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 oranticipated future legal and consulting fees owed by Commonwealth Snackto Brauer & Brauer. Nonetheless, the respondent transferred anadditional $23,000 of GPFC’s escrowed funds to a separate escrowaccount for Brauer & Brauer to pay $19,628.90 in fees and expensesthat Commonwealth Snack owed to the law firm for past work, plusanother $3,371.10 to cover anticipated fees for future work. OnSeptember 5, 1996, the respondent wired the remaining $650,000 ofGPFC’s escrowed funds to the China Trust Bank, without explaining the$100,000 shortfall. The next day, the respondent notified GPFC byletter that he had placed $77,000 of its escrowed funds in a separateescrow account pursuant to a court order, and that he had put anadditional $23,000 of its escrowed funds in a different escrow accountfor 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, attachedthereto were the determinations of the Superior Court judge and theAppeals Court, which subsequently would be reviewed by the board’schairman for their preclusive effect. In its action before the SuperiorCourt, GPFC alleged that the respondent had converted GPFC’s funds, andit sought to recover $100,000 that had been misappropriated. “Theelements of conversion require that a defendant be proved to have’intentionally or wrongfully exercise[d] acts of ownership, control ordominion over personal property to which he has no right of possessionat 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 judgedetermined, inter alia, that (1) the respondent knew that he hadreceived the $750,000 from GPFC in accordance with the terms of theescrow agreement between GPFC and Commonwealth Snack pertaining to theuse of such funds; (2) the respondent was obligated to return suchfunds to GPFC on request; (3) the respondent had no legal right toretain such funds to pay past or future legal or consulting fees owedby Commonwealth Snack to Brauer & Brauer and Decnos; (4) therespondent intentionally exercised dominion over the funds and deprivedGPFC of their use; (5) the respondent intentionally delayed returningthe funds to GPFC so that Decnos could obtain an attachment; (6) therespondent’s father knew that GPFC had demanded the return of itsescrowed funds and that Commonwealth Snack had instructed Brauer &Brauer to return those funds to the China Trust Bank; and (7) therespondent failed to inform the Dedham District Court of the factssurrounding the escrow agreement. On appeal, after reviewing thejudge’s “comprehensive” findings, the Appeals Court stated that suchfindings 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 tothe issue whether the respondent had converted funds belonging to GPFCwere actually litigated, and the judge’s findings of fact andconclusions of law on that issue were essential to the final judgmentin GPFC’s favor on its conversion claim. The judge’s findings weremirrored in the allegations of misconduct set forth in the petition fordiscipline, 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 therespondent should be precluded from challenging the factual allegationsset forth in the petition for discipline (except paragraph 17), wherethose facts were established adversely to the respondent in proceedingsbefore the Superior Court.

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