Tuesday, July 29, 2008

Collateral Estoppel In Bar Discipline

The full Massachusetts Supreme Judicial Court ordered an indefinite suspension of an attorney who had received into escrow funds specifically designated to pay a settlement. Instead, the lawyer sought to establish a basis to pay his firm and his father's consulting business out of the funds received. The father was a retired lawyer and shareholder of the son's law firm. The court concluded:

The respondent had no right to use GPFC's escrowed funds to pay past or anticipated future legal and consulting fees owed by Commonwealth Snack to Brauer & Brauer. Nonetheless, the respondent transferred an additional $23,000 of GPFC's escrowed funds to a separate escrow account for Brauer & Brauer to pay $19,628.90 in fees and expenses that Commonwealth Snack owed to the law firm for past work, plus another $3,371.10 to cover anticipated fees for future work. On September 5, 1996, the respondent wired the remaining $650,000 of GPFC's escrowed funds to the China Trust Bank, without explaining the $100,000 shortfall. The next day, the respondent notified GPFC by letter that he had placed $77,000 of its escrowed funds in a separate escrow account pursuant to a court order, and that he had put an additional $23,000 of its escrowed funds in a different escrow account for the payment of legal fees that Commonwealth Snack owed to Brauer & Brauer.

The court rejected the attorney's claim that he was improperly collaterally estopped from challenging findings in prior court proceedings:

Here, when bar counsel filed the petition for discipline, attached thereto were the determinations of the Superior Court judge and the Appeals Court, which subsequently would be reviewed by the board's chairman for their preclusive effect. In its action before the Superior Court, GPFC alleged that the respondent had converted GPFC's funds, and it sought to recover $100,000 that had been misappropriated. "The elements of conversion require that a defendant be proved to have 'intentionally or wrongfully exercise[d] acts of ownership, control or dominion over personal property to which he has no right of possession at the time....' " Grand Pac. Fin. Corp. v. Brauer, 57 Mass.App.Ct. 407, 412 (2003), quoting Abington Nat'l Bank v. Ashwood Homes, Inc., 19 Mass.App.Ct. 503, 507 (1985).  In concluding that the elements of conversion had been satisfied, the judge determined, inter alia, that (1) the respondent knew that he had received the $750,000 from GPFC in accordance with the terms of the escrow agreement between GPFC and Commonwealth Snack pertaining to the use of such funds; (2) the respondent was obligated to return such funds to GPFC on request; (3) the respondent had no legal right to retain such funds to pay past or future legal or consulting fees owed by Commonwealth Snack to Brauer & Brauer and Decnos; (4) the respondent intentionally exercised dominion over the funds and deprived GPFC of their use; (5) the respondent intentionally delayed returning the funds to GPFC so that Decnos could obtain an attachment; (6) the respondent's father knew that GPFC had demanded the return of its escrowed funds and that Commonwealth Snack had instructed Brauer & Brauer to return those funds to the China Trust Bank; and (7) the respondent failed to inform the Dedham District Court of the facts surrounding the escrow agreement. On appeal, after reviewing the judge's "comprehensive" findings, the Appeals Court stated that such findings were "amply supported in the record." Grand Pac. Fin. Corp. v. Brauer, supra at 409.


We agree with bar counsel that the factual circumstances pertaining to the issue whether the respondent had converted funds belonging to GPFC were actually litigated, and the judge's findings of fact and conclusions of law on that issue were essential to the final judgment in GPFC's favor on its conversion claim. The judge's findings were mirrored in the allegations of misconduct set forth in the petition for discipline, with the exception of paragraph 17 of the petition, pertaining to purported conflicts of interest. See note 8, supra. Accordingly, the board's chairman did not err in concluding that the respondent should be precluded from challenging the factual allegations set forth in the petition for discipline (except paragraph 17), where those facts were established adversely to the respondent in proceedings before the Superior Court.

If the link does not work, the case is Matter of Brauer, decided July 28, 2008. (Mike Frisch)



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