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Commonwealth of Massachusetts

NO. BD-2007-032

IN THE MATTER OF AN ATTORNEY

S.J.C. Order (Remanded to Office of Bar Counsel for Admonition) entered by Justice Ireland on June 21, 2007.

BOARD MEMORANDUM

Bar Counsel charged that the respondent, Jane Doe, sent opposing counsel in a divorce action a deceptive letter to obtain an advance distribution of marital assets. The hearing committee concluded that the respondent had violated no ethical rules and recommended that we dismiss the petition. On appeal, Bar Counsel asks that we find misconduct and impose a public reprimand. Upon review and after oral argument before the full board, we (1) adopt and incorporate by reference the hearing committee’s subsidiary findings of fact, (2) reject its conclusions of law and instead find violations, and (3) order an admonition.

The Facts

The respondent is a partner in her firm’s domestic relations group. During 2003, while assisting a partner by drafting a summary divorce settlement proposal, the respondent learned that the wife, the firm’s client, had become romantically involved with a Mr. Smith. When the husband hired a new attorney, settlement discussions broke down. The respondent had little to do with the case over the next several months, but she knew that it had become highly contentious.

In August 2003, the respondent learned that the wife had requested a $300,000 advance from the marital estate to buy a house, with a closing scheduled for August 22nd, and that the husband had agreed to the advance as long as it was handled through counsel. While the respondent’s firm was handling the advance, the wife used another attorney to handle the closing.

On August 18, 2003, the respondent’s partner sent a letter confirming the husband’s agreement to the advance and requesting that the husband’s attorney countersign. The partner then went on vacation, and he left the respondent and an associate to handle the matter in his absence.

Around August 21, 2003, the respondent learned that the closing had been postponed until the 25th and that if the wife could not postpone the closing again, Smith would buy the property as an accommodation until the wife obtained financing and the advance. The wife would then take title from Smith in her name alone. The respondent’s associate began to draft a motion to compel the advance.

On August 22, 2003, the husband’s counsel wrote:

[W]e can agree to such an advance as soon as we receive information concerning the address of the property, the purchase price, how the title is to be held and whether any deposit funds are being provided by anyone other than [the client].

The letter also said that the husband needed five business days to fund a check for the $300,000 advance. The letter did not ask whether Smith was involved in the transaction. The committee found that the husband wanted the property to remain a marital asset and did not want Smith to get any of the advance or to have an ownership interest in the house being purchased.

The respondent’s associate brought this letter to her, along with a draft response. The associate told the respondent that she was uncomfortable about writing and signing the response, and that the wife was uncomfortable about disclosing the property address to the husband. The respondent agreed to sign the final letter. She instructed her associate to get the exact street address from the wife because it would have to be disclosed. The respondent did not speak directly with the wife.

On August 25 or 26, 2003, the respondent’s associate learned from the wife that Smith had bought the property from the seller for $580,000. The associate passed this information to the respondent along with the street address of the property.

On August 26, 2003, the respondent sent a letter to the husband’s attorney. In relevant part, she stated:

Relying on your representation [that the husband would agree to the advance upon receipt of certain information], we are providing you with the following information with regard to the home [the wife] is in the process of purchasing:
  • The property is located at [street address].
  • The purchase price is $580,000.
  • Title will be held in [the wife’s] name alone.
  • No deposit funds are being provided by anyone other than [the wife].
  • The closing date has been delayed on more than one occasion, and most recently was scheduled to occur yesterday. It is now expected to occur immediately upon [the wife’s] receipt of the $300,000.
[The wife] is under serious pressure to close on the property right away. Therefore, she is concerned by the representation in your letter that [the husband] will need five business days to make the $300,000 available to her. … Any delay beyond 24 hours will only serve to increase [the wife’s] hardship and further delay the closing. The release of these funds needs to be expedited.

I would appreciate hearing from you immediately upon receipt of this letter as to when [the wife] can expect to receive the monies so that the closing can be rescheduled.

The letter did not mention Smith’s accommodating purchase or the client’s plans to purchase the property from him.

The committee credited the respondent’s testimony that:

  1. When she sent the letter to the husband’s attorney, she believed that the statements in it were true.
  2. She believed that the wife intended to use the $300,000 advance and financing to buy the house in her own name.
  3. She believed that the situation was still urgent because of the expense of the jumbo mortgage Smith had obtained for the short-term purchase and re-sale to the wife.
  4. She believed that disclosing Smith’s role to the husband would “complicate the situation.”
  5. The wife had not authorized disclosure of Smith’s role.
  6. She believed that it would have been unethical for her to disclose voluntarily in the context of an acrimonious divorce the information about Smith’s involvement where that information had not been requested and the wife had not authorized its disclosure.

The husband’s attorney was satisfied with the respondent’s letter and did not inquire further. The wife received the $300,000 advance by August 29, 2003.

In March 2004, the respondent learned that the wife had not taken title to the property. She also learned that the wife had used the $300,000 advance to pay down the principal on Smith’s mortgage during a refinancing, and that the attorney who handled the original closing for the wife was holding a quitclaim deed from Smith to the wife and Smith jointly, with right of survivorship.

The respondent immediately advised the husband’s attorney that the property was being held by an accommodation party. She also convinced the wife to record the deed to her and Smith, and to take a note and mortgage from Smith for $300,000. The respondent then wrote to the husband’s attorney, explaining the situation in detail, and offered to have the wife pay any additional taxes resulting from the transaction.

The committee found that the respondent’s conduct caused no harm, and that her efforts after learning that the wife had not taken title demonstrated her belief in the veracity of the representations made in her August 26, 2003 letter to the husband’s attorney.

Conclusions of Law

The committee concluded that the respondent did not violate Mass. R. Prof. C. 4.1(a) (prohibiting knowingly making false statements of material fact or law to a third person) or 8.4(c) (prohibiting conduct involving dishonesty, fraud, deceit or misrepresentation), noting that the question was a “close one,” because (1) the August 26, 2003 letter contained no explicit and literal misrepresentations, (2) the husband’s attorney had not specifically asked about Smith’s involvement in the transaction, and (3) Rules 4.1(a) and 8.4(c) do not impose an affirmative duty of disclosure. It found that the respondent did not violate Rule 4.1(b) (prohibiting failure to disclose a material fact to a third party when disclosure is necessary to avoid assisting a criminal or fraudulent act by a client) because, given what the respondent knew at the time and all of the circumstances, the omission of any reference to Smith’s role did not constitute “assisting a criminal or fraudulent act by a client.” The committee also concluded that although the respondent came “close to the line,” her conduct was not so egregious that it reflected adversely on her fitness to practice, in violation of Rule 8.4(h). Finding no violations, the committee recommended that we dismiss the petition.

The committee also noted that, given all the circumstances, it would have recommended dismissal even if it had found a violation.

Misconduct

Bar Counsel argues that certain specific statements in the letter were misrepresentations. Those statements and the circumstances that allegedly rendered them false were:

The respondent argues that each of these statements was true, on a certain understanding of them.

Bar Counsel also argues that the letter as a whole was misleading because it invited false inferences:

Any reasonable person reading the letter would have believed that the [original] seller still owned the property, that the contemplated transaction involved a sale by the seller to the wife alone, that the seller was pressuring the wife to close, that the wife was desperately trying to qualify for a mortgage, that the wife needed the $300,000 to do so, and that she was in imminent danger of losing the house altogether if she did not get the money immediately.
Bar Counsel’s Brief, at 15-16.

We agree that the letter was deliberately misleading. It does more than invite a false inference; it is obviously calculated to lead the husband’s attorney to believe that the advance was for a routine, arm’s-length real estate transaction between the original sellers and the client, and that the husband was jeopardizing the transaction by delaying the advance. The respondent accomplished this by deliberately eliding the postponed closing between the original seller and the wife (and which had already occurred, albeit between the seller and Smith) with another, future closing at which the wife would take title from Smith. Similarly, while there remained pressure on the wife to complete the second closing quickly – because of the burden of the jumbo mortgage on Smith – the letter deliberately misleads the reader into believing the urgency pertained to the already consummated closing with the original seller. As a consequence, the letter was deceptive and dishonest in violation of Rule 8.4(c).

It is not a defense to these charges that the individual statements made in the letter could be read as literally true. Literal truth may be a defense to a criminal charge of perjury. Compare Bronston v. United States, 409 U.S. 353 (1973) with United States v. DeZarn, 157 F.3d 1042 (6th Cir. 1998). But Rule 8.4(c) “prohibits more than outright perjury. Attorneys may not engage in conduct involving dishonesty, fraud, deceit, or misrepresentation ….” Matter of Dittami, 12 Mass. Att’y Disc. R. 98, 112 (1996) (applying predecessor to Rule 8.4(c)). See also Matter of Moore, 442 Mass. 285, 292 n. 10, 20 Mass. Att’y Disc. R. 400, 408 n.10 (2004); Matter of Harlow, 20 Mass. Att’y Disc. R. 212, 216-218 (2004) (misleading partial disclosure violated 8.4(c)).

By the same reasoning, we also find that the misleading nature of the letter violated Rule 4.1(a). Drafting the letter to conceal the existence of a second closing involving Smith constituted misrepresentation. “A representation stating the truth so far as it goes but which the maker knows or believes to be materially misleading because of his failure to state additional or qualifying matter is a fraudulent misrepresentation.” 2 Restatement (Third) of the Law Governing Lawyers § 98, comment c (2000), quoting from Restatement (Second) of Torts § 529 (1977) and citing Restatement (Second) of Contracts § 159, comment (b) (1977); Matter of Goodman, BD 2006-069 (December 4, 2006), Board Memorandum at 5 (same). The elision of the two closings stated such a “half-truth,” and it induced the husband to infer that she was referring only to the original closing between the wife and the original seller.1

The respondent rejoins that we are bound by the committee’s finding -- one she characterizes as a credibility determination -- that when she sent the letter she believed in “good faith” that the statements made in it were true. First, “good faith” is an inference drawn from subsidiary facts, not a credibility determination as to subsidiary facts, and we are free to draw a different inference in that regard. Matter of McCabe, 13 Mass. Att’y Disc. R. 501, 513 (1997). Second, we do defer to the committee’s determination to credit her testimony that she believed that each of the statements in her letter was true. Through careful parsing those statements can be read as literally true. As we have noted, however, their literal truth does not end the inquiry – and neither, obviously, does the respondent’s belief that they were literally true. We are free to make additional findings warranted on the record so long as they do not trench on the role of the hearing committee as arbiter of credibility. Matter of Dodd, 21 Mass. Att'y Disc. R. 196, 204-06 (2005), Matter of Shea, 14 Mass. Att'y Disc. R. 708, 715-18 (1998). Here it is evident that the letter invites the reader to infer, falsely, that there was only one closing and that Smith was not involved in it.

The respondent’s concern for preserving confidential client information does not justify her conduct, although we do weigh it in mitigation. She had alternatives that would not have required engaging in deception. She could have: answered the questions put by the husband’s counsel without further embellishment; tried to convince the client to disclose Smith’s role; or pressed the motion to compel the advance that her associate had started drafting before the husband agreed to it.

The respondent knew that it would “complicate” things if the husband became aware of Smith’s involvement, but her deception is not excused on the grounds that the husband had no good reason to object to Smith’s role as accommodation purchaser. The husband was entitled, at the very least, to know whether the wife was making gifts of marital property before the divorce had become final, and he had a legitimate interest in seeing that the transaction was structured accordingly. His demand for information about who was contributing to the down payment and how title would be held served that interest. While the husband would have been credited with the advance in the eventual division of marital property, it was nonetheless improper to mislead him about the actual nature of the transaction.

The Appropriate Sanction

Conduct like the respondent’s has a negative effect on the public’s confidence in and perception of the bar, and we agree with Bar Counsel that discipline is warranted. In the absence of harm or other aggravating circumstances, a misrepresentation not made to a tribunal may warrant a public reprimand. See, e.g., Matter of Corcoran, 18 Mass. Att’y Disc. R. 153 (2002); Matter of Bixby, 17 Mass. Att’y Disc. R. 81 (2001); Matter of Mason, 17 Mass. Att’y Disc. R. 408 (2001). But see Matter of Harlow, 20 Mass. Att’y Disc. R. 212 (2004) (suspension for misrepresentation to Department of Public Health concerning compliance with escrow requirements); Matter of Connolly, 11 Mass. Att'y Disc. R. 43 (1995) (suspension for knowingly assisting client in defrauding employer to obtain additional moving expenses).

We have discerned no such aggravating circumstances here. There was no harm. In part, this is because the husband would have received full credit for the advance anyway once the divorce became final. Harm was also averted by the prompt action of the respondent, who took swift and appropriate steps to reveal and undo the wife’s chicanery in not taking title to the property, but simply using the $300,000 advance to pay down the principal on Smith’s mortgage, once it came to her attention. In further mitigation, we note that the respondent stepped into a contentious divorce case on behalf of a vacationing partner, and she was motivated by a genuine concern for a client caught in a stressful and time-sensitive transaction. She made a mistake in writing a misleading letter in an attempt to walk a difficult path between her conflicting obligations to maintain client confidences and to be truthful in her dealings with the other side. In these circumstances, an admonition is appropriate. See Matter of the Discipline of Two Attorneys, 421 Mass. 619, 630, 12 Mass. Att'y Disc. R. 580, 593 (1996) (attorneys who engaged in conflicts and used client secrets without consent received admonition where they were not indifferent to their ethical dilemma, but did not “select the correct course to avoid violations of disciplinary rules”). See also ABA Standards For Imposing Lawyer Sanctions, §§ 3.0, 9.32(b) and 9.32(d) (1992).

Conclusion

For the reasons set forth above, we adopt the hearing committee’s subsidiary findings of fact but reject its conclusions of law. We find that the respondent violated Mass. R. Prof. C. 4.1(a) and 8.4(c) by making misrepresentation in her August 26, 2003 letter. The matter shall be concluded by admonition.


FOOTNOTES:

1 We agree with the committee that the misconduct did not rise to a violation of Rule 8.4(h). Cf. Matter of the Discipline of Two Attorneys, 421 Mass. 619, 628, 629, 12 Mass. Att’y Disc. R. 580, 592 (1996).



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