In Re Complaint as to the Conduct of Phinney

No. 50 October 3, 2013 329

IN THE SUPREME COURT OF THE

STATE OF OREGON

In re Complaint as to the Conduct of

W. SCOTT PHINNEY,

OSB #823710,

Accused.

(OSB 10-68; SC S060529)

En Banc

On review of the decision of a trial panel of the Disciplinary

Board.

Argued and submitted June 5, 2013.

W. Scott Phinney, Tualatin, argued the cause and

submitted the brief pro se.

Stacy J. Hankin, Assistant Disciplinary Counsel, Oregon

State Bar, Tigard, argued the cause and filed the brief for

the Oregon State Bar.

PER CURIAM

The accused is disbarred, effective 60 days from the date

of this decision.

In this lawyer discipline proceeding, the Bar alleged that the accused violated

Rule of Professional Conduct (RPC) 8.4(a)(2), which prohibits criminal conduct

that reflects adversely on a lawyer’s honesty and trustworthiness, and RPC 8.4(a)

(3), which prohibits conduct involving dishonesty and misrepresentation that

reflects adversely on a lawyer’s fitness to practice law. The accused acknowledged

that he had acted inappropriately in engaging a series of unauthorized

transactions in which, as treasurer for the Yale Alumni Association of Oregon

(association), he withdrew $32,600 from the association’s bank accounts,

deposited those proceeds into his personal account, and used the funds to pay his

own and his family’s expenses; however, the accused claimed that his actions did

not constitute theft in violation of those rules because he intended to repay the

monies. The trial panel found that the accused violated both rules and imposed a

sanction of disbarment. Held: On de novo review, the accused violated both rules

and disbarment is the appropriate sanction. The accused’s conduct constituted

theft by appropriation in violation of ORS 164.015, the duration and magnitude

of which was sufficiently serious to warrant disbarment. The accused’s conduct

also seriously adversely reflected on his fitness to practice law.

The accused is disbarred, effective 60 days from the date of this decision.

330 In re Phinney

PER CURIAM

In this lawyer disciplinary proceeding, the Bar

alleged that the accused, who admitted taking substantial

funds from the Yale Alumni Association of Oregon, violated

Rule of Professional Conduct (RPC) 8.4(a)(2), which prohibits

criminal conduct that reflects adversely on a lawyer’s honesty

and trustworthiness, and RPC 8.4(a)(3), which prohibits con-

duct involving dishonesty and misrepresentation that reflects

adversely on a lawyer’s fitness to practice law. The trial panel

found that the accused had violated both rules and imposed

the sanction of disbarment. The accused appealed, arguing

for a lesser sanction than disbarment. He contends that he

did not commit theft because he intended to return the money.

The Bar supports disbarment based on the accused’s serious

misconduct and breach of fiduciary duty. On de novo review,

we find that the accused violated both rules of professional

conduct, and we conclude that disbarment is the appropriate

sanction.

The Bar is required to prove the alleged misconduct

in this case by clear and convincing evidence, which means

“evidence establishing that the truth of the facts asserted

is highly probable.” In re Cohen, 316 Or 657, 659, 853 P2d

286 (1993). This court’s statutory review of the trial panel’s

decision is de novo. ORS 9.536(2).

We find the following facts, which are essentially

undisputed, by clear and convincing evidence. The accused

was admitted to practice law in Oregon in 1982. In 1996, the

accused was elected treasurer of the Yale Alumni Association

of Oregon (association), a nonprofit organization open to mem-

bership by graduates of Yale University. Serving in that capa-

city on a volunteer basis, the accused was responsible for the

association’s bank accounts, including bank deposits and

the payment of bills. The accused routinely reported on the

association’s finances to the president of the association and

to the membership.

Beginning in early 2007, the accused experienced

serious financial difficulties because of a work lay-off, family

expenses, and extensive debt accumulated on credit cards

that he used to pay his living expenses. The accused began

withdrawing funds from the association’s bank accounts by

writing checks payable to himself or cash; he then deposited

Cite as 354 Or 329 (2013) 331

the proceeds into his personal account to pay his own and his

family’s expenses. Between September 2008 and January

2010, the accused wrote 21 checks for his own use in the

total amount of $32,600. The accused knew that he had no

right to withdraw the funds and use the proceeds as he did.

Shortly after December 2010, the president of the

association discovered a record that the accused had written

two checks payable to cash. He confronted the accused who

only then admitted that he had been “borrowing” funds from

the association. The accused acknowledged at the trial panel

hearing that he probably would have continued to withdraw

funds for his personal use had the president not discovered

the record of the two checks. The president of the association

closed the accounts and asked the accused for an accounting.

The accounting disclosed that the accused had withdrawn a

total of $32,600 from the accounts and that he had periodically

paid back into one of the two accounts amounts totaling

$18,070. The accounting also disclosed that the accused still

owed the association $14,530 at that time.

In August 2010, the Bar filed a formal complaint

against the accused, alleging that he had violated RPC

8.4(a)(2) and RPC 8.4(a)(3).1 The Bar alleged that the

accused’s conduct constituted theft, in violation of ORS

164.015, reflecting adversely on his honesty, trustworthiness,

or fitness as a lawyer in violation of RPC 8.4(a)(2). The Bar

also alleged that the accused knowingly had converted

association funds for his own use in a manner involving

dishonesty and reflecting adversely on his fitness to practice

law, in violation of RPC 8.4(a)(3). The accused filed an

answer denying both alleged violations and affirmatively

alleging “mitigating factors concerning the alleged actions

including, but not limited to: no prior discipline, personal

and emotional problems, physical disability, and full and

free disclosure.”

1

Under RPC 8.4,

“(a)  It is professional misconduct for a lawyer to:

“* * * * *

“(2) commit a criminal act that reflects adversely on the lawyer’s honesty,

trustworthiness or fitness as a lawyer in other respects; [or]

“(3)  engage in conduct involving dishonesty, fraud, deceit or misrepresentation

that reflects adversely on the lawyer’s fitness to practice law[.]”

332 In re Phinney

At the hearing before the trial panel, the accused

admitted that his conduct was inappropriate but insisted

that he did not commit theft because, at all times, he had

intended to repay the association monies as soon as he could.

The accused also emphasized that he did not attempt to

conceal his misconduct and was forthright after the president

of the association discovered his personal withdrawals He

also testified that his mother and father had died and he

had encountered emotional difficulties during that period of

time. He said that he had felt depressed and desperate as a

result of his personal and financial circumstances.2

After the hearing, two members of the trial panel

found that the Bar had proved both violations. In a written

decision, the trial panel made findings and concluded that

the sanction of disbarment was presumptively appropriate

under the circumstances, citing American Bar Association’s

Standards for Imposing Lawyer Sanctions (1991) (amended

1992) (ABA Standards), Standard 5.21.3 After considering

mitigating and aggravating circumstances, the trial panel

imposed the sanction of disbarment.

The chair of the trial panel dissented from the

majority’s finding that the accused had committed a criminal

act reflecting adversely on his honesty, trustworthiness, or

fitness, in violation of RPC 8.4(a)(2), but concurred with the

majority’s finding that the accused engaged in dishonest

conduct in violation of RPC 8.4(a)(3). The chair also dis-

sented from the majority’s decision to disbar the accused;

he concluded that the appropriate sanction in this case was

a 90-day suspension with reinstatement conditioned on full

restitution.4

2

The accused testified that, in 2009, he was sick for a month and in the hospital

for a week. He also stated that he “couldn’t work” and that he had experienced

other personal losses around that time.

3

ABA Standard 5.21 provides:

“Disbarment is generally appropriate when a lawyer in an official or gov-

ernmental position knowingly misuses the position with the intent to obtain

a significant benefit or advantage for himself or another, or with the intent to

cause serious or potentially serious injury to a party or to the integrity of the

legal process.”

4

The chair drafted an extensive opinion in support of his conclusions. We

appreciate the diligent work and thoughtful opinions of trial panel members in

this, and all, disciplinary cases.

Cite as 354 Or 329 (2013) 333

Before we review the trial panel’s conclusion as to

the accused’s misconduct, we first consider the majority’s

assessment that the accused was not credible:

“Because of the manner of presenting his testimony, his

refusal to acknowledge the wrongful nature of his conduct,

his constant rationalizations, and his refusal to accurately

characterize his actions, the majority of the panel finds

that the Accused is not credible. He attempted to convince

the panel that he was simply naïve, but his claimed naiveté

seemed contrived to the majority of the panel and is not

believable. When questioned by the panel, the Accused

frequently equivocated.”

In our review of disciplinary cases, this court may

give weight to a trial panel’s express credibility assessments

when those assessments are based on the panel’s obser-

vations. In re Hostetter, 348 Or 574, 596, 238 P3d 13 (2010);

In re Fitzhenry, 343 Or 86, 103 n 13, 162 P3d 260 (2007).

Here, because the trial panel based its assessment on its

own observations of the accused’s demeanor and the manner

in which he testified, we defer to the panel’s determination

that the accused lacked credibility.

We next review the trial panel’s conclusion that the

accused committed a criminal act and violated RPC 8.4(a)(2)

by taking monies from the association. The majority of the

trial panel found that the Bar had demonstrated by clear

and convincing evidence that the accused committed theft

in taking the association’s funds. The majority concluded

that the accused “[intended] to deprive the association of its

funds and did so for many months and continues to deprive

it of its funds.”

A person commits theft “when, with intent to deprive

another of property or to appropriate property to the per-son

*  * the person *  * [t]akes, appropriates, obtains or with-

*  *

holds such property from an owner thereof.” ORS 164.015(1).

“With intent” means that “a person acts with a conscious

objective to cause the result or to engage in the conduct so

described.” ORS 161.085(7). Thus, if the requirements of

ORS 164.015(1) are otherwise met, a person commits theft if

the person acts with the conscious objective to either deprive

another of property or to appropriate property from the

334 In re Phinney

person. Based on our de novo review, we find that the accused

appropriated property in violation of ORS 164.015(1).5

As previously mentioned, the accused made 21 sep-

arate withdrawals from the bank accounts of the associa-

tion over the course of 17 months, in the total amount of

$32,600.6 Each time he withdrew association funds in that

manner, he directly applied the funds to pay his own and his

family’s expenses.

The accused acknowledges that it was improper

for him to take association funds for his own purposes, but

insists that he intended to only temporarily borrow the

money. The accused misapprehends the legal requirements

for a finding of theft by appropriation in violation of ORS

164.015(1). ORS 164.005(1)(b) provides that “ ‘[a]ppropriate

property of another to oneself or a third person’ or ‘appro-

priate’ means to * * * [d]ispose of the property of another for

the benefit of oneself or a third person.” In that statutory

context, the plain meaning of to “dispose of” property as

set out in ORS 164.005(1)(b) is “to transfer into new hands

or to the control of someone else.” Webster’s Third New Int’l

Dictionary 654 (unabridged ed 2002). The question, then,

is whether the accused, by withdrawing the association’s

funds, acted with the conscious objective to dispose of the

funds for the benefit of himself and his family.

Here, it is undisputed that the accused acted with a

conscious objective to make the personal withdrawals from

the association’s bank accounts and deposit the funds into

his personal bank account. He personally took control of the

association’s funds and disposed of the funds for his benefit

and the benefit of his family. Thus, he committed theft by

appropriation each time he withdrew and personally dis-

posed of association funds. When he made the withdrawals

5

Because we find that the accused appropriated property in violation of ORS

164.015(1), we do not find it necessary to determine whether the accused acted

with intent to deprive the association of its property under that statute.

6

The accused repaid a total of $18,070 into one of the bank accounts before

the discovery of his misconduct around December 2010. The record indicates that

the last month that he repaid money to an association account was September

2009. The accused made no repayments during the two-year period preceding the

hearing in August 2011. At the time of the hearing, the accused still owed the asso-

ciation $14,530.

Cite as 354 Or 329 (2013) 335

the association’s accounts, he acted with an intent to dispose

of the funds for his own purposes. That he may have also

intended to repay the funds he withdrew at some time in the

future does not negate his demonstrated intent to appropriate

the funds under ORS 164.015(1). We therefore conclude that

the Bar has proved by clear and convincing evidence that

the accused’s withdrawal and disposition of the association’s

funds amounted to theft by appropriation in violation of

ORS 164.015(1). Further, the Bar has proved that the theft,

as described, “reflects adversely on the [accused’s] honesty

[and] trustworthiness” in violation of RPC 8.4(a)(2).

We next review the trial panel’s conclusion that the

accused’s theft of association funds violated RPC 8.4(a)(3),

which prohibits conduct involving dishonesty and misrep-

resentation that reflects adversely on a lawyer’s fitness to

practice law. Based on our de novo review, we conclude that

the Bar proved by clear and convincing evidence that the

accused, in appropriating the association’s funds for his own

personal use, “engage[d] in conduct involving dishonesty, * * *

deceit [and] misrepresentation that reflects adversely on the

[accused’s] fitness to practice law,” in violation of RPC 8.4(a)(3).

The accused’s theft of association funds for the accused’s

personal use over an extensive period of time is flatly incon-

sistent with adherence to the basic standard of honesty that

an attorney must follow in the practice of law. Moreover,

the record indicates that the accused gave regular reports

about bank account activity and balances to the president

and membership of the association from late 2008 through

the end of 2010, without disclosing the withdrawals.7 Thus,

the accused, in his role as treasurer, engaged in deceit and

also misrepresented the financial position of the association

to its membership for over two years.

We now turn to the appropriate sanction in this

case based on those violations. We recently summarized our

approach to imposing sanctions for professional misconduct

as follows:

7

Although the accused referred to the withdrawals that he appropriated as

“loans” on the association’s check stubs, he maintained possession of the records

and did not disclose that information to anyone.

336 In re Phinney

“We first consider the duty violated, the accused’s state

of mind, and the actual or potential injury caused by the

accused’s conduct. In re Kluge, 332 Or 251, 259, 27 P3d 102

(2001); ABA Standard 3.0. We next decide whether any

aggravating or mitigating circumstances exist. Kluge, 332

Or at 259. Finally, we consider the appropriate sanction

in light of this court’s case law. Id. In determining the

appropriate sanction, our purpose is to protect the public

and the administration of justice from lawyers who have

not discharged properly their duties to clients, the public,

the legal system, or the profession. See ABA Standard 1.1.”

In re Renshaw, 353 Or 411, 419, 298 P3d 1216 (2013).

The accused’s violations of RPC 8.4(a)(2) and (3)

breached duties that the accused owed to the public. See

Kluge, 332 Or at 259 (violation of former iteration of RPC

8.4(a) listed as breach of duty owed to public). We find that the

accused acted intentionally in taking the association’s funds

and in routinely misrepresenting the association’s financial

status to the president and membership. See ABA Standards

at 7 (“intent” defined as “the conscious objective or purpose

to accomplish a particular result”). Further, the accused

caused actual injury to the association by taking $32,600

from association bank accounts and applying those funds

to his own personal use. As a result, the association’s funds

were not available to it to use as the membership saw fit.

Under the ABA Standards, disbarment is the appro-

priate sanction when a lawyer engages in “serious criminal

conduct, a necessary element of which includes *  * theft.”

*

ABA Standard 5.11(a). Here, the accused committed theft

by taking the association’s funds, and his criminal conduct

was “serious” within the meaning of ABA Standard 5.11(a).

Over a period of 17 months, the accused made 21 separate

withdrawals from association bank accounts for his own use.

The duration of the misconduct, the number of withdrawals,

and the total amount of the theft ($32,600) makes this a

serious crime. See Renshaw, 353 Or at 420 (accused took

total of $100,000 in improper distributions from law partners

over three-year period of time).

Cite as 354 Or 329 (2013) 337

Disbarment is also an appropriate sanction when a

lawyer engages in “any other intentional conduct involving

dishonesty, fraud, deceit, or misrepresentation that seriously

adversely reflects on the lawyer’s fitness to practice.” ABA

Standard 5.11(b). As previously stated, we have found that

the accused, as treasurer of the association, routinely mis-

represented the association’s financial position to the mem-

bership and its president over a period of 17 months. During

that period of time, he did not disclose that he had taken

substantial withdrawals of association funds for his own use.

We conclude that the accused’s violation of RPC 8.4(a)(3),

involving dishonesty and misrepresentation, “seriously”

adversely reflects on his fitness to practice law within the

meaning of ABA Standard 5.11(b).

Based on the ABA Standards, we determine, pre-

liminarily, that disbarment is the appropriate sanction in

this case. We next consider whether mitigating or aggra-

vating factors might affect that determination. We find

four aggravating factors. First, the accused committed a

criminal act. ABA Standard 9.22(k). Second, the accused

engaged in a pattern of repeated thefts (21 withdrawals)

over a period of 17 months during 2008, 2009, and 2010.

ABA Standard 9.22(c). Third, the accused was admitted to

practice in Oregon in 1982 and has substantial experience

in the practice of law. ABA Standard 9.22(i). Fourth, the

accused acted with a selfish motive. ABA Standard 9.22(b).

Based on the record, we find four mitigating factors.

First, the accused has no prior disciplinary record. ABA

Standard 9.32(a). Second, the accused engaged in full and

free disclosure in the discipline process and he displayed a

cooperative attitude toward the disciplinary proceedings.

ABA Standard 9.32(e). Third, the accused had repaid a

substantial amount of the money he took prior to the

discovery of his misconduct.8 ABA Standard 9.32(d). Fourth,

the accused experienced personal and emotional problems

8

Although evidence of repayment by an accused is generally irrelevant to a

determination of whether a violation occurred, see, e.g., In re Bartlett, 283 Or 487,

500, 584 P2d 296 (1978), repayment or restitution may be a mitigating factor in

determining the appropriate sanction. Under ABA Standard 9.32(d), the “timely

good faith effort to make restitution or to rectify consequences of misconduct” is a

factor that may be considered in mitigation.

338 In re Phinney

during the period of time when he violated the rules of pro-

fessional conduct.9 ABA Standard 9.32(c).

After considering the above aggravating and miti-

gating factors, we conclude that the sanction of disbarment

is appropriate. The accused breached a fiduciary duty when

he repeatedly took funds from the association for his per-

sonal use. His extensive pattern of theft and his routine

misrepresentations to the association for over two years

calls into serious question his trustworthiness in handling

the money of future clients or others who might trust him as

an attorney.

The accused, as treasurer of the association, was

in a fiduciary relationship as a result of the special confi-

dence placed in him by the association. See Allen v. Breding,

181 Or 332, 342, 181 P2d 783 (1947) (“Fiduciary relation-

ship includes not only legal and technical relations. It is

found wherever there is confidence reposed on one side and

resulting superiority and influence on the other.”); see also

Patterson v. Getz, 166 Or 245, 287, 111 P2d 842 (1941) (“A

‘fiduciary’ or ‘confidential’ relation *  * exists ‘in all cases

*

where there has been a special confidence reposed in one

who in equity and good conscious is bound to act in good

faith and with due regard to the interests of the one repos-

ing the confidence.’  (quoting Anderson v. Watson, 141 Md

”

217, 118 Alt 569 (1922)).10 Here, the accused breached a fidu-

ciary duty of trust and confidence to the association.

9

The trial panel did not find that the accused’s personal and emotional

problems were a mitigating factor. However, as previously mentioned, the accused

testified at some length about a number of unfortunate setbacks in his life that

caused him extreme difficulties, including emotional issues. Based on our de novo

review, it does not appear that the trial panel questioned the accused’s credibility

with respect to that specific testimony. We find the accused’s testimony credible on

this subject and find that his personal and emotional problems are a mitigating

factor. As will be explained, we do not consider that that mitigating factor, even

when combined with other mitigating factors, is of sufficient weight to reduce the

presumptive sanction in this case.

10

Black’s Law Dictionary (9th ed 2009) defines the concepts of “fiduciary

relationship” and “fiduciary duty” as follows:

“fiduciary relationship. (1846) A relationship in which one person is under

a duty to act for the benefit of another on matters within the scope of the

relationship. ● Fiduciary relationships—such as trustee-beneficiary, guardian-

ward, principal-agent, and attorney-client—require an unusually high degree

of care. Fiduciary relationships usu. arise in one of four situations: (1) when

one person places trust in the faithful integrity of another, who as a result

Cite as 354 Or 329 (2013) 339

Finally, we turn to prior decisions of this court

most pertinent to our resolution of this case. In Renshaw,

we recently decided that disbarment was appropriate where

a managing partner of a law firm took a total of $100,000

from his partners over a three-year period by making

unauthorized distributions of profit and using his firm’s line

of credit to pay personal expenses. In doing so, we rejected

the suggestion that the theft of partnership funds was not

as serious a transgression as the theft of client funds. We

quoted from In re Pennington, 220 Or 343, 349, 348 P2d 774

(1960), as follows:

“  is also urged that the accused has taken no funds

‘It

of any client. He did not disclose taking his partner’s funds

until called to account. The long practice of taking and

secreting funds not his own reflects directly on his right to

be placed in a position to handle other people’s property. If

these were the funds of a client there would be no hesitancy

in imposing the most severe sanction; particularly when we

consider the intent evidenced by the long course of conduct.

The same violation of the fiduciary duty to partnership

funds is no less abhorrent.’ ”

Renshaw, 353 Or at 421.

The accused’s breach of fiduciary duty to the asso-

ciation in this case similarly supports disbarment. Here, we

also have the substantial theft of funds by an attorney over

an extended period of time. The accused’s breach of duty

in taking the funds of an organization relying on him is

unacceptable. As we said in Pennington:

gains superiority or influence over the first, (2) when one person assumes con-

trol and responsibility over another, (3) when one person has a duty to act

for or give advice to another on matters falling within the scope of the

relationship, or (4) when there is a specific relationship that has traditionally

been recognized as involving fiduciary duties, as with a lawyer and a client or

a stockbroker and a customer.”

Black’s at 1402 (boldface type in original).

“fiduciary duty. * * * A duty of utmost good faith, trust, confidence, and candor

owed by a fiduciary (such as a lawyer or corporate officer) to the beneficiary

(such as a lawyer’s client or a shareholder); a duty to act with the highest

degree of honesty and loyalty toward another person and in the best interests

of the other person (such as the duty that one partner owes to another).”

Black’s at 581 (boldface type in original).

340 In re Phinney

“No one who is admitted into the legal profession may be

permitted to sully or destroy the right and need of the public

to impose absolute confidence in the integrity of a lawyer.

Literally thousands of personal and business transactions

of unknowing people must be and are entrusted to the

hands of some lawyer. Money, property and matters of per-

sonal confidence are daily entrusted to the integrity of the

individual lawyer. In almost all such instances no bond or

security, other than integrity, is required to assure the

protection or performance of the trust. No member of the

Bar need consider long wherein his duty lies. True, the

rules of professional conduct may fill many pages; the

opinions interpreting some of the rules, many volumes.

But in the more basic conduct he is called upon to perform,

any lawyer knows the simple rules that he must cling to:

Simple straightforward honesty and absolute good faith.

No less will suffice.”

220 Or at 347.

Other comparable cases that support disbarment in

this case are: In re Murdock, 328 Or 18, 968 P2d 1270 (1998)

(disbarment appropriate when law firm associate knowingly

embezzled more than $9,000 from law firm); In re Laury,

300 Or 65, 706 P2d 935 (1985) (disbarment appropriate

when attorney converted $1,100 in client funds to his own

personal use); and In re Pierson, 280 Or 513, 571 P2d 907

(1977) (disbarment appropriate when attorney converted

$56,000 from client trust funds to his own personal use

notwithstanding full restitution of the funds by the attorney).

In his dissent below, the chair of the trial panel con-

cluded that the accused’s conduct should be viewed similarly

to the misconduct sanctioned in In re Kimmell, 332 Or 480,

31 P3d 414 (2001). We disagree. In Kimmell, an attorney

committed the theft of a jacket from a department store and

was suspended from the practice of law for six months. We

concluded that the attorney had committed a criminal act

that reflected adversely on his honesty and affirmed the six-

month suspension. This case is significantly distinguishable.

The most critical distinction is that Kimmell “was not act-

ing in a fiduciary capacity when he committed the theft at

issue.” Id. at 491. We observed in Kimmell that, “[i]n most

instances, a lawyer who misappropriates property or funds

Cite as 354 Or 329 (2013) 341

while acting in a fiduciary capacity will be sanctioned more

severely than a lawyer who misappropriates property or

funds outside of that capacity.” Id. (footnote omitted). More-

over, Kimmell involved the single theft of a jacket, not num-

erous withdrawals of substantial funds from bank accounts

over an extended period of time, coupled with numerous

misrepresentations of financial status made to a reliant

organization. Here, the accused committed the substantial

theft of funds from an organization to which he owed a fidu-

ciary duty of utmost honesty, confidence, and trust.

The accused is disbarred, effective 60 days from the

date of this decision.