You can
search the entire site.
or go to the recent opinions, or the chronological or subject indices.
In the matter of Frost (11/26/93), 863 P 2d 843
<![CDATA[
Notice: This is subject to formal correction before
publication in the Pacific Reporter. Readers are
requested to bring typographical or other formal errors
to the attention of the Clerk of the Appellate Courts,
303 K Street, Anchorage, Alaska 99501, in order that
corrections may be made prior to permanent publication.
THE SUPREME COURT OF THE STATE OF ALASKA
In the Disciplinary Matter )
Involving ) Supreme Court Nos. S-5169/5268
)
STEPHEN F. FROST, ) ABA File Nos. 1988D118/157
)
)
Respondent. ) O P I N I O N
)
ABA Membership No. 7510067 ) [No. 4029 - November 26, 1993]
______________________________)
Appeal of Decision from the Disciplinary
Board of the Alaska Bar Association.
Appearances: Keith A. Sanders,
Assistant Bar Counsel, Anchorage, for Alaska
Bar Association. Stephen F. Frost, pro per,
Redmond, Washington.
Before: Moore, Chief Justice,
Rabinowitz, Burke, Matthews, and Compton,
Justices.
MATTHEWS, Justice.
BURKE, Justice, with whom COMPTON,
Justice, joins, dissenting.
In this disciplinary case the hearing committee found
that Stephen Frost violated four provisions of the disciplinary
rules and recommended that he be suspended from the practice of
law for eighteen months. Frost appealed to the disciplinary
board, which accepted the committee's findings, but recommended
that Frost should be suspended for a total of eight months.1
Both the bar association and Frost now challenge the disciplinary
board's recommendation. The bar contends that the board erred in
rejecting the hearing committee's recommendation of an eighteen-
month suspension. Frost contends that the evidence does not
establish that he committed any violations and raises a number of
procedural and jurisdictional points. We find that Frost
committed only one minor violation and that censure is the
appropriate discipline.
I. BURDEN OF PROOF/STANDARD OF REVIEW
Bar counsel has the burden of proving the charges of
misconduct in a petition for formal hearing by clear and
convincing evidence. Alaska Bar Rule 22(e). This court reviews
the evidence adduced before the hearing committee independently
while giving deference to the findings of the board. Bar Rule
22(n); In re Simpson, 645 P.2d 1223, 1226-27 (Alaska 1982). On
questions of sanctions, this court also exercises its independent
judgment, guided by the American Bar Association Standards for
Imposing Lawyer Sanctions (1986) and the sanctions imposed in
comparable disciplinary proceedings. Alaska Bar Rule 22(r); In
re Schuler, 818 P.2d 138, 139 (Alaska 1991).
II. STATEMENT OF FACTS
This case arose when George Barth Sr. and Peter Barth
filed grievances against Frost. Following an investigation, the
bar association filed a ten-count petition for formal hearing. A
nine-day evidentiary hearing was held August 19 through 29, 1991.
We have reviewed the transcript of the hearing. Except where a
dispute in testimony is noted, the following facts are supported
by clear and convincing evidence.
George Barth Sr. (George Sr.), a businessman and former
real estate salesman, was represented by Frost in a number of
legal matters between 1982 and 1988. Frost was not George Sr.'s
only attorney, however, as George Sr. was a frequent litigant who
used numerous attorneys.2
In 1986 one of George Sr.'s brothers, Peter Barth, was
involved in litigation against two of his other brothers, Tom
Barth and John Barth, and another party, Virginia Gaylen,
concerning a daycare center referred to as Hanson Acres. Peter
asked George Sr. for his help in this litigation. George Sr.
asked Frost to represent Peter but Frost declined, concluding
that Peter was too emotionally distraught to deal with the case
rationally. To overcome this problem, George Sr. took an
assignment of Peter's interest in Hanson Acres and in the
litigation in the name of George Sr.'s wholly-owned corporation,
Alta Corporation (Alta). Under this assignment, Peter was to
receive "the first Fifty Thousand Dollars ($50,000) cash
received, without interest, after all costs and attorney's fees
are paid." Alta then entered into a contingent fee agreement
with Frost under which Frost would represent Alta in the litiga
tion in exchange for fifty percent of any proceeds.
About six months after Frost entered the litigation a
settlement was reached. Gaylen became the sole owner of the
property and signed promissory notes, one in the amount of
$50,000 in favor of Alta, and two in the amount of $40,000 in
favor of Tom and John. These notes were secured by a second deed
of trust on Hanson Acres. Hanson Acres was also subject to a
prior deed of trust and note in the original amount of $305,000
administered by SeaFirst Bank. This note was in default, and
under the settlement Gaylen was required to pay it.
George Sr., through Alta, assigned fifty percent of the
$50,000 note to Frost on September 2, 1986. In March of 1987
George Sr., on behalf of Alta, assigned Alta's remaining interest
in the $50,000 note to George Sr.'s daughter, Diane Barth Olsbo.
Frost prepared this assignment. George Sr. explained to Frost
that he wanted this done because he was going to be out of the
country and that Diane would be available for signing any and all
necessary documents. It was understood that, although the
assignment was absolute in form, the note was intended to be held
for the benefit of Alta and, thus, for Peter.
In April of 1987 Frost agreed to conduct a non-judicial
foreclosure proceeding on the Hanson Acres property. Frost wrote
to George Sr. on April 17, 1987, stating, "I will bring the
foreclosure action on behalf of Alta and Frost & Grashin and will
evenly split the legal costs and legal fees with you."
Consistent with this, on May 27, 1987, Frost wrote to the other
holders of second deed of trust notes on Hanson Acres -- Tom,
John, and Diane -- and obtained their consent to non-judicially
foreclose the second deed of trust. Thereafter, Frost sent
monthly statements to George Sr. captioned "Foreclosure v.
Gaylen."
In June of 1987, under George Sr.'s direction, Diane
assigned her interest in the $50,000 note to George Barth Jr.
(George Jr.), George Sr.'s son. According to Diane, the reason
for this assignment was that she was about to file for divorce
and she thought the note might become enmeshed in that
litigation. Diane and George Sr. testified that they intended
that the note would be held for the benefit of Alta and Peter.
However, the assignment, like the assignment from Alta to Diane,
was absolute on its face. After George Jr. received the
assignment from Diane, he consented to being represented by Frost
in the non-judicial foreclosure.
On August 14, 1987, Frost transmitted to Land Title
Company, the trustee under the second deed of trust, the
documents necessary to initiate the non-judicial foreclosure. On
August 24, 1987, the trustee initiated the foreclosure by
executing and recording a notice of default and sale. The sale
was scheduled for December 10, 1987. The deed of trust sale took
place as scheduled and the successful purchasers were the record
owners of the second deed of trust notes: John, Tom, George Jr.,
and Frost's law firm. The purchase was made with an offset bid.
The trustee's deed was issued on December 21, 1987.
In the interim between the assignment from Diane to
George Jr. and the sale, an important event took place. George
Jr. called Frost, claiming that the interest that had been
assigned to him in Hanson Acres was his free of any claims by
Alta. George Jr. stated that he had received the interest in
payment of a debt which George Sr. owed him in another
transaction.3
Frost discussed George Jr.'s claim with George Sr.4
Both Frost and George Sr. agree on the following aspects of this
discussion:
1. That George Sr. was upset and said he
had to do something right away.
2. That Frost stated he would not become
involved in a lawsuit brought by Alta or
George Sr. against George Jr.
3. That Frost warned George Sr. that there
was a possibility that George Jr. could sell
the note which was in his name to an innocent
third party who might have a legitimate claim
to it.
4. That Frost promised he would place any
money claimed by George Jr. from a sale or
lease of the property in Frost's trust
account or with the court pending resolution
of claims to the money.
It is disputed whether Frost advised George Sr. to
consult with another attorney. Frost claims he gave such advice
and George Sr. claims he did not. In any case, George Sr.
consulted with another attorney concerning George Jr.'s claim
soon after his meeting with Frost. George Sr. testified that
thereafter he felt comfortable with what Frost had told him.
It is also disputed whether Frost warned George Sr.
that any lawsuit he might bring might prompt SeaFirst Bank to
foreclose on its deed of trust. George Sr. claims that Frost
told him this. Frost states that he did not tell George Sr. not
to file suit, but told him "don't go off half-cocked, whatever
you do, make sure it's with the advice of an attorney . . . ."
According to Frost, he was not concerned about George Sr. filing
suit and a lis pendens against George Jr. because such a suit
would not have damaged a sale so long as there were assurances
that the lis pendens could be released upon deposit of the
disputed portion of the funds in court.
Frost also testified that he had the following
consultation with George Sr. about whether to continue with the
foreclosure or stop:
[I]t doesn't matter one iota one way or
another, if you want me to continue on it,
then I'm going to be representing George
Barth, Jr., he's going to continue to sign
the documents as he has before and the only
protection I can give you is to tell you if
any funds come in from the sale that I'm
negotiating at the same time -- that we're
negotiating, then those monies will be placed
into a court account . . . .
George Sr.'s account of the discussion does not contain Frost's
offer to either withdraw from the foreclosure or continue with
the foreclosure and sale negotiations.
Prior to the foreclosure sale, Frost began to negotiate
with prospective lessees and purchasers of Hanson Acres.5 Frost
also negotiated with SeaFirst and obtained an extension for the
repayment of the loan it was administering.
On the day of the sale, December 10, 1987, Frost
dictated a letter to George Sr. discussing the conflict between
George Jr., on the one hand, and Alta, George Sr. and Peter Barth
on the other. The letter states in part: "I do not represent
Alta Corporation, you, or Peter Barth in this matter. I
represent the holders of the Deed of Trust, namely John, Tom and
George Barth, Jr., as well as the Law Offices of Frost &
Grashin." The letter does not state that the foreclosure sale
had taken place. The letter was sent on December 15, 1987, to
George Sr.'s address on Grand Cayman Island. He did not receive
it until March of 1988.
While George Sr. claims that he did not know of the
foreclosure sale until after it was held, and Frost asserts that
George Sr. knew about the sale at all times, it is clear that
Frost and George Sr. discussed the sale, in George Sr.'s words,
"right after the foreclosure."6 Thereafter, he and Frost acted
together in trying to sell Hanson Acres.
In January of 1988 George Sr. and Frost met with
prospective purchasers. According to George Sr., at the
conclusion of a meeting in late January of 1988 or early
February, Frost told George Sr., "I'm not representing you, I'm
representing the owners of record which are Tom, John, George
Barth, Jr., and the law firm of Frost and Grashin."7 After this
conversation George Sr. contacted another attorney, Michael
Lindeman, who on February 3, 1988, filed suit against George Jr.
and recorded a lis pendens on Hanson Acres. Frost did not appear
in this litigation on behalf of any party.
On February 3, 1988, AmVets Post 2 made an offer to
purchase the Hanson Acres property for a total price of $395,000,
contingent on approval of a liquor license transfer. This offer
included paying the deed of trust note administered by SeaFirst,
the balance of which was then about $270,000.
On February 26, 1988, Frost wrote a four-page letter to
Lindeman, George Sr.'s attorney. After summarizing his view of
events, Frost advocated acceptance of the AmVets offer. He noted
that while George Jr. would stipulate to the deposit in court of
all funds attributable to the Alta/George Jr. disputed share in
exchange for a release of the lis pendens, Frost understood that
George Sr. would not agree to this. Instead, George Sr. would
insist that funds for the undisputed shares also be deposited in
court. Frost conjectured that this could result in the
frustration of the sale. Frost continued:
If the closing does not take place,
SeaFirst has advised me that it will bringing
[sic] a judicial foreclosure action against
Peter Barth, John Barth, Tom Barth, and
Virginia Gaylen. Alta Corporation should
reconsider its "trust" relationship with
Peter Barth when risking this eventuality
with the lis pendens. Of course, if the
closing does not occur I fully intend to
bring legal action against George Barth, Sr.
on behalf of Frost & Grashin, if not the
other owners, for all losses arising from the
failure of the transaction to close as a
result of George Barth, Sr.'s or Alta's
actions. If a counterclaim is asserted or
any claim is asserted against me personally,
you are fully aware that that waives all
attorney/client privileges and this matter
could become messy and ugly. I have
insurance to cover my legal fees and expenses
and I can assure you that the litigation will
not be pleasant for anyone. I hope this does
not become necessary.
In April 1988 AmVets withdrew its offer as it was
unable to obtain approval for transfer of its liquor license to
the Hanson Acres location. On May 26, 1988, George Sr. filed a
grievance against Frost. Peter's grievance followed on July
15th. On July 10 and 11, 1988, Frost notified Cher Gamblin, the
real estate agent, and the other record owners of the property
that due to the allegations being directed against him by George
Sr. he would no longer take a lead role in attempting to sell the
property.
On January 13, 1989, the superior court ordered
reconveyance of George Jr.'s interest in Hanson Acres to Alta in
trust for Peter Barth. In the spring of 1990 SeaFirst's
foreclosure of its deed of trust was completed and the interests
of the Barths and Frost in Hanson Acres were extinguished.
In summary, the facts show the successful non-judicial
foreclosure of a second deed of trust held by a number of
beneficiaries who acquired title at the foreclosure sale. Sub
sequent efforts by the beneficiaries to sell the property were
unsuccessful and their interests were extinguished by foreclosure
of a first deed of trust. The dispute as to ownership of a
fractional beneficial interest in the deed of trust, and later,
the property, had no effect on the foreclosure; whether the
ownership dispute affected the beneficiaries' ability to sell the
property is uncertain.
III. VIOLATIONS FOUND BY THE COMMITTEE
The committee found that Frost had committed acts of
misconduct in connection with Counts I through III and IX of the
ten-count petition. For convenience, we first summarize the acts
of alleged misconduct, then set out the committee's findings.
Count I - Frost should have declined to act as counsel
in the non-judicial foreclosure because the exercise of his
independent professional judgment on behalf of the beneficiaries
possibly could be affected by his own financial interest in the
property and because Frost did not make a full disclosure of the
potential for conflict. This violated DR 5-105(A).
Count II - When George Jr. claimed to be the owner of
the note and deed of trust free of any claim by Alta, an irrecon
cilable conflict was created which required Frost to resign as
attorney for the beneficiaries in the non-judicial foreclosure
and in their efforts to sell the property. Frost's failure to
resign violated DR 5-105(B).
Count III - Frost did not make a full disclosure of the
differing interests of the beneficiaries, including his own
interest as a beneficiary, at the outset of his employment as
counsel in the foreclosure, and developed an irreconcilable
conflict once George Jr. expressed his independent claim which
required Frost to withdraw. This violated DR 5-104(a).
Count IX - Frost's letter of February 26, 1988, to
George Sr.'s attorney, Michael Lindeman, stating that if a
counterclaim or claim was asserted against Frost then "all
attorney/client privileges"would be waived, was a use of a
client confidence or secret for the advantage of Frost, in
violation of DR 4-101(b)(3).
The findings of the committee which the committee cited
in support of the above conclusions are as follows:
11. [Applicable to Count III] On
or before April 17, 1987, George Barth, Sr.
and Alta retained Frost to commence and
complete a non-judicial foreclosure of the
second deed of trust. This relationship was
confirmed in a letter to George, Sr. from
Frost dated April 17, 1987 (Exhibit 20)
wherein Frost advises that he will "bring the
foreclosure action on behalf of Alta and
Frost and Grashin, and will evenly split the
legal costs and legal fees with you."
Although this letter does reference the fact
that Frost will be pursuing the action in
part on his own behalf, Frost never made full
disclosure of the possibility that his
personal, business interest might diverge
from that of George, Sr. or Alta, that such
divergence might affect Frost's professional
judgment on behalf of George, Sr. or Alta,
and that the consent after disclosure of
George, Sr. and Alta was therefore required
before Frost could proceed. Frost was
negligent in failing to realize at the outset
that his personal interest in the foreclosure
required such complete disclosure to and the
informed consent of his client. Frost
negligently concluded that because the
foreclosure would extinguish Gaylen's
interest in the property and permit it to be
sold by the note holders, foreclosure was in
the interest of all. Frost negligently
failed to realize that the foreclosure might
affect persons with recorded interests in the
property like Frost differently than those
with unrecorded claims to the property like
Alta or George, Sr. George, Sr. was billed
by Frost for one-half of the attorney's fees
incurred in the foreclosure proceeding from
April through the end of December, 1987.
George, Sr. was, in Frost's words, the
"driving force" behind the foreclosure.
George, Sr. was not a mere guarantor of
payment of the attorney's fees incurred in
the foreclosure.
. . . .
14. [Applicable to Count III] On
or before June 5, 1987, Frost formed an
attorney-client relationship with Thomas R.
Barth whereby Frost was to undertake the non-
judicial foreclosure of the Hanson Acres
property, make efforts to negotiate a sale of
the property, and negotiate with SeaFirst for
extension of time for payment under the note
held by the State of Alaska which was secured
by the property. Prior to that date he had
consulted with Thomas' counsel, Roger DuBrock
regarding such representation. On June 5,
1987, he met with Thomas who signed the
substitution of trustee, the beneficiaries'
affidavit, and a consent to representation
appended to a letter to him dated May 27,
1987, from Frost (Exhibit 26). On or before
August 14, 1987, Frost entered into an
attorney-client relationship with George, Jr.
for the same purposes. As discussed infra,
George, Jr. had by that time received an
assignment of Diane's interest in the Gaylen
note and deed of trust. George, Jr. executed
the same documents as Thomas on August 14,
1987. On or about August 18, 1987, Frost
entered into an attorney-client relationship
with John R. Barth for the same purposes as
described above for the relationship with
Thomas and George, Jr. John, through his
attorney-in-fact Gerald Barth, executed the
same documents as Thomas and George, Jr. on
that date. The dates next to the signatures
of Thomas and John on the consent form
(Exhibit 26, page 4) are in Frost's hand
writing and do not establish the date that
they signed that document.
15. [Applicable to Counts I and
II] Though Frost's letter of May 27, 1987
(Exhibit 26) sets forth some facts concerning
his own interest and the interest of Thomas,
George, Jr., and John, Frost never made full
disclosure of the possibility that his
personal, business interest might diverge
from that of Thomas, George, Jr. and John,
that such divergence might affect Frost's
professional judgment on behalf of Thomas,
George, Jr., and John, and that the consent
after disclosure of Thomas, George, Jr., and
John, was therefore required before Frost
could proceed. Frost was negligent in
failing to realize at the outset that his
personal interest in the foreclosure and
attempts to sell the property required
disclosure to and consent of these clients.
Frost also never made full disclosure of the
potential for conflict between George, Sr.,
Alta, Thomas, George, Jr., John, and Frost,
as multiple clients, that such multiple
interests might affect Frost's professional
judgment on behalf of each of those persons,
and that the consent after disclosure of each
of those persons was therefore required
before Frost could proceed. Frost was
negligent in failing to realize at the outset
that these multiple interests, particularly
those of the non-record claimants of an
interest in the property and those of the
record owners of interest in the property,
might conflict and diverge and that therefore
disclosure to and consent of all of his
clients was required. In fact, the interests
did subsequently conflict and diverge.
. . . .
18. [Applicable to Counts II and
III] At least one month prior to December
10, 1987, George, Jr. called Frost to tell
him that he, George, Jr., considered his
interest in the note and deed of trust to be
his own property free of any claim by Alta or
George, Sr. George, Jr. advised Frost that
he had received the interest in payment of a
debt by his father to him arising from
another transaction. Frost considered at
some length the conflict presented by this
claim of George, Jr.
19. [Applicable to Count II] The
assertion of this claim by George, Jr.
created an irreconcilable conflict which
required Frost to withdraw from the attorney-
client relationship he had formed with
George, Sr., Alta, Thomas, John, and George,
Jr. involving the foreclosure of the
property, effort to sell the property, and
effort to procure extensions on the note and
deed of trust from SeaFirst. George, Jr.'s
interest was to proceed with the foreclosure
which would result in title to the property
vesting in George, Jr. in part. This would
give him control along with Thomas, John, and
Frost, of the property thereby facilitating
its sale and rental in accordance with terms
to his liking. George, Sr.'s interest was to
immediately commence suit against George, Jr.
seeking to establish that George, Jr. held
his interest in some way for George, Sr. and
to immediately record a lis pendens in
connection with such suit. Such action was
required by George, Sr. in order to avoid
superior positions arising in third parties
to whom George, Jr. might sell and convey his
interest in the note and deed of trust and to
prevent the record owners from arguing that
he waived his claim by allowing the
foreclosure to proceed with his knowledge and
without objection to title vesting in George,
Jr. The lis pendens was further necessary to
insure that any sale of the property by the
record owners after foreclosure would not
vest title in a bona fide purchaser for value
who would have a superior claim to the
property to George, Sr. While George, Sr.'s
interest may ultimately have been to consent
to the foreclosure or sale of the property, a
complex tactical evaluation by an independent
lawyer for George, Sr. was required before
his cooperation in these two matters could
safely be said to be in George, Sr.'s
interest.
20. [Applicable to Count III] The
claim of George, Jr. also resulted in an
irreconcilable conflict between Frost's
personal, business interest and those of his
client George, Sr. Frost's interests, as a
record owner, were similar to those of
George, Jr.'s and were in conflict with those
of his client, George, Sr., for the same
reasons outlined above.
21. [Applicable to Counts II and
III] Frost did not withdraw from the
representation of any of his clients in the
foreclosure matter. Frost did not disclose
to the trustee that a dispute as to the
ownership of the beneficial interest in the
deed of trust had arisen. The foreclosure
sale was held on December 10, 1987 and Land
Title Company executed and recorded on
December 21, 1987 a trustee's deed to the
property prepared by Frost (Exhibit 42) which
vested the fee simple title to the property
in Frost, Thomas, John, and George, Jr.
. . . .
23. [Applicable to Counts II and
III] According to Mr. Frost's billings
(Exhibit J, page 24), Frost dictated a letter
to George, Sr. on December 10, 1987, and a
letter dated December 15, 1987 (Exhibit 40)
was received in evidence. Frost has
described this document as a "CYA letter"and
given its date, it is the best evidence of
Frost's actions in the foreclosure matter in
the latter part of 1987. Though the letter
discusses a "very demanding call from George
Barth, Jr."in which George, Jr. claimed the
deed of trust as his own property, the letter
does not state that this problem had been
discussed with George, Sr. at any time
previously and in particular does not assert
that the subject was discussed at a meeting
between George, Sr. and Frost which both
George, Sr. and Frost's billings indicate
occurred on December 4, 1987. Moreover,
despite being written the day of the fore
closure and dated five days thereafter, the
letter does not disclose that the foreclosure
sale has occurred and does not state that a
copy of the proposed trustee's deed was
enclosed. The letter inferentially suggests
that the sale has not occurred since it
refers to the continuing negotiability of the
note, beneficial holders of an interest in
the deed of trust, and the difficulty, in the
present tense, of handling the foreclosure.
Finally, the explanatory letter to the
Association dated July 29, 1988 (Exhibit 74,
p. 5 second paragraph) suggests that the
letter of December 15, 1987 advises that the
named beneficiaries will be the named owners
on the trustee's deed when in fact the letter
does not even reference the trustee's deed.
Given the proximity of the preparation and
date of the December 15th letter to the date
of the foreclosure sale, Frost's failure to
disclose that the foreclosure sale had
occurred can only have been intentional. The
letter evidences an intent to create the
appearance of timely and full disclosure of
the claim of George, Jr., the conflict which
arose from that claim, and the need for
George, Sr. to have separate counsel while at
the same time not disclosing information
about the conclusion of the foreclosure sale
and the pending execution of the trustee's
deed by the title company. Despite the
conflict in the testimony between George, Sr.
and Frost, there is therefore clear and
convincing evidence that Frost knew of the
conflict presented by the claim of George,
Jr., knowingly did not disclose that conflict
to George, Sr. in a timely enough manner to
allow George, Sr. to block completion of the
foreclosure sale if he so desired, and
knowingly failed to withdraw from
representation of any of the parties in the
foreclosure. These actions were taken with
the intent to assist Frost and the record
owners of the note and deed of trust in
becoming vested in title to the property by
virtue of the trustee's deed.
. . . .
25. [Applicable to Counts II and
III] Sometime in January of 1988, George,
Sr. discussed the claim of George, Jr. with
Frost who refused to proceed against George,
Jr. George, Sr. retained Michael Lindeman
who immediately filed a complaint on his
behalf against George, Jr. and recorded a lis
pendens against the property. (Exhibit 47.)
Frost, meanwhile, continued to represent
Thomas, John, George, Jr., and himself in
efforts to find a purchaser for the property
and to obtain a conditional use permit from
the Municipality of Anchorage.
. . . .
27. [Applicable to Count IX] On
February 26, 1988, Frost wrote to Lindeman
(Exhibit 53) discussing Frost's efforts to
sell the property and requesting that George,
Sr. release his lis pendens under certain
conditions proposed by Frost. That letter
contains the following paragraph:
If we fail in this
endeavor, the closing will not take
place. If the closing does not
take place, SeaFirst has advised me
that it will bringing [sic] a
judicial foreclosure action against
Peter Barth, John Barth, Tom Barth
and Virginia Gaylen. Alta
Corporation should reconsider its
"trust" relationship with Peter
Barth when risking this eventuality
with the lis pendens. Of course,
if the closing does not occur I
fully intend to bring legal action
against George Barth, Sr. on behalf
of Frost and Grashin, if not the
other owners, for all losses
arising from the failure of the
transaction to close as a result of
George Barth, Sr.'s or Alta's
actions. If a counterclaim is
asserted or any claim is asserted
against me personally, you are
fully aware that that waives all
attorney/client privileges and this
matter could become messy and ugly.
I have insurance to cover my legal
fees and expenses and I can assure
you that the litigation will not be
pleasant for anyone. I hope this
does not become necessary.
[emphasis added.]
Frost expected that a copy of this
letter would be provided to George, Sr. or
that its substance would be conveyed by
Lindeman to George, Sr. Frost concedes that
the third to the last sentence is inaccurate
because only confidences pertaining to the
particular matter on which the lawyer is
being sued would be permitted to be revealed
by the lawyer in defense of himself. Frost
knew that George, Sr. would probably react
emotionally to the underlined statements in
this letter (as in fact he did). Frost
knowingly used confidences of his client,
George, Sr., to the disadvantage of George,
Sr. with the intent of discouraging George,
Sr. from bringing claims against Frost and
encouraging him to cooperate in the sale of
the property as proposed by Frost.
IV. DISCUSSION
A. Count I
Disciplinary Rule 5-105(A) provides:
A lawyer shall decline proffered
employment if the exercise of his independent
professional judgment in behalf of a client
will be or is likely to be adversely affected
by the acceptance of the proffered
employment, except to the extent permitted
under DR 5-105(C).
DR 5-105(A) addresses the situation confronting a
lawyer when first considering employment on a particular
undertaking. At that point the lawyer must ask whether accepting
the new undertaking will likely affect his or her professional
judgment in a prior and pending undertaking. If the answer to
that question is in the affirmative, the lawyer must decline to
take the new employment. If the lawyer obviously can adequately
represent the interests of each client, the lawyer may undertake
the new employment after full disclosure to each client if each
client consents to the representation. DR 5-105(C).
The committee did not give sufficient consideration to
the threshold requirement of DR 5-105(A), which is that the
lawyer's exercise of independent professional judgment "will be
or is likely to be adversely affected by the acceptance of new
employment." (Emphasis added.) Finding 15 merely notes the
"possibility"of a divergence of interest and later states that
the multiple interests of the various beneficiaries "might
affect" Frost's professional judgment and that the various
multiple interests "might conflict and diverge." The committee
did not find that there was a likelihood that Frost's independent
professional judgment on behalf of existing clients would be
adversely affected by his undertaking on behalf of the deed of
trust beneficiaries in this case. It is our view that such a
likelihood did not exist. Promptly foreclosing, taking control
of and selling the property was in all of the beneficiaries' best
interest.8
B. Count II
Disciplinary Rule 5-105(B) provides:
A lawyer shall not continue
multiple employment if the exercise of his
independent professional judgment in behalf
of a client will be or is likely to be
adversely affected by his representation of
another client, except to the extent
permitted under DR 5-105(C).
Like DR 5-105(A), this rule is subject to the DR 5-
105(C) exception, which applies in cases where adequate represent
ation of conflicting interests obviously can be afforded,
assuming all clients consent after full disclosure.
The committee found that when George Jr. claimed that
his interest in the note and deed of trust was his own property,
this "created an irreconcilable conflict which required Frost to
withdraw . . . ." We do not agree that Frost's only option, once
George Jr. revealed his claim, was to withdraw from continued
participation as an attorney for the beneficiaries in the non-
judicial foreclosure and in their efforts to sell Hanson Acres
after the foreclosure.
It would have been acceptable for Frost to notify
George Sr., George Jr., and the other beneficiaries of the
conflict; assert that he would not become involved in its
resolution; and state that he would nevertheless continue to
oversee the non-judicial foreclosure and the efforts to sell the
property. Frost contends that he did precisely this. George Sr.
does not contradict him. In the foreclosure and attempted sale
of the property, Frost's professional judgment was not likely to
be adversely affected by his representation of the beneficiaries
collectively because such actions were in all of the benefici
aries' interest.9 Here again, given Frost's limited undertaking
on behalf of the beneficiaries, the threshold requirement for a
DR 5-105(B) violation, likelihood that the lawyer's independent
professional judgment will be adversely affected by multiple
representation, has not been demonstrated.10
C. Count III
Disciplinary Rule 5-104(A) provides:
A lawyer shall not enter into a
business transaction with a client if they
have differing interests therein and if the
client expects the lawyer to exercise his
professional judgment therein for the
protection of the client, unless the client
has consented after full disclosure.
The misconduct found by the committee with respect to
Count III is a combination of the misconduct found by the
committee with respect to Counts I and II: Frost should have
advised each of the beneficiaries of the potential conflict and
Frost should have withdrawn once George Jr. asserted his claim.11
For the reasons given with respect to Counts I and II, this count
is rejected.
D. Count IX
Disciplinary Rule 4-101(B)(3) states:
Except when permitted under DR 4-
101(C) and (D), a lawyer shall not knowingly
during or after termination of the
professional relationship to his client:
. . . .
(3) Use a confidence or secret of
his client for the advantage of himself or of
a third person, unless the client consents
after full disclosure.
The committee found that Frost's assertion in his
February 26, 1988, letter to George Sr.'s attorney that a claim
brought by George Sr. against Frost would "waive all attorney-
client privileges"was a use of confidences or secrets of George
Sr. for the advantage of Frost. Frost has neither briefed nor
argued that DR 4-101(B)(3) may not be applied to an implied
threat to reveal a confidence. We therefore accept the view of
the bar that such application is appropriate. As the fact of the
letter is undisputed, we accept the recommendation of the board
and find that Frost violated DR 4-101(B)(3).
V. SANCTIONS
In determining appropriate sanctions, this court is
guided but not constrained by the American Bar Association
Standards for Imposing Lawyer Sanctions (1986). In re Schuler,
818 P.2d 138, 139 (Alaska 1991). Under these Standards, after a
finding of lawyer misconduct, the court should consider the
following factors:
(a) the duty violated;
(b) the lawyer's mental state;
(c) the actual or potential injury
caused by the lawyer's misconduct; and
(d) the existence of aggravating or
mitigating factors.
ABA Standards, ABA/BNA at 01:805-06; see also, id. at 01:815.
Using the Standards' framework, the duty violated by
Frost was the duty owed to clients, which most closely falls
within paragraph 4.2 of the Standards, "Failure to Preserve the
Client's Confidences."12 While Frost did not reveal any
information relating to his representation of George Sr., the
implied threat to reveal confidential information is itself
unethical conduct. In re Dienes, 571 A.2d 1303, 1303 (New Jersey
1990) ("No lawyer . . . should use a threat to disclose
confidential information to obtain a favorable legal result.").
Frost's mental state appears to us to be a neutral
factor in the question of sanctions. Frost's action was
deliberate. However, when he wrote the letter Frost was
understandably perturbed at George Sr. for taking the
unreasonable position that all sale proceeds be deposited in
court, rather than merely those proceeds prorated to the
contested George Jr./Alta share. This position, according to
Frost, eliminated any possibility that the sale would take place,
as George Sr.'s brothers Tom and John would not agree to have
their portion of the proceeds placed in court.
As for the third factor, Frost's implied threat caused
no actual injury to George Sr. Further, the potential to cause
injury to George Sr. was quite slight since, as Frost testified,
he did not know confidential information which might be damaging
to George Sr. in any case.
The Standards list factors which may be considered in
aggravation and mitigation of recommended sanctions. Standards
9.2, 9.3, 01:838-41. Most of these factors do not apply to
Frost's case. Those that do apply are essentially offsetting.
Substantial experience in the practice of law is an aggravating
factor under Standard 9.22(i). This applies to Frost's case as
he is an experienced attorney. This factor is, however, offset
by the mitigating factor of absence of a prior disciplinary
record. Standard 9.32(a).
The listing of factors in aggravation and mitigation is
not exclusive. We regard Frost's offense as mitigated for two
reasons. First, what he stated in the letter varied only
slightly from what he would have been permitted to say. It would
not have been ethically wrong for him to have stated that if
George Sr. presented a claim against him, this would amount to a
waiver of the attorney/client privilege to the extent necessary
for Frost to defend himself. Such a statement would have been
permissible under DR 4-101(C)(4). Frost's actual statement was
not limited by the "necessary to defend"qualification and thus
was overbroad. Second, the implied threat was not made in a
letter to George Sr. Instead, the letter was written to George
Sr.'s counsel, who could advise George Sr. as to the limits of
any disclosure which Frost might be permitted to make.13
VI. CONCLUSION
For the above reasons we reject the Disciplinary
Board's recommendations respecting Counts I, II and III. We
accept the recommendation of the Disciplinary Board concerning
Count IX. Pursuant to Bar Rule 16(a)(4) we shall administer a
sanction of public censure against Frost.14
BURKE, Justice, with whom COMPTON, Justice, joins, dissenting.
I dissent from today's decision because I believe the
record supports the hearing committee's findings that Frost
violated Disciplinary Rules 5-105(B), 5-104(A) and 4-101(B)(3) as
set forth in counts II, III and IX, respectively, of the
petition.15 Accordingly, I believe that the sanction imposed by
this Court is inappropriate, given the severity of Frost's
violations.
After reviewing the record and considering the American
Bar Association's Standards For Imposing Lawyer's Sanctions, I
concur with the disciplinary board's recommendation that Frost be
suspended from the practice of law for a period of eight months
and that he take and pass the MPRE before he is readmitted to
practice law in Alaska. I would remand to the disciplinary
board's liaison member to determine the appropriate award of
costs and attorney's fees.
_______________________________
1 The board also recommended that Frost be required to pass
the Multistate Professional Responsibility Exam (MPRE) prior to
reinstatement and awarded the bar $8,500 in costs and attorney's
fees.
2 The record indicates that George Sr. has been a party to
more than fifty lawsuits since 1977; at least six of these cases
involved disputes with attorneys, not including George Sr.'s
pending civil action against Frost. George Sr. testified that
over the past ten to fifteen years he has used from ten to
fifteen attorneys.
3 George Sr. acknowledged that George Jr. had given him
$10,000 to invest in the Cayman Islands, but that "I don't recall
what it went for. . . . I think I invested it in real property."
4 The evidence is in conflict as to when Frost and George
Sr. first discussed George, Jr.'s claim. Frost placed the
discussion in October, while George Sr. thought it took place
earlier, perhaps in late July or early August, 1987.
5 At George Sr.'s request, the property was listed with Cher
Gamblin, a real estate agent who was also the sister of George
Sr.'s live-in companion. Gamblin was involved in these
negotiations.
6 George Sr. was twice asked by bar counsel what his
reaction or response was to the news of the sale. He stated that
he did not have any reaction or "emotions one way or
another. . . . I just thought that he -- he'd done a foreclosure
for us and we had to go forward with -- getting a tenant for the
building."
7 Frost in a letter dated February 4, 1988, to George Sr.
described the incident this way:
When we were introduced at the . .
. meeting by the Alaska Youth and Parent
Foundation's director, you were introduced as
a part owner. You looked at me with some
surprise and I shook my head "no,"indicating
that we would not correct them on the record.
This is because I did not want to embarrass
you as I did not know what you had
represented your position to be.
After the meeting I once again made
it clear to you that you were not an owner
and you seemed to readily agree with that.
8 Frost did disclose to all the beneficiaries his ownership
of one of the notes secured by the second deed of trust.
9 Frost would have been in a conflict situation had he taken
a position in the ownership dispute between George Sr. (Alta) and
George Jr. Instead, it is undisputed that Frost refused to
become involved in that controversy, but did advise George Sr. of
the risk that George Jr. might transfer his interest to an
innocent third party.
10 The suggestion in Committee Finding 23 that Frost did not
discuss George Jr.'s claim with George Sr. in a timely fashion is
not supported by any evidence. Both Frost and George Sr.
acknowledge that such a discussion took place in the summer or
fall of 1987. The committee's suggestion in the same finding
that Frost attempted to conceal the fact and the date of the
foreclosure sale is not supported either by clear and convincing
evidence or by a preponderance of the evidence. Frost's monthly
billings, which were sent to George Sr., are entitled
"Foreclosure v. Gaylen." George Sr. testified that he was
familiar with non-judicial foreclosure procedures and thus would
have been expected to know the significance of such entries as
"prepared foreclosure documents, ordered title report" (May 21,
1987), a disbursement for the "trustee's sale GTY" (June 1,
1987), and a disbursement for "recording fee - . . . notice of
default" (August 24, 1987). George Sr. acknowledged receiving
the letter of April 17, 1987, which states that the foreclosure
will proceed. In September of 1987, George Sr. gave Frost a
power of attorney to act for George Sr. and Alta in connection
with the deed of trust and the Hanson Acres property. The power
of attorney contains an expiration date of December 15, 1987, a
date selected, according to Frost, because the sale was scheduled
for December 10th and the additional five days were thought to be
all that would be necessary to obtain title documents following
the sale. Prior to the sale, Frost was working closely with a
real estate agent who was the sister of George Sr.'s live-in
companion and who had been selected by George Sr. In these
efforts the fact of the anticipated December 10th foreclosure
sale played a dominant role. Finally, George Sr. testified that
right after the foreclosure sale he discussed it with Frost.
Although invited by bar counsel to relate what his emotions were
at that point, George Sr. did not state that he was in any way
surprised by this discussion.
11 The undisputed facts concerning the disclosure made by
Frost to George Sr. concerning George Jr.'s claim are set forth
above on pages 6 and 7.
12 None of the ABA proposed sanctions exactly applies to
Frost's misconduct. The closest one to Frost's case is 4.24,
which states:
Admonition is generally appropriate
when a lawyer negligently reveals information
relating to representation of a client not
otherwise lawfully permitted to be disclosed
and this disclosure causes little or no
actual or potential injury to a client.
13 Frost aptly reviewed most of the factors relevant to
sanctions for the implied threat in his statement to the
Disciplinary Board:
I mean I was angry number one, and I
wasn't thinking real clearly. And I think,
number two, he has such a history of
litigation. I mean in my mind I'm just -- us
going through that kind of battle I -- I --
when I said that, I was thinking of his
history. His litigation history. . . . I
mean I don't have -- to this day I don't know
of any confidences. And I testified to that.
. . . I didn't know of any at the time. Why
did I say all, it was just stupid. You know.
And it was to an attorney and it didn't have
any effect. I mean stopping George Barth
from litigating, you know, is like trying to
stop a waterfall. . . .
[T]here's nothing wrong with trying to
stop somebody from suing you . . . and
stating what your legal right is. If I said,
if you're going to sue me, I'm going to
counterclaim for this, this and this, well
that's fine. Nothing wrong with that. And
if I said if you sue me, I'm going to utilize
every defense available to me, that's fine.
Okay? We are all in agreement on that. And
if I say, I even get to use some confidences
if they're related to my defense, that's okay
for me to say that. I said "all,"and that's
wrong. That's a very sm-- half step, I'll
put to you. . . . And, frankly, you should
slap my hands for it. But I've admitted that
since day one . . . .
14 We do not accept the committee's recommendation that Frost
be required to pass the MPRE. We vacate the award of the costs
and attorney's fees assessed against Frost and order that the
parties each bear their own costs and attorney's fees. Finally,
we note that we have reviewed the other contentions raised by
Frost and find them to be without merit and that our disposition
herein moots the bar's appeal.
15. I agree with the majority that the record does not
support a finding that Frost violated DR 5-105(A).
]]>
