jackman "knew that [the nonlawyer] was handling personal injury claims and managing the office without adequate supervision"). See also Matter of Luongo, 416 Mass. 308, 311 (1993) (not requiring knowledge element on charge of assisting in unauthorized practice, but using Luongo's "knowing participation" as matter in aggravation on issue of appropriate sanction).
However, the respondent also testified that he understood Porter could only represent clients at the MCAD pursuant to an attorney's appearance, and allowed Porter to sign the respondent's name on all appearances. Furthermore, even after the MCAD sent a letter stating that Porter's appearances before the MCAD were not allowed, he did not fire Porter or arrange for attorney supervision of Porter's discrimination practice.
See, e.g., S.J.C. Rule 1.8 (a), 426 Mass. 1338 (1998) (lawyer shall not knowingly acquire pecuniary interests adverse to client); S.J.C. Rule 3.3, 426 Mass. 1383 (1998) (lawyer shall not knowingly engage in conduct that violates requirement of candor before a tribunal); S.J.C. Rule 3.4 (c), 426 Mass. 1389 (1998) (lawyer shall not knowingly disobey obligation under rules of tribunal).
Similar to Jackman, the respondent was aware of the extent of Porter's practice before the MCAD, was aware that Porter's practice was unsupervised, did not arrange for his actions to be supervised, and was aware that Porter was not an attorney. At best, the respondent's defense is that, because he was not aware that Porter's activities, as permitted and arranged by the respondent, amounted to the unauthorized practice of law, he cannot be held liable for assisting in that practice. This is not a sufficient defense. See Matter of the Discipline of an Attorney, 392 Mass. 827, 835 (1984) ("There have been, and will be, few cases of unethical conduct where we consider it relevant that an offending attorney was not aware of the disciplinary rules or their true import").
Here, the respondent's conduct in knowingly facilitating Porter's unsupervised discrimination practice clearly falls within the ambit of assistance in the unauthorized practice of law, and this holding upholds the purpose of the rule forbidding an attorney from assisting in the unauthorized practice of law — that is, the protection of the public from the rendition of legal services by unqualified persons. Comment 1 to Mass. R. Prof. C. 5.5.
5. Sanctions. The board recommended a term suspension of one year and one day. In reviewing the board's recommended sanction, we consider whether the recommended sanction "is markedly disparate from judgments in comparable cases." Matter of Finn, 433 Mass. 418, 423 (2001). See Matter of Kerlinsky, 428 Mass. 656, 664, cert. denied, 526 U.S. 1160 (1999). Regardless, "[e]ach case must be decided on its own merits and every offending attorney must receive the disposition most appropriate in the circumstances." Matter of the Discipline of an Attorney, supra at 837. The consideration of the cumulative effects of several ethical violations is proper when determining the appropriate sanction. Matter of Saab, 406 Mass. 315, 326-327 (1989).
The respondent argues that the appropriate sanction for his disciplinary violations is a three-month suspension. He claims that because he merely failed to supervise Porter adequately, instructed him on the appropriate use of fee agreements and the handling of client funds, took steps to determine whether Porter's practice at the MCAD was allowed, and made efforts to identify Porter as a paralegal, the sanction recommended by the board would be disproportionate to other similar cases. Conversely, bar counsel argues that the board's recommended sanction of one year and one day is the minimum required to address the respondent's misconduct.
We agree with the board's recommended sanction of one year and one day, as it is not disparate from sanctions imposed in similar cases. The board, in affirming the subsidiary findings of the hearing committee and adding conclusions that the respondent assisted in the unauthorized practice of law, formed a business entity with Porter, and made false, deceptive, or misleading communications, determined that the respondent violated several of the rules of professional conduct in connection with collaboration with Porter; and further violated other rules of professional conduct on unrelated charges involving the respondent's trust account records, financial assistance to clients, and business transactions with clients. These conclusions are well supported by the record.
The sanction for similar cumulative misconduct in previous cases has varied, depending on the severity of the misconduct. In Matter of Jackman, 444 Mass. 1013, 1014 (2004), this court stated that "with respect to the misconduct involving fee splitting, inadequate supervision of nonlawyers, and assisting in the unauthorized practice of law, a term suspension is warranted." See Matter of Luongo, 416 Mass. 308, 311 (1993) ("standing alone, the attorney's knowing participation in the practice of law with [a nonlawyer] warrants at least a suspension from the practice of law, where the attorney obtained financial gain from the association and clients were defrauded"). Jackman was suspended for two years for his improper association with nonlawyers and negligent misuse of client funds, each of which caused harm to clients and warranted a term suspension. Matter of Jackman, supra at 1014-1015. As noted by both the respondent and bar counsel, the misuse of client funds as a result of Jackman's inaction is a significant difference between Jackman and the respondent's case. See Matter of Wysocki, 16 Mass. Att'y Discipline Rep. 437 (2000) (two-year suspension for assisting disbarred lawyer's practice [without fee split or financial benefit], taking cases from disbarred lawyer without consent, neglect, commingling, and record-keeping violations); Matter of DiCicco, 6 Mass. Att'y Discipline Rep. 83, 89 (1989) (two-year suspension for assisting in unauthorized practice of law by paralegal, including representing that paralegal was "of counsel," neglect of cases, and other misconduct). Conversely, the respondent's infractions were less egregious, particularly in light of his belief, albeit misguided, that all of Porter's actions were sanctioned by the MCAD. Accordingly, we conclude that a suspension of less than two years is appropriate, as the cases imposing a two-year suspension involve conduct more severe than the respondent's actions in this case.
The respondent relies on cases where the sanction for similar misconduct was less than one year. In Matter of Dash, 22 Mass. Att'y Discipline Rep. 179 (2006), the attorney was suspended for six months and one day for setting up a tort practice with a paralegal, letting the paralegal manage and settle cases, letting the paralegal control his IOLTA account, and failing to supervise the paralegal. In contrast to the respondent's case, the misconduct at issue in Dash did not result in any loss or injury to the rights or interests of any client, the arrangement with the paralegal only lasted for a matter of months, and there were no additional instances of misconduct separate from Dash's arrangement with the paralegal. Id. at 179-180. In Matter of Holzberg, 15 Mass. Att'y Discipline Rep. 264, 265-267 (1999), an attorney received a public reprimand for allowing a paralegal to manage one client's case with very little supervision, and the paralegal mishandled the client's money. The client was not prejudiced by the paralegal's actions. Id. at 266. In contrast, the respondent here engaged in misconduct that spanned three years, involved at least forty clients, and resulted in prejudice to the claims of numerous clients. See Admonition No. 00-23, 16 Mass. Att'y Discipline Rep. 482, 483 (2000) (attorney assisted in unauthorized practice of law; however, no clients interests were harmed, fees were not shared with paralegal, and representation by paralegal was limited to Social Security claims). Each case relied on by the respondent is distinguishable from the respondent's case and supports the conclusion that the respondent's conduct in connection with Porter, which resulted in injury and prejudice to multiple clients, in addition to his recordkeeping and other violations, warrants the suspension of the respondent for the recommended sanction of one year and one day.
6. Disposition. A judgment shall enter suspending the respondent from the practice of law in the Commonwealth for one year and one day.
So ordered.