Opposition Brief — Smith v. Kentucky Bar Ass'n

v

FILED

| ALEXANDER L. STEVAg,

i CLERK

FILE NO. 84-541

IN THE

Supreme Court Of The United States

OCTOBER TERM, 1984

eg err ery PETITIONER

versus

KENTUCKY BAR ASSOCIATION ......... RESPONDENT

GN PETITION FOR A WRIT OF CERTIORARI TO

THE SUPREME COURT OF KENTUCKY

BRIEF FOR RESPONDENT IN OPPOSITION

Michael M. Hooper

Kentucky Bar Association

West Main at Kentucky River

Frankfort, Kentucky 40601

(502) 564-3795

Counsel for Respondent

SRE O A TRIE LEE LEE EE

PRINT MASTER, WC. 630 LAME ALLER BB. LEXINGTON, KY. 40004, PH. OG) 278-6341

1.

to

QUESTIONS FOR REVIEW

Whether the Kentucky Supreme Court’s suspension of

petitioner’s law license was based on a charge of which

he had no prior notice thereby violating his right to due

process.

Whether the Kentucky Supreme Court enlarged and

retroactively applied a vague disciplinary standard

thereby violating petitioner’s right to due process.

ii

TABLE OF CONTENTS

Page

QUESTIONS FOR REVIEW ................-. are

APPLICABLE COURT RULES ...............-.. 1-3

COUNTERSTATEMENT OF THECASE .......... 3-5

REIT nc hvu 505s hee karees eee rendre wae 5-23

I. The Kentucky Supreme Court's Suspension of

Petitioner from the Practice of Law Was Based

on the Charge of Which He had Prior Notice

and an Opportunity to be Heard. The Ken-

tucky Supreme Court Did Not Su stitute a

New Charge and Did Not Violate the

Petitioner's Right to Procedural Due

PEE ere Per rare mmr | S- 5-13

II. The Kentucky Supreme Court Has Not

Enlarged and Retroactively Applied a Vague

Disciplinary Standard to Suspend Petitioner's

License to Practice Law and Has Not Violated

His Right to Due Process. .................-- 13-23

ts + 7 | ARMANI PEO m nr Grane 5 OG e miter 24

iii

TABLE OF AUTHORITIES

CASES: Page

Kentucky Bar Association v. Signer,

IG, MOOD V's ek ce eens 6

In re Edge,

ee ks ces 6

Louisville Bar Association v. Hubbard,

282 Ky. 734, 139 S.W.2d 773 (1940) ........... ee

In re Gilbert,

274 Ky. 187, 118 S.W.2d 535 (1938) .............. 6

In re Stump,

272 Ky. 593, 114 S.W.2d 1094 (1938) ............. 6

Kentucky Bar Association v. Stivers,

IP I se ec 7

Kentucky Bar Association v. Franklin,

CIPO, i ccs uc cece 7

Kentucky Bar Association v. Collis,

535 S.W.2d 95 (Ky. 1975) cert den 423 U.S. 1049 ....7

Kentucky Bar Association v. Tucker,

535 S.W.2d 97 (Ky. 1975) cert den 423 U.S. 1054 .... 7

Kentucky Bar Association v. Cohen,

625 S.W.2d 573 (Ky. 1981) cert den 456 U.S. 1007 ... 7

In re Ruffalo,

es oe kts kas se nenes passim

Daugherty v. Runner,

581 S.W.2d 12 (Ky. App. 1978) .............. 14,17

In re Ray,

390 S.W.2d 899 (Ky. 1965) .................. 15-16

Palms’ Administrators v. Howard,

MS UIE, OD ge

iv

TABLE OF AUTHORITIES (Continued)

CaASsEs: . Page

Hunt v. Picklesimer,

162 S.W.2d 27 (Ky. 1942) .......... Ct BeREe

Arrowood v. Lyon,

Se eee Ge BOER sus br Citic Ai 17

Owen v. Neely,

471 S.W.2d 705 (Ky. 1971) ......... iio ee

Kentucky Bar Association v. Vincent,

537 S.W.2d 171 (Ky. 1976) ........... 19

Kentucky Bar Association v. Kramer,

555 S.W.2d 245 (Ky. 1977) .......... | acc

Kentucky Bar Association v. Ricketts,

599 S.W.2d 454 (Ky. 1980) ............. ere

Nicholson v. Judicial Retirement and Removal

Commission, 562 S.W.2d 306 (Ky. 1978) ..... . 21-22

Rutes Or Tue Supreme Court Or

Tue UNiteD STATEs:

EES neg ee Pacem meats hn yy ag SOU ae 1, 20-21

ee ee, -.... 2,10,18

I os ou oc ee 2, 12-13

Rs bon Sees _... 28, 12-13

OrueR AUTHORITIES:

Black's Law Dictionary (4th Edition; West, 1968)

Definition of the term “‘uberrima fides” ......__.. 16

v

TABLE OF AUTHORITIES (Continued)

OTHER AUTHORITIES: Page

7 Am.Jur.2d Attorneys at Law §120.............. 17

7 Am.Jur.2d Attorneys at Law §125.............. 17

Code of Professional Responsibility

Ethical Consideration 5-1 ..................... 18

Ethical Consideration 5-2................. 18

1

IN THE

Supreme Court Of The United States

ERIC S&S. SMITH ................. ........ PETITIONER

vs.

KENTUCKY BAR ASSOCIATION ......... RESPONDENT

ON PETITION FOR A WRIT OF CERTIORARI TO

THE SUPREME COURT OF KENTUCKY

BRIEF FOR RESPONDENT IN OPPOSITION

APPLICABLE COURT RULES

SUPREME COURT OF THE UNITED STATES

RULE 8. DISBARMENT.

Where it is shown to the Court that any member of its

Bar has been disbarred or suspended from practice in any

court of record, or has engaged in conduct unbecoming a

member of the Bar of this Court, such member forthwith

may be suspended from practice before this Court. Such

member thereupon will be afforded the opportunity to

show good cause, within 40 days, why disbarment should

not be effectuated. Upon his response, or upon the expira-

tion of the 40 days if no response is made, the Court will

enter an appropriate order.

SUPREME COURT OF KENTUCKY

Rule 3.130 ABA Code of Professional Responsibility

Recognized as Authority

(1) Except for Ethical Considerations and Disciplinary

Rules in conflict with Rule 3.135, the Court recognizes and

accepts the principles embodied in the American Bar

Association's Code of Professional Responsibility as a

sound state nent of the standards of professional conduct

required oi members of the bar, and the Inquiry Tribunal

may cause to be tried all charges brought under this Code

as well as charges for other unprofessional or »rethical con-

duct tending to bring the bench and bar into « »repute.

Rule 3.150 Proceedings Not Public; Exception

(1) Nothing connected with a disciplinary case shall be

made public unless so ordered by the Court. Upon request

of the Retirement and Removal Commission the director

shall make available to the Commission any of its records

pertinent to an investigation by the Commission.

Rule 3.300 Rights of Respondent Against Whom

a Charge Has Been Filed

The respondent against whom a charge has been filed

shall have the right to be represented by counsel. If the

Tribunal finds the answer to the charge raises issues of

fact, hearing before a Trial Commissioner. He shall have

the rights secured to a party by the Rules of Civil Pro-

cedure with respect to the introductien of evidence, the

right to compel the attendance of witnesses: and the pro-

duction of books, papers and documents or other writings

except those contained in the investigative file or associa-

tion. He shall have the right to an oral argument or to file a

brief before the Trial Commissioner. He shall be afforded a

3

full opportunity to remain silent, to defend himself by the

introduction of evidence and to cross-examine witnesses

called against him. If the respondent be unable to employ

counsel, the Chairman, upon written request in affidavit

form, made within twenty days after service of the

charges, shall appoint counsel for the respondent.

COUNTERSTATEMENT OF THE CASE

The case concerns a decision by the Supreme Court of

Kentucky to suspend petitioner from the practice of law in

the Commonwealth of Kentucky for eighteen months. The

case began when one of petitioner's clients, Dr. Nath, filed

a complaint with the Kentucky Bar Association

(hereinafter referred to as KBA) against petitioner thereby

initiating an investigation by the Inquiry Tribunal of the

KBA. Petitioner was served with Nath's complaint and he

filed a response.

On October 29, 1981, the Inquiry Tribunal issued a for-

mal charge of unethical conduct against petitioner which is

set forth in petitioner's appendix pages 40a - 45a. The

charge contained a detailed statement of the allegations of

fact concerning petitioner's involvement and participation

in his client, Nath, making an unsecured loan of $30,000 to

REBSCS. REBSCS was a corporation which petitioner

formed and represented as a lawyer. Petitioner had a per-

sonal financial interest in REBSCS. The charge cited cer-

tain provisions of the Code of Professional Responsibility

which petitioner was alleged to have violated. The charge

further stated that petitioner was guilty of unethical and

unprofessional conduct tending to bring the bar of Ken-

tucky into disrepute. The essence of the charge was that

petitioner had violated ethical duties he owed to Nath by

engaging in conflicts of interest, neglecting legal matters

entrusted to petitioner, and making false or deceptive

statements to Nath.

4

Petitioner was served with the charge and he filed an

answer. An evidentiary hearing was held before a trial com-

missioner which lasted two full days. At the hearing peti-

tioner was afforded every opportunity to cross-examine the

witnesses called against him. Petitioner testified at great

length and introduced numerous documents and records

into evidence. Petitioner was also permitted to introduce

the testimony of any witnesses he wanted in order to sup-

port his version of what had occurred. The record of

evidence produced at the hearing was voluminous and

exhaustive. The evidence completely addressed every rele-

vant aspect of petitioner’s involvement with REBSCS, and

all the facts and circumstances surrounding petitioner's

participation in Nath loaning $30,000 to REBSCS.

After the hearing petitioner and respondent filed

extensive briefs with the trial commissioner. The trial com-

misioner issued a report containing advisory findings of

fact. The commissioner’s report is set forth in petitioner’s

appendix pages 24a - 39a. The trial commissioner found

petitioner guilty of many of the allegations of fact

contained in the charge.

The trial commissioner’s report was submitted to the

Board of G.vernors of the KBA. The parties filed exten-

sive briefs with the Board of Governors arguing the facts

and the law. Petitioner took advantage of this opportunity

to vigorously disagree with some of the trial

commissioner’s advisory findings of fact. After reviewing

the entire record the Board of Governors adopted the trial

commissioner’s findings and by a vote of 11-0 found peti-

tioner guilty of unethical conduct. The Board recom-

mended to the Kentucky Supreme Court that petitioner be

found guilty and suspended from the practice of law for

eighteen months. A copy of the Board’s opinion is set forth

in petitioner’s appendix pages 14a - 23a.

Petitioner disagreed with the Board of Governors and

he exercised his right to request judicial review of the

Board’s decision by the Kentucky Supreme Court. The par-

ties filed extensive briefs and on October 12, 1983, the Ken-

tucky Supreme Court rendered an opinion adopting the

decision of the Board of Governos and ordering that peti-

tioner’s law license be suspended for eighteen months. A

copy of said opinion is set forth in petitioner’s appendix

pages 9a - 13a.

Petitioner was dissatisfied and filed a petition for

rehearing and modification in the Kentucky Supreme

Court. Petitioner argued in part that the Kentucky Court

was in effect creating a new rule of ethics and applying it

retroactively in violation of his constitutional right to due

process of law. The KBA filed a response to the petition for

rehearing requesting the Kentucky Court to clarify its

opinion by more fully explaining the facts and the law

which formed the basis for the decision to suspend

petitioner from the practice of law.

On July 5, 1984, the Kentucky Court rendered a

modified opinion and entered an order denying the petition

for rehearing. The modified opinion of the Kentucky Court

is set forth in petitioner’ appendix pages 3a - 8a.

ARGUMENT

I, THE KENTUCKY SUPREME COURT’S SUSPENSION

OF PETITIONER FROM THE PRACTICE OF LAW

WAS BASED ON THE CHARGE OF WHICH HE HAD

PRIOR NOTICE AND AN OPPORTUNITY TO BE

HEARD. THE KENTUCKY SUPREME COURT DID

NOT SUBSTITUTE A NEW CHARGE AND DID NOT

VIOLATE THE PETITIONER'S RIGHT TO

PROCEDURAL DUE PROCESS.

The touchstone of procedural due process is that a per-

6

son who is accused of unlawful conduct must have fair

notice of the allegations of misconduct and an opportunity

to be heard. Respondent is confident that when this Court

reviews the the charge, the trial commissioner’s report, the

opinion of the Board of Governors, and the opinion of the

Kentucky Supreme Court, several important facts will be

obvious. First, the petitioner had full and fair notice of the

charges against him and the factual allegations of miscon-

duct. Second, the petitioner was afforded a full and fair op-

portunity at every stage of the disciplinary process to in-

troduce evidence and argue his case. He was afforded the

opportunity to be heard at the investigative stage before

the Inquiry Tribunal, at the evidentiary hearing before the

trial commissioner, before the Board of Governors and in

the Kentucky Supreme Court. Third, the opinion of the

Kentucky Court was based on the charge issued by the

Inquiry Tribunal and the decision of the Board of

Governors.

The Supreme Court of Kentucky has held that

disciplinary proceedings in Kentucky are neither criminal

nor quvasi-criminal. Disciplinary proceedings are civil in

nature and are inquiries into what may have constituted

unethical or unprofessional conduct. Kentucky Bar

Association v. Signer, 558 S.W.2d 582 (Ky. 1977); In re

Edge, 282 S.W.2d 830 (1955); Louisville Bar Association v.

Hubbard, 282 Ky. 734, 139 S.W.2d 773 (1940); In re Gilbert,

274 Ky. 187, 118 S.W.2d 535 (1938); In re Stump, 272 Ky.

593, 114 S.W.2d 1094 (1938). The Supreme Court of Ken-

tucky has reserved to itself the authority to make the final

findings of fact and final conclusions of law in bar

disciplinary cases. The reports and recommendations of

the trial commissioner and the Board of Governors are

merely advisory. Kentucky State Bar Association v.

Stivers, 475 S.W.2d 900 (Ky. 1972); Kentucky Bar Associa-

tion v. Franklin, 534 S.W.2d 459 (Ky. 1976); Kentucky Bar

Association v. Collis, 535 S.W.2d 95 (Ky. 1975) cert den

423 U.S. 1049; Kentucky Bar Association v. Tucker, 535

S.W.2d 97 (Ky. 1975) cert den 423 U.S. 1054; Kentucky Bar

Association v. Cohen, 625 S.W.2d 573 (Ky. 1981) cert den

456 U.S. 1007.

Petitioner contends that the Kentucky Court sus-

pended him for conduct entirely different than that alleged

in the charge upon which he had been tried. Petitioner’s

argument is without merit. A review of the Kentucky

Court’s opinion shows that it was based on factual allega-

tions contained in the charge, and based on the reports of

the trial commissioner and the Board of Governors. In the

modified opinion which the Kentucky Supreme Court

rendered on July 5, 1984, the Kentucky Court expressly

stated: ‘‘We adopt the decision of the Board of Governors.”

See Petitioner’s Appendix page 2a.

The thrust of petitioner’s argument is that the Ken-

tucky Court found him guilty of unethical conduct based

solely on his mere participation in the loan transaction.

Petitioner seeks to characterize his involvement in the loan

transaction ‘as being innocuous and simply performing

ministerial acts such as preparing the $30,000 check. In its

modified opinion rendered on July 5, 1984, the Kentucky

Supreme Court stated:

It is in the events leading up to the loan that the

Kentucky Bar Association has charged respondent

with unethical and unprofessional conduct.

We do not attempt to unravel all the contradic-

tory testimony regarding what Dr. Nath testified

respondent said and did in order to persuade Dr. Nath

8

to invest in REBSCS and what respondent testified

that he said and did in demal.

It is uncontradicted that Nath Holdings was

formed by respondent on February 13, 1980, and the

certificate of incorporation was issued on February 13,

1980. Nath gave respondent a check for $30,200 on the

same day and a bank account for the corporation was

opened by respondent. Respondent was registered

agent for service of process and used his office as mail-

ing address for the corporation. Whether or not Nath

Holdings was set up for the purpose of making the in-

vestment or loan, the timing leads to that inference.

When the meeting consummating the transaction

took place, respondent had prepared a check on Nath

Holdings made to REBSCS in the amount of $30,000

as a loan in exchange for convertible debenture with

conversion within five years into an amount equal to

ten percent (10%) of the total shares in REBSCS.

_ This check was voided at the request of Dr. Nath,

and respondent prepared another check marked loan.

There was no security or promissory note. Nath

testified respondent told him all that would be taken

care of later. Respondent denied this and testified he

could not under the circumstances perform any ser-

vice for REBSCS. In any event, REBSCS had a bank

balance of $73.31. This money was quickly dispensed,

first $10,000 to Towles to repay for expenses and later

$5,500 to Towles to repay for expenses. The bank

balance of REBSCS shortly was reduced to about $41.

Respondent's defense that it was not established

that he represented Dr. Nath in-this transaction is a

non-defense.

Respondent had performed all the legal work for

REBSCS and he owned a contingency interest in

REBSCS. Respondent’s office address was used as a

mailing address for REBSCS. Respondent also

r-presented Dr. Nath and one of his corporations

———

9

generally. We consider Nath Holdings as an extension

of Dr. Nath personally.

Whether Dr. Nath knew that respondent owned

an interest in REBSCS and whether Dr. Nath knew

that Towles planned to reimburse himself for $10,000

in expenses after the loan are beside the point.

Respondent engaged in these activities

culminating in preparing a check and, to that extent,

participated in a transaction whereby one client lent

money to a corporation in which respondent had a

substantial interest. A lawyer simply cannot defend

against a charge of unethical and unprofessional con-

duct in such a scenario. In placing himself in this posi-

tion, respondent incurs the penalty imposed as recom-

mended by the Kentucky Board of Bar Governors to

this court. It is only for the reason that we cannot be

sure from the evidence as to the actual misrepresenta-

tion that we do not impose a more severe penaltj.

This situation is one of first impression in this

Commonwealth and should illustrate that we are com-

mitted to the proposition that, in financial dealings

with a client, a law) er must exercise the utmost good

faith and fidelity to a client and not place himself or

herself in a position of participating in a transaction,

such as here, so as to bring the bench and bar into

disrepute. The unethical and unprofessional conduct

here and the consequential loss of money by a client,

Dr. Nath, is in our opinion such unethical and

unprofessional conduct as to warrant the suspension

of respondent. Petitioner's Appendix 4a - 8a.

The Kentucky Court essentially found that an

attorney-client relationship existed between petitioner and

Dr. Nath, and that petitioner violated fiduciaiy duties he

owed to Dr. Nath. Such a decision by the Kentucky Court

is consistent with the charge issued against petitioner and

the opinion of the Board of Governors. Throughout the

10

period of time when petitioner was discussing REBSCS

with Nath up to and including the date Nath invested the

$30,000, petitioner was being paid by Nath a monthly re-

tainer fee for personal legal advice and a monthly retainer

fee to represent Nath Chartered. Petitioner gave legal ad-

vice to Nath about forming Nath Holdings to serve as the

vehicle for making the investmert in REBSCS. Petitioner

incorporated Nath Holdings for Dr. Nath as his attorney

and petitioner also opened the bank account for Nath

Holdings for the specific purpose of enabling Dr. Nath to

invest in REBSCS. The $30,000 which was used to fund

Nath Holdings came from Nath Chartered and petitioner

was general counsel for Nath Chartered on retainer. Peti-

tioner wrote out the check for Nath to disburse the $30,000

from Nath Holdings to REBSCS. Petitioner's act of

writing out the check for Nath’s signature was only one of

several significant actions that petitioner took to advise

and assist Nath to accomplish the REBSCS investment.

It should be noted that the charge issued by the

Inquiry Tribunal against petitioner not only alleged that

he had violated certain provisions of the Code of Profes-

sional Responsibility but also alleged that petitioner had

engaged in ‘‘unethical and unprofessional conduct tending

to bring the bench and bar of Kentucky into disrepute."

Petitioner's Appendix 44a - 45a. Rule 3.130(1) of the Ken-

tucky Supreme Court provides in part: “the Inquiry

Tribunal may cause to be tried all charges brought under

this Code as well as charges for other unprofessional or

unethical conduct tending to bring the bench and bar into

disrepute.” In its final opinion the Kentucky Supreme

Court held that petitioner is guilty of unethical and

unprofessional conduct. Petitioner’s Appendix page 6a.

The Kentucky Court's decision was based on the Inquiry

— ceo ee

1l

Tribunal’s charge, the record of evidence, the trial commis-

sioner’s report and the opinion of the Board of Governors.

The Kentucky Court did not create a new charge or

“substitute” charges as claimed by petitioner.

Petitioner cites the case of Jn re Ruffalo, 390 U.S. 554

(1968), which is not applicable to the facts and cir-

cumstances in the present case. Ruffalo was a lawyer who

was the subject of disciplinary charges in the State of Ohio.

Ruffalo was charged with using a man named Orlando to

solicit clients. A hearing was held at which Ruffalo and

Orlando testified that Ruffalo only employed Orlando as an

investigator. After the testimony a new, additional charge

of ethical misconduct was levied against Ruffalo on the

ground that he had hired Orlando to investigate Orlando's

other employer, a railroad company. The Ohio Supreme

Court ultimately disbarred Ruffalo based on the new

charge which had been added after Ruffalo had testified.

The United States Court of Appeals for the Sixth Circuit

disbarred Ruffalo from practicing law before the Sixth Cir-

cuit based on his disbarment in Ohio. Ruffalo appealed to

the United States Supreme Court which reversed. The

United States Supreme Court held that Ruffalo had been

deprived of procedural due process. This Court held that

Ruffalo was entitled to fair notice of the charges against

him before he testified.

In the present case it is clear that petitioner had fair

notice of the charge against him prior to the evidentiary

hearing and no new charges were issued against him after

he had testified. The charge issued by the Inquiry Tribunal

was detailed and concerned petitioner’s conduct in a loan

transaction between two of his clients, Nath and REBSCS.

The charge expressly stated the facts and circumstances

surrounding petitioner’s involvement in the loan trans-

12

action from the incorporation of Nath Holdings to the is-

suance of the $30,000 check. The charge alleged that such

actions by petitioner not only violated certain provisions of

the Code of Professional Responsibility but also con-

stituted unethical and unprofessional conduct tending to

bring the bar into disrepute. It is obvious that petitioner's

argument that he was not given fair notice of the charge is

without merit and Ruffalo, supra, is inapplicable.

Petitioner, on pages 15 and 19 of his petition for writ of

certiorari, complains that the disciplinary proceeding was

conducted in secrecy and that he was somehow unfairly

restricted from procuring and producing evidence in his

own defense. Respondent disagrees. Rule 3.150(1) of the

Kentucky Supreme Court provides in part: ‘‘Nothing con-

nected with a disciplinary case shall be made public unless

so ordered by the Court.”’ The purpose of Rule 3.150(1) is to

maintain the confidentiality of disciplinary proceedings

from the media and members of the general public who are

not involved in the case. Rule 3.150(1) cannot and should

not be interpreted as preventing petitioner from in-

vestigating, interviewing witnesses and presenting

evidence. Rule 3.150(1) must be read in conjunction with

Rule 3.300 of the Kentucky Supreme Court which

provides:

The respondent against whom a charge has been

filed shall have the right to be represented by counsel.

If the Tribunal finds the answer to the charge raises

issues of fact, hearing before a Trial Commissioner. He

shall have all the rights secured to a party by the

Rules of Civii Procedure with respect to the introduc-

tion of evidence, the right to compel the attendance of

witnesses; and the production of books, papers and

documents or other writings except those contained in

13

the investigative file of the association. He shall have

the right to an oral argument or to file a brief before

the Trial Commissioner. He shall be afforded a full op-

portunity to remain siler:t, to defend himself by the in-

troduction of evidence and to cross-examine witnesses

called against him. If the respondent be unable to

employ counsel, the Chairman, upon written request

in affidavit form, made within twenty days after ser-

vice of the charges, shall appoint counsel for the

respondent.

If petitioner honestly and sincerely believed that Rule

3.150(1) was unfairly restricting him from investigating

and discussing the case with witnesses, all he had to do was

file a motion with the Kentucky Supreme Court requesting

relief. Petitioner never filed such a motion with the Ken-

tucky Court. In fact, petitioner has not demonstrate! that

his access to witnesses or evidence was signficantly

restricted by Rule 3.150(1). Petitioner only refers to an

amicus curiae brief filed in the Kentucky Supreme Court.

The record of evidence taken before the trial commissioner

shows that petitioner did call several witnesses to testify

on his behalf.

Il. THE KENTUCKY SUPREME COURT HAS NOT

ENLARGED AND RETROACTIVELY APPLIED A

VAGUE DISCIPLINARY STANDARD TO SUSPEND

PETITIONER'S LICENSE TO PRACTICE LAW AND

HAS NOT VIOLATED HIS RIGHT TO DUE PROCESS.

Petitioner argues that his right to due process was

violated because at the time he became involved in the loan

transaction with his client, Nath, petitioner did not have

reasonable, prior notice that such actions could be con-

sidered unethical and grounds for discipline. Petitioner

again argues that the Kentucky Supreme Court based its

14

decision to suspend his law license solely on the ground

that he had merely “participated” in a loan transaction

between clients.

As respondent has previously discussed in this brief,

supra, the Kentucky Court decided to suspend petitioner's

law license because he violated fiduciary duties owed to his

client,.Nath. The Kentucky Court held that in financial

dealings with a client a lawyer must exercise the utmost

good faith and fidelity to a client. It should not come as a

surprise to petitioner or any other reasonable lawyer that

the Kentucky Supreme Court would recognize and enforce

such a standard of ethical conduct. Prior to petitioner

engaging in his misconduct there was law readily available

in Kentucky which gave him adequate notice that his

actions could be deemed improper. In Daugherty v.

Runner, 581 S.W.2d 12 (Ky. App. 1978), discretionary

review denied by Kentucky Supreme Court June 5, 1979,

the Kentucky Court of Appeals held at p. 16:

What is the level of service demanded from

members of the legal profession? The relationship of

attorney-client is a contractual one, either expressed

or implied by the conduct of the parties. The relation-

ship is generally that of principal and agent; however,

the attorney is vested with powers superior to those of

any ordinary agent because of the attorney's quasi-

judicial status as an officer of the court; thus the

attorney is responsible for the administration of

justice in the public interest, a higher duty than any

ordinary agent owes his principal. Since the relation-

ship of attorney-client is one fiduciary in nature, the

attorney had the duty to exercise in all his relation-

ships with this client-principal the most scrupulous

honor, good faith and fidelity to his client’s interest.

15

In the case of Jn re Ray, 390 S.W.2d 899 (Ky. 1965), the

former Kentucky Court of Appeals (now Kentucky

Supreme Court) suspended Ray from the practice of law for

3ix months. In its opinion the Kentucky Court stated the

following facts and conclusions of law at p. 890:

Bibb was the owner of a piece of mortgaged real

estate. He fell behind in his payments and was

threatened with foreclosure. He then went to Ray

seeking legal advice and assistance. It appeared that

Bibb needed financial rather than legal aid. At Ray's

suggestion, Bibb deeded the land to Ray, as

“trustee.” under an agreement that Ray would

transfer it back to Bibb or to anyone Bibb named upon

payment to Ray of his expenditures and his charges

for use of his credit and for his services in saving the

property from foreclosure. Subsequently the pruperty

was transferred at Bibb’s request to his brother-in-

law, for a price of $4,000. After the mortgage and all

expenses were paid including a fee to Ray for legal ser-

vices, Ray had left a sum of around $1,300, which he

claimed as his own.

The foregoing statement of facts consists only of

facts asserted or admitted by Ray; it does not include

disputed assertions by Bibb of fraudulent acts and

representations by Ray.

Although the Trial Committee stated in its report

that the only issue to be considered was whether Ray

had acted “‘fraudulently"’ in the handling of the real

estate transaction, actually the committee based its

recommendation of disciplinary action on a finding of

a breach of a fiduciary relationship.

By way of response in this Court, Ray asserts

among other things (1) that he was denied the oppor-

tunity before the Trial Committee to show fully the

motives behind the bringing of the charges against

16

him, and (2) that the evidence does not warrant a find-

ing of fraud on his part. It is our opinion that neither

of these matters is of any significance.

What is significant is that Bibb came to Ray own-

ing a substantial equity in a piece of real estate, and

when his dealings with Ray were completed he had

nothing while Ray had $1,300. Obviously there was a

breach of professional ethics in the achievement of

such a result, and it is immaterial by what name the

breach be called. We think also it is immaterial (except

as regards the degree of the offense) that Ray may

have done what he did with full agreement of Ribb. It

is our opinion that an attorney may not properly be

permitted to switch hats, from that of an officer of the

court to that of a money lender, in the middle of his

dealings with a client.

We are not convinced that Ray was guilty of any

fraudulent conduct or that he was deliberately seeking

to take undue advantage of his client's financial

predicament. Jt appears that his offense was at-

tributable mainly to his failure to appreciate fully the

high trust responsibilities that rest upon an attorney

in a financial transaction with his client. Under the

circumstances we think a six-month suspension is

adequate discipline. (Emphasis supplied).

Generally, as well as in Kentucky, a client is entitled to

expect from his or her attorney not just competent

technical performance, but uberrima fides, defined in

Black's Law Dictionary (4th Edition; West, 1968) as:

The most abundant good faith; absolute and

perfect candor or openness and honesty; the absence

of any concealment or deception however

17

See also 7 Am.Jur.2d Attorneys at Law § 120:

An attorney must faithfully, honestly, and con-

sistently represent the interests anc protect the rights

of his client. He is bound to discharge his duties to his

client with the strictest fidelity, to observe the highest

and utmost good faith toward him, and to inform his

client promptly of any known information important

to him. An attorney may not withhold from his client

information acquired in his capacity as an attorney

(and) may not use the information to his own advan-

tage..." (citations omitted)

Kentucky Courts have consistently held that the prin-

cipal of uberrima fides is almost per se inconsistent with a

lawyer's entangling his personal and financial affairs with

those of his client, particularly where the entanglemunt in-

volves the subject of the underlying representation. There

is a flat presumption that the lawyer has overreached the

client; see Palms’ Administrators v. Howard, 112 S.W.

1110 (Ky. 1908); Hunt v. Picklesimer, 162 S.W.2d 27 (Ky.

1942); see also 7 Am.Jur.2d Attorneys at Law § 125.

There is also a concomitent duty to disclose any fact or

matter gained in the course of the representation which

would be material to the client, or to his interests; see

Arrowood v. Lyon, 279 S.W.2d 801 (Ky. 1955). The at-

torney is under a specific obligation to recognize and

promptly inform the client of adverse circumstances; see

Daughterty v. Runner, supra, 581 S.W.2d at 17-18. A

lawyer cannot escape this obligation by express

disclaimers or reservations; Owen v. Neely, 471 S.W.2d 705

(Ky. 1971).

Furthermore, the Code of Professional Responsibility

which has been adopted by the Kentucky Supreme Court

18

pursuant to Rule 3.130 contains the following Ethical

Considerations:

EC 5-1 The professional judgment of a lawyer

should be exercised, within the bounds of the law, sole-

ly for the benefit of his client and free of compromising

influences and interests of cther clients, nor the

desires of third persons should be permitted to dilute

his loyalty to his client.

EC 5-2 A lawyer should not accept proffered

employment if his personal interests or desires will, or

there is a reasonable probability that they will, affect

adversely the advice to be given or services. to be

rendered the prospective client. After accepting

employment, a lawyer carefully should refrain from

acquiring a property right or assuming a position that

would tend to make his judgment less protective of

the interests of his client.

As an attorney actively practicing law in Kentucky,

petitioner either knew or should have known about the

above cited law. Petitioner either knew or should have

known that he owed certain fiduciary duties to his client,

Nath, and that if he violated his fiduciary duties,

disciplinary sanctions could be imposed on him pursuant

to Rule 3 of the Kentucky Supreme Court.

Petitioner argues that his due process rights have been

violated because the Kentucky Supreme Court suspended

him based on the standard that his actions constituted

unethical and unprofessional conduct tending to bring the

bar into disrepute. Petitioner claims that such a standard

is ambiguous and void for vagueness because it does not

give him adequate prior notice as to what types of conduct

by attorneys are prohibited. As stated supra, respondent

19

submits that based on the law which existed in Kentucky

at the time petitioner engaged in the acts of misconduct

petitioner had fair and adequate prior notice that his viola-

tion of fiduciary duties owed to a client could result in th-

imposition of disciplinary sanctions with regard to his law

license.

in Kentucky Bar Association v. Vincent, 537 S.W.2d

171 (Ky. 1976) the Kentucky Supreme Court suspended

Vincent from the practice of law for six months based on

his conviction for wilfully failing to file income tax returns.

The Kentucky Court went on to state the following

criterion for disciplining attorneys at p. 173:

We have long extended the arm of patience and

understanding to members of our legal profession

when they have been subjected to disciplinary pro-

ceedings. It may be that we have defined the limits of

conduct too broadly in speaking in subjective terms

such as ‘conviction of an offense involving morai tur-

pitude or of being convicted of a serious misdemeanor

or a felony.’ In any event, the real criterion is and

should be whether the attorney is guilty of such un-

professional and unethical conduct which is calculated

to bring the bench and bar into disrepute. It is beyond

cavil that an attorney who is convicted of an offense

involving moral turpitude, or who is convicted of an

intentional and serious misdemeanor, or who is con-

victed of a felony, is guilty of such conduct as is

calculated to bring the bench and bar into disrepute.

Respondent was permitted, without limitation, to ful-

ly indulge himself in the introduction of evidence to

support his position in his effort to build up and make

realistic his claim to extenuating circumstances. He is

an officer of the court (Kentucky State Bar Associa-

tion v. Taylor, Ky., 482 S.W.2d 574), and it is his

20

duty—yes, even more so, it is his responsibility—to

conduct his personal and professional life in a manner

as to be above reproach. Is this too much tc ask of any

attorney? We think not. Other than one’s own con-

fidante, no person occupies such close relationship to

the general public as do the members of the legal pro-

fession. It is the atturney to whom the intimacies of

family relations are confided; it is the attorney who is

entrusted with advising as to the management and

disposition of the family estate: it is the attorney who

is entrusted with the protection of our constitutional

and statutory rights. Such a burden resting upon the

members of the legal profession must not be taken

lightly.

‘... that you will faithfully execute, to the best of

your ability, the office of attorney at law...’ are not

idle words, to which all attorneys have pledged their

allegiance. The conduct of even one attorney which

would embarrass the legal profession will not be

tolerated.

The Kentucky Supreme Court has adopted Rule

3.130(1) which provides that attorneys may be disciplined

for violating the Code of Professional Responsibility and

“for other unprofessional or unethical conduct tending to

bring the bench and bar into disrepute.”” The Kentucky

Supreme Court has held that this standard is not void for

vagueness. Kentucky Bar Association v. Kramer, 555

S.W.2d 245 (Ky. 1977); Kentucky Bar Association v.

Ricketts, 599 S.W.2d 454 (Ky. 1980).

It is interesting and informative to compare the Ken-

tucky Court’s standard of ‘“‘unethical and unprofessional

conduct tending to bring the bench and bar into disrepute”’

with the standard used by the Supreme Court of the

United States. Rule 8 of the United States Supreme Court

provides in part:

21

Where it is shown to the Court that any member

of its Bar has been disbarred or suspended from prac-

tice in any court of record, or has engaged in conduct

unbecoming a member of the Bar of this Court, such

member forthwith may be suspended from practice

before this Court. (Emphasis supplied.)

The Kentucky Court’s standard is no more void for

vagueness than the standard adopted by the United States

Supreme Court which is that a lawyer may be suspended

for engaging in conduct unbecoming a member of the bar

of the United States Supreme Court.

Another signficiant Kentucky case is Nicholson v.

Judicial Retirement and Removal Commission, 562 S.W.2d

306 (1978). Nicholson was charged with having so ineptly

handled a RCr 11.42 proceeding that he brougl:t the

judicial office into disrepute. The Kentucky Supreme Court

rejected Nicholson’s claim that the constitutional

authorization to discipline judges ‘for good cause”’ was so

vague as to violate his right to due process of law holding:

Nicholson can not claim a lack of notice that his

conduct would be subject to review by the Commis-

sion. The authority to remove members of the

judiciary for good cause is not ambiguous to the

members of the legal profession. Such phrases as ‘‘for

cause” or ‘“‘for good cause’’ are terms of art which

possess a special meaning manifest to the profession

when used in this context. These terms denote a legal

cause which affects the ability and fitness of a judge

to perform the duties of the office. Napolitano v.

Ward, 317 F.Supp. 79 (D.C. III 1970); Sarisohn v.

Appellate Div., Second Dept., Supreme Court, 265

F.Supp. 455 (D.C., N.Y. 1967).

22

Such a standard is not so vague as to violate due

process requirements. Although the specific acts of

misconduct encompassed within the phrase are

numerous ample guidelines for the determination of

proper conduct may be found in the ethical standards

applicable to lawyers and judges adopted by national

and state bar associations and in the moral standards

expected of judicial officers by the public. Sarisohn v.

Appellate Div., supra. Such a standard is no more

vague than that of ‘“‘good behavior’’ used with respect

to federal judges contained in Section 1 of Article 3 of

the United States Constitution. Friedman v. State, 24

N.Y.2d 528, 301 N.Y.S.2d 484, 249 N.E.2d 369 (1969).

Id. at 308-309.

In the case of Jn re Ruffalo, supra, Justices Marshall

and White discussed this issue at pp. 554-555:

A relevant inquiry in appraising a decision to

disbar is whether the attorney stricken from the rolls

can be deemed to have been on notice that the courts

would condemn the conduct for which he was

removed. The Court of Appeals for the Sixth Circuit

had provided petitioner and other members of its bar

with a general standard for disbarment:

‘When it is shown to the court that any member of

its bar has been suspended or disbarred from practice

in any other court of record, or has been guilty of con-

duct unbecoming a member of the bar of the court, the

member will be forthwith suspended from practice

before the court and notice of his suspension will be

mailed to him, and unless he shows good cause to the

contrary within 40 days thereafter, he will be further

suspended or disbarred from practice before the

court.’ Rule 6(3), Court of Appeals for the Sixth

Circuit.

23

Even when a disbarment standard is as unspecific

as the one before us, members of a bar can be assumed

to know that certain kinds of conduct, generally con-

demned by responsible men, will be grounds: for

disbarment. This class of conduct certainly includes

the criminal offenses traditionally known as malum in

se. It also includes conduct which all responsible at-

torneys would recognize as improper for a member of

the profession. (Emphasis supplied.)

The true test of whether a law or regulation is void for

vagueness is to apply it to the specific fact situation before

the Court. When the standard of “unethical and unprofes-

sional conduct tending to bring the bench and bar into

disrepute”’ is applied to petitioner and his violation of

fiduciary duties owed to a client, it is clear that petitioner’s

actions are a proper subject for discipline. The Ken :ucky

Supreme Court had every reason to expect petitioner and

every other Kentucky attorney to exercise the utmost good

faith and fidelity to a client when the attorney is involved

in financial dealings with a client under the facts and

circumstances of this particular case.

24

CONCLUSION

For the foregoing reasons, it is respectfully submitted

that the petition for writ of certiorari should be denied.

Respectfully submitted,

MICHAEL M. HOOPER

ASSISTANT DIRECTOR

KENTUCKY BAR ASSOCIATION

West Main at Kentucky River

Frankfort, Kentucky 40601

PH: 502-564-3795

Counsel for Respondent

CERTIFICATE OF SERVICE

I certify that three copies of this Brief for Respondent

in Opposition were mailed to counsel for petitioner, Bert T.

Combs, 2800 Citizens Plaza, Louisville, Kentucky 40202,

and Ben L. Kessinger, Jr., 400 Bank of Lexington

Building, 101 East Vine Street, Lexington, Kentucky, this

\st_ day of _Novem ey _, 1984.

a

Pasa 2. 8 AL

MICHAEL M. HOOPER