Case Title: Disciplinary Counsel v. Cowden

Citation: 2012-Ohio-877

Docket Number: 2011-1047

State: ohio

Court: Ohio Supreme Court

Date: 2012-03-06T00:00:00Z

Document:
[Until this opinion appears in the Ohio Official Reports advance sheets, it may be cited as 
Disciplinary Counsel v. Cowden, Slip Opinion No. 2012-Ohio-877.] 
 
 
 
NOTICE 
This slip opinion is subject to formal revision before it is published in 
an advance sheet of the Ohio Official Reports.  Readers are requested 
to promptly notify the Reporter of Decisions, Supreme Court of Ohio, 
65 South Front Street, Columbus, Ohio 43215, of any typographical or 
other formal errors in the opinion, in order that corrections may be 
made before the opinion is published. 
 
SLIP OPINION NO. 2012-OHIO-877 
DISCIPLINARY COUNSEL v. COWDEN. 
DISCIPLINARY COUNSEL v. NAGORNEY. 
[Until this opinion appears in the Ohio Official Reports advance sheets,  
it may be cited as Disciplinary Counsel v. Cowden,  
Slip Opinion No. 2012-Ohio-877.] 
Attorneys—Misconduct—Conflicts of interest with clients—Misuse of confidence 
or secret of client—Stayed suspensions. 
(No. 2011-1047—Submitted August 8, 2011—Decided March 6, 2012.) 
ON CERTIFIED REPORT by the Board of Commissioners on Grievances and 
Discipline of the Supreme Court, No. 10-033. 
__________________ 
Per Curiam. 
{¶ 1} Respondents, Gerald Wayne Cowden, Attorney Registration No.  
0024360, and Frank Paul Nagorney, Attorney Registration No.  0010933, both of 
Cleveland, Ohio, were admitted to the practice of law in Ohio in 1975.  Cowden is 
a named partner in the firm of Cowden, Humphrey & Sarlson (“CHS”), where 
Nagorney is also a partner.  In April 2010, relator, disciplinary counsel, filed a 
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complaint against Cowden, Nagorney, and a third attorney from their firm, 
alleging that they had violated multiple Disciplinary Rules of the Code of 
Professional Responsibility while representing several clients in a series of 
complex business deals. 
{¶ 2} A panel of the Board of Commissioners on Grievances and 
Discipline found that Cowden had engaged in conduct that adversely reflects on 
his fitness to practice law by accepting employment when the exercise of his 
professional judgment may be affected by his personal interests, entering into a 
business transaction with a client without obtaining the informed consent of the 
client, and failing to disclose potential conflicts of interest before accepting 
employment that was likely to compromise his independent judgment in 
representing another client. 
{¶ 3} The panel also found that Nagorney had engaged in conduct that 
adversely reflects on his fitness to practice law by using a confidence or secret of 
a client to the disadvantage of a client and failing to disclose potential conflicts of 
interest before accepting employment that was likely to compromise his 
independent judgment in representing another client.  The panel recommends that 
the remaining charges against Cowden and Nagorney be dismissed, and has 
unanimously dismissed all of the charges against a third partner. 
{¶ 4} As the sanctions for their misconduct, the panel recommended that 
Cowden be suspended for one year and that Nagorney be suspended for six 
months but that both sanctions be stayed on the condition that they commit no 
further misconduct.  The board adopted the panel’s findings of fact and 
misconduct, as well as the recommended sanctions, as do we. 
Misconduct 
{¶ 5} 
Brian Stuffleben was the president, majority owner, and sole 
director of Technology Strategies, Inc. (“Old TSI”), a software technology 
company that provided registration information and services to Fortune 500 
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companies.  Old TSI began to experience financial difficulties in 1997 and faced a 
number of lawsuits arising from the company’s acquisition of a marketing firm.  
In early 1999, Stuffleben retained Cowden to obtain advice about the viability of 
the company. 
{¶ 6} Cowden negotiated a series of forbearance agreements related to 
Stuffleben’s personal guaranty in excess of $1 million to Huntington National 
Bank and later introduced Stuffleben to Lou Fisi and Dean Ganzhorn, who were 
both Cowden’s clients and his partners in a venture-capital firm called Hockey 
Stick Investments.  Cowden then recommended that Old TSI enter into a secured-
party sale with Huntington Bank as a way to reduce Stuffleben’s debt, maintain 
control of the company, and obtain an infusion of capital.  The secured-party sale 
involved Huntington’s foreclosure on the assets of Old TSI and sale of those 
assets to TSI Holdings Limited (“Limited”), which was wholly owned by Hockey 
Stick, for $50,000 at closing, two $25,000 installments, and a $250,000 note 
personally guaranteed by Stuffleben.  The assets would then be sold to TSI 
Holdings, Inc. (“New TSI”) in exchange for a warrant for 30 percent of New 
TSI’s stock and a $300,000 note.  This plan would reduce Stuffleben’s personal 
guarantee to the bank from $1.1 million to $250,000 and reduced his ownership 
interest from 94 percent of Old TSI to 64 percent of New TSI.  Cowden 
negotiated the terms of this secured-party sale as counsel for Old TSI, New TSI, 
Limited, and Hockey Stick. 
{¶ 7} Cowden instructed Stuffleben to speak with attorney Robert 
Vilsack about the transaction, but the terms of the secured-party sale had already 
been agreed upon, and Cowden was recruiting Vilsack to work for his firm.  
Vilsack represented New TSI at the closing of the secured-party sale, and Cowden 
represented both Old TSI and Limited.  Although the panel found that Stuffleben 
was aware that that Cowden owned a one-third interest in Hockey Stick and 
would therefore have a potential ownership interest in New TSI, the panel found 
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that Cowden had failed to fully disclose the potential conflicts of interest inherent 
in his investment and had failed to strongly advise Stuffleben to seek independent 
counsel.  Within months of this restructuring, Limited defaulted on a $25,000 
payment to Huntington that eventually permitted Huntington to take a $227,000 
judgment against Stuffleben. 
{¶ 8} In December 2000, New TSI needed additional working capital.  
Fisi instructed Nagorney to draft a factoring agreement between New TSI and 
Ganzcorp Investments, a company owned by Ganzhorn.  Ganzcorp was a client of 
Cowden’s firm, and Cowden owned a 7.5 percent interest in the company.  
Nagorney, who was unaware of Cowden’s relationship to Ganzcorp, represented 
New TSI in the factoring agreement, and Ganzhorn negotiated on behalf of 
Ganzcorp. 
{¶ 9} Nagorney presented the factoring agreement to Stuffleben during a 
Christmas party in 2000 and instructed him to sign it.  Stuffleben questioned a 
portion of the agreement that required him to personally guarantee the loan.  
When Nagorney advised Stuffleben that the deal could not be completed without 
the personal guarantee, Stuffleben signed the agreement.  The factoring agreement 
was, in essence, a loan that enabled New TSI to continue operations for a short 
period of time.  By February 2001, New TSI was again experiencing financial 
difficulties, and the following month investors learned that the company had not 
been withholding payroll taxes and remitting them to the appropriate authorities. 
{¶ 10} In late March 2001, Cowden advised Stuffleben that Hockey Stick 
would no longer invest in New TSI and that Stuffleben would need to retain new 
counsel because Cowden had a conflict.  Shortly thereafter, Ganzcorp sent New 
TSI and Stuffleben a letter, drafted by Nagorney, demanding that they pay 
$151,900.53 to Ganzcorp under the factoring agreement that Nagorney had 
prepared while representing New TSI.  Nagorney then arranged for another law 
firm to represent Ganzcorp against New TSI and Stuffleben for breach of the 
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factoring agreement and discussed the contents of that agreement with Ganzcorp’s 
new counsel.  Pursuant to the factoring agreement that Nagorney drafted as the 
attorney for New TSI, Ganzcorp obtained a cognovit judgment and lien against 
New TSI and Stuffleben.  Acting on Ganzcorp’s behalf, Nagorney sought to 
collect the judgment and the costs of obtaining it from his former client—New 
TSI. 
{¶ 11} Based upon the factual findings made by the panel, adopted by the 
board, and summarized above, the board found that Cowden’s conduct violated  
DR 1-102(A)(6) (prohibiting a lawyer from engaging in conduct that adversely 
reflects on the lawyer’s fitness to practice law), 5-101(A)(1) (prohibiting a lawyer 
from accepting employment if the exercise of the lawyer’s professional judgment 
will be or reasonably may be affected by the lawyer’s personal interests), 5-104 
(prohibiting a lawyer from entering into a business transaction with a client if they 
have differing interests unless the client has consented after full disclosure), and 
5-105(A) (requiring a lawyer to disclose potential conflicts of interest before 
accepting employment that is likely to compromise the lawyer’s independent 
judgment on a client’s behalf) and that Nagorney’s conduct violated DR 1-
102(A)(6), 4-101(A) (defining “confidence” and “secret”), and 5-105(A). 
{¶ 12} The board recommends that we dismiss allegations that Cowden 
violated  DR 1-102(A)(6), 5-101(A)(1), 5-104, and 5-105(A) with respect to the 
enforcement of the factoring agreement against New TSI, as well allegations that 
Nagorney violated DR  5-101(A)(1), 1-102(A)(6), 4-101(A), 5-101(A)(1), and 5-
105(A) by enforcing the factoring agreement against New TSI and advising Fisi 
in the completion of Internal Revenue Service forms related to New TSI’s tax 
delinquency. 
{¶ 13} None of the parties have objected to the board’s report.  In 
accordance with the board’s findings of fact and misconduct, which we adopt, we 
find that Cowden’s conduct violated DR 1-102(A)(6), 5-101(A)(1), 5-104, and 5-
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105(A) and that Nagorney’s conduct violated DR 1-102(A)(6) and 5-105(A).  We 
also find that Nagorney violated DR 4-101(B)(2) (prohibiting a lawyer from using 
a confidence or secret of a client to the disadvantage of a client), which the relator 
and board paraphrased while mistakenly citing DR 4-101(A).  We also dismiss 
additional allegations that Cowden violated DR 1-102(A)(6), 5-101(A)(1), 5-104, 
and 5-105(A) and allegations that Nagorney violated DR 1-102(A)(6), 4-101(A), 
5-101(A)(1), and 5-105(A) in enforcing the factoring agreement against New TSI 
and advising Fisi in the completion of Internal Revenue Service forms related to 
New TSI’s tax delinquency. 
Sanction 
{¶ 14} When imposing sanctions for attorney misconduct, we consider 
relevant factors, including the ethical duties that the lawyer violated and the 
sanctions imposed in similar cases.  Stark Cty. Bar Assn. v. Buttacavoli, 96 Ohio 
St.3d 424, 2002-Ohio-4743, 775 N.E.2d 818, ¶ 16.  In making a final 
determination, we also weigh evidence of the aggravating and mitigating factors 
listed in Section 10(B) of the Rules and Regulations Governing Procedure on 
Complaints and Hearings Before the Board of Commissioners on Grievances and 
Discipline (“BCGD Proc.Reg.”).  Disciplinary Counsel v. Broeren, 115 Ohio 
St.3d 473, 2007-Ohio-5251, 875 N.E.2d 935, ¶ 21.   
{¶ 15} As aggravating factors, the board found that both Cowden and 
Nagorney engaged in a pattern of misconduct involving multiple offenses.  See 
BCGD Proc.Reg. 10(B)(1)(c) and (d).  Mitigating factors include that neither 
Cowden nor Nagorney has a prior disciplinary record and that neither acted with a 
selfish motive.  BCGD Proc.Reg. 10(B)(2)(a) and (b).  They have acknowledged 
the wrongful nature of their conduct, cooperated in the disciplinary proceedings, 
and demonstrated that apart from their current misconduct, they have outstanding 
reputations in the legal community and the community at large.  BCGD Proc.Reg. 
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10(B)(2)(d) and (e).  Moreover, the board found that both respondents have taken 
steps to ensure that their misconduct will not be repeated. 
{¶ 16} In his closing argument before the panel, relator argued in favor of 
one-year stayed suspension for both Cowden and Nagorney, while Cowden 
sought a six-month stayed suspension, and Nagorney sought dismissal of the 
charges against him, or at most a public reprimand.  Without explaining their 
rationale, the panel and board recommend a one-year stayed suspension for 
Cowden and a six-month stayed suspension for Nagorney. 
{¶ 17} Cowden and Nagorney failed to adequately disclose potential 
conflicts of interest that were likely to compromise their independent judgment 
and failed to obtain their clients’ informed consent with respect to their 
representation of Old TSI, New TSI, and the multiple entities involved in 
restructuring and financing those companies.  Nagorney drafted a demand letter to 
New TSI on behalf of Ganzhorn, in which Ganzcorp sought to enforce the 
factoring agreement that Nagorney had drafted while serving as counsel for New 
TSI.  He also assisted a New TSI officer in completing IRS forms related to his 
role in the company’s payroll-tax delinquency.  A malpractice claim arising from 
Cowden’s and Nagorney’s involvement in these matters was settled in 2007. 
{¶ 18} The board found, however, that Stuffleben had some knowledge of 
Cowden’s financial interest in the corporate restructuring before it occurred.  And 
while we do not condone Cowden’s and Nagorney’s actions, it is not entirely 
clear that Stuffleben, Old TSI, or New TSI suffered harm as a result of their 
conduct. 
{¶ 19} Stuffleben testified that before he retained Cowden, Old TSI 
experienced financial difficulties arising from its takeover of a business that had 
substantial, uncollectable accounts receivable.  Old TSI and Stuffleben, as a 
personal guarantor, owed more than $1 million to Huntington Bank.  Cowden’s 
restructuring of that debt conferred substantial benefits by permitting the business 
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to continue its operations with a reduced debt load, and reducing Stuffleben’s 
personal guaranty from approximately $1.1 million to just $250,000. 
{¶ 20} The infusion of capital from other entities through the restructuring 
and factoring agreements permitted Stuffleben to remain in business, maintain 
majority control of the new company, and continue to draw a salary and benefits 
for more than a year.  When the business failed, Stuffleben was permitted to 
remove a number of corporate assets, including computer servers and the client 
database, and use them to start a new business.  Thus, Stuffleben received 
substantial benefits from the representation. 
{¶ 21} We have imposed stayed suspensions of varying lengths for 
comparable misconduct in the past.  E.g., Disciplinary Counsel v. McNamee, 119 
Ohio St.3d 269, 2008-Ohio-3883, 893 N.E.2d 490, ¶ 33, 35 (imposing a one-year 
stayed suspension on an attorney who represented multiple parties to a business 
venture in which he also had a significant financial interest without making the 
proper disclosures); Cuyahoga Cty. Bar Assn. v. Schmelzer, 84 Ohio St.3d 382, 
704 N.E.2d 243 (1999) (imposing a six-month stayed suspension on an attorney 
who initially represented a potential purchaser of real property, but who upon 
determining that the sale to a third party would be more advantageous to the 
seller, began to represent the seller). 
{¶ 22} Having considered the conduct of Cowden and Nagorney, the 
aggravating and mitigating factors present, as well as the sanctions imposed in 
similar cases, we adopt the sanctions recommended by the panel and board. 
{¶ 23} Accordingly, Gerald Wayne Cowden is suspended from the 
practice of law in Ohio for one year and Frank Paul Nagorney is suspended from 
the practice of law in Ohio for six months.  These suspensions, however, will be 
stayed on the condition that Cowden and Nagorney commit no further acts of 
misconduct.  If either Cowden or Nagorney fails to comply with this condition, 
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his stay will be lifted, and he will serve the full term of his suspension.  Costs are 
taxed to respondent. 
Judgment accordingly. 
O’CONNOR, C.J., and PFEIFER, LUNDBERG STRATTON, O’DONNELL, 
LANZINGER, CUPP, and MCGEE BROWN, JJ., concur. 
__________________ 
Jonathan E. Coughlan, Disciplinary Counsel, and Joseph M. Caligiuri, 
Senior Assistant Disciplinary Counsel, for relator. 
Hahn, Loeser & Parks and Deborah A. Coleman, for respondent Gerald 
W. Cowden. 
Richard C. Alkire and Dean C. Nieding, for respondent Frank P. 
Nagorney. 
______________________