Measure 91: What It Means for Oregon Lawyers— Marjorie Elken, Zupancic Rathbone Law Group PC, Lake Oswego, Oregon — David Elkanich, ... Chapter 1Control, Regulation, and Taxation

Friday, December 19, 20149 a.m.–Noon

Oregon State Bar CenterTigard, Oregon

1.75 General CLE credits and 1.25 Ethics credits

Measure 91: What It Means for Oregon Lawyers

Measure 91: What It Means for Oregon Lawyers ii

MEASURE 91: WHAT IT MEANS FOR OREGON LAWYERS

The materials and forms in this manual are published by the Oregon State Bar exclusively for the use of attorneys. Neither the Oregon State Bar nor the contributors make either express or implied warranties in regard to the use of the materials and/or forms. Each attorney must depend on his or her own knowledge of the law and expertise in the use or modification of these materials.

Copyright © 2014

OREGON STATE BAR16037 SW Upper Boones Ferry Road

P.O. Box 231935Tigard, OR 97281-1935

Measure 91: What It Means for Oregon Lawyers iii

TABLE OF CONTENTS

Schedule . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . v

Faculty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . vii

1. Ballot Measure 91: Control, Regulation, and Taxation of Marijuana and Industrial Hemp Act—Presentation Slides. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1–i— Dave Kopilak, Emerge Law Group, Portland, Oregon— Amy Margolis, Emerge Law Group, Portland, Oregon

2. Weeding Out the Ethical Issues in the Marijuana Industry . . . . . . . . . . . . . . . . . . . 2–i— Marjorie Elken, Zupancic Rathbone Law Group PC, Lake Oswego, Oregon— David Elkanich, Holland & Knight LLP, Portland, Oregon— Helen Hierschbiel, Oregon State Bar, Tigard, Oregon

Measure 91: What It Means for Oregon Lawyers iv

Measure 91: What It Means for Oregon Lawyers v

SCHEDULE

8:30 Registration

9:00 Measure 91: How to Navigate What Comes NextF Final statutory languageF Administrative rulesF Advising new and existing participants in the gray-market marijuana industryDave Kopilak, Emerge Law Group, PortlandAmy Margolis, Emerge Law Group, Portland

10:30 Break

10:45 Weeding Out the Ethical Issues in the Marijuana IndustryF Advising cannabusinesses and others in a new industryF Legal ethics for lawyers who use marijuana or invest in marijuana-related businessesF Proposed changes to the Oregon Rules of Professional ConductModerator: Marjorie Elken, Zupancic Rathbone Law Group PC, Lake OswegoDavid Elkanich, Holland & Knight LLP, PortlandHelen Hierschbiel, Oregon State Bar, Tigard

Noon Adjourn

Measure 91: What It Means for Oregon Lawyers vi

Measure 91: What It Means for Oregon Lawyers vii

FACULTY

Marjorie Elken, Zupancic Rathbone Law Group PC, Lake Oswego. Ms. Elken’s practice focuses on advising businesses in litigation and through every stage of their business life cycles. Additionally, Ms. Elken offers advice about how to do business with enterprises that are trying to navigate the rapidly evolving laws and regulations for legalized marijuana. Ms. Elken is a member of the American Bar Association, the Federal Bar Association, the Multnomah Bar Association, and the American Bankruptcy Institute. She is admitted to practice in both Oregon and Washington.

David Elkanich, Holland & Knight LLP, Portland. Mr. Elkanich focuses his practice on litigation involving legal ethics and risk management. He advises both lawyers and law firms in a wide range of professional responsibility matters. He has extensive experience defending lawyers in attorney discipline matters and related litigation, such as sanction, withdrawal and disqualification motions, and fee disputes. Mr. Elkanich frequently counsels lawyers and other professionals on how to navigate an “electronic” practice, including the rules of engaging in online activity, mining metadata, and utilizing social media. In addition, Mr. Elkanich has a general litigation practice, where he defends large entities and financial institutions such as home loan servicers and other professionals in connection with licensing and litigation matters. Mr. Elkanich is an adjunct professor at Lewis & Clark Law School teaching Regulation and Legal Ethics. Mr. Elkanich is a member of the Multnomah Bar Association, the Oregon State Bar Legal Ethics Committee, the Association of Professional Responsibility Lawyers, and the American Bar Association Center for Professional Responsibility. He is admitted to practice in Oregon, Idaho, and Washington.

Helen Hierschbiel, Oregon State Bar, Tigard. Ms. Hierschbiel is General Counsel of the Oregon State Bar, where, among other things, she gives ethics guidance to lawyers. She joined the Oregon State Bar in December 2003 in the Client Assistance Office, reviewing and investigating complaints against lawyers. While at the bar, she has written numerous article and given dozens of presentations regarding lawyers’ ethical obligations. Prior to joining the Oregon State Bar, she worked in private practice in Portland and for DNA–People’s Legal Services on the Navajo and Hopi reservations in Arizona.

Dave Kopilak, Emerge Law Group, Portland. Mr. Kopilak has represented and advised clients at all stages of growth in connection with a wide variety of business transactions and legal issues. He has been helping cannabis businesses use traditional corporate structuring to enter the legal market. Mr. Kopilak is the president and cofounder of ClayTablet, a company that provides legal document templates to Oregon and Washington attorneys. Mr. Kopilak was the primary drafter of Ballot Measure 91, commonly known as New Approach Oregon, which taxes and regulates the use of recreational cannabis.

Amy Margolis, Emerge Law Group, Portland. Ms. Margolis has been representing people charged with marijuana-related offenses for 13 years. She is also a practicing criminal defense attorney in both state and federal court. She has expanded her practice to represent clients in all aspects of the cannabis industry. She is particularly interested in the potential pitfalls for marijuana-related businesses. She founded the Growers PAC and Oregon Growers Association. Ms. Margolis is a member of the American Bar Association. Before entering private practice, Ms. Margolis worked as a public defender, as a lobbyist for the Partnership for Safety and Justice, and a lobbyist for the Oregon Criminal Defense Lawyers Association. She has been involved in the Dispensary Rules Advisory Board, the Better People panel on the state of medical marijuana, and the Classroom Law Project

Measure 91: What It Means for Oregon Lawyers viii

Chapter 1

Ballot Measure 91: Control, Regulation, and Taxation of Marijuana and Industrial

Hemp Act—Presentation SlidesDave KopilaK

Emerge Law GroupPortland, Oregon

amy margolis

Emerge Law GroupPortland, Oregon

Chapter 1—Control, Regulation, and Taxation of Marijuana and Industrial Hemp Act—Presentation Slides

Measure 91: What It Means for Oregon Lawyers 1–ii


Measure 91: What It Means for Oregon Lawyers 1–1

12/12/2014

NEW APPROACH 1

Ballot Measure 91

Control, Regulation, and Taxation of Marijuana and Industrial Hemp Act

Presentation by Dave Kopilak and Amy MargolisPresentation by Dave Kopilak and Amy MargolisEmerge Law GroupOregon State Bar Measure 91: How to Navigate What Comes NextDecember 19, 2014

General Themes of Measure 91 ► Minimize the illegal market and prevent revenue

from going to criminal enterprisesfrom going to criminal enterprises Incentivize private businesses to enter into the

regulated market Incentivize adult consumers to purchase from licensed

retailers

► Regulate in a manner substantially similar to beer and wineand wine Oregon Liquor Control Commission as regulatory

agency Parallel the Oregon Liquor Act as much as possible

► Enforcement priorities specified in the Cole Memo2



12/12/2014

NEW APPROACH 2

US Department of Justice Cole Memo (August 29, 2013)► Federal enforcement priorities

Prevent distribution to minors Prevent revenue from going to criminal enterprises Prevent revenue from going to criminal enterprises Prevent diversion of marijuana to other states Prevent trafficking of other illegal drugs Prevent violence Prevent drugged driving and other adverse public health consequences Prevent growing of marijuana on public lands Prevent possession and use of marijuana on federal property

► “In jurisdictions that have enacted laws legalizing marijuana in some form and that have also implemented strong and effective reg lator and enforcement s stems to control the c lti ationregulatory and enforcement systems to control the cultivation, distribution, sale, and possession of marijuana, conduct in compliance with those laws and regulations is less likely to threaten the federal priorities set forth above. Indeed, a robust system may affirmatively address those priorities.”

3

Measure 91 Implementation► OLCC

Broad rulemaking authority (7) Broad rulemaking authority (7)

Licensing, tax collection, and enforcement (18, 21)

Substantially similar to the regulation of beer and wine

► Assistance from other agencies Oregon Health Authority (7(3), 8)

State Department of Agriculture (7(3), 9)

4



12/12/2014

NEW APPROACH 3

Marijuana Licenses► OLCC

Prescribes application forms (7(3)) Prescribes application forms (7(3))

Processes applications (28-29)

Conducts background checks (29(2)(b))

Issues licenses (18)

► Licensees are private businesses (5(10), 5(24), 7(5))

► Types of commercial licenses► Types of commercial licenses Production (19)

Processor (20)

Wholesale (21)

Retail (22)5

Marijuana Taxes► Goals (5)

Minimize the illegal market Minimize the illegal market Maximize revenues for public services Discourage use by minors

► Tax rates (33(1))

$35 per ounce on marijuana flowers $10 per ounce on marijuana leaves $5 per immature marijuana plant

► Indexed to inflation (33(4))

► Paid by marijuana producers (33-35) 6



12/12/2014

NEW APPROACH 4

Tax Revenues► Oregon Marijuana Account (separate from General

Fund) (43-44))

► OLCC reimbursed expenditures (43)

► Revenues (44)

40% Common School Fund 20% Mental Health Alcoholism and Drug Services 5% Oregon Health Authority for drug abuse prevention 15% State Police 10% Cities for law enforcement 10% Counties for law enforcement

► No supplanting moneys from other sources (44)(3)) 7

Enforcement► Criminal laws

No use or possession by persons under 21 (79) No use or possession by persons under 21 (79)

No delivery to persons under 21 (14; 78)

No person under 21 on licensed premises (52)

No manufacture or delivery within 1,000 feet of schools (ORS 475.858; ORS 475.862)

No use in public place (54)

Possession limits for adults (79)

DUI (ORS 813.010)

No importing or exporting (45)

8



12/12/2014

NEW APPROACH 5

Enforcement► Commercial regulations

Product testing and standards (7(2)(a); 50; 51(2)) Product testing and standards (7(2)(a); 50; 51(2))

Packaging and labeling requirements (7)(2)(a); 51(1))

Advertising restrictions (7)(2)(g))

► City and county regulations Reasonable time, place, and manner regulations (59)

Zoning regulations by local jurisdictions (59)

9

Local Jurisdictions► Measure 91 preempts local laws

No inconsistent charters or ordinances (58) No inconsistent charters or ordinances (58)

State has exclusive right to tax (42)

► Local jurisdictions may opt out (60)

City or county initiative petition Majority vote Elections held at time of statewide general election

► Loss of tax revenues (44(2)(d-e))

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12/12/2014

NEW APPROACH 6

OLCC’s Continued Interaction With Legislature► Tax rates (33)(5))

Ongoing regular reviews by OLCC Ongoing regular reviews by OLCC Recommendations to legislature regarding adjustments

► Oregon Vehicle Code (7(4))

OLCC presents DUI research to legislature Recommendations regarding amendments to Oregon

Vehicle Code

11

What Measure 91 Does Not Do► Reduce criminal penalties for

Manufacture or possession by persons under 21 (77 79) Manufacture or possession by persons under 21 (77, 79)

Delivery by or to persons under 21 (78)

Manufacture or delivery within 1,000 feet of school (ORS 475.858; ORS 475.862)

► Amend or affect DUI laws (ORS 813.010)

Laws pertaining to employment matters (4)(1)) Laws pertaining to employment matters (4)(1))

Laws pertaining to landlord-tenant matters (4)(2))

Oregon Medical Marijuana Act (4)(7))

12



12/12/2014

NEW APPROACH 7

Timeline ► November 4, 2014 through June 30, 2015

No changes as Act does not yet become effective (82(1))g y ( ( ))

OLCC may begin the process of adopting rules and prescribing application forms (82(2))

► July 1, 2015 – Act becomes effective (82)(1))

► January 1, 2016 – Deadline for OLCC to adopt rules and prescribe application forms (7(3))

► January 4, 2016 – Deadline for OLCC to begin receiving license applications (18)

► First half of 2016 – First licenses issued and first taxes paid 13

Free Market Attributes► Low application and license fees

► Vertical integration permitted

► No residency requirements for business ownership

► No limit on number of licenses held by a licensee

► No limit on aggregate number of licenses issued by OLCCOLCC

► No production limits

► No restrictions on location (other than 1,000 feet from school) 14



12/12/2014

NEW APPROACH 8

Free Market Attributes ► Taxation

Relatively low excise tax Relatively low excise tax 280E disregarded for Oregon personal and corporate

income taxes

► State law preemption State has exclusive right to tax and impose fees Inconsistent local charters and ordinances repealed

► Local jurisdiction opt out Local ballot initiative in general election year Loss of tax revenue

15

2015 and 2016 Issues ► Oregon

Oregon legislature Oregon legislature OLCC rulemaking Local jurisdictions

► Measure 91 interaction with OMMA

► Production or license limits

► Opt outs

► Local taxes

► Zoning 16



12/12/2014

NEW APPROACH 9

2015 and 2016 Issues ► Federal government

Cole memo Cole memo 280E Banking

► State of Washington’s reaction

► Next states to legalize? California California Arizona Nevada Maine Massachusetts 17



Chapter 2

Weeding Out the Ethical Issues in the Marijuana Industry

marjorie elKen

Zupancic Rathbone Law Group PCLake Oswego, Oregon

DaviD elKanich

Holland & Knight LLPPortland, Oregon

helen hierschbiel

Oregon State BarTigard, Oregon

Contents

Selected Oregon Rules of Professional Conduct . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2–1

U.S. Department of Justice Guidance Regarding Marijuana Enforcement . . . . . . . . . . . . . . . 2–5

Department of the Treasury Financial Crimes Enforcement Network Bank Secrecy Act Expectations Regarding Marijuana-Related Businesses . . . . . . . . . . . . . . . . . . . . . . 2–9

Colorado Formal Ethics Opinion 125 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2–17

Colorado Rule Change 2014(05) (Redlined). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2–19

King County Bar Association Ethics Advisory Opinion on I-502 & Rules of Professional Conduct . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2–21

Amendment of Oregon Rules of Professional Conduct 1.2 (Board of Governors Resolution No. 5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2–27

Formal Opinion No. 2005-105, Information Relating to the Representation of a Client: Receipt of Property Stolen by Client or Other “Fruits” of Crime . . . . . . . . . . . . . . . . . . . . 2–29

In re Barton, 22 DB Rptr 266 (2008) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2–33

In re Conduct of White, 815 P.2d 1257, 311 Or. 573 (Or., 1991). . . . . . . . . . . . . . . . . . . . . . . 2–39

Chapter 2—Weeding Out the Ethical Issues in the Marijuana Industry

Measure 91: What It Means for Oregon Lawyers 2–ii



SELECTED OREGON RULES OF PROFESSIONAL CONDUCT

Rule 1.1 Competence

A lawyer shall provide competent representation to a client. Competent representation requires the legal knowledge, skill, thoroughness and preparation reasonably necessary for the representation.

Rule 1.2 Scope of Representation and allocation of authority between client and lawyer

(a) Subject to paragraphs (b) and (c), a lawyer shall abide by a client’s decisions concerning the objectives of representation and, as required by Rule 1.4, shall consult with the client as to the means by which they are to be pursued. A lawyer may take such action on behalf of the client as is impliedly authorized to carry out the representation. A lawyer shall abide by a client’s decision whether to settle a matter. In a criminal case, the lawyer shall abide by the client’s decision, after consultation with the lawyer, as to a plea to be entered, whether to waive jury trial and whether the client will testify.

(b) A lawyer may limit the scope of the representation if the limitation is reasonable under the circumstances and the client gives informed consent.

(c) A lawyer shall not counsel a client to engage, or assist a client, in conduct that the lawyer knows is illegal or fraudulent, but a lawyer may discuss the legal consequences of any proposed course of conduct with a client and may counsel or assist a client to make a good faith effort to determine the validity, scope, meaning or application of the law.

Rule 1.4 Communication

(a) A lawyer shall keep a client reasonably informed about the status of a matter and promptly comply with reasonable requests for information

(b) A lawyer shall explain a matter to the extent reasonably necessary to permit the client to make informed decisions regarding the representation.

Rule 1.6 Confidentiality of Information

(a) A lawyer shall not reveal information relating to the representation of a client unless the client gives informed consent, the disclosure is impliedly authorized in order to carry out the representation or the disclosure is permitted by paragraph (b).

(b) A lawyer may reveal information relating to the representation of a client to the extent the lawyer reasonably believes necessary:

(1) to disclose the intention of the lawyer’s client to commit a crime and the information necessary to prevent the crime;

(2) to prevent reasonably certain death or substantial bodily harm;

(3) to secure legal advice about the lawyer’s compliance with these Rules;

(4) to establish a claim or defense on behalf of the lawyer in a controversy between the lawyer and the client, to establish a defense to a criminal charge or civil claim against the lawyer based upon conduct in which the client was involved, or to respond to allegations in any proceeding concerning the lawyer’s representation of the client;

(5) to comply with other law, court order, or as permitted by these Rules; or

(6) in connection with the sale of a law practice under Rule 1.17 or to detect and resolve conflicts of interest arising from the lawyer’s change of employment or from changes in the composition or ownership of a firm. In those circumstances, a lawyer may disclose with respect to each affected client the client’s identity. the identities of any adverse parties, the nature and extent of the legal services involved, and fee and payment information, but only if the information revealed would not compromise the attorney-client privilege or otherwise prejudice any of the clients. The lawyer or lawyers receiving



the information shall have the same responsibilities as the disclosing lawyer to preserve the information regardless of the outcome of the contemplated transaction.

(7) to comply with the terms of a diversion agreement, probation, conditional reinstatement or conditional admission pursuant to BR 2.10, BR 6.2, BR 8.7or Rule for Admission Rule 6.15. A lawyer serving as a monitor of another lawyer on diversion, probation, conditional reinstatement or conditional admission shall have the same responsibilities as the monitored lawyer to preserve information relating to the representation of the monitored lawyer’s clients, except to the extent reasonably necessary to carry out the monitoring lawyer’s responsibilities under the terms of the diversion, probation, conditional reinstatement or conditional admission and in any proceeding relating thereto.

(c) A lawyer shall make reasonable efforts to prevent the inadvertent or unauthorized disclosure of, or unauthorized access to, information relating to the representation of a client.

Rule 1.7 Conflict of Interest: Current Clients

(a) Except as provided in paragraph (b), a lawyer shall not represent a client if the representation involves a current conflict of interest. A current conflict of interest exists if:

(1) the representation of one client will be directly adverse to another client;

(2) there is a significant risk that the representation of one or more clients will be materially limited by the lawyer’s responsibilities to another client, a former client or a third person or by a personal interest of the lawyer; or

(3) the lawyer is related to another lawyer, as parent, child, sibling, spouse or domestic partner, in a matter adverse to a person whom the lawyer knows is represented by the other lawyer in the same matter.

(b) Notwithstanding the existence of a current conflict of interest under paragraph (a), a lawyer may represent a client if:

(1) the lawyer reasonably believes that the lawyer will be able to provide competent and diligent representation to each affected client;

(2) the representation is not prohibited by law;

(3) the representation does not obligate the lawyer to contend for something on behalf of one client that the lawyer has a duty to oppose on behalf of another client; and

(4) each affected client gives informed consent, confirmed in writing.

Rule 1.16 Declining or Terminating Representation

(a) Except as stated in paragraph (c), a lawyer shall not represent a client or, where representation has commenced, shall withdraw from the representation of a client if:

(1) the representation will result in violation of the Rules of Professional Conduct or other law;

(2) the lawyer’s physical or mental condition materially impairs the lawyer’s ability to represent the client; or

(3) the lawyer is discharged.

(b) Except as stated in paragraph (c), a lawyer may withdraw from representing a client if:

(1) withdrawal can be accomplished without material adverse effect on the interests of the client;

(2) the client persists in a course of action involving the lawyer’s services that the lawyer reasonably believes is criminal or fraudulent;

(3) the client has used the lawyer’s services to perpetrate a crime or fraud;



(4) the client insists upon taking action that the lawyer considers repugnant or with which the lawyer has a fundamental disagreement;

(5) the client fails substantially to fulfill an obligation to the lawyer regarding the lawyer’s services and has been given reasonable warning that the lawyer will withdraw unless the obligation is fulfilled;

(6) the representation will result in an unreasonable financial burden on the lawyer or has been rendered unreasonably difficult by the client; or

(7) other good cause for withdrawal exists.

(c) A lawyer must comply with applicable law requiring notice to or permission of a tribunal when terminating a representation. When ordered to do so by a tribunal, a lawyer shall continue representation notwithstanding good cause for terminating the representation.

(d) Upon termination of representation, a lawyer shall take steps to the extent reasonably practicable to protect a client’s interests, such as giving reasonable notice to the client, allowing time for employment of other counsel, surrendering papers and property to which the client is entitled and refunding any advance payment of fee or expense that has not been earned or incurred. The lawyer may retain papers, personal property and money of the client to the extent permitted by other law.

Rule 5.1 Responsibilities of Partners, Managers, and Supervisory Lawyers

A lawyer shall be responsible for another lawyer’s violation of these Rules of Professional Conduct if:

( a) the lawyer orders or, with knowledge of the specific conduct, ratifies the conduct involved; or

( b) the lawyer is a partner or has comparable managerial authority in the law firm in which the other lawyer practices, or has direct supervisory authority over the other lawyer, and knows of the conduct at a time when its consequences can be avoided or mitigated but fails to take reasonable remedial action.

Rule 5.2 Responsibilities of a Subordinate Lawyer

(a) A lawyer is bound by the Rules of Professional Conduct notwithstanding that the lawyer acted at the direction of another person.

(b) A subordinate lawyer does not violate the Rules of Professional Conduct if that lawyer acts in accordance with a supervisory lawyer’s reasonable resolution of an arguable question of professional duty.

Rule 5.3 Responsibilities Regarding Nonlawyer Assistance

With respect to a nonlawyer employed or retained, supervised or directed by a lawyer:

(a) a lawyer having direct supervisory authority over the nonlawyer shall make reasonable efforts to ensure that the person’s conduct is compatible with the professional obligations of the lawyer; and

(b) except as provided by Rule 8.4(b), a lawyer shall be responsible for conduct of such a person that would be a violation of the Rules of Professional Conduct if engaged in by a lawyer if:

(1) the lawyer orders or, with the knowledge of the specific conduct, ratifies the conduct involved; or

(2) the lawyer is a partner or has comparable managerial authority in the law firm in which the person is employed, or has direct supervisory authority over the person, and knows of the conduct



at a time when its consequences can be avoided or mitigated but fails to take reasonable remedial action.

Rule 8.4 Misconduct

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

(1) violate the Rules of Professional Conduct, knowingly assist or induce another to do so, or do so through the acts of another;

(2) commit a criminal act that reflects adversely on the lawyer’s honesty, trustworthiness or fitness as a lawyer in other respects;

(3) engage in conduct involving dishonesty, fraud, deceit or misrepresentation that reflects adversely on the lawyer’s fitness to practice law;

(4) engage in conduct that is prejudicial to the administration of justice; or

(5) state or imply an ability to influence improperly a government agency or official or to achieve results by mans that violate these Rules or other law, or

(6) knowingly assist a judge or judicial officer in conduct that is a violation of applicable rules of judicial conduct or other law.

(b) Notwithstanding paragraphs (a)(1), (3) and (4) and Rule 3.3(a)(1), it shall not be professional misconduct for a lawyer to advise clients or others about or to supervise lawful covert activity in the investigation of violations of civil or criminal law or constitutional rights, provided the lawyer’s conduct is otherwise in compliance with these Rules of Professional Conduct. “Covert activity,” as used in this rule, means an effort to obtain information on unlawful activity through the use of misrepresentations or other subterfuge. “Covert activity” may be commenced by a lawyer or involve a lawyer as an advisor or supervisor only when the lawyer in good faith believes there is a reasonable possibility that unlawful activity has taken place, is taking place or will take place in the foreseeable future.

Rule 8.5 Disciplinary Authority; Choice of Law

(a) Disciplinary Authority. A lawyer admitted to practice in this jurisdiction is subject to the disciplinary authority of this jurisdiction, regardless of where the lawyer’s conduct occurs. A lawyer not admitted in this jurisdiction is also subject to the disciplinary authority of this jurisdiction if the lawyer provides or offers to provide any legal services in this jurisdiction. A lawyer may be subject to the disciplinary authority of both this jurisdiction and another jurisdiction for the same conduct.

(b) Choice of Law. In any exercise of the disciplinary authority of this jurisdiction, the Rules of Professional Conduct to be applied shall be as follows:

(1) for conduct in connection with a matter pending before a tribunal, the rules of the jurisdiction in which the tribunal sits, unless the rules of the tribunal provide otherwise; and

(2) for any other conduct, the rules of the jurisdiction in which the lawyer’s conduct occurred, or, if the predominant effect of the conduct is in a different jurisdiction, the rules of that jurisdiction shall be applied to the conduct. A lawyer shall not be subject to discipline if the lawyer’s conduct conforms to the rules of a jurisdiction in which the lawyer reasonably believes the predominant effect of the lawyer’s conduct will occur.











www.fincen.gov

Guidance

FIN-2014-G001Issued: February 14, 2014Subject: BSA Expectations Regarding Marijuana-Related Businesses

The Financial Crimes Enforcement Network (“FinCEN”) is issuing guidance to clarify Bank Secrecy Act (“BSA”) expectations for financial institutions seeking to provide services to marijuana-related businesses. FinCEN is issuing this guidance in light of recent state initiatives to legalize certain marijuana-related activity and related guidance by the U.S. Department of Justice (“DOJ”) concerning marijuana-related enforcement priorities. This FinCEN guidance clarifies how financial institutions can provide services to marijuana-related businesses consistent with their BSA obligations, and aligns the information provided by financial institutions in BSA reports with federal and state law enforcement priorities. This FinCENguidance should enhance the availability of financial services for, and the financial transparencyof, marijuana-related businesses.

Marijuana Laws and Law Enforcement Priorities

The Controlled Substances Act (“CSA”) makes it illegal under federal law to manufacture, distribute, or dispense marijuana.1 Many states impose and enforce similar prohibitions. Notwithstanding the federal ban, as of the date of this guidance, 20 states and the District of Columbia have legalized certain marijuana-related activity. In light of these developments, U.S. Department of Justice Deputy Attorney General James M. Cole issued a memorandum (the “Cole Memo”) to all United States Attorneys providing updated guidance to federal prosecutors concerning marijuana enforcement under the CSA.2 The Cole Memo guidance applies to all of DOJ’s federal enforcement activity, including civil enforcement and criminal investigations and prosecutions, concerning marijuana in all states.

The Cole Memo reiterates Congress’s determination that marijuana is a dangerous drug and that the illegal distribution and sale of marijuana is a serious crime that provides a significant source of revenue to large-scale criminal enterprises, gangs, and cartels. The Cole Memo notes thatDOJ is committed to enforcement of the CSA consistent with those determinations. It also notes that DOJ is committed to using its investigative and prosecutorial resources to address the most

1 Controlled Substances Act, 21 U.S.C. § 801, et seq. 2 James M. Cole, Deputy Attorney General, U.S. Department of Justice, Memorandum for All United States Attorneys: Guidance Regarding Marijuana Enforcement (August 29, 2013), available at http://www.justice.gov/iso/opa/resources/3052013829132756857467.pdf.



2

significant threats in the most effective, consistent, and rational way. In furtherance of those objectives, the Cole Memo provides guidance to DOJ attorneys and law enforcement to focus their enforcement resources on persons or organizations whose conduct interferes with any one or more of the following important priorities (the “Cole Memo priorities”):3

Preventing the distribution of marijuana to minors;Preventing revenue from the sale of marijuana from going to criminal enterprises, gangs,and cartels;Preventing the diversion of marijuana from states where it is legal under state law in some form to other states;Preventing state-authorized marijuana activity from being used as a cover or pretext for the trafficking of other illegal drugs or other illegal activity;Preventing violence and the use of firearms in the cultivation and distribution of marijuana;Preventing drugged driving and the exacerbation of other adverse public health consequences associated with marijuana use;Preventing the growing of marijuana on public lands and the attendant public safety andenvironmental dangers posed by marijuana production on public lands; andPreventing marijuana possession or use on federal property.

Concurrently with this FinCEN guidance, Deputy Attorney General Cole is issuing supplemental guidance directing that prosecutors also consider these enforcement priorities with respect to federal money laundering, unlicensed money transmitter, and BSA offenses predicated on marijuana-related violations of the CSA.4

Providing Financial Services to Marijuana-Related Businesses

This FinCEN guidance clarifies how financial institutions can provide services to marijuana-related businesses consistent with their BSA obligations. In general, the decision to open, close, or refuse any particular account or relationship should be made by each financial institution based on a number of factors specific to that institution. These factors may include its particular business objectives, an evaluation of the risks associated with offering a particular product or service, and its capacity to manage those risks effectively. Thorough customer due diligence is a critical aspect of making this assessment.

In assessing the risk of providing services to a marijuana-related business, a financial institutionshould conduct customer due diligence that includes: (i) verifying with the appropriate state authorities whether the business is duly licensed and registered; (ii) reviewing the license application (and related documentation) submitted by the business for obtaining a state license to operate its marijuana-related business; (iii) requesting from state licensing and enforcement authorities available information about the business and related parties; (iv) developing an understanding of the normal and expected activity for the business, including the types of

3 The Cole Memo notes that these enforcement priorities are listed in general terms; each encompasses a variety of conduct that may merit civil or criminal enforcement of the CSA. 4 James M. Cole, Deputy Attorney General, U.S. Department of Justice, Memorandum for All United States Attorneys: Guidance Regarding Marijuana Related Financial Crimes (February 14, 2014).



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products to be sold and the type of customers to be served (e.g., medical versus recreational customers); (v) ongoing monitoring of publicly available sources for adverse information about the business and related parties; (vi) ongoing monitoring for suspicious activity, including for any of the red flags described in this guidance; and (vii) refreshing information obtained as part of customer due diligence on a periodic basis and commensurate with the risk. With respect to information regarding state licensure obtained in connection with such customer due diligence, a financial institution may reasonably rely on the accuracy of information provided by state licensing authorities, where states make such information available.

As part of its customer due diligence, a financial institution should consider whether amarijuana-related business implicates one of the Cole Memo priorities or violates state law. Thisis a particularly important factor for a financial institution to consider when assessing the risk of providing financial services to a marijuana-related business. Considering this factor also enablesthe financial institution to provide information in BSA reports pertinent to law enforcement’s priorities. A financial institution that decides to provide financial services to a marijuana-related business would be required to file suspicious activity reports (“SARs”) as described below.

Filing Suspicious Activity Reports on Marijuana-Related Businesses

The obligation to file a SAR is unaffected by any state law that legalizes marijuana-related activity. A financial institution is required to file a SAR if, consistent with FinCEN regulations,the financial institution knows, suspects, or has reason to suspect that a transaction conducted or attempted by, at, or through the financial institution: (i) involves funds derived from illegal activity or is an attempt to disguise funds derived from illegal activity; (ii) is designed to evade regulations promulgated under the BSA, or (iii) lacks a business or apparent lawful purpose.5

Because federal law prohibits the distribution and sale of marijuana, financial transactions involving a marijuana-related business would generally involve funds derived from illegal activity. Therefore, a financial institution is required to file a SAR on activity involving a marijuana-related business (including those duly licensed under state law), in accordance with this guidance and FinCEN’s suspicious activity reporting requirements and related thresholds.

One of the BSA’s purposes is to require financial institutions to file reports that are highly useful in criminal investigations and proceedings. The guidance below furthers this objective byassisting financial institutions in determining how to file a SAR that facilitates law enforcement’s access to information pertinent to a priority.

“Marijuana Limited” SAR Filings

A financial institution providing financial services to a marijuana-related business that itreasonably believes, based on its customer due diligence, does not implicate one of the Cole Memo priorities or violate state law should file a “Marijuana Limited” SAR. The content of this

5 See, e.g., 31 CFR § 1020.320. Financial institutions shall file with FinCEN, to the extent and in the manner required, a report of any suspicious transaction relevant to a possible violation of law or regulation. A financial institution may also file with FinCEN a SAR with respect to any suspicious transaction that it believes is relevant to the possible violation of any law or regulation but whose reporting is not required by FinCEN regulations.



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SAR should be limited to the following information: (i) identifying information of the subjectand related parties; (ii) addresses of the subject and related parties; (iii) the fact that the filing institution is filing the SAR solely because the subject is engaged in a marijuana-related business; and (iv) the fact that no additional suspicious activity has been identified. Financial institutions should use the term “MARIJUANA LIMITED” in the narrative section.

A financial institution should follow FinCEN’s existing guidance on the timing of filingcontinuing activity reports for the same activity initially reported on a “Marijuana Limited” SAR.6 The continuing activity report may contain the same limited content as the initial SAR,plus details about the amount of deposits, withdrawals, and transfers in the account since the last SAR. However, if, in the course of conducting customer due diligence (including ongoing monitoring for red flags), the financial institution detects changes in activity that potentiallyimplicate one of the Cole Memo priorities or violate state law, the financial institution should file a “Marijuana Priority” SAR.

“Marijuana Priority” SAR Filings

A financial institution filing a SAR on a marijuana-related business that it reasonably believes,based on its customer due diligence, implicates one of the Cole Memo priorities or violates state law should file a “Marijuana Priority” SAR. The content of this SAR should include comprehensive detail in accordance with existing regulations and guidance. Details particularly relevant to law enforcement in this context include: (i) identifying information of the subject and related parties; (ii) addresses of the subject and related parties; (iii) details regarding theenforcement priorities the financial institution believes have been implicated; and (iv) dates, amounts, and other relevant details of financial transactions involved in the suspicious activity.Financial institutions should use the term “MARIJUANA PRIORITY” in the narrative section to help law enforcement distinguish these SARs.7

“Marijuana Termination” SAR Filings

If a financial institution deems it necessary to terminate a relationship with a marijuana-related business in order to maintain an effective anti-money laundering compliance program, it should

6 Frequently Asked Questions Regarding the FinCEN Suspicious Activity Report (Question #16), available at: http://fincen.gov/whatsnew/html/sar_faqs.html (providing guidance on the filing timeframe for submitting a continuing activity report).7 FinCEN recognizes that a financial institution filing a SAR on a marijuana-related business may not always be well-positioned to determine whether the business implicates one of the Cole Memo priorities or violates state law, and thus which terms would be most appropriate to include (i.e., “Marijuana Limited” or “Marijuana Priority”). For example, a financial institution could be providing services to another domestic financial institution that, in turn, provides financial services to a marijuana-related business. Similarly, a financial institution could be providing services to a non-financial customer that provides goods or services to a marijuana-related business (e.g., a commercial landlord that leases property to a marijuana-related business). In such circumstances where services are being provided indirectly, the financial institution may file SARs based on existing regulations and guidance without distinguishing between “Marijuana Limited” and “Marijuana Priority.” Whether the financial institution decides to provide indirect services to a marijuana-related business is a risk-based decision that depends on a number of factors specific to that institution and the relevant circumstances. In making this decision, the institution should consider the Cole Memo priorities, to the extent applicable.



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file a SAR and note in the narrative the basis for the termination. Financial institutions should use the term “MARIJUANA TERMINATION” in the narrative section. To the extent the financial institution becomes aware that the marijuana-related business seeks to move to a second financial institution, FinCEN urges the first institution to use Section 314(b) voluntary information sharing (if it qualifies) to alert the second financial institution of potential illegal activity. See Section 314(b) Fact Sheet for more information.8

Red Flags to Distinguish Priority SARs

The following red flags indicate that a marijuana-related business may be engaged in activity thatimplicates one of the Cole Memo priorities or violates state law. These red flags indicate only possible signs of such activity, and also do not constitute an exhaustive list. It is thus important to view any red flag(s) in the context of other indicators and facts, such as the financial institution’s knowledge about the underlying parties obtained through its customer due diligence.Further, the presence of any of these red flags in a given transaction or business arrangement may indicate a need for additional due diligence, which could include seeking information from other involved financial institutions under Section 314(b). These red flags are based primarily upon schemes and typologies described in SARs or identified by our law enforcement and regulatory partners, and may be updated in future guidance.

A customer appears to be using a state-licensed marijuana-related business as a front or pretext to launder money derived from other criminal activity (i.e., not related tomarijuana) or derived from marijuana-related activity not permitted under state law.Relevant indicia could include:

o The business receives substantially more revenue than may reasonably be expected given the relevant limitations imposed by the state in which it operates.

o The business receives substantially more revenue than its local competitors or than might be expected given the population demographics.

o The business is depositing more cash than is commensurate with the amount of marijuana-related revenue it is reporting for federal and state tax purposes.

o The business is unable to demonstrate that its revenue is derived exclusively from the sale of marijuana in compliance with state law, as opposed to revenue derived from (i) the sale of other illicit drugs, (ii) the sale of marijuana not in compliance with state law, or (iii) other illegal activity.

o The business makes cash deposits or withdrawals over a short period of time that are excessive relative to local competitors or the expected activity of the business.

8 Information Sharing Between Financial Institutions: Section 314(b) Fact Sheet, available at: http://fincen.gov/statutes_regs/patriot/pdf/314bfactsheet.pdf.



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o Deposits apparently structured to avoid Currency Transaction Report (“CTR”)requirements.

o Rapid movement of funds, such as cash deposits followed by immediate cash withdrawals.

o Deposits by third parties with no apparent connection to the accountholder.

o Excessive commingling of funds with the personal account of the business’s owner(s) or manager(s), or with accounts of seemingly unrelated businesses.

o Individuals conducting transactions for the business appear to be acting on behalf of other, undisclosed parties of interest.

o Financial statements provided by the business to the financial institution are inconsistent with actual account activity.

o A surge in activity by third parties offering goods or services to marijuana-related businesses, such as equipment suppliers or shipping servicers.

The business is unable to produce satisfactory documentation or evidence to demonstrate that it is duly licensed and operating consistently with state law.

The business is unable to demonstrate the legitimate source of significant outside investments.

A customer seeks to conceal or disguise involvement in marijuana-related business activity. For example, the customer may be using a business with a non-descript name (e.g., a “consulting,” “holding,” or “management” company) that purports to engage in commercial activity unrelated to marijuana, but is depositing cash that smells like marijuana.

Review of publicly available sources and databases about the business, its owner(s), manager(s), or other related parties, reveal negative information, such as a criminal record, involvement in the illegal purchase or sale of drugs, violence, or other potential connections to illicit activity.

The business, its owner(s), manager(s), or other related parties are, or have been, subject to an enforcement action by the state or local authorities responsible for administering or enforcing marijuana-related laws or regulations.

A marijuana-related business engages in international or interstate activity, including by receiving cash deposits from locations outside the state in which the business operates, making or receiving frequent or large interstate transfers, or otherwise transacting with persons or entities located in different states or countries.



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The owner(s) or manager(s) of a marijuana-related business reside outside the state in which the business is located.

A marijuana-related business is located on federal property or the marijuana sold by the business was grown on federal property.

A marijuana-related business’s proximity to a school is not compliant with state law.

A marijuana-related business purporting to be a “non-profit” is engaged in commercial activity inconsistent with that classification, or is making excessive payments to its manager(s) or employee(s).

Currency Transaction Reports and Form 8300’s

Financial institutions and other persons subject to FinCEN’s regulations must report currencytransactions in connection with marijuana-related businesses the same as they would in any othercontext, consistent with existing regulations and with the same thresholds that apply. For example, banks and money services businesses would need to file CTRs on the receipt or withdrawal by any person of more than $10,000 in cash per day. Similarly, any person or entity engaged in a non-financial trade or business would need to report transactions in which they receive more than $10,000 in cash and other monetary instruments for the purchase of goods or services on FinCEN Form 8300 (Report of Cash Payments Over $10,000 Received in a Trade or Business). A business engaged in marijuana-related activity may not be treated as a non-listed business under 31 C.F.R. § 1020.315(e)(8), and therefore, is not eligible for consideration for an exemption with respect to a bank’s CTR obligations under 31 C.F.R. § 1020.315(b)(6).

* * * * *

FinCEN’s enforcement priorities in connection with this guidance will focus on matters of systemic or significant failures, and not isolated lapses in technical compliance. Financial institutions with questions about this guidance are encouraged to contact FinCEN’s Resource Center at (800) 767-2825, where industry questions can be addressed and monitored for the purpose of providing any necessary additional guidance.





COLORADO FORMAL ETHICS OPINION 125

Colorado’s Formal Ethics Opinion 125 was issued on 10/21/13; addendum issued 10/21/2013; Withdrawn 5/17/14.

The complete opinion may be viewed here: http://www.cobar.org/tcl/tcl_articles.cfm?articleid=8370

“Colorado is one of a handful of states conducting an experiment in democracy: the gradual decriminalizing of marijuana. The Committee notes that, as a consequence of Colo.RPC 1.2(d) as written, Colorado risks conducting this experiment either without the help of its lawyers or by putting its lawyers in jeopardy of violating its rules of professional conduct.”

http://www.cobar.org/tcl/tcl_articles.cfm?articleid=8370









KCBA Ethics Advisory Opinion on I-502 & Rules of Professional Conduct

October, 2013

The King County Bar Association proposed on October 4, 2013, given unresolved attorney ethics questions after Washington State voters approved Initiative 502 (marijuana legalization), that the Washington State Supreme Court consider amendments to the Rules of Professional Conduct. While that RPC proposal is under consideration by the Court, the KCBA Board of Trustees has adopted an ethics advisory opinion to assist the bar in the interim as attorneys consider practice issues under the existing RPCs.

Questions presented:

1. Should an attorney who assists clients to engage in conduct that is permitted by I-502 and its implementing regulations, but is forbidden by federal law, be subjected to professional discipline in Washington?

2. Should an attorney who has an ownership interest in or is employed by a marijuana dispensary and/or occasionally possesses marijuana, both in a manner expressly permitted by I-502 but forbidden by federal law, be subjected to professional discipline in Washington?

Background and hypothetical facts

On November 6, 2012, Washington voters approved Initiative 502 (“I-502”) by a margin of 55.7% to 44.3%.1 When undertaken in proper compliance with Washington law, the manufacture of marijuana, sale of marijuana, and possession of marijuana in certain amounts by adults is no longer criminalized by state law.2 Colorado passed a similar law in its November 2012 general election.3

1 Washington Sec’y of State, November 2012 General Election Results, Initiative Measure 502 Concerns marijuana, available at http://vote.wa.gov/results/20121106/Initiative-Measure-No-502-Concerns-marijuana.html (last accessed Oct. 6, 2013). 2 I-502 §§ 4(1)-(3); 20(3). The Washington State Bar Association does not offer ethical opinions that address the substance of the underlying law, and this KCBA opinion follows that practice. See, e.g., WSBA Advisory Op. 2107 (2006) (noting that the Committee does not provide statutory analysis or interpretation, but including statutory references in order to aid discussion of potential professional ethics issues). References to the substance of I-502 or its regulations is intended to aid in discussion of the law’s effect on an attorney’s ethical responsibilities, and not to opine on the substance of the law. 3 See Colorado const. amend. 64 (adding recreational use amendment to Article 18 of Colorado constitution).



I-502 required the state liquor control board to adopt rules regarding the procedures and criteria necessary to implement several goals of the new initiative.4 By law, the liquor control board must do so by December 1, 2013, and the agency’s most recent update says that it is on track to implement the regulations by that date.5

Meanwhile, on August 29, 2013, Deputy Attorney General James M. Cole issued a memorandum for all United States Attorneys regarding enforcement under the federal Controlled Substances Act (“CSA”) in light of new state laws such as Washington’s.6 The “Cole Memorandum” stated that the goals of federal marijuana policy had typically been addressed by state enforcement when consistent with eight important federal goals, including keeping marijuana out of the hands of children and keeping marijuana proceeds out of the hands of criminal organizations.7 The Cole Memorandum recognized that, when a state regulatory system accomplishes these goals, “consistent with the traditional allocation of federal-state efforts in this area, enforcement of state law by state and local law enforcement and regulatory bodies should remain the primary means of addressing marijuana-related activity.”8 The same day, Attorney General Eric Holder informed the governors of Washington and Colorado that the Department of Justice would not immediately file suit seeking to invalidate the states’ respective recreational marijuana laws.9

The CSA continues to criminalize the sale and possession of marijuana,10 as the Cole Memorandum expressly recognizes.11 Attorneys in Washington, therefore, may face ethical dilemmas based on this inconsistency between federal and state law. The remainder of this advisory opinion considers two hypothetical attorneys: Attorney A, who assists a client with the panoply of legal issues associated with setting up a marijuana distribution business in compliance with Washington law, and Attorney B, who maintains an ownership interest in a marijuana dispensary and occasionally possesses marijuana (and does both in full compliance with Washington law).

4 I-502 § 10. 5 Id.6 Memorandum from James M. Cole, Deputy Attorney General, to All United States Attorneys, Guidance Regarding Marijuana Enforcement (Aug. 29, 2013), available at http://www.justice.gov/iso/opa/resources/3052013829132756857467.pdf (“Cole Memorandum”). 7 Id. at 1-2. The eight recognized federal law enforcement priorities recognized in the Cole Memorandum are: (i) preventing distribution to minors; (ii) preventing marijuana revenue from reaching criminal organizations; (iii) preventing the diversion of legal marijuana to states where it is illegal; (iv) preventing state-authorized marijuana activities from serving as a front for other illegal activity (including trafficking of other drugs); (v) preventing violence and the use of firearms related to marijuana commerce; (vi) preventing drugged driving and other adverse health consequences related to marijuana; (vii) preventing the growth of marijuana on public lands; and (viii) preventing marijuana possession or use on federal property. 8 Id. at 3. 9 News Release, Joint Statement from Gov. Inslee and AG Ferguson regarding update from AG Ferguson on implementation of Washington’s voter-approved marijuana law (Aug. 29, 2013), available at http://www.atg.wa.gov/pressrelease.aspx?id=31361.10 21 U.S.C. § 841(a)(1); 21 U.S.C. § 812(c). 11 Cole Memorandum at 4 (“This memorandum does not alter in any way the Department’s authority to enforce federal law, including federal laws related to marijuana, regardless of state law. Neither the guidance herein nor any state of local law provides a legal defense to a violation of federal law, including any civil or criminal violation of the CSA.”).



Analysis

A. Ethical implications of offering client counseling and advice regarding I-502

Will Attorney A be in violation of his ethical obligations if he assists a client in complying with I-502, in a manner that will necessarily violate the text of the CSA? The KCBA believes that subjecting an attorney to professional misconduct on this basis would be wholly inconsistent with the purpose of the rule and the public policy of the state.12

Washington Rule of Professional Conduct (“RPC”) 1.2(d) states:

A lawyer shall not counsel a client to engage, or assist a client, in conduct that the lawyer knows is criminal or fraudulent, but a lawyer may discuss the legal consequences of any proposed course of conduct with a client and may counsel or assist a client to make a good faith effort to determine the validity, scope, meaning or application of the law.

While the latter portion of the rule offers a safe harbor for “discuss[ing] the legal consequences of any proposed course of conduct” and assisting the client to “make a good faith effort to determine the validity, scope, meaning, or application of the law,” this safe harbor may not offer sufficient protection to those attorneys who wish to actually assist a client in complying with I-502 and its regulations. To be sure, an attorney could advise a client on the relationship between I-502 and federal law and the likelihood of enforcement of federal law as set forth in the Cole Memorandum, which resembles an attempt to determine the meaning and applicability of existing law. A client, however, would normally demand much more assistance in navigating the complicated regulatory field of I-502. A client who requests help with I-502 compliance, such as Attorney A’s client, cannot honestly be said to seek only to determine the reach of I-502 or the CSA: Attorney A’s client seeks to form a marijuana distribution business.13 If Attorney A restricted his advice to an explanation of the interplay of I-502 and federal law, he might be ethically safe, but he would not be helpful to his client.

This opinion must, therefore, address the substance of RPC 1.2(d), namely the provisions against “counsel[ing]” or “assist[ing]” a client in conduct that the lawyer knows is criminal. While the rule on its face does not seem to distinguish between violations of state and federal law, the analysis is complicated by the novel circumstance where federal and Washington laws conflict as they do here. Three state associations have discussed the analogous situation where an attorney sought to assist clients with complying with state medical marijuana laws, arriving at different conclusions.

The Maine Professional Ethics Commission concluded in 2010 that representing or advising clients under Maine’s Medical Marijuana Act would “involv[e] a significant degree of risk which 12 This advisory opinion is limited to conduct that is expressly permitted by positive state law, or for which state law expressly provides an affirmative defense. This opinion does not address violations of the professional rules premised solely on the violation of federal law, where state law is silent or did not form basis for the relevant underlying misconduct. Indeed, it is likely that conduct of the latter type will frequently be the proper subject of attorney discipline. See, e.g., In re Disciplinary Proceeding Against Smith, 170 Wn.2d 721, 246 P.3d 1224 (2011) (affirming attorney’s disbarment for conviction of conspiracy to commit federal securities fraud and wire fraud). 13 See Sam Kamin and Eli Wald, Marijuana Lawyers: Outlaws or Crusaders?, 91 Oregon L. Rev. 869 (2013) (addressing this argument) (hereinafter “Outlaws or Crusaders?”).



needs to be carefully evaluated.”14 The Commission recognized that the federal government had deprioritized enforcement of the CSA in medical marijuana cases, but reasoned that Maine’s rule “does not make a distinction between crimes which are enforced and those are not.” As long as the federal law and Maine’s RPCs remain unchanged, attorneys needed to determine “whether the particular legal service being requested rises to the level of assistance in violating federal law.” If so, the attorney risks violating RPC 1.2. The Connecticut Bar Association Professional Ethics Committee reached a similar conclusion to that of the Maine commission: while an attorney could safely advise a client on the requirements of state and federal marijuana law, advice and services in aid of functioning marijuana enterprises could run afoul of RPC 1.2(d).15

Like the Maine commission, the Connecticut committee reasoned that “[w]hether or not the CSA is enforced, violation of it is still criminal in nature. . . . Lawyers may not assist clients in conduct that is in violation of federal criminal law.”

In 2011, however, the State Bar of Arizona reached the opposite conclusion.16 Unlike the Maine and Connecticut opinions, the Arizona opinion declined to read its Ethics Rule 1.2 to forbid attorney assistance regarding conduct prohibited by the CSA yet compliant with state law. To do so, the bar reasoned, would “depriv[e] clients of the very legal advice and assistance that is needed to engage in the conduct that the state law expressly permits.” In addition to recognizing the desirability of making legal services available, the bar noted that Arizona’s act had not yet been held invalid or preempted by federal law. The bar advised that an attorney could ethically perform legal services related to the state’s Medical Marijuana Act so long as (i) the conduct was expressly permitted under the Act, (ii) the lawyer advised the client on potential federal law implications and consequences, and (iii) the client, having received full disclosure, elected to proceed with a course of action specifically permitted by the Act.

The KCBA favors the State Bar of Arizona approach, and would urge this state to follow the same approach regarding client advice and counseling about compliance with I-502. While the KCBA does not agree with all components of the Arizona opinion,17 its emphasis on the client’s need for legal assistance to comply with state law accurately reflects the reality that Washington clients face in navigating the new Washington law. The initial proposed implementing regulations for I-502, for example, have added 49 new sections in the Washington Administrative Code encompassing 42 pages of text.18 These regulations are consistent with I-502’s express goal of removing the marijuana economy from the province of criminal organizations and bringing it into a “tightly regulated, state-licensed system.”19 In building this complex system, the voters of Washington could not have envisioned it working without

14 Maine Prof. Ethics Comm’n, Op. 199 (July 7, 2010). 15 Conn. Bar Ass’n, Prof. Ethics Comm’n, Informal Op. 2013-12, Providing Services to Clients Seeking Licenses under the Connecticut Medical Marijuana Law (Jan. 16, 2013). 16 State Bar of Az. Ethics Op. 11-01 (Feb. 2011). 17 The Arizona opinion emphasizes that no court has held its state’s act to be invalid or preempted. To the extent that this suggests that the effectiveness of the CSA may be diminished or affected by the contrary state law, or that a court would need to hold otherwise before it was clear, the KCBA does not make such an assumption. See generally Alec Rothrock, Is Assisting Medical Marijuana Dispensaries Hazardous to a Lawyer’s Professional Health?, 89 Denver U. L. Rev. 1047 (2012) (criticizing Arizona opinion’s discussion of interplay between state and federal law as “a misunderstanding of federalism,” and stating that “the federal law remains unchanged and in full force in every corner of Arizona”). 18 WSR 13-14-124. 19 I-502 § 1.



attorneys. As the State Bar of Arizona recognized, disciplining attorneys for working within such a system would deprive the state’s citizens of legal services “necessary and desirable to implement and bring to fruition that conduct expressly permitted under state law.”

While the Maine and Connecticut opinions may be more faithful to the plain text of their rules, both founder on addressing the importance of legal assistance to those who wish to engage in the conduct that state law permits. Moreover, neither opinion fully grapples with the diminished federal desire to enforce marijuana activities done in unambiguous compliance with state law. Under the current federal directive, the CSA will not ordinarily be enforced against an individual or business when the activity does not threaten federal enforcement objectives, which may be demonstrated by “the operation [being] demonstrably in compliance with a strong and effective state regulatory system.”20 Because federal enforcement policy is tied to compliance with state law, an attorney advising a client on complying with I-502 and the Cole Memorandum’s objectives would be helping a client avoid federal prosecution, even if technically counseling or assisting the client to violate the letter of federal law. This state should reject a formalistic reading of RPC 1.2(d) that would prohibit such conduct.

Even if officials in this state were to follow the Maine and Connecticut opinions and find a technical violation of RPC 1.2(d) under the circumstances presented here, a separate rationale should counsel against attorney discipline: estoppel. Assuming that federal law could provide the predicate to a violation of Washington’s RPC 1.2(d), attorney discipline is state-based, and the state should interpret its own rules in accordance with the state policy that favors strong regulation of legalized marijuana and, by inference, attorney assistance in this regime. Now that the state has established such a regime, it has no legitimate interest in disciplining attorneys who operate within the confines of that same regime.21

The proper scope of RPC 1.2(d) as applied here is a novel question, and the KCBA hopes to avoid such close determinations by amendments to the text of the rule to make clear that Attorney A’s conduct is permitted by the RPCs. In the meantime, however, the KCBA believes that an attorney who fully advises the client of the federal law implications of I-502 and the CSA (including the policies reflected in the Cole Memorandum) may assist the client, so long as the counseled or assisted conduct is expressly permitted by I-502.

B. Ethical implications of personal conduct in compliance with I-502

Will Attorney B commit professional misconduct solely by her ownership interest in a marijuana dispensary and her personal possession of marijuana? Assuming she is compliant with I-502, the KCBA believes she would not, as her actions are unrelated to her honesty, trustworthiness, or fitness as a lawyer.

RPC 8.4(b) states that “[i]t is professional misconduct for a lawyer to: . . . commit a criminal act that reflects adversely on the lawyer’s honesty, trustworthiness or fitness as a lawyer in other respects[.]” Attorney B would face a similar dilemma to Attorney A, because her ownership interest in a marijuana dispensary and her personal possession of marijuana may be permitted in Washington, but remain technically “criminal acts” under the CSA. 20 See Cole Memorandum at 3. 21 See Marijuana Lawyers: Outlaws or Criminals, supra note 13, at 929 (arguing that state that legalizes marijuana should be estopped from disciplining lawyers who act within this framework).



Regardless of the criminal nature of the acts, however, Washington requires “some nexus between the lawyer’s conduct and those characteristics relevant to law practice” prior to imposing discipline for violating a law.22 The Colorado Bar Association Ethics Commission found the absence of such a nexus to the mere use of medical marijuana in Formal Opinion No. 124, concluding that such use would not violate the Colorado rule without “additional evidence that the lawyer’s conduct adversely implicates the lawyer’s honesty, trustworthiness, or fitness as a lawyer in other respects.” Here, absent other factors, there is no nexus between Attorney B’s conduct that is permitted by I-502, and her honesty, trustworthiness, or fitness as a lawyer. If Attorney B’s business activities or personal possession of marijuana made her unfit to practice, or caused her to violate other provisions of the RPCs, she would properly be subject to discipline under other RPC provisions.

Although the KCBA believes that the existing ethics rules regarding an attorney’s personal conduct with respect to marijuana provide clearer protection to attorneys than the existing rules regarding client advice, it has requested amendments to the RPCs and comments to make clear that Attorney B’s conduct, standing alone, would not subject her to professional misconduct.

C. Advisory nature of opinion

While the KCBA does not believe that an attorney should be subjected to professional discipline for engaging in the conduct described in this opinion, like the WSBA, its opinion does not have the force of law. The Washington Supreme Court is the ultimate arbiter of whether an attorney’s conduct violates the RPCs.23 Indeed, given the disagreement between professional ethics tribunals in other states and the novel nature of issues presented by I-502, an attorney must proceed with caution in undertaking the activities addressed in this opinion.

Approved by the King County Bar Association Board of Trustees, October 16, 2013.

22 Matter of Disciplinary Proceeding Against Curran, 115 Wn.2d 747, 768, 801 P.2d 962 (1990) (attorney could not be disciplined under RPC 8.4(b) following vehicular homicide, because no nexus existed between that crime and the lawyer’s fitness as an attorney). 23 Wash. State Bar Ass’n, Advisory Opinions: About Advisory Opinions, available at http://www.wsba.org/Resources-and-Services/Ethics/Advisory-Opinions (last accessed Oct. 6, 2013) (“[T]he Board recognized the Washington Supreme Court’s opinion in In re Disciplinary Proceeding Against DeRuiz, 152 Wn.2d 558, 99 P.3d 881 (2004), which emphasized that ethics opinions issued by the Bar Association are advisory only, and that the Court is the ultimate arbiter of the Rules of Professional Conduct.”).



Exhibit A 7. Amendment of Oregon Rule of Professional Conduct 1.2 (Board of Governors Resolution No. 5)

Whereas, The Board of Governors has formulated the following amendment to the Oregon Rules of Professional Conduct pursuant to ORS 9.490(1); and

Whereas, The Oregon State Bar House of Delegates must approve any changes in the rules of professional conduct before they are presented to the Oregon Supreme Court for adoption pursuant to ORS 9.490(1); now, therefore, be it

Resolved, That the amendment of Oregon Rule of Professional Conduct 1.2 as set forth below is approved and shall be submitted to the Oregon Supreme Court for adoption:

RULE 1.2 SCOPE OF REPRESENTATION AND ALLOCATION OF AUTHORITY BETWEEN CLIENT AND LAWYER

(a) Subject to paragraphs (b) and (c), a lawyer shall abide by a client's decisions concerning the objectives of representation and, as required by Rule 1.4, shall consult with the client as to the means by which they are to be pursued. A lawyer may take such action on behalf of the client as is impliedly authorized to carry out the representation. A lawyer shall abide by a client's decision whether to settle a matter. In a criminal case, the lawyer shall abide by the client's decision, after consultation with the lawyer, as to a plea to be entered, whether to waive jury trial and whether the client will testify.

(b) A lawyer may limit the scope of the representation if the limitation is reasonable under the circumstances and the client gives informed consent.

(c) A lawyer shall not counsel a client to engage, or assist a client, in conduct that the lawyer knows is illegal or fraudulent, but a lawyer may discuss the legal consequences of any proposed course of conduct with a client and may counsel or assist a client to make a good faith effort to determine the validity, scope, meaning or application of the law.

(d) Notwithstanding paragraph (c), a lawyer may counsel and assist a client regarding Oregon’s marijuana-‐related laws. In the event Oregon law conflicts with federal or tribal law, the lawyer shall also advise the client regarding related federal and tribal law and policy.





257

FORMAL OPINION NO. 2005-105Information Relating to the Representation of a Client:

Receipt of Property Stolen by Clientor Other “Fruits” of Crime

Facts:Defendant A is charged with theft. Defendant A hires Lawyer A and

asks Lawyer A to take possession of the stolen property and return it tothe victim of the crime.

Defendant B is charged with obtaining money under false pretenses.Defendant B hires Lawyer B and would like to pay Lawyer B a largeadvance retainer.

Defendant C is accused of murder. Defendant C hires Lawyer C andasks Lawyer C to take possession of the murder weapon.

Questions:1. May Lawyer A accept the stolen property for the reason noted?2. May Lawyer B accept the retainer?3. May Lawyer C accept the murder weapon?

Conclusions:1. Yes.2. Yes, qualified.3. No, qualified.

Discussion:1. Return of Stolen Property to a Crime Victim.Absent a separate unlawful purpose, Lawyer A may assist in the

return of stolen property to its lawful owner. Cf. Oregon RPC 1.2(a),which provides, in pertinent part:

(a) Subject to paragraphs (b) and (c), a lawyer shall abide bya client’s decisions concerning the objectives of representation and, asrequired by Rule 1.4, shall consult with the client as to the means bywhich they are to be pursued.



1 Knows denotes “actual knowledge of the facts in question.” Knowledge can be“inferred from the circumstances.” Oregon RPC 1.0(h).

258

2. Acceptance of the Retainer.On facts as provided, it is not clear whether the funds to be received

by Lawyer B from Client B are the “fruits” of a crime. If Lawyer Bknows1 that the funds to be paid to Lawyer B were the fruits of a crime,Lawyer B cannot accept the funds. ORS 164.095 (prohibiting the receiptor retention of stolen property); Oregon RPC 8.4(a)(2) (prohibiting thecommission of “a criminal act that reflects adversely on the lawyer’shonesty, trustworthiness or fitness as a lawyer in other respects”); OregonRPC 1.2(c) (a lawyer shall not “counsel a client to engage, or assist aclient, in conduct that the lawyer knows is illegal or fraudulent”). Seealso In re Albrecht, 333 Or 520, 42 P3d 887 (2002); In re Hendricks, 306Or 574, 761 P2d 519 (1988); In re Griffith, 304 Or 575, 748 P2d 86(1987): In re Anson, 302 Or 446, 730 P2d 1229 (1986). If Lawyer B doesnot know that the funds are the fruits of a crime, however, Lawyer B mayethically accept and retain the funds. But cf. FTC v. Assail, Inc., 410 F3d256 (5th Cir 2005) (requiring disgorgement of fees knowingly receivedfrom frozen funds).

3. Acceptance of the Murder Weapon.A lawyer who comes into possession of information linking a client

to a crime ordinarily is barred by the lawyer’s duty of confidentialityfrom voluntarily disclosing that information to others. See, e.g., ORS9.460(3) and Oregon RPC 1.6, discussed in OSB Formal Ethics Op No2005-34. A lawyer may not, however, accept evidence of a crime, suchas the murder weapon at issue here, unless the lawyer makes it availableto the prosecutor. Cf. People v. Belge, 50 App Div2d 1088, 376 NYS2d771 (1975), aff’d, 41 NYS2d 60 (1976); In re Ryder, 381 F2d 713 (4thCir 1967); In re January 1976 Grand Jury, 534 F2d 719 (7th Cir 1976).See also ORS 162.295 (tampering with evidence); Oregon RPC 8.4(a)(4)(prohibiting “conduct that is prejudicial to the administration of justice”).A lawyer may, however, deliver the weapon to the prosecutor



259

anonymously or through an intermediary to avoid implicating thelawyer’s client.

Approved by Board of Governors, August 2005.

COMMENT: For additional information on this general topic and other relatedsubjects, see THE ETHICAL OREGON LAWYER §11.14 (Oregon CLE 2003);RESTATEMENT (THIRD) OF THE LAW GOVERNING LAWYERS §§44–45 (2003); and ABAModel Rules 1.2, 1.6, 1.15, 8.4.





Cite as In re Barton, 22 DB Rptr 266 (2008)

266

IN THE SUPREME COURTOF THE STATE OF OREGON

In re: ))

Complaint as to the Conduct of ) Case No. 07-134)

GREGORY P. BARTON, ))

Accused. )

Counsel for the Bar: Linn D. DavisCounsel for the Accused: Susan D. IsaacsDisciplinary Board: None Disposition: Violation of DR 1-102(A)(2). Stipulation for

Discipline. Public reprimand.Effective Date of Order: October 12, 2008

ORDER APPROVING STIPULATION FOR DISCIPLINEThis matter having been heard upon the Stipulation for Discipline entered into

by the Accused and the Oregon State Bar, and good cause appearing,IT IS HEREBY ORDERED that the stipulation between the parties is approved

and the Accused is publicly reprimanded for violation of DR 1-102(A)(2).DATED this 12th day of October 2008.

/s/ Susan G. BischoffSusan G. Bischoff, Esq.State Disciplinary Board Chairperson

/s/ William B. CrowWilliam B. Crow, Esq., Region 5Disciplinary Board Chairperson




267

STIPULATION FOR DISCIPLINEGregory P. Barton, attorney at law (hereinafter “Accused”), and the Oregon

State Bar (hereinafter “Bar”) hereby stipulate to the following matters pursuant toOregon State Bar Rule of Procedure 3.6(c).

1.The Bar was created and exists by virtue of the laws of the State of Oregon

and is, and at all times mentioned herein was, authorized to carry out the provisionsof ORS Chapter 9, relating to the discipline of attorneys.

2.The Accused was admitted by the Oregon Supreme Court to the practice of

law in Oregon on September 22, 1995, and has been a member of the Oregon StateBar continuously since that time. The Accused has since August 1999 maintained hisoffice and place of business in Multnomah County, Oregon.

3.The Accused enters into this Stipulation for Discipline freely and voluntarily.

This Stipulation for Discipline is made under the restrictions of Bar Rule ofProcedure 3.6(h).

4.On October 12, 2007, a Formal Complaint was filed against the Accused

pursuant to the authorization of the State Professional Responsibility Board(hereinafter “SPRB”), alleging violation of ORS 9.527(2) and DR 1-102(A)(2). Theparties intend that this Stipulation for Discipline set forth all relevant facts, violations,and the agreed-upon sanction as a final disposition of the proceeding.

Facts5.

In August 2006, the Accused and his spouse were medical marijuanacardholders pursuant to the Oregon Medical Marijuana Act (hereinafter “OMMA”).The OMMA permitted the Accused to grow marijuana at his residence in limitedallotments for medicinal use by the Accused and his spouse.

6.On or about August 25, 2006, law enforcement officers checked the Accused’s

duly registered marijuana grow site and discovered an excess of marijuana plants atthe site.




268

7.At all relevant times, ORS 475.864 provided as follows; “(1) It is unlawful for

any person knowingly or intentionally to possess marijuana. (2) Unlawful possessionof marijuana is a Class B felony. (3) Notwithstanding subsection (2) of this section,unlawful possession of marijuana is a violation if the amount possessed is less thanone avoirdupois ounce [ . . . ].”

8.The Accused admits that on August 25, 2006, he knowingly possessed a

mixture or substance containing marijuana that was in excess of the combinedOMMA allotments of the Accused and his spouse, and the excess marijuana weighedover one avoirdupois ounce. On or about March 28, 2007, a judgment of convictionfor the felony of Unlawful Possession of Marijuana, in violation of ORS 475.864(2)was entered against the Accused by plea in State v. Gregory Paul Barton, MultnomahCounty Circuit Court Case No. 060935225. On or about April 8, 2008, the felonyconviction was reduced to a misdemeanor after the Accused successfully completeda one-year period of probation.

Violations9.

The Accused admits that, by engaging in the conduct described in paragraphs5 through 8, he violated DR 1-102(A)(2). The parties agree that based upon thereduction of the felony conviction to a misdemeanor, the charge of an allegedviolation of ORS 9.527(2) has been dismissed by the State Professional ResponsibilityBoard.

Sanction10.

The Accused and the Bar agree that in fashioning an appropriate sanction inthis case, the Disciplinary Board should consider the ABA Standards for ImposingLawyer Sanctions (hereinafter “Standards”). The Standards require that the Accused’sconduct be analyzed by considering the following factors: (1) the ethical dutyviolated, (2) the attorney’s mental state, (3) the actual or potential injury, and (4) theexistence of aggravating and mitigating circumstances.

a. Duties violated. The Accused violated his duty to maintain personalintegrity. Standards, § 5.1.

b. Mental state. The Accused knew that he grew and possessed marijuanain excess of his allotment pursuant to the Oregon Medical MarijuanaProgram.

c. Injury. The Accused’s conduct cast a negative light on the professionand on the Oregon Medical Marijuana Program.




269

d. Aggravating circumstances. There are no applicable aggravatingcircumstances.

e. Mitigating circumstances. Mitigating circumstances include:1. Absence of a prior disciplinary record. Standards, § 9.32(a).2. Absence of a selfish or dishonest motive. Standards, § 9.32(b).3. Cooperative attitude toward disciplinary proceedings. Standards,

§ 9.32(e).4. Imposition of other penalties or sanctions in the criminal case

arising from the same facts. Standards, § 9.32(k). The Accusedwas sentenced to serve a period of probation and to perform 80hours community service.

11.Prior to the consideration of aggravating or mitigating circumstances, the ABA

Standards, § 5.12, generally recommend suspension where a lawyer knowinglyengages in criminal conduct that seriously adversely reflects on the lawyer’s fitnessto practice, but which does not contain the elements listed in Standards, § 5.11(a),such as trafficking in controlled substances or dishonesty, fraud, deceit, ormisrepresentation. Standards, § 5.12. Since there are no aggravating circumstancesand several mitigating circumstances in the present matter, reprimand may beappropriate.

12.The Oregon Supreme Court has suspended lawyers engaged in felony

possession or trafficking in controlled substances. See, e.g., In re Allen, 326 Or 107,120–124, 949 P2d 710 (1997) (lawyer violated DR 1-102(A)(2) where lawyer’sconduct constituted possession of a controlled substance and it caused substantialactual injury to another); In re Taylor, 316 Or 431, 435, 851 P2d 1138 (1993) (citingthe recommendation of the Standards that disbarment is generally appropriate fortrafficking in controlled substances). Although the Accused’s conduct of registeringin the Oregon Medical Marijuana Program and then knowingly disregarding thelimitations under the program reflects adversely on his fitness to practice, there wasno allegation of trafficking and little actual or potential injury. There are severalmitigating factors in the case and no aggravating factors. Lawyers who have engagedin criminal conduct not arising from the practice of law have received reprimands onprior occasions where the mitigating factors have outweighed the aggravating factors.See, e.g., In re Flannery, 334 Or 224, 47 P3d 891 (2002) (lawyer reprimanded forconviction of making a false application for a driver license where mitigating factorsoutweighed aggravating factors).




270

13.Consistent with the Standards and Oregon case law, the parties agree that the

Accused shall be publicly reprimanded for violation of DR 1-102(A)(2), the sanctionto be effective upon approval of this stipulation.

14.This Stipulation for Discipline is subject to review by Disciplinary Counsel of

the Oregon State Bar and to approval by the SPRB. If approved by the SPRB, theparties agree the stipulation is to be submitted to the Disciplinary Board forconsideration pursuant to the terms of BR 3.6.

EXECUTED this 15th day of September 2008.

/s/ Gregory P. BartonGregory P. BartonOSB No. 95208

EXECUTED this 22nd day of September 2008.

OREGON STATE BAR

By: /s/ Linn D. DavisLinn D. DavisOSB No. 03221Assistant Disciplinary Counsel





Page 1257 815 P.2d 1257 311 Or. 573

In Re Complaint as to the Conduct of Craig D. White.

OSB 86-25, 87-34/SC S37007.

Supreme Court of Oregon, In Banc.

Argued and Submitted Oct. 10, 1990.

Decided July 25, 1991. Reconsideration Denied Sept. 24, 1991.

Christopher Bishop, Portland, argued the cause, for the accused. With him on the briefs, was Craig D. White, pro se.

[311 Or. 574] Susan K. Roedl, Asst. Disciplinary Counsel, Lake Oswego, argued the cause and filed the brief, on behalf of the Or. State Bar.

[311 Or. 575] PER CURIAM.

The Oregon State Bar charged the accused with violations of several different Disciplinary Rules. The trial panel found him guilty of 11 violations and decided that he should be disbarred. The accused seeks review. We review the record de novo. ORS 9.536(3); BR 10.6. The Bar has the burden of establishing ethical misconduct by clear and convincing evidence. BR 5.2.

The Bar alleges that the accused violated the following standards of professional conduct:

"DR 1-102 Misconduct; Responsibility for Acts of Others.

"(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 to practice law;

" * * * * *

"(4) Engage in conduct that is prejudicial to the administration of justice." 1

"DR 2-109 Acceptance of Employment.

"(A) A lawyer shall not accept employment on behalf of a person if he knows or it is obvious that such person wishes to:

Page 1258

"(1) Bring a legal action, conduct a defense, or assert a position in litigation, or otherwise have steps taken for the person, merely for the purpose of harassing or maliciously injuring any other person.



"(2) Present a claim or defense in litigation that is not warranted under existing law, unless it can be supported by good faith argument for an extension, modification, or reversal of existing law."

"DR 7-102 Representing a Client Within the Bounds of the Law.

"(A) In the lawyer's representation of a client, a lawyer shall not:

[311 Or. 576] "(1) File a suit, assert a position, conduct a defense, delay a trial, or take other action on behalf of the lawyer's client when the lawyer knows or when it is obvious that such action would serve merely to harass or maliciously injure another.

"(2) Knowingly advance a claim or defense that is unwarranted under existing law, except that the lawyer may advance such claim or defense if it can be supported by good faith argument for an extension, modification, or reversal of existing law.

" * * * * *

"(5) Knowingly make a false statement of law or fact."

We conclude that the accused filed unwarranted actions and advanced unwarranted claims merely to harass, in violation of DR 7-102(A)(1) and (2); that he accepted employment knowing that his client intended to bring actions merely to harass and to advance unwarranted claims, in violation of DR 2-109(A)(1) and (2); that the conduct described above--in addition to failures to appear for hearings, failure to follow an order concerning venue, and failures to prosecute claims--prejudiced the administration of justice, in violation of DR 1-102(A)(4); that the accused knowingly made a false statement to a court, in violation of DR 7-102(A)(5); and that the accused committed a criminal act that reflected adversely on his fitness to practice law, in violation of DR 1-102(A)(2). We suspend the accused from the practice of law for three years.

I. PETTIBON LITIGATION

Most of the alleged violations arose out of the accused's conduct during litigation over the dissolution of a chiropractic partnership. That litigation encompassed 22 cases. The accused represented Pettibon, one of the chiropractors. For ease of reference, we will refer to those cases collectively as the "Pettibon litigation." We also have given each case a case designation (for example, "Beeson 1 " or "Pettibon 1 ") using the plaintiff's name and the chronological order of filing by that plaintiff. The Appendix contains a list of the cases and pertinent information about them. When we refer in this opinion to a specific case, we will use the case designation found in the Appendix.

[311 Or. 577] With respect to the Pettibon litigation, the Bar alleges that the accused accepted employment on behalf of a client, Pettibon, who intended to harass the opposing parties with litigation and that the accused filed unwarranted claims with the intent to harass the opposing parties. The Bar also contends that the accused failed to appear at hearings, failed to comply with an order to change venue, and failed to prosecute cases during the Pettibon litigation. The Bar further contends that the behavior of the accused prejudiced the administration of justice.

A. Findings and Discussion

1. Beginning of Litigation

The accused was admitted to practice law in Oregon in 1981. He is a sole practitioner.

Pettibon and Beeson, two chiropractors, entered into several business partnerships. Their first venture was to establish Willamette View Chiropractic Clinic in Portland. Pettibon kept the financial



records and shared the profits with Beeson. Pettibon and Beeson were also business partners in clinics in Hawaii and Oregon City and had similar arrangements with respect to keeping records and sharing profits. In addition,

Page 1259

Pettibon and Beeson engaged in a real estate development venture with Lord, a contractor, on undeveloped land in Oregon City. Pettibon, Beeson, and Lord also leased real property in Aloha and formed a corporation, Willamette View Associates (WVA), to manage the construction of an office building on the property. For a short time, Pettibon served as president of WVA.

In April 1983, Lord, Beeson, and WVA filed an action against Pettibon, the first case in the Pettibon litigation (Beeson 1 ). Lord, Beeson, and WVA sought injunctive relief and an accounting from Pettibon of corporate assets covering his time as president of WVA. In June 1983, Lord and Beeson filed a second action against Pettibon, seeking to have Lord declared a one-third owner of the land in Oregon City (Beeson 2 ). Pettibon denied that Lord had any ownership interest. Ratoza was the lawyer who represented Beeson in both cases.

[311 Or. 578] 2. Intent to File Claims Merely to Harass

On July 7, 1983, the accused called Ratoza to inform him that, on behalf of Pettibon, the accused had filed an action against Beeson in Clackamas County (Pettibon 1 ). Ratoza asked the accused why he was filing a separate action rather than joining it with the first case, Beeson 1, which then was pending in Multnomah County. According to Ratoza, the accused replied that Pettibon intended "to sue Dr. Beeson in as many different courts for as many different claims as they could think up." The accused told Ratoza that Beeson had hurt Pettibon and that Pettibon was going to get even by causing Beeson "as much grief and expense * * * as was humanly possible." The accused also intimated that Pettibon enjoyed litigation. The accused denied that he made those statements to Ratoza.

In addition to offering Ratoza's testimony at the disciplinary hearing, the Bar introduced Ratoza's contemporaneous handwritten notes and his affidavit about the conversation, which was prepared about seven months after the conversation took place. After hearing the testimony of both Ratoza and the accused, the trial panel found that Ratoza was credible. The accused admits that Ratoza was a credible witness but asserts that Ratoza was impeached, because he admitted that his notes were not a verbatim account of the accused's statements. Ratoza testified, however, that the notes accurately conveyed the substance of the accused's statements.

We find that the accused did not testify truthfully in this proceeding when he denied making the statements to Ratoza. We find in accordance with Ratoza's testimony. In July of 1983, the accused intended to bring legal actions on Pettibon's behalf merely for the purpose of harassing Beeson.

After the conversation with Ratoza, in a period of five years, the accused filed 14 more cases on Pettibon's behalf--in Clackamas, Multnomah, and Washington Counties; in Clark County, Washington; in the United States District Court in Portland, Oregon; and in federal bankruptcy court. Beeson was an opposing party in all but one of those cases. We turn to an examination of several specific actions.

[311 Or. 579] 3. Duplicate Claims Concerning Note

In the first case (Beeson 1 ), the accused filed a counterclaim on behalf of Pettibon against Lord, Beeson, and WVA, seeking to collect on a note for $25,750. The jury determined that the note was not a debt of either the corporation or the partnership, because it had been a capital contribution, rather than a loan. Yet, less than one year later, the accused, on Pettibon's behalf, sued the same parties on the same note in a different county (Pettibon 13 ). The complaint in that action alleged that the note was due,



despite the earlier jury determination that the note actually was a capital contribution. The trial court dismissed the claim in Pettibon 13 on the ground that it was barred by principles of claim preclusion.

The accused argues that, in Pettibon 13, his client was not pursuing the same claim

Page 1260

as in Beeson 1. He says that he simply pleaded the note, because he was seeking a partnership accounting and wanted it included as a capital contribution. The complaint alleges, however, that Pettibon loaned the money to defendants and was entitled to repayment. The claim concerning the note in Pettibon 13 was unwarranted in law and in fact, and the accused knew it. The accused filed that claim merely to harass Beeson and Lord.

4. Bankruptcy Proceedings

The accused, on Pettibon's behalf, sought to have WVA involuntarily declared bankrupt (Pettibon 3 ) a few days before the scheduled trial on the accounting of assets (Beeson 1 ) and five days after the circuit court had denied the accused's motion for a postponement in Beeson 1. After filing the involuntary bankruptcy petition, the accused again sought a postponement in Beeson 1, based on the automatic stay provision of the federal bankruptcy laws. 11 U.S.C. § 362 (1983). The circuit court again denied the postponement, on the ground that the automatic stay applies only to actions against the debtor, not to actions by the debtor. The circuit court had already severed the counterclaims against WVA in Beeson 1 for the purposes of the trial.

Although the scheduled trial in the circuit court did not involve an action against the debtor, the accused argued in the bankruptcy court for a contempt order against Beeson [311 Or. 580] and Lord for proceeding with the case in circuit court in violation of the automatic stay. The bankruptcy court found that Pettibon had pursued the contempt motion in bad faith: "the motion was interposed to harass [Beeson and Lord] and to delay the pending actions in state court." The court denied the motion and imposed sanctions against Pettibon. The court also dismissed the involuntary bankruptcy petition, although it specifically found that the petitioner had not filed the petition in bad faith.

The accused claims that he did not decide that Pettibon should file the case in bankruptcy court, but instead relied entirely on a bankruptcy law specialist. The accused did not sign the contempt motion. He was, however, designated on the motion as "Trial Attorney for Petitioner." He also argued the contempt motion to the bankruptcy court. We find that the accused participated in the bankruptcy proceedings, including the contempt motion. We are not convinced that the bankruptcy petition itself was unwarranted. We do find, however, that the accused participated in pursuing a contempt motion in Pettibon 3 that he knew was unwarranted in law and in fact and that he pursued the contempt motion merely to harass Beeson and Lord.

5. Shareholder's Derivative Action and Action for Fraud

The accused filed a shareholder's derivative action against Beeson and Lord, on Pettibon's behalf, alleging fraud in the development of the Aloha property (Pettibon 6 ). While that case was pending, the accused filed yet another action against Beeson, alleging fraud and breach of fiduciary duty in the development of the same property (Pettibon 11 ). After filing Pettibon 11, the accused did not prosecute it. It was dismissed for want of prosecution 10 months after filing.

The accused argues that a shareholder's derivative action is not an action directly against Beeson. Although technically correct, that argument does not absolve the accused in the circumstances here. The complaints contained substantially similar allegations. There were only three shareholders of WVA: Beeson, Lord, and Pettibon. In Pettibon 6, Pettibon was suing Beeson and Lord--the only other



shareholders. Pettibon was the only shareholder who stood to [311 Or. 581] benefit from that action. Thus, the claims in his direct action (Pettibon 11 ) and his derivative action (Pettibon 6 ) were substantially the same. The second of those two actions, Pettibon 11, was duplicative and, therefore, unwarranted in law and in fact, and the accused knew it. The accused filed Pettibon 11 merely to harass Beeson.

Page 1261

6. Change of Venue

On Pettibon's behalf, the accused filed two actions in Washington County against Beeson and Lord (Pettibon 6 and Pettibon 7 ). Beeson's new lawyer, Lundeen, filed a motion to change venue to Multnomah County in both cases. The court granted the motion and ordered the accused to change venue within 10 days. The accused failed to change venue in either case. Instead, he filed two new cases in Multnomah County, Pettibon 8 and Pettibon 12, and left Pettibon 6 pending in Washington County. 2 About six months later, the court dismissed Pettibon 12 for want of prosecution. The accused obtained an order of reinstatement, but the court dismissed the case again after the accused failed to respond to ORCP 21 motions. The court dismissed Pettibon 8 for failures to appear at court appointments and failure to prosecute the case.

The accused asserts that he did not intend to harass the opposing parties. Rather, he claims, he could not locate any statute or rule that explained the procedure to change venue. The record shows otherwise. The motion to change venue cited ORS 14.030 et seq., which details how to change venue. The accused also testified that he researched the venue statutes whenever he filed an action. Finally, according to the Washington County Court Clerk's notes, the accused refused to pay the fee for changing venue.

We find that the accused knew how to change venue and knew that maintaining two actions (Pettibon 6 and Pettibon 12 ), instead of transferring the first of them (Pettibon 6 ) was not warranted. The accused continued to maintain two actions, instead of changing venue, merely to harass Beeson and Lord. We also find that the accused did not testify [311 Or. 582] truthfully in this proceeding when he denied knowing how to change venue.

7. Failures to Appear

As he admitted, the accused failed to appear at six hearings over the course of the Pettibon litigation. Two of those failures to appear were in "Rule 4" hearings 3 (Pettibon 5 and Pettibon 8 ). Two of the hearings were on ORCP 21 motions (Bank 2 and Pettibon 5 ). As to those four hearings, the accused admitted that he could offer no explanation for failing to appear.

The accused provided explanations for why he missed two hearings. One concerned a discovery motion in Bank 2. The accused requested that hearing. He testified that he had a conflicting trial date and that he had tried to have another lawyer appear in his place, but that the day before the hearing that lawyer had informed the accused that he could not appear. The accused did not inform the court or the opposing parties, however, that he would be unable to appear. The accused's explanation, assuming its accuracy, is inadequate to justify his failure to notify the court and opposing counsel of his inability to appear.

The other hearing that the accused missed, for which he provided an explanation, was a conference in Multnomah County Circuit Court scheduled by Beeson's lawyer in Pettibon 8. The accused testified that he did not receive notice of the conference until after it had occurred. We find his explanation plausible, because Beeson's lawyer sent notice of the conference very close to the date that it occurred. The Bar has not proved by clear and convincing evidence that the accused intentionally failed to appear at that conference.



8. Attorney's Lien

Pettibon eventually dismissed the accused as his counsel, after which Pettibon and Beeson concluded a comprehensive settlement.

Page 1262

Soon thereafter, the accused filed an [311 Or. 583] attorney's lien on the Aloha property. The lien clouded Beeson's title and compromised his ability to apply for a bank loan to pay Pettibon the amount agreed to in the settlement.

The accused's filing of an attorney's lien did not violate the standards of professional conduct. He had a legal right to file the attorney's lien. The Bar does not contend otherwise. The evidence does not show clearly and convincingly that the accused filed the lien merely to harass. The fact that it may have impeded payment of the settlement does not, in and of itself, make filing an otherwise permissible attorney's lien a violation of any Disciplinary Rule.

9. Effect on Court Docket

The accused filed 15 separate actions in several different courts--including the Circuit Courts for Multnomah, Washington, and Clackamas Counties--in the Pettibon litigation. Senior Judge Charles S. Crookham testified that, in his opinion, the accused should have filed all but two of the claims (Pettibon 3 and Beeson 2 ) in Multnomah County. Had the accused done so, Judge Crookham testified, 12 of the cases could have been consolidated for trial: Pettibon 1, 2, 4, 5, 6, 7, and 8; Grabhorn 1; 4 and Pettibon 10, 11, 14, and 15. We find in accordance with Judge Crookham's testimony, subject to the correction made in note 4. We also have found, above, that some of the actions were repetitive and unwarranted. The conduct of the accused burdened the dockets of the Multnomah, Washington, and Clackamas County Circuit Courts.

B. Disciplinary Rules Violated

We conclude that the accused violated the following Disciplinary Rules in the course of the Pettibon litigation discussed above:

1. DR 1-102(A)(4).

The accused engaged in conduct prejudicial to the administration of justice by: filing repetitious claims (Beeson 1/Pettibon 13 and Pettibon 6/Pettibon 11 ); filing claims in different counties when that was not warranted (Pettibon 6, [311 Or. 584] Pettibon 7 ); failing to change venue (Pettibon 6, Pettibon 7 ); failing to appear at hearings (Pettibon 5, Pettibon 8, Bank 2 ); and failing to prosecute cases (Pettibon 8, Pettibon 11, Pettibon 12 ). See In re Rochat, 295 Or. 533, 668 P.2d 376 (1983) (holding that a lawyer who harassed court personnel to secure court appointments unnecessarily consumed court time in violation of DR 1-102(A)(4)); In re Haws, 310 Or. 741, 748, 801 P.2d 818 (1990) (holding that a repeated pattern of conduct that caused some harm to the administration of justice violated DR 1-102(A)(4)).

2. DR 2-109(A)(1).

The accused accepted employment from Pettibon knowing that Pettibon intended to use litigation as a tool to harass Beeson.

3. DR 2-109(A)(2).

The accused accepted employment from Pettibon knowing that Pettibon intended to pursue unwarranted claims against Beeson.



4. DR 7-102(A)(1).

a. The accused filed claims in Pettibon 3, 11, and 13 merely to harass Beeson and, except in Pettibon 11, merely to harass Lord.

b. The accused filed claims in different counties when that was not warranted, merely to harass Beeson and Lord (Pettibon 6 and Pettibon 7 ).

5. DR 7-102(A)(2).

The accused knowingly advanced unwarranted claims in:

Page 1263

a. Pettibon 13 by alleging that a note was due, despite an earlier jury determination that it was not.

b. Pettibon 3 by participating in pursuing an unwarranted contempt motion in bankruptcy court.

c. Pettibon 11 by filing a direct action against Beeson that was substantially the same as a pending derivative action in Pettibon 6.

[311 Or. 585] II. ALLEGEDLY FALSE STATEMENTS

A. Trial Court

The Bar contends that the accused violated DR 7-102(A)(5) during the Pettibon litigation, by making a false statement to the trial court. The Bar contends that the accused knowingly misrepresented the age of one case and the nature of two proceedings in order to obtain postponement of a trial.

On February 17, 1984, the accused sought a postponement in the second case filed against Pettibon by Beeson and Lord (Beeson 2 ). His affidavit in support of the request contained these statements:

"I have two conflicting cases now pending in Multnomah County which conflict with the time now set for trial in this case. The first is Multnomah County Circuit Court No. 8306-04131 which was first filed on or about March 23, 1984 [sic ] 5 ... Both of the cases which are in time conflict with the trial date in this case have been pending for longer than this case."

The accused had in fact filed Case No. 8306-04131 about one month after the case in which he was seeking a postponement. His statement that Case No. 8306-04131 was older was, therefore, false.

The Bar further contends that, by using the words "conflicting cases," the accused knowingly suggested that the conflict was with a pending trial date. In fact, the only conflict was with a Rule 4 hearing. The accused argues that the word "cases" is broad enough to fit both types of proceedings and that he interpreted it broadly.

We find that the accused intended that "cases" be understood by the court to mean "trials" or, at least, significant proceedings. His argument to the contrary does not comport with his testimony at the disciplinary hearing. There, the accused stated that Rule 4 hearings were relatively insignificant, so that missing them was inconsequential. He [311 Or. 586] said that he often did not appear for oral argument in Rule 4 hearings. He further testified that "[a] trial is more important than any kind of motion."



In addition, the accused testified that opposing counsel informed the court in oral argument that the conflict was with a Rule 4 motion. He appears to contend that he is absolved from responsibility for his false statement, because opposing counsel clarified what the conflict was. We disagree. DR 7-102(A)(5) prohibits a lawyer from knowingly making a false statement to the court. Whether the court is misled by the false statement is irrelevant. The accused knowingly made a false statement to the trial court in Beeson 2 in order to obtain a postponement, in violation of DR 7-102(A)(5).

B. Court of Appeals

The Bar alleges that the accused also made a false statement to the Court of Appeals. The accused wrote the following in a motion to consolidate two appeals:

"The parties are the same in both pending cases on appeal. Burl R. Pettibon is the Plaintiff-Appellant in both cases, No. A41110 [Pettibon 12 ] and No. A42199 [consolidated appeal of Beeson 2 and Pettibon 13 ]. Both Steven G. Lord and Daniel E. Beeson are named Defendant-Respondents in both cases. Each of the three individuals are co-equal 1/3 owners of the outstanding stock of [WVA]. " (Emphasis added.)

Page 1264

The Court of Appeals denied the motion to consolidate.

The parties were not the same in both of the cases pending on appeal. The Court of Appeals had dismissed Lord from one of the appeals more than 11 months before the accused filed the motion to consolidate. The accused had signed the stipulation providing for Lord's dismissal from the case. In addition, when the motion for consolidation was filed, Pettibon no longer owned one-third of the outstanding stock of WVA. He had sold it to Lord as part of a settlement agreement.

The accused contends that he did not knowingly make false statements in the motion to consolidate. The motion states that the court had dismissed Lord as a party, pursuant to a settlement agreement. The motion further states, however, that Pettibon was challenging the validity of [311 Or. 587] the settlement agreement. In his brief to the Court of Appeals in case No. A42199, the accused did in fact claim that Pettibon was "forced" to sign the agreement under threat of contempt by the trial judge. Because the motion on its face disclosed the basis for the conclusory statements quoted above, the accused does not appear to have misled the Court of Appeals knowingly. The Bar has not proved by clear and convincing evidence that the accused made a statement to the Court of Appeals knowing that it was false.

III. ASSAULT AND ASSAULT LITIGATION

The Bar's last cause of complaint involves the accused's assault of a police officer. On December 16, 1983, the accused became intoxicated at a Christmas party. He was arrested later that evening for driving while under the influence of intoxicants. Officer Hostetler was dispatched to the scene to assist the arresting officer. When Hostetler arrived, the accused was seated in the back of the arresting officer's patrol car. Hostetler started to impound the accused's car and check for damage to and ownership of another car that the accused's car had hit. The arresting officer called for help. The accused had rolled over onto his back and was kicking the driver's side passenger window of the patrol car, hard and repeatedly. Hostetler opened the door, grabbed the accused's feet, and pulled him upright by the coat. The accused responded by saying, "What you jerks need is civil litigation." Hostetler closed the door and walked away, but the accused again rolled over and began to kick the window. Hostetler returned and opened the door. The accused yelled, "I'll kick the shit out of you," and kicked Hostetler in the face with the side of his right shoe. Hostetler suffered a loose tooth, a bruised and swollen upper lip, and a stiff neck



as a result of the kick. The accused was charged with a misdemeanor for the assault, was convicted, and received a seven-day jail sentence. 6

Hostetler filed a civil action against the accused to recover for damages that he sustained from the assault. The accused responded with a counterclaim for battery. The case [311 Or. 588] was assigned to arbitration. The arbitrator ordered the accused to produce his tax records, in connection with the claim for punitive damages, and a videotape of his deposition. The arbitrator testified at the disciplinary hearing that the accused did not produce either the tax records or the videotape. The arbitrator dismissed the accused's counterclaim as frivolous and awarded the police officer $14,000, of which $12,500 was for punitive damages. The arbitrator found that "the accused has treated the judicial procedures, both criminal and civil, in this matter as totally facetious with total contempt of any responsibility or obligation therein."

The Bar alleges that the accused violated two Disciplinary Rules in connection with those incidents. First, by assaulting a police officer, he committed a criminal act adversely reflecting on his fitness to practice law, in violation of DR 1-102(A)(2). Second, by failing to produce documents

Page 1265

and displaying contempt for the arbitration process, the accused interfered with the arbitration process and prejudiced the administration of justice, in violation of DR 1-102(A)(4). We consider the assault first.

DR 1-102(A)(2) provides that it is professional misconduct for a lawyer to "commit a criminal act that reflects adversely on the lawyer's honesty, trustworthiness or fitness to practice law." Most cases arising under that rule concern criminal acts that show fraud or dishonesty. See, e.g., In re Hendricks, 306 Or. 574, 761 P.2d 519 (1988) (violation of federal tax law). The criminal act in this case does not show fraud or dishonesty. This court has not been called on previously to examine whether a misdemeanor assault can be a criminal act that reflects adversely on a lawyer's fitness to practice law. This court has held, however, that a lawyer can violate DR 1-102(A)(2) without having committed an act of fraud or dishonesty and without having engaged in the specific kinds of conduct envisioned by the drafters of the American Bar Association's parallel model rule. In re Rochat, supra, 295 Or. at 537-40, 668 P.2d 376 (the accused's "bullying attempts" to have court clerks place his name on list for indigent appointments adversely reflected on his fitness to practice law, in violation of DR 1-102(A)(2)).

We agree with the American Bar Association Standards for Imposing Lawyer Sanctions, Commentary to § 5.0 (1986) (ABA Standards), when they state:

[311 Or. 589] "The most fundamental duty which a lawyer owes the public is the duty to maintain the standards of personal integrity upon which the community relies. The public expects the lawyer to be honest and to abide by the law; public confidence in the integrity of officers of the court is undermined when lawyers engage in illegal conduct * * *."

Oregon law echoes a similar theme. ORS 9.250 provides in part:

"If an applicant for admission as an attorney is found qualified, the court shall administer an oath to the applicant, that in the practice of law the applicant will support the Constitution and laws of the United States and of this state, and be of faithful and honest demeanor in office." 7

Accordingly, in the oath that the accused took, he promised to "support the Constitution and laws of the United States and of the State of Oregon."

To some extent, every criminal act shows lack of support for our laws and diminishes public confidence in lawyers, thereby reflecting adversely on a lawyer's fitness to practice. DR 1-102(A)(2) does



not sweep so broadly, however. For example, a misdemeanor assault arising from a private dispute would not, in and of itself, violate that rule. See In re Johnson, 106 Ariz. 73, 74, 471 P.2d 269 (1970) (holding that a lawyer who had been charged with assault did not violate the parallel Arizona disciplinary rule; incident was isolated, not involving a fixed pattern of misbehavior, and did not involve moral turpitude). Each case must be decided on its own facts. There must be some rational connection other than the criminality of the act between the conduct and the actor's fitness to practice law. Pertinent considerations include the lawyer's mental state; the extent to which the act demonstrates disrespect for the law or law enforcement; the presence or absence of a victim; the extent of actual or potential injury to a victim; and the presence or absence of a pattern of criminal conduct.

[311 Or. 590] In the present case, the Bar does not claim that the accused's driving under the influence of intoxicants was a criminal act that reflected adversely on his fitness to practice law within the contemplation of DR 1-102(A)(2). The accused did more than that, however, when he tried doggedly to obstruct his detention following the arrest and assaulted Hostetler in the process. Among the most important components of support for the law are nonviolent resolution of disputes and respect for those who

Page 1266

enforce the law. More specifically, Oregon law is clear that any dispute over the legality of police action must be settled in court and not by resort to violence. See ORS 161.260 (person may not use physical force to resist an arrest by peace officer, whether arrest is lawful or unlawful); ORS 163.208 (defining crime of assaulting a public safety officer); State v. Wright, 310 Or. 430, 799 P.2d 642 (1990) (holding that, if a police officer uses excessive force in making an arrest, the arrestee may use only such physical force as is reasonably necessary under the circumstances for self-defense against the excessive force). The accused's assault of a police officer, although only a single misdemeanor, demonstrated a profound disregard for the process of peaceful dispute resolution, as well as for those whose task it is to facilitate that process. His criminal act also caused physical injury to the officer. The accused's criminal act reflects adversely on his fitness to practice law. He violated DR 1-102(A)(2).

We turn to the Bar's second allegation--that the accused prejudiced the administration of justice by failing to produce documents and a videotape as ordered during arbitration. The accused contends that the Bar did not present clear and convincing evidence that the requested items were not produced. The accused admits only that he did not produce a "schedule" to his tax return. As to that item, the accused testified that the requested schedule did not exist.

With respect to the order to produce, the arbitrator testified:

"Q. Did [the accused] comply with the order?

"A. My recollection is he did not.

"Q. In particular, with the videotape, what did he tell you about that?

[311 Or. 591] "A. My recollection is that he said he had lost the tape or it had been misplaced."

That testimony is not sufficient to meet the Bar's burden of proof. The Bar has not proved by clear and convincing evidence that the accused intentionally failed to obey the order to produce documents and a videotape during arbitration.



IV. SANCTION

We have found the accused guilty of several violations of the Disciplinary Rules: DR 1-102(A)(2) and (4); DR 2-109(A)(1) and (2); and DR 7-102(A)(1), (2), and (5). We turn now to the task of deciding what sanction his actions warrant. We refer for assistance to the ABA Standards. See In re Bristow, 301 Or. 194, 206-08, 721 P.2d 437 (1986) (looking to ABA Standards for guidance). The ABA Standards set out the factors to consider generally in imposing sanctions, in Standard 3.0:

"(a) the duty violated;

"(b) the lawyer's mental state;

"(c) the potential or actual injury caused by the lawyer's misconduct; and

"(d) the existence of aggravating or mitigating factors."

The accused violated his duty to the legal system during the course of the Pettibon litigation, and he did so intentionally and repeatedly. He abused the legal system by filing a multitude of vexatious actions on behalf of his client. He intentionally used the legal system as a tool to harass, rather than to resolve his client's legitimate disputes. He knowingly made a false statement to the trial court. His conduct wasted a great deal of time and money for the courts, lawyers, and litigants involved.

Despite our conclusion that the accused also violated DR 1-102(A)(2) by assaulting a police officer, that violation plays no role in our assessment of the appropriate sanction, for two reasons. First, there was a lengthy delay in pursuing the violation. The accused's act occurred in 1983, but the Bar did not hold a hearing concerning it until 1989. See ABA Standard 9.32(i) (delay in disciplinary proceeding is mitigating factor). Second, the conduct was isolated. The record shows no repetition of criminal conduct by the accused, [311 Or. 592] indicating his rehabilitation in the interim. See ABA Standard 9.32(j) (interim rehabilitation is mitigating factor).

The ABA Standards provide some guidance on the appropriate sanction for the

Page 1267

accused's conduct during the Pettibon litigation:

"6.1 False Statements, Fraud, and Misrepresentation

"Absent aggravating or mitigating circumstances, upon application of the factors set out in Standard 3.0, the following sanctions are generally appropriate in cases involving conduct that is prejudicial to the administration of justice or that involves dishonesty, fraud, deceit, or misrepresentation to a court:

" * * * * *

"6.12 Suspension is generally appropriate when a lawyer knows that false statements or documents are being submitted to the court * * *, and causes injury or potential injury to a party to the legal proceeding, or causes an adverse or potentially adverse effect on the legal proceeding."

"6.2 Abuse of the Legal Process

"Absent aggravating or mitigating circumstances, * * * the following sanctions are generally appropriate in cases involving failure to expedite litigation or bring a meritorious claim, or failure to obey



any obligation under the rules of a tribunal except for an open refusal based on an assertion that no valid obligation exists:

" * * * * *

"6.22 Suspension is generally appropriate when a lawyer knows that he or she is violating a court order or rule, and causes injury or potential injury to a client or a party, or causes interference or potential interference with a legal proceeding."

In the absence of aggravating or mitigating circumstances, the accused's conduct justifies a suspension. There are four aggravating circumstances: The accused is guilty of multiple offenses, he has been disciplined previously (albeit for a different kind of conduct), 8 he testified falsely during the [311 Or. 593] disciplinary process, and he does not acknowledge the wrongful nature of his conduct. See ABA Standard 9.22(a), (f), and (g) (aggravating factors). Arguably, the accused was inexperienced in the practice of law at the time the events described in this opinion began, and his prior discipline was remote. See ABA Standard 9.32(f) and (m) (mitigating factors). Even if those are mitigating circumstances, the aggravating circumstances outweigh them.

The accused is guilty of numerous violations of the Disciplinary Rules. He engaged in a pattern of inappropriate conduct over a period of five years. That pattern of conduct, coupled with the accused's lack of candor, suggests that disbarment, or a substantial period of suspension, is needed in order to impress on the accused the necessity of complying with the Disciplinary Rules. The appropriate sanction is a three-year suspension.

The accused is suspended from the practice of law for a period of three years, effective on issuance of the appellate judgment.

[311 Or. 594] APPENDIX

INDEX OF CASES

CASE CASE NAME, NUMBER, SUMMARY OF CASE

DESIGNATION VENUE & FILING DATE

-------------------------------------------------------------------------------

Beeson 1 * Lord, Beeson, & WVA, An action by WVA, Inc., Lord, and

Inc. v. Pettibon Beeson, seeking an accounting from

A8304"02497 Pettibon of corporate assets during

(Multnomah) 4"20"83 his tenure as corporation president

from Oct. 1982 to Apr. 20, 1983, and

seeking injunctive relief.

Beeson 2 * Lord & Beeson v. Lord and Beeson sue Pettibon to have

Pettibon 83"6"27 Lord declared owner of a 1/3 interest

(Clackamas) 6"1"83 in Oregon City real property and to

require Pettibon to execute and record

the necessary documents.



Pettibon 1 Pettibon v. Beeson & Pettibon sues Beeson and Smith on a

Smith 83"6"469 $25,750 note due from the

(Clackamas) 6"28"83 Pettibon/Beeson/Smith partnership, for

an accounting for the obligation to

satisfy the amount advanced to

partnership, for breach of contract,

and for partition of real property and

distribution of partnership assets.

Pettibon 2 Pettibon v. Beeson Pettibon sues Beeson on a $218,769

83"2"02043"7 (Clark) promissory note executed on or about

"4"83 12"31"80 and for $15,000 in attorney

fees.

Pettibon 3 In Re: Willamette View Pettibon sues to have WVA, Inc.,

Associates, Inc. involuntarily declared bankrupt.

383"04295 (U.S.

District,

Bankruptcy,

Portland, OR)

12"28"83

Pettibon 4 Pettibon v. Beeson Same as Pettibon 2, except asks for

84"2"00626"2 (Clark) $35,000 in attorney fees.

3"19"84

Pettibon 5 Pettibon v. Beeson & Pettibon sues Beeson and Ratoza for

Ratoza A8404"02603 damages for breach of fiduciary duty,

(Multnomah) 4"30"84 legal negligence, negli-entrustment,

breach of contract, and interference

with actual and prospective advantage

relating to the sale of partnership

assets in Hawaii. Pettibon also

requests an accounting and winding up

of the partnership.



Bank 1 ** Bank of Oregon v. The Bank of Oregon sues to foreclose on

Beeson, Pettibon et the underlying mortgage on the

al. 84"8"142 Willamette Smith Clinic for failure to

(Clackamas) 8"10"84 make payments.

Bank 2 ** First Interstate Bank First Interstate Bank sues Pettibon and

v. Beeson & Pettibon Beeson on a promissory note for

A8408"04870 $100,000, to foreclose on a security

(Multnomah) 8"21"84 agreement on fixtures in Hawaii, and

to foreclose on Portland clinics and

the T"V Highway property.

Pettibon 6 WVA, Inc. & Pettibon Pettibon brings a stockholder derivative

v. Lord and Beeson action against Lord and Beeson for

84"1102C fraud, negligence, breach of fiduciary

(Washington) 9"17"84 duty, and breach of contract and

requests an accounting and dissolution

of WVA, Inc.

Notdurft 1 ** Notdurft v. Pettibon, Notdurft sues for strict foreclosure of

Beeson & Lord a real estate contract concerning

84"10"214 Clackamas County real property.

(Clackamas) 10"17"84

Pettibon 7 Pettibon v. Lord & Pettibon seeks a declaratory judgment

Beeson 85"0192C and injunctive relief, on the grounds

(Washington) 2"19"85 that a corporate resolution executed

on 5"31"84 provided that defendants

would forebear execution on judgments

in Beeson 1 for $15,212 and Pettibon 3

for $2,200, and that Beeson had

repudiated that agreement by notifying

Pettibon of his intent to proceed to

execution by way of garnishment or

attachment.



Pettibon 8 Pettibon v. Beeson & Same as Pettibon 7.

Lord A8505"02824

(Multnomah) 5"6"85

Grabhorn 1 Grabhorn v. Pettibon, Grabhorn sues to recover rent on T"V

Beeson & WVA, Inc. Highway property.

85"0684C(Washington)

6"5"85

Pettibon 9 Pettibon v. Beeson Pettibon sues Beeson for note due

A8507"04759 ($218,769), foreclosure, and partition

(Multnomah) 7"17"85 on Beeson's S.W. 13th Avenue clinic.

Pettibon 10 Pettibon v. Ratoza Pettibon sues Ratoza for legal

A8507"04759 negligence.

(Multnomah) 7"31"85

Pettibon 11 Pettibon v. Beeson & Pettibon sues Beeson and U.S. Creditcorp

U.S. Creditcorp for fraud, negligent

85"0957C misrepresentation, money had and

(Washington) 8"1"85 received, breach of fiduciary duty,

and rescission.

Pettibon 12 Pettibon & WVA, Inc. Same as Pettibon 6 (venue changed to

v. Lord & Beeson Multnomah).

A8509"05830

(Multnomah) 9"18"85

Pettibon 13 Pettibon v. Beeson & Pettibon sues for partnership

Lord 85"11"312 dissolution and accounting of

(Clackamas) 11"29"85 Willamette Associates, note due

($25,750), and partition of real

property located in Clackamas County.

Beeson 3 Beeson v. Pettibon Beeson sues to recover $11,000 principal

A8609"05459 and $7,030 interest on a note executed

(Multnomah) 9"9"86 on 9"4"80, guaranteed by Pettibon.



Pettibon 14 American Chiropractic Pettibon sues Beeson for interference

Clinic v. Beeson with actual and prospective advantage,

87"101 RE(U.S. defamation, and unlawful trade

District, Portland, practices.

OR) 1"30"87

Pettibon 15 Pettibon v. Beeson Pettibon seeks damages from Beeson as

A8703"01765 managing general partner of the

(Multnomah) 3"18"87 Willamette View Chiropractic Center

partnership, for breach of fiduciary

duty, and negligence. Pettibon also

seeks a partnership dissolution and

accounting.

* Pettibon filed counterclaims.

** Pettibon filed cross-claims.

[311 Or. 599] UNIS, Justice, concurring in part and concurring in the sanction.

The majority holds that the misdemeanor assault committed by the accused while he was intoxicated in 1983--over seven and one-half years ago--is professional misconduct in violation of DR 1-102(A)(2) because it "reflects adversely on his fitness to practice law." I disagree. Nevertheless, I concur in the sanction imposed by the court, and join all of the majority's opinion except that portion of Part III relating to DR 1-102(A)(2).

DR 1-102(A)(2) provides that "[i]t is professional misconduct for a lawyer to * * * [c]ommit a criminal act that reflects adversely on the lawyer's honesty, trustworthiness or fitness to practice law." In this case, the sole focus of our inquiry is the phrase "fitness to practice law."

Many kinds of criminal conduct reflect adversely on fitness to practice law. Offenses such as fraud, embezzlement, and wilful failure to file income tax returns are illustrative. Some criminal offenses, however, do not implicate fitness to practice law. DR 1-102(A)(2) does not suggest, nor does the majority hold, that lawyers should be disciplined for all forms of criminal conduct. See 311 Or. at 589, 815 P.2d at 1265. As the majority states, "[f]or example, a misdemeanor assault arising from a private dispute would not, in and of itself, violate [DR 1-102(A)(2) ]." 311 Or. at 589, 815 P.2d at 1265.

Thus, although a lawyer is personally answerable to the entire criminal law, a lawyer is professionally answerable only for criminal offenses that indicate lack of those characteristics relevant to law practice.

"Fitness to practice law," as that phrase has meaning in the context of DR 1-102(A)(2), refers to those characteristics relevant to law practice. It obviously includes more than technical legal skills. It encompasses respect for the legal process and "good moral character," which is defined as "those qualities of truth-speaking, of a high sense of honor, of granite discretion,

Page 1271



of the strictest observance of fiduciary responsibility." In re Taylor, 293 Or. 285, 288 n. 2, 647 P.2d 462 (1982) (quoting Schware v. Board of Bar Examiners, 353 U.S. 232, 247, 77 S.Ct. 752, 760-61, 1 L.Ed.2d 796 (1957) (Frankfurter, J., concurring)).

[311 Or. 600] In assessing whether to discipline a lawyer under DR 1-102(A)(2) for criminal conduct, the court should construe the criminal conduct provision of DR 1-102(A)(2), in my view, very much like the "good moral character" requirement for bar applicants in BR 7.5 1 and ORS 9.220(2)(b). 2 The fitness assessments of admitted lawyers through the disciplinary proceedings and the fitness assessments made of applicants through the good moral character requirement should be in harmony. 3 "Fundamentally, the question involved in both situations is the same--is the applicant for admission or the attorney sought to be disciplined a fit and proper person to be permitted to practice law * * *." Hallinan v. Committee of Bar Examiners, 65 Cal.2d 447, 55 Cal.Rptr. 228, 233, 421 P.2d 76, 81 (1966). The "fitness to practice law" requirement in the disciplinary rule and the "good moral character" requirement for bar admissions are designed principally to protect the public from unethical lawyers who victimize them or abuse the legal process. It is important to protect the public equally from experienced unfit lawyers and from new unfit lawyers.

In In re Fine, 303 Or. 314, 317, 736 P.2d 183 (1987), this court recognized that "[t]he statutory and administrative rules for admission to practice law in Oregon conform to the constitutional standard established by Schware [v. Board of Bar Examiners, supra ]." In Schware, the Supreme Court of the United [311 Or. 601] States held that the good moral character requirement for admission to the Bar is constitutionally permissible as long as pre-admission conduct which is the basis for denying bar admission has a "rational connection with the applicant's fitness or capacity to practice law." 353 U.S. at 239, 77 S.Ct. at 756. In In re Fine, supra, this court said that evidence of past acts or conduct may be relevant to the issue of whether a bar applicant is presently of good moral character "if rationally connected to [the] applicant's fitness to practice law." 303 Or. at 317, 736 P.2d 183.

Deciding whether particular criminal conduct is rationally connected with a lawyer's or bar applicant's fitness to practice law, however, can be difficult. It is a fact-specific inquiry. The concepts of "fitness to practice law" and "good moral character" are phrases that defy precise definition. The nature and gravity of the criminal act, the motivation of the lawyer or applicant in committing the crime, and the circumstances surrounding the crime are relevant considerations.

If admitted lawyers and bar applicants are treated similarly, then it follows that if a past criminal offense committed by a bar applicant would not, of itself, preclude a

Page 1272

finding of present good moral character, the same act if committed by an admitted lawyer should not, of itself, establish present unfitness to practice law. Conversely, if a past criminal act committed by an applicant would, of itself, establish lack of good moral character, the same misconduct if committed by an admitted lawyer should, of itself, establish present unfitness to practice law.

Turning now to the present case, I do not believe that the 1983 misdemeanor assault is a criminal act that reflects adversely on the accused's "fitness to practice law," as that catch-all phrase has meaning in the context of DR 1-102(A)(2). The assault, standing alone, does not indicate lack of those characteristics relevant to the practice of law. If committed by a bar applicant, it would not, of itself, preclude a finding of good moral character. The assault was an isolated incident, not involving a fixed pattern of misbehavior, and did not involve moral turpitude. There is nothing in the record that suggests that the assault is symptomatic of the accused's character and behavior. The assault was committed while the accused was intoxicated; it was committed while the accused's faculties and good judgment were unquestionably impaired. The accused, of [311 Or. 602] course, was personally answerable to the



criminal law and the civil law for his misconduct. He should not, however, be held professionally answerable for the misdemeanor assault, because there is no rational connection between that isolated, dated offense and his fitness to practice law.

For the foregoing reasons, I join all of the majority's opinion except that portion of Part III relating to DR 1-102(A)(2). I concur in the sanction imposed by the majority.

---------------

1 DR 1-102(A)(4) originally was adopted as DR 1-102(A)(5). In 1986, DR 1-102 was amended, changing the subparagraph number from "(5)" to "(4)." The text of the rule remained the same.

2 The parties voluntarily dismissed Pettibon 7 shortly after the trial court granted the motion to change venue. In Pettibon 6, there was no order of dismissal entered, except for an order dismissing Lord, which was entered about 16 months after the trial court granted the motion to change venue.

3 Senior Judge Charles S. Crookham, who had been a presiding judge in Multnomah County Circuit Court, testified that the court conducted "Rule 4" hearings to determine the status of pending cases that were not at issue. "Rule 4" referred to the number of the local rule.

4 Judge Crookham appears to have meant Pettibon 9, rather than Grabhorn 1, because he stated that all the cases that he listed were brought by Pettibon as plaintiff. We find that Judge Crookham misspoke and that he meant to include Pettibon 9 rather than Grabhorn 1.

5 The accused misstated the filing date of Case No. 8306-04131. He filed it on June 29, 1983, not March 23, 1984. The Bar concedes that his misstatement of the filing date was inadvertent. Case No. 8306-04131 was not part of the Pettibon litigation.

6 The accused testified that he did not form any culpable intent. See ORS 161.125 (voluntary intoxication can "negative an element of the crime charged"). The jury at his trial for assault found to the contrary, and so do we.

7 See also ORS 9.220(2)(b) (applicant for admission as attorney may lack "good moral character" if conduct would cause a reasonable person to have substantial doubts about applicant's respect for the rights of others and for the laws of the state).

8 In re Craig White, 1 DB Rptr 174 (1986) (accused received a public reprimand for having accepted a clearly excessive fee).

1 BR 7.5 requires that a bar applicant establish by clear and convincing evidence that he or she has the requisite good moral character and general fitness to practice law, and that his or her admission to the practice of law in this state will not be detrimental to the administration of justice or the public interest.

2 ORS 9.220(2)(b) provides:

"[T]he lack of 'good moral character' may be established by reference to acts or conduct that reflect moral turpitude or to acts or conduct which would cause a reasonable person to have substantial doubts about the individual's honesty, fairness and respect for the rights of others and for the laws of the state and nation. The conduct or acts in question should be rationally connected to the applicant's fitness to practice law." (Emphasis supplied.)

" 'Moral turpitude' * * * imports an act of baseness, vileness or depravity in the duties which one person owes to another or to society in general which is contrary to the usual, accepted and customary rule of right and duty which a person should follow." ABA Model Code of Professional Responsibility Canon 1 n. 13 (1986); Maryland Attorney Grievance Commission v. Walman, 280 Md. 453, 459, 374 A.2d 354, 358 (1977).

3 The court should be guided by the treatment afforded bar applicants who engage in similar misconduct. See In re Jaffee, 311 Or. 159, 806 P.2d 685 (1991) (the Board of Bar Examiners should use this court's prior disciplinary cases resulting in disbarment as a guide in assessing present moral character in admission cases).





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