Title: In re Cobb

State: oregon

Issuer: Oregon Supreme Court

Document:

FILED: July 17, 2008
IN THE SUPREME COURT OF THE STATE OF OREGON
In re:  Complaint as to the Conduct of
MONTGOMERY W. COBB,
Accused.
(OSB 05-07; SC S054584)
En Banc
On review of the decision of a trial panel of
the Disciplinary Board.
Argued and submitted March 6, 2008.
Montgomery W. Cobb, Newberg,  in propria
persona, argued the cause and filed the briefs.  With him on the briefs
were Eric M. Bosse and Katharine W. Mathews, Newberg.
Stacy J. Hankin, Assistant Disciplinary Counsel,
Lake Oswego, filed the brief for the Oregon State Bar.
PER CURIAM
The complaint
is dismissed.
PER CURIAM
The accused in this lawyer disciplinary
case represented entities that invested and participated in a tax avoidance enterprise
created by Walter J. Hoyt III (Hoyt). (1)
The Bar's allegations against the accused fall into two categories.  The first
set of charges alleges that the accused committed ethical violations in his
representation of Hoyt & Sons Master Limited Partnership (MLP), a Hoyt
entity that was a debtor in a Chapter 7 bankruptcy. (2)
The Bar alleges that MLP falsely reported to the bankruptcy court that it had
no significant assets or income, when, in fact, MLP owned promissory notes, had
the right to receive payments on those notes from investor partnerships, and
was receiving or diverting those payments.  The Bar charges that the accused
made false representations and acted dishonestly by filing MLP's false
financial disclosure statement and schedules and by giving false answers to
questions posed by the bankruptcy trustee; that the accused engaged in conduct
prejudicial to the administration of justice by failing to file both an amended
financial disclosure statement setting forth the existence of the notes and
payments and a statutorily required statement of his fees; and that the accused
failed to call upon MLP to rectify its bankruptcy fraud.
As we will discuss, we conclude that
the Bar did not prove its first set of charges by clear and convincing
evidence.  In large part, our conclusions rest on the Bar's failure to prove
that MLP had the right to receive note payments from the investor partnerships
and that the accused knowingly made false statements about those notes and payments. 

 The second set of charges that the
Bar filed against the accused alleges that the accused violated conflict of
interest rules.  For several years before the accused represented MLP, he
represented the partnerships that had invested in the Hoyt enterprise.  The Bar
charges that the accused had a conflict of interest in undertaking
representation of MLP because the interests of MLP and the investor
partnerships were actually or potentially adverse and the accused nevertheless
(1) simultaneously represented both; and (2) continued to represent the
investor partnerships after he withdrew from his representation of MLP.  As we
will explain, we conclude that the interests of MLP and the investor
partnerships were not actually adverse when the accused initially agreed to
represent MLP in the Chapter 7 bankruptcy and that the accused appropriately advised
his clients of the potential for conflict and obtained their consent to his continued
representation.  We conclude that the Bar did not prove its second category of
charges by clear and convincing evidence, and we therefore dismiss the Bar's
complaint.
I.  FACTS
A.        The Hoyt Enterprise
Hoyt began his enterprise in
the early 1970s.  That enterprise was intended to operate in the following fashion. 
Each individual investor would be a limited partner in an investor partnership
that would include approximately 30 other individual investors.  The investor
partnerships would purchase cattle (3)
from Hoyt & Sons Ranches (Hoyt & Sons), entitling the partnerships to
tax depreciation deductions that would flow through to the individual investors. 
The investor partnerships would purchase the cattle by making small cash
investments and executing promissory notes to Hoyt & Sons for the remainder. (4)
Another Hoyt entity, Laguna Tax Service, would prepare the individual
investors' tax returns.  The individual investors would pay 75 percent of their
resulting tax savings toward their partnership note obligations and retain 25
percent of those savings for themselves.  The money that the individual
investors paid would be dispersed to various other Hoyt entities that managed
and maintained the cattle herds.  After 15 years, the note obligations would be
paid in full, and the cattle would be sold.   
In the beginning, the Hoyt
enterprise likely operated as we have described.  To what extent it continued
to do so over time is unclear, and that lack of clarity has a significant
effect on the result in this proceeding.
In the late 1980s or early 1990s,
Hoyt & Sons was liquidated.  At about that same time, Hoyt created MLP and
intended to transfer the promissory notes made payable to Hoyt & Sons to
that new entity.  In approximately 1991, the Internal Revenue Service (IRS)
began to freeze the tax refunds that individual investors had been receiving,
and from that time forward, instead of making payments from expected refunds,
investors made payments from their own funds.  Whether Hoyt actually transferred
the notes to MLP for consideration, whether the notes were enforceable
obligations of the investors, and whether the payments by investors in 1996 and
1997 were payments on the notes or contributions to their partnerships to cover
the costs of maintaining their herds are important issues in this case.
Hoyt was the creator and promoter of
the enterprise we have described.  He was also the managing partner of all the
entities material to this case, including MLP and the investor partnerships.
B. The Accused's Representation of Investors and Investor
Partnerships
The accused's association with Hoyt's
enterprise began in 1994 when he was retained by the investor
partnerships to represent a number of the individual investors in test cases
against IRS personnel asserting that they had violated the investors'
constitutional rights. (5)
When the accused undertook that representation, he thought that the Hoyt
organization was a legitimate for-profit operation.  See Bales v. Commissioner,
58 TCM (CCH) 431, 445 (1989) (tax court concluded that Hoyt business was
"a quality operation").  Shortly thereafter, the accused undertook
representation of investor partnerships to challenge the disallowance of
deductions by the IRS in a number of administrative proceedings. (6)
And, in 1995, the accused represented one of the investor partnerships in a
federal court test case, again challenging the IRS disallowance of deductions.
In all those instances, the accused
represented individual investors or investor partnerships, usually in
litigation, for specific limited purposes.  The accused never served as
personal or general business counsel for Hoyt or any of his entities; Hoyt
retained other counsel to perform those roles.
C.  Chapter 11 Bankruptcy Proceeding
In 1995, one of the many entities that
Hoyt had created to carry out his enterprise, Hoyt & Sons Ranch Properties
(Ranch Properties), filed a Chapter 11 voluntary bankruptcy.  Ranch Properties
leased ranch lands to another Hoyt entity, Hoyt & Sons Management Company
(Management Company), which grazed cattle owned by the investor partnerships on
the ranch lands.  The Chapter 11 bankruptcy trustee asserted a landlord's lien
on the cattle and threatened foreclosure.  The investor partnerships engaged
the accused to protect their cattle from the trustee's seizure and sale. 
Raymond Jackson, a California bankruptcy attorney with 30 years' experience,
represented Management Company.  Jackson and the accused brokered a settlement
agreement with the Chapter 11 trustee that required various Hoyt entities, including
MLP, to make payments to the bankruptcy estate over time.  To convince the
trustee to accept that agreement, Jackson and the accused submitted a draft
budget entitled "Management Co and MLP Budget," which showed "monthly
partnership income" of $240,000 per month.
D.  Chapter 7 Bankruptcy Proceeding
In 1996, several individual
investors, represented by attorney Eric Derbes, filed an action in Louisiana
against Hoyt, Management Company, and MLP, and obtained an $11 million default
judgment against them.  
On February 24, 1997, the Derbes
plaintiffs filed involuntary petitions in bankruptcy for Management Company and
MLP, in an attempt to force them to liquidate their assets to pay the Derbes
judgment.  Hoyt hired Jackson, the attorney for Management Company in the
Chapter 11 bankruptcy, to represent MLP.  Jackson planned to assert a
jurisdictional defense known as the "farmer defense," a defense under
11 USC section 303(a), which provides that farmers cannot be forced into
involuntary bankruptcy.  Successful assertion of that defense would avert
appointment of a Chapter 7 trustee and, therefore, lessen the likelihood that a
trustee would assert control over and require liquidation of the herds. 
Jackson asked the accused to serve as local counsel for the debtors in the
Chapter 7 proceeding.  The accused agreed, thinking that assertion of the
farmer defense and dismissal of the Chapter 7 bankruptcy would be in the
interests of his investor partnership clients, and he filed an answer on behalf
of MLP raising the farmer defense.
In May 1997, Jackson drafted an
affidavit for signature by Dave Barnes, a manager in the Hoyt enterprise, in
support of MLP's motion to dismiss.  The affidavit stated that MLP was in the
business of buying and selling cattle, that it had earned gross income in the 12
months preceding February 1997 of approximately $1.4 million, and that its
expenses had exceeded its income during that period.  Jackson did not finalize or
file the affidavit, however, because Hoyt instructed Jackson not to assert the
farmer defense and insisted that MLP was not conducting business and had no
assets or income.  On June 5, 1997, the bankruptcy court issued an uncontested
"order for relief."  See 11 USC § 303(h) (1997) (providing for
entry of order for relief against debtor in involuntary bankruptcy).  Once that
order issued, MLP was required to cease business, and its income and assets
became the property of the bankruptcy estate subject to the control of the
trustee of the estate.  See 11 USC § 303(f) (1997) (debtor's business
may continue until entry of order for relief).  In this case, the court
appointed the United States Trustee, Jan Ostrovsky, and his two assistant
trustees, Neal Jackson and Pamela Griffith, to perform that role.  All three
were experienced attorneys.
E.  The Accused Seeks to Withdraw
When Hoyt prevented his attorneys
from asserting the farmer defense, he also instructed the accused to withdraw. 
On June 11, 1997, the accused filed such a motion, together with a supporting
affidavit indicating the limited capacity in which he had been retained:
"1.  I am one of the attorneys for the debtor herein.
"2.  I was retained by the debtor in this matter on a
temporary basis to facilitate filing of initial pleadings and early appearances
in this case, only.  I was not retained to permanently represent the debtor in
this matter.
"3.  I have now been instructed by W.J. Hoyt III,
general partner of the debtor, to take no further action in this matter and to
withdraw as counsel of record."
The bankruptcy judge did not grant the accused's motion and
instead prevailed upon him to continue in his capacity as local counsel to
assist the court in administration of the case.  The accused recognized that
his continued representation of the investor partnerships potentially could
pose a conflict of interest.  In July 1997, the accused wrote a letter to Hoyt and
three of Hoyt's independent attorneys, advising them that he had a potential
conflict of interest and seeking their "advice and assistance in
determining the appropriate role for me in these cases."
F.  The Accused Files Debtor's
Financial Disclosure Statement and Fails to File his  Report of Attorney Fees
The order for relief that the
bankruptcy court entered on June 5, 1997, required MLP to file a financial
disclosure statement with attached schedules listing its income and assets. 
Jackson prepared the documents, had Barnes, a Hoyt manager, sign them, and
forwarded them to the accused.  The accused briefly reviewed the documents, and
an assistant in his firm filed them.  The bankruptcy court rejected the
attached schedules because they were on the wrong form, and, after receiving
reformatted schedules from Barnes, a secretary in the accused's office refiled
them.  Neither the accused nor anyone in his firm signed the financial
disclosure statement or the schedules.
In
bankruptcy cases, a lawyer is required to file, in accordance with 11 USC
section 329, a statement disclosing any compensation paid or agreed to be paid,
and the source of the compensation, for services rendered in connection with
the bankruptcy.  See also Federal Rule of Bankruptcy Procedure (FRBP) 2016(b) (1997) (procedural rule
relating to filing of statements under Section 329).  A lawyer must file the
statement, referred to as a 329 statement, within 15 days after the order for
relief is issued and must file supplemental statements within 15 days after any
payment or agreement not previously disclosed.  Id.  Jackson sent his
initial 329 statement to the accused for filing.  The accused filed Jackson's
329 statement along with MLP's financial disclosure statement, but did not file
a 329 statement of his own.
Other
than filing MLP's answer, financial disclosure statement and schedules, the
accused did minimal work for MLP in the Chapter 7 bankruptcy.  The accused was,
however, very busy with his representation of the investor partnerships in the
Chapter 11 proceeding and in the administrative and federal court tax cases.
G.        The Bankruptcy Trustee Obtains and Seeks Information
About Notes and Fees
In August 1997, Jensen, an assistant
United States Trustee, conducted a creditors' meeting pursuant to 11 USC section
341.  At that meeting, Jensen specifically asked Hoyt if MLP had any interest
in contracts receivable, promissory notes, or "the right to receive
payment from any source."  Hoyt responded that MLP had "a book of
accounts of notes receivable" but that the obligors had stopped paying
those notes and they were not collectible.  Jackson, who was present as
attorney for MLP, also indicated that he was aware of the notes and that the
obligors had stopped making payment.  During the Section 341 hearing, Jensen
encouraged Hoyt to consult with Jackson to see whether the notes should be
listed in the schedules, "so that the trustee can make an independent
determination as to whether or not they are viable."
On September 4, 1997, Jensen wrote to
Jackson and the accused, asking that MLP file amended schedules setting forth
the existence of the notes and requesting information about transfers into or
out of MLP during the preceding four years.  Jensen also specifically asked for
a description of the attorneys' fee arrangements.  
That letter placed MLP and its
attorneys in a bit of a quandary as to how to accurately report MLP assets and
income.  At times, even after the bankruptcy court had issued the order for
relief, Hoyt had insisted that MLP had assets to protect and that he wished to
proceed with the farmer defense.  At other times, Hoyt had declared that MLP
had no assets and demanded that the attorneys accede to its liquidation.  The
accused also knew, as did the trustee, that, in March 1997, the Derbes
plaintiffs had sued DSR in Nevada, claiming that it was the transferee of MLP's
assets and that Hoyt was using DSR to hide those assets.  And, on June 9, 1997,
Blackburn had sent a letter to Hoyt, with a copy to the accused and others,
stating that DSR had taken over the responsibilities of MLP and had been paying
investor partnership bills and receiving investor's payments "on their
notes."
Responding to Jensen's questions
about attorney fees also would be difficult.  The accused had spent the bulk of
his time between February 1997, when the Chapter 7 proceeding had commenced,
and September 1997, when Jensen had made his request for fee information, representing
the investor partnerships in other proceedings to preserve their herds and tax
benefits. (7)
The accused had not segregated his time in his billing statements, but instead had
billed collectively for the time that he had spent on all Hoyt-related matters.
 Although the time that the accused had spent on the Chapter 7 bankruptcy was small
in comparison to his other efforts, his total fees for that period were nearly
$137,000.  Typically the accused had received payment of his fees from Hoyt
& Sons Feedlot Company (Feedlot), (8)
which served as a repository for payments to and from the investor
partnerships, but he had also received payments directly from investor
partnerships, and in late 1996 he had begun receiving payments from DSR.
On September 8, 1997, the accused
conferred with Jackson and discussed the requirement that he file a 329
statement disclosing the compensation that he had been paid in the
Chapter 7 bankruptcy and its source.  The accused did not immediately file a
329 statement, and he did not respond to the letter from Jensen.
Jensen followed his September 4,
1997, letter with a motion to compel MLP to file an amended financial
disclosure statement, which the court granted on October 24.  On October 27,
the accused received a letter from Pamela Griffith, an assistant United States Trustee,
which included copies of two checks that had alerted the trustee's office that
MLP was continuing to operate and to receive payments from investors.
That same day, the accused determined
that he could no longer represent MLP, and he wrote a letter to attorneys with
the Hoyt organization advising them that he needed to resign his representation
of MLP "due to the inevitable potential conflict of interest which will
become actual as soon as the partnerships, which this firm has represented for
a long time, assert claims against [MLP]."  On October 31, 1997, the
accused filed his motion to withdraw and asserted that he was doing so because
it had become clear that the bankruptcy would continue and that conflicts
of interest would inevitably arise.  Around that same time, the accused spoke
with Jensen about the 329 statement that Jensen had requested. 
According to the accused, Jensen told the accused that they would "deal
with it later."
On November 3, 1997, the accused met
with Hoyt and his attorneys and discussed the nature of the payments by the
individual investors and the role of DSR.  The participants confirmed that
there was "no paper trail" that could establish that the notes actually
had been transferred to MLP and that MLP may not have paid consideration for
the notes.  Hoyt explained that investors were continuing to make payments to
MLP as contributions to their partnerships to cover the costs of maintaining
their herds and that MLP served as a temporary repository for such payments.  At
least some participants found Hoyt's explanations confusing and came away with
many questions about the nature of the Hoyt operation.
On November 5, 1997, the accused and
Jackson had a telephone meeting with Ostrovsky and Jensen, the Chapter 7
trustee and assistant trustee.  The accused related the substance of that
meeting to his clients and Hoyt attorneys in a letter dated November 6, 1997. 
The accused told them that, "[w]ith regard to the interception of money,
[Jackson] and I took the position that MLP has no assets as far as we know and
hasn't had any.  It merely served as a conduit, although it may have had some
incidental assets."  The accused also answered questions about DSR, the
Hoyt entity that the Derbes plaintiffs contended was being used to hide MLP
assets.  The accused repeated that, as to DSR, he "could only tell him the
truth which is that I really do not know in detail how the financial structure
is set up and know very little about DSR because that entity has not been
involved in any litigation in which I have participated."
Effective November 17, 1997, the bankruptcy court granted the accused's motion to withdraw as attorney
for MLP.  On January 30, 1998, however, Ostrovsky, on behalf of the bankruptcy estate,
waived all conflicts posed by the accused's continuing representation of the
investor partnerships, and, on February 2, 1998, Jensen confirmed that waiver
in open court, stating:
"after much discussion, it is our opinion that we are
better off to waive the conflict that might exist with regard to [the accused],
rather than lose him as a representative for potentially 2,500 investors, and
maybe as many as 500 active investors in who knows how many partnerships.  And
the benefit to be derived from having him continue to represent these various
entities and have one individual to whom we can communicate effectively
outweighs the competing concerns we have with regard to him having represented
one of these -- both of these debtors previously." 
The accused then sent a letter to the investor partnerships
and the individual investors and sought and obtained their consent to his
continued representation.  Thereafter, the trustee authorized the
creation of a fund to enable the investor partnerships to pay the accused
directly for his continued services.
H.        The Bankruptcy Court Consolidates the Hoyt Entities
Once
the trustee began to investigate the Hoyt enterprise, he found that he had a
hard time isolating the assets that belonged solely to MLP and that the
entities that comprised the Hoyt enterprise had been operated without regard to
the separate existence of each.  As a result, in December 1998, the bankruptcy
court "substantively consolidated" all the Hoyt entities, effective
from the date of the filing of the Chapter 7 proceeding.  Also as a result of his investigation,
the trustee decided not to assert claims against the investors for
payment of the promissory notes.  He determined that the note obligations were
either nonexistent or unenforceable.  It
took the trustee several years to marshal the assets of the Hoyt estate
and shut down the Hoyt enterprise.  During those years, as the trustee testified,
the accused worked "hand in glove" with the trustee to assist him in
determining how the Hoyt enterprise had operated.  However, the trustee
eventually came to think that the accused himself had contributed to the losses
that the estate had incurred, and the trustee asserted claims against the
accused.  The trustee sought, among other things, to have the accused disgorge
the attorney fees that he had received prior to the court's
establishment of the fund for investor payments of attorney fees.  Eventually,
the accused and the trustee reached a settlement of that dispute.
I. The Bar's Complaint and Proceedings
Below
The
Bar filed the complaint in this case in March 2005, and the trial panel issued
its decision in December 2006.  Two members of the three-member panel ruled
that the accused had engaged in misrepresentation, dishonesty, and conduct
prejudicial to the administration of justice, and that he had violated the duty
to call upon his client to rectify its fraud.  The third member disagreed and
wrote a detailed dissent.  The panel unanimously rejected the Bar's conflict of
interest charges.  As to the appropriate sanction, the panel majority
recommended a public reprimand, reasoning that it was not clear that the accused's
misconduct had resulted in harm to investors, that the accused is a
conscientious, ethical, and well-respected lawyer, that "[t]here was no
evidence of dishonesty," that there had been no prior disciplinary actions
against the accused, and that there was no reason to believe that his conduct
was likely to reoccur.
The
Bar sought review, asserting that the trial panel had erred in finding that the
accused had not violated the disciplinary rules regarding conflicts of
interest.  The Bar asks that we impose a one-year suspension as a sanction for
the accused's misconduct.  The accused, on the other hand, maintains that he
committed no disciplinary violations and argues that the complaint should be
dismissed.
II.  DISCUSSION
A.        Standard of Review
The standard of review in Bar matters
is de novo:
"The court shall consider each matter de
novo upon the record and may adopt, modify or reject the decision of the trial
panel * * * in whole or in part and thereupon enter an appropriate order."
BR 10.6.  The Bar must prove each violation by clear and
convincing evidence, BR 5.2, which means that the truth of the asserted facts
must be "highly probable."  In re Claussen, 331 Or 252,
260, 14 P3d 586 (2000).    
B.         Misrepresentation,
Dishonesty, Conduct Prejudicial to the Administration of Justice, and Failure
to Have Client Rectify Fraud
The first category of charges relates
to the accused's representation of MLP in the bankruptcy proceeding.
1.         Misrepresentation and dishonesty
At the time of the accused's alleged
misconduct, DR 1-102(A)(3) provided that "[i]t is professional misconduct
for a lawyer to * * * [e]ngage in conduct involving dishonesty, fraud, deceit
or misrepresentation." (9)
To prove misrepresentation, the Bar must prove that the accused knowingly made
a false statement of material fact.  In re Fitzhenry, 343 Or 86, 101,
162 P3d 260 (2007) (citations omitted).  Proving dishonesty is slightly
different, however, and does not require an affirmative misrepresentation:
"In contrast to what is required to prove an
affirmative misrepresentation, the Bar may prove dishonest conduct without
proving that the accused knowingly made affirmative false statements. 
Dishonest conduct is 'conduct that indicates a disposition to lie, cheat, or
defraud; untrustworthiness; or a lack of integrity.'  Although proving that a
lawyer acted dishonestly does not require evidence that the lawyer intended
to deceive, it does require a mental state of knowledge -- that is, that the
accused lawyer knew that his conduct was culpable in some respect."

In re Skagen, 342 Or 183, 203, 149 P3d 1171 (2006)
(citations omitted; emphasis in original).  The Bar charges the accused with
misrepresentation and dishonesty in several particulars, and we proceed to
consider the merits of each.
a.         Financial
disclosure statement and schedules
The Bar first alleges that the
accused engaged in misrepresentation and dishonesty when he filed MLP's
financial disclosure statement and schedules, which had been prepared by
Jackson, the bankruptcy attorney for MLP, and signed by Barnes, a
manager of MLP.  We begin by considering whether, in filing those documents,
the accused himself made a statement of fact.  See Fitzhenry, 343 Or at
101 (to establish misrepresentation, Bar must prove that accused made false
statement of material fact).  
The accused did not sign MLP's
disclosure statement or schedules, and the bankruptcy rules in effect at the
time did not require that he do so.  FRBP 9011 (1997). (10)
At the time that the accused filed the disclosure statement, FRCP 11 provided
that, by filing a document, an attorney certified that there was or would be an
evidentiary basis for the facts set forth in the document. (11)
However, the applicable bankruptcy rules did not contain a similar provision,
and the bankruptcy rules, not FRCP 11, controlled. (12)
See In re Muscatell, 116 BR 295, 298 (Bankr MD Fla 1990) (FRBP 9011, not
FRCP 11, applies in bankruptcy cases).  Therefore, by filing, without signing,
MLP's financial statement and schedules, the accused himself did not represent
that the facts in those documents were true, and he therefore did not make the
affirmative representation that is necessary to a misrepresentation charge.
That does not resolve, however, the
Bar's charge of dishonesty.  As we have explained, an affirmative misrepresentation
is not required to prove dishonesty.  In considering that charge, we must decide whether MLP's disclosure
statement and schedules were false and whether the accused knew that they were
false when he filed them.
The
Bar contends that MLP's schedules were false in three particulars:  (1) in
reporting negative gross income for calendar year 1996; (2) in reporting zero
gross income for the period from January 1, 1997, until the bankruptcy
proceeding commenced on February 24, 1997; and (3) in failing to list the
promissory notes as assets of MLP. (13)
 The Bar proved that MLP's schedules
were false in reporting negative gross income for calendar year 1996.  A partnership
cannot have negative gross, as opposed to net, income.  It appears that MLP erred
in reporting its negative taxable income for fiscal year 1995-96, rather
than its gross income for the calendar year. 
MLP's report that it did not receive
any gross income in 1997 and its failure to list the promissory notes as assets
require a more difficult weighing of competing facts.  The Bar proved that, in
the early years of the Hoyt enterprise, investors had executed promissory notes
in favor of Hoyt & Sons, that Hoyt had intended that the notes be
transferred to MLP, and that Hoyt had taken the position in a federal tax case
that the transfer had occurred.  The Bar offered the testimony of individual
investors that, in 1997, (1) they were making payments to MLP that they viewed
as payments on their notes; and (2) that they thought that they were obligated
to make those payments.  The Bar also pointed to two documents to prove that
MLP had earned income in 1997:  the budget that Jackson and the accused had prepared
for use in settlement discussions in the Chapter 11 case, and the draft
affidavit that Jackson had prepared in May 1997 for submission to the court in
the Chapter 7 case, in support of the farmer defense.  In the Chapter 11 case,
the trustee had asserted a lien on the cattle owned by the investor
partnerships, and, to convince the Chapter 11 trustee to accept payments over
time in lieu of seizure and sale of the cattle, Jackson and the accused had submitted
a budget entitled "Management Co and MLP Budget, January 1997 to May
1997."  That budget showed "monthly partnership income" of
$240,000 per month.  In the Chapter 7 case, Jackson had prepared a draft
affidavit dated May 6, 1997, that showed MLP gross income of $1.4 million in
the preceding year.  
The accused presented countervailing
evidence.  None of the promissory notes were made payable to MLP, and no
documents were produced to establish that the notes that were made payable to
Hoyt & Sons were actually transferred to MLP.  The Hoyt organization did
not credit payments by investors as note payments after 1988; rather, it
credited those payments as contributions to capital and as "monthly
payments."  After 1988, the investors were not receiving the tax benefits that
they had been promised and were using their own funds, rather than expected
tax refunds, to make payments.  As general partners, the investors were
required to contribute to their partnerships their share of the costs of
maintaining the herds that their partnerships owned.  Those contributions were
pooled and dispersed to other Hoyt entities to manage the herds.  Blackburn, an
investor and later a representative of the investor partnerships, testified
that investors made payments to MLP, not because they owed money to MLP, but
because MLP served as a temporary repository for those partnership payments
until they could be transferred to other Hoyt entities.  The MLP bank account
was jointly owned by the investor partnerships, and the accused pointed out
that one of the two checks that the Bar proved that investors had sent to MLP
in 1997 was made payable to SGE 84-4, which appears to have been one of the
investor partnerships.  The accused testified that the "monthly
partnership income" to which he and Jackson had referenced in their submitted
Chapter 11 budget represented payments that the investor partnerships, as
cattle owners, intended to pay for the expenses of caring for the cattle, and
that those expenses were also set forth in the proposed budget.  As to the
income mentioned in the draft affidavit that Jackson had prepared for the
Chapter 7 proceeding, Jackson never had filed that document with the court,
because Jackson thought that the information contained therein was incorrect.
In
weighing which of the competing positions is most worthy of belief, we
find it significant that the bankruptcy trustee determined, after extensive
investigation, that the note obligations were either nonexistent or
unenforceable and decided not to take action against investors to collect
them.  The senior bankruptcy analyst assigned to both the Chapter 11 and Chapter
7 cases did not testify at the trial panel hearing, and the Bar did not offer any
other expert testimony to the effect that MLP had owned the promissory notes
and had a legal right to obtain payment of them.  The trustee also had been unable
to determine how to allocate the assets and income between the various Hoyt
entities and, as a result, substantively consolidated them.  Until that time,
the investor partnerships had been operating as separate entities, and it is
understandable that the investors would continue to make payments to the
partnerships to care for their cattle even after MLP, a separate entity, was forced
into bankruptcy.  The investors may have thought of their monthly payments as
"note payments," but that does not prove for purposes of these
proceedings that those payments were required or used for the purpose of
reducing note obligations.  In our view, the Bar did not prove by clear and
convincing evidence that MLP owned the notes or had an enforceable right to the
payments that the investors made after the bankruptcy was commenced.  The Bar
therefore did not prove that MLP's statements of assets or income were false. (14)
Perhaps just as importantly, we also
conclude that the Bar did not prove that the accused filed MLP's bankruptcy
schedules knowing that they were false.  The Bar proved that MLP's report of
1996 negative gross income was technically false, but we credit the accused's
assertion that, at the time when he filed MLP's schedules in July 1997, he had not
reviewed them in sufficient detail to catch that error.  Neither did the
accused review those schedules in sufficient detail to consider whether they
were false in reporting MLP's 1997 income and assets.  At the time that the accused
filed the schedules, he considered his role to be a very limited one, and he
testified at the trial panel hearing that, as a result, he did not give the
schedules more than a cursory examination.  
This case is distinguishable from Fitzhenry,
in which this court concluded that, despite his protestations to the contrary,
the accused lawyer in that case knew that the contents of a letter that he
signed were false.  The accused lawyer in that case had participated in the
negotiations underlying the representations in the letter.  And, the letter
began with a statement that the accused lawyer's signature was intended to
confirm the representations contained in the letter and the lawyer admitted
that he had read the letter in its entirety with an eye toward confirming the
truth of the legal matters it contained.  The particular representation at
issue was conspicuously listed, and in the court's view, it was legal in
nature.  343 Or at 105-06.  In contrast, here, the accused was not a
participant in the Hoyt operations.  The accused explained that he did not sign
the documents that he had filed or review them to determine their truth.  The
accused may have had an obligation to his client or to the court to conduct a
more thorough review of the documents than he did, but a breach of that duty is
not the issue before us. (15)
The Bar did not prove, as required by DR 1-102(A)(3), that, in filing MLP's schedules,
the accused acted knowing that his conduct was culpable.
b.         Telephone conversation
with trustee and counsel for trustee
By November 5, 1997, when the accused
and Jackson had a telephone meeting with Ostrovsky and Jensen, the Chapter 7 trustee
and his assistant trustee, the accused had become well aware that MLP's schedules
did not reveal the existence of the notes or the payments by investors.  However,
by then, the trustee also had learned from Hoyt himself that the notes existed,
and he had written the accused and Jackson asking that they file amended
schedules setting forth the existence of the notes and requesting information
about transfers into or out of MLP during the preceding four years.  On
November 3, 1997, the accused had met with Hoyt and his lawyers to
discuss the appropriate response to Jensen's request.  The participants had
confirmed that there were no documents transferring the notes from Hoyt &
Sons to MLP and that MLP may not have paid any consideration for a transfer of
the notes, and also had discussed whether the payments that the investors
were making could qualify as partnership contributions for the purpose of
maintaining their herds.
When the trustee made inquiry during
the November 5, 1997, telephone call, the accused related that, "[w]ith
regard to the interception of money, [Jackson] and I took the position that MLP
has no assets as far as we know and hasn't had any.  It merely served as a
conduit, although it may have owned some incidental assets."  The
accused maintains that he did not conceal or misrepresent the assets or income
of MLP in that telephone call.  Instead, he simply took the legal position that
the payments were not income to MLP -- a legal position that the Bar has not
proved was false.  
The bankruptcy trustee also had inquired
about DSR.  The accused knew, as did the trustee, that the Derbes plaintiffs
had filed an action against DSR, seeking to require DSR to pay the judgment
that the Derbes plaintiffs had obtained against MLP and alleging that Hoyt
fraudulently had created DSR to avoid payment of the MLP judgment.  The accused
also had received a copy of a letter from Blackburn to Hoyt stating that DSR
had taken over the responsibilities of MLP and had been paying partnership
bills and receiving partners' payments "on their notes."  Further,
the accused knew that DSR had been making payments to him for attorney fees.  The
accused answered the trustee's questions about DSR by stating that he
"could only tell him the truth which is that I really do not know in
detail how the financial structure is set up and know very little about DSR
because that entity has not been involved in any litigation in which I have
participated."  The accused contends that that response was truthful,
although somewhat evasive.  The accused had played no part in the formation of
DSR, and the fact that payments were being made to or by DSR did not establish
that MLP had a right to those payments.  Previously Feedlot or the investor
partnerships, not MLP, had paid the accused's fees, and the accused could not
affirmatively have concluded that the payments that he had received from DSR
were actually the property of MLP.
The accused was required to answer
truthfully when he answered the questions that the bankruptcy trustee posed. 
But the accused was under no affirmative duty to produce facts in that forum
with respect to, or to relay his growing concerns about, the legitimacy of the Hoyt
operations.  We conclude that the accused's answers navigated, just barely, the
difficult line between responding truthfully and not volunteering his
subjective concerns.
2.         Conduct prejudicial to the administration
of justice
DR 1-102(A)(4) (1997) forbade lawyers
from engaging in conduct prejudicial to the administration of justice:  
"To conclude that a lawyer's conduct was prejudicial to
the administration of justice under DR 1-102(A)(4), we must find that the
lawyer engaged either in repeated acts causing some harm to the administration
of justice or a single act that caused substantial harm to the administration
of justice."  
Skagen, 342 Or at 214.  The Bar contends that the
accused engaged in conduct prejudicial to the administration of justice in
three respects.  We will examine each in order.
a.         Misrepresentation
and dishonesty
The Bar contends that the conduct of
the accused that it claims violated DR 1-102(A)(3), discussed above, also
qualifies as conduct prejudicial to the administration of justice.  See In
re Wilson, 342 Or 243, 249-50, 149 P3d 1200 (2006) (misrepresentations to
court violated both DR 1-102(A)(3) and DR 1-102(A)(4)).  In addition to our
conclusions above that the accused did not engage in misrepresentation or
dishonesty, we also conclude that the accused's conduct did not prejudice the
administration of justice in the Chapter 7 bankruptcy.  The trustee was
independently aware of the existence of the notes, the payments by investors,
the existence of DSR, and the contention that DSR was diverting funds that were
the property of MLP. (16)
The trustee eventually decided not to attempt collection action against the
investors, and we cannot conclude that the trustee would have been any more
successful in shutting down the Hoyt enterprise, collecting its assets, or
obtaining funds wrongly held by DSR, if any, had the accused himself disclosed
the existence of the notes or investor payments earlier in the proceeding.   
b.         Failure to file amended
bankruptcy schedules
The Bar also contends that the
accused engaged in acts prejudicial to the administration of justice by failing
to file an amended financial disclosure statement and schedules on behalf of
MLP setting forth the existence of the notes.  The bankruptcy trustee sent the
accused a letter on September 4, 1997, asking for those documents, and, on
October 24, 1997, obtained an order requiring Hoyt to file them.  The Bar cites
In re Brown, 262 Or 171, 177, 493 P2d 1376 (1972), for the proposition
that a lawyer's repeated failure to respond to a court's request for
information demonstrates "a lack of respect" and conduct prejudicial
to the administration of justice, but that citation demonstrates only the
significant difference that this case presents.  In Brown, the trial
court's rules and its numerous written requests were directed specifically to
the accused, not to his client.  Here, the court's rule and its one order
required action by Hoyt.  A lawyer does not demonstrate a lack of respect for
the court each time a client is recalcitrant, and client recalcitrance alone does
not establish a lawyer's violation of the code of ethics.  Moreover, the
court's order requiring MLP to file amended documents came so close to the date
on which the accused filed his motion to withdraw that we cannot attribute to
him the willful noncompliance that would justify a finding of guilt.
c.          Failure to disclose attorney
fees and their source
The Bar next argues that the accused's
failure to file a timely 329 statement revealing the fees he had been paid for
representing MLP and the source of those payments, as required by Section 329, caused
harm to the administration of justice because, if the trustee had been apprised
of the payments that the accused had received, the trustee would have been
entitled to collect those funds for the benefit of the estate.  Under Section
329, the bankruptcy court may review fees for reasonableness and order their
return only if they are excessive. (17)
The Bar does not argue that the accused's fees were excessive under Section
329; rather, the Bar seems to assert that the funds used to pay the accused's
fees were MLP's assets that were diverted to the accused.  To prevail on that
argument, the Bar was required to establish that the payments that the accused
received were the property of MLP at the time that the payments were made -- a
fact that the Bar did not succeed in proving.  The accused received payment of
his fees from Feedlot, investor partnerships, and DSR.  The Bar did not prove
by clear and convincing evidence that the funds that those entities used to pay
the accused were owned by MLP.
The Bar adduced evidence that the
bankruptcy trustee was successful in reaching a settlement with the accused,
the terms of which apparently required that the accused return at least some of
the fees that he received.  By the time of the settlement, however, the
interests of the investor partnerships and the other Hoyt entities had been
consolidated, and the assets of all Hoyt entities had become assets of the
estate.  The fact of that subsequent settlement does not establish that, when
the accused initially received the fees, they belonged to the MLP.  In
addition, we observe that Jensen, an assistant trustee and an attorney who was aware
that the accused had not filed a 329 statement, told the accused near the time
of his withdrawal from representation of MLP that they would "deal with it
later," which they in fact did.  We conclude that the Bar did not prove by
clear and convincing evidence that the accused caused harm to the estate by
failing to file a 329 statement.
3.         Duty to call upon client
to rectify fraud
DR 7-102(B)(1) (1997) provided that a
lawyer who recognizes that a client has perpetrated a fraud must call upon the
client to rectify it: 
"A lawyer who receives information clearly establishing
that [t]he lawyer's client has, in the course of the representation,
perpetrated a fraud upon a person or tribunal shall promptly call upon the
lawyer's client to rectify the same, and if the lawyer's client refuses or is
unable to do so, the lawyer shall reveal the fraud to the affected person or
tribunal except when the information is a confidence as defined in DR
4-101(A)."
The Bar alleges without specification that the accused
"possessed information clearly establishing that Management Company and
MLP were perpetuating a fraud upon the court in the Chapter 7
proceeding."  The Bar argues that the continuing payments that the individual
investors made to entities other than the trustee and the continuing operation
of the Hoyt enterprise amounted to "fraud" for purposes of the
disciplinary rule.
In bringing that charge and in making
that argument, the Bar fails to recognize that the accused considered the
investor partnerships to be entities that were separate from MLP and that they
were entitled to manage and preserve their herds.  Unless MLP had a right to
require note payments from the investors, and unless the partnerships
maintained their herds using funds that belonged to MLP, there was nothing
wrong with the investor partnerships continuing to protect their cattle.  MLP
was the entity that was in bankruptcy, and the bankruptcy rules required that
it cease business after entry of the order for relief, but the partnerships
were not similarly limited.  Because the Bar failed to prove the facts
necessary to prove that MLP engaged in fraud in the manner asserted, the Bar
failed to prove that the accused violated DR 7-102(B)(1) (1997). 
C.        Conflict of interest
The Bar alleges that the accused had
a current-client conflict of interest when he represented MLP in the Chapter 7
bankruptcy while simultaneously representing investor partnerships adverse to
MLP.  The Bar also alleges that the accused had a former-client conflict of
interest in his continued representation of the investor partnerships after he
had withdrawn from representation of MLP.
1.         Current-Client Conflict
DR 5-105(E) (1997) provided that a
lawyer shall not represent multiple current clients when such representation
would result in an actual or likely conflict.  "An 'actual conflict of
interest' exists when the lawyer has a duty to contend for something on behalf
of one client that the lawyer has a duty to oppose on behalf of another
client."  DR 5-105(A)(1).  "A 'likely conflict of interest' exists in
all other situations in which the objective personal, business or property interests
of the clients are adverse."  DR 5-105(A)(2).  If the current conflict was
actual, then representation of both clients was prohibited, but if the current conflict
was not actual, then representation was permitted if the clients consented
after full disclosure.  DR 5-105(F) (1997).
The Bar argues that an actual
conflict of interest existed when the accused represented both MLP, as debtor,
and the investor partnerships, as creditors, in the Chapter 7 proceeding.  The
Bar advances that, in such circumstances, the debtor seeks to minimize its
assets, while the creditor seeks to maximize them.  However, when the accused initially
agreed to represent MLP, he understood that the purpose of his representation
would be to assist bankruptcy counsel in filing a motion to dismiss the
bankruptcy proceeding altogether.  The accused maintains that MLP and the
investor partnerships had congruent interests in achieving dismissal because,
if they were successful in doing so, they would preserve the herds from the
claims of the Derbes creditors and the reach of the United States Trustee.  We
agree with the Bar that the test of whether there is an actual conflict of
interest is objective, rather than subjective.  See In re Cohen, 316 Or
657, 662, 85 P2d 286 (1993) (whether conflict exists depends on client's
objective interests).  We disagree, however, that the investor partnerships
were necessarily creditors of MLP before the order for relief was entered. 
Until that time, the efforts of both parties were directed toward the goal of dismissing
the bankruptcy.
When the order for relief was
entered, Hoyt instructed the accused to withdraw.  However, the bankruptcy
court requested that the accused continue in his role as local counsel to
provide assistance to the court.  The accused acceded to the court's request, explained
the potential conflict that that presented in a letter to both sets of clients,
and obtained their consent to his continued representation. (18)

The Bar contends that the accused's
disclosure of the potential conflict was insufficient.  DR 10-101(B) (1997) defined
"full disclosure" to mean "an explanation sufficient to apprise
the recipient of the potential adverse impact on the recipient of the matter to
which the recipient is asked to consent," including a required "recommendation
that the recipient seek independent legal advice," confirmed contemporaneously
in writing.  The Bar argues that the accused failed to confirm in writing his
recommendation that MLP seek independent legal advice.  The Bar's argument is
not well taken.  The accused's July 1997 letter discussing the potential
conflict issues was addressed to three of Hoyt's independent attorneys, as well
as to Hoyt and Blackburn.  That letter laid out the potential conflict and
ended with the request, "I would appreciate your advice and assistance in
determining the appropriate role for me in these cases."  We agree with
the Bar that lawyers are required to abide by the black letter of DR 10-101(B) and
that compliance with its "spirit" alone is insufficient.  See 
In re Lawrence, 332 Or 502, 512, 31 P3d 1078 (2001) (accused's failure to
confirm advice that client obtain independent legal advice in writing not
obviated because accused arranged for client to consult with another lawyer).  However,
in our view, the accused in this case did meet the rule's requirement, as well
as its purpose.  The accused set forth the facts that created the potential
conflict in a letter to his client and to independent counsel selected by his
client and asked counsel to provide advice as to the potential conflict
presented.
2.          Former client conflict
When the accused learned, in late
October 1997, that the interests of the investor partnerships and MLP had
changed from interests that potentially could conflict to interests that did,
by then, actually conflict, he renewed his motion to withdraw as attorney for
MLP.  After the bankruptcy court allowed the accused to withdraw, he continued
to represent the investor partnerships in the Chapter 7 proceeding.  DR
5-105(C) (1997) provided that a lawyer who has represented a client in one
matter is prohibited from subsequently representing another client in the same
matter when the interests of the current and former clients are in likely
conflict, unless the lawyer obtains the client's consent after full disclosure
from both the former client and the current client.  According to the Bar, the
accused's disclosure of the conflict that he concedes was likely was inadequate,
because he did not reveal to the bankruptcy trustee, who represented the
interests of MLP, that the investor partnerships had made payments to the
accused and to Hoyt entities that instead should have been directed to MLP.
The Bar's argument is not well
taken.  A lawyer who recognizes a likely conflict is required to advise the
client of the potentially adverse consequences of the multiple representation,
not of all facts known to him that could be helpful to the former client.  DR
10-101(B); see In re Brandt/Griffin, 331 Or 113, 135, 10 P3d 906 (2000)
(lawyer must provide disclosure sufficient to apprise client of adverse
consequences and permit independent counsel to assess the conflict).  In the
affidavit that the accused filed in support of his motion to withdraw, the
accused notified the trustee of the nature of the conflict, i.e., that
the interests of MLP and the investor partnerships could diverge and that he
could not advocate for both.  The trustee gave his consent to the accused's
continued representation, because the trustee determined that it was essential
that he have one representative of the investors with whom he could
communicate, given that 2,500 individual investors could be affected by the
bankruptcy proceeding.  The trustee may have benefitted had the accused also disclosed
information about payments by investors or investor partnerships that would have
assisted him in marshaling MLP assets, but that is not information that the
accused was required to disclose to comply with conflict of interest rules. 
Finally, the Bar complains that the
accused failed to comply with the requirement that he recommend that the
trustee obtain independent legal advice and confirm that recommendation in
writing as defined by DR 10-101(B)(2).  The Bar is correct factually, and the
Bar is also correct, as we have noted, that compliance with the letter of the rule
is required.  See In re Leuenberger, 337 Or 183, 212, 93 P3d 786
(2004) (lawyer did not advise client to seek independent counsel regarding his
conflict of interest and did not confirm advice in writing); Lawrence,
332 Or at 512 (court rejected lawyer's argument that he complied with
"spirit" rather than "the letter of DR 10-101" in failing
to advise client in writing of the potential conflict of interest); In re
Barber, 322 Or 194, 196, 904 P2d 620 (1995) (lawyer sanctioned because he
"never disclosed in writing the nature and extent of a likely or actual
conflict of interest, nor did he advise his clients to seek independent legal
advice to determine whether consent to continued joint representation should be
given"); In re Altstatt, 321 Or 324, 330-31, 897 P2d 1164 (1995)
(lawyer, who was both indebted to and representing estate, failed to make full
disclosure in writing); In re Cohen, 316 Or 657, 662, 853 P2d 286 (1993)
(lawyer represented both husband and wife in juvenile proceeding, in which
authorities accused husband of mistreating wife's daughter, and failed to make
full disclosure in writing); In re McKee, 316 Or 114, 129-30 & n 15,
849 P2d 509 (1993) (lawyer filed slander-of-title action against former client
without making full disclosure in writing).  In each of those cases, the client
the lawyer was required to advise of the potential conflict was a client of the
lawyer with whom the lawyer had had a direct and continuing relationship.  In
each case, the rule required the lawyer to inform the client both orally and in
writing that the client should seek independent legal advice, and the lawyer
failed to do so.
Here, the Bar contends that the accused failed to advise his former client, MLP, to seek independent
legal advice.  The bankruptcy court had put a trustee in control of MLP's
affairs, and the trustee, who was an experienced government lawyer, also
represented the bankruptcy estate.  Only the trustee could decide, on behalf of
the estate, whether to assent to the accused's continued representation of the
investor partnerships.  The trustee and the estate never had been clients of
the accused and never had relied upon him to make decisions on their behalf.  The
circumstances of this case are unique in that the bankruptcy court specifically
had appointed the trustee to provide the independent legal advice of which DR
10-101 speaks.  Therefore, the accused was not required to advise the trustee
to seek other advice on MLP's behalf.  We find no violation of DR 5-105(C) or DR
10-101(B)(2).
III.  CONCLUSION
Hoyt created and operated a
fraudulent enterprise.  For many years, the accused believed in the legitimacy
of that enterprise and represented the partnerships that invested in it.  The
accused heeded the separate existence of those investor partnerships and each
of the other entities that made up the Hoyt enterprise, including MLP. 
Ultimately, of course, the accused was wrong:  The enterprise was not
legitimate in either substance or form.  But it took from February to November
1997 for the accused to understand that reality.  That the accused did not act
as promptly as he should have to disassociate himself from Hoyt and other
aspects of his conduct in connection with the Hoyt matters are not above
criticism.  However, the Bar did not prove by clear and convincing evidence
that the accused committed the ethical violations that it charges.  We
therefore dismiss the complaint in its entirety.
The complaint is dismissed.
1. In
2001, the federal government convicted Hoyt for conspiracy, mail fraud,
bankruptcy fraud, and money laundering, resulting in a sentence of nearly 20
years imprisonment.  United States v. Hoyt, 47 Fed Appx 834 (9th Cir
2002).
2. To
be precise, the Bar charges that the accused violated ethical rules in his
representation of two entities that were debtors in the Chapter 7 proceeding. 
The primary debtor was Hoyt & Sons Master Limited Partnership (MLP).  The other
debtor was Hoyt & Sons Management Company (Management Company).  Because
the Bar's allegations focus primarily on MLP, and because the additional
allegations relating to Management Company do not affect our analysis, we will
specifically address only the allegations relating to MLP.
3. 
Not all the investor partnerships invested in cattle; some invested in sheep. 
It is likely that all partnerships operated similarly, and, because the
particular livestock that each partnership owned is not material to our
analysis, we will describe and refer to only the purchase and ownership of
cattle.
4. As
general partners, the individual investors would be liable for the partnership
debt represented by the promissory notes, and, in addition, the individual
investors would execute partnership and subscription agreements agreeing to pay
their pro-rata portions of the promissory notes executed by the investor
partnerships and agreeing to be bound to pay their partnerships' notes in their
entirety, should the other individual investors fail to pay their portions.
5. Those
cases are referred to as Bivens cases, because the plaintiffs in those
cases asserted a private right of action recognized in the Supreme Court case
of Bivens v. Six Unknown Named Agents of Fed. Bureau of Narcotics, 403
US 388, 91 S Ct 1999, 29 L Ed 2d 619 (1971) (providing tort remedy for
violation of constitutional rights).
6. Those
administrative cases are referred to as Final Partnership Administrative
Adjustment (FPAA) cases.  When the IRS takes action affecting a
partnership, such as an audit, it does so by issuing an FPAA, and the
partnership may contest the FPAA in an administrative proceeding.  See
26 USC § 6223(a) (describing notice provisions for FPAA proceedings).
7. Those
matters included filing an appellate brief in a tax case and representation in
the Chapter 11 bankruptcy and related adversary proceedings.
8. Feedlot
sold cull cattle and steers owned by the investor partnerships.
9. The
Oregon Rules of Professional Conduct became effective January 1, 2005.  Because
the conduct of the issue here occurred before that date, the Disciplinary Rules
of the Oregon Code of Professional Responsibility apply.  In re Fitzhenry,
343 Or 86, 88 n 1, 162 P3d 260 (2007).
10. In
July 1997, FRBP 9011 provided as follows:
"a)  Signature.  Every petition, pleading,
motion and other paper served or filed in a case under the Code on behalf of a
party represented by an attorney, except a list, schedule, or statement, or
amendments thereto, shall be signed by at least one attorney of record in
the attorney's individual name, whose office address and telephone number shall
be stated.  A party who is not represented by an attorney shall sign all papers
and state the party's address and telephone number.  The signature of an
attorney or a party constitutes a certificate that the attorney or party has
read the document; that to the best of the attorney's or party's knowledge,
information, and belief formed after reasonable inquiry it is well grounded in
fact and is warranted by existing law or a good faith argument for the
extension, modification, or reversal of existing law; and that it is not
interposed for any improper purpose, such as to harass or to cause unnecessary
delay or needless increase in the cost of litigation or administration of the
case.  If a document is not signed, it shall be stricken unless it is signed
promptly after the omission is called to the attention of the person whose
signature is required.  If a document is signed in violation of this rule, the
court on motion or on its own initiative, shall impose on the person who signed
it, the represented party, or both, an appropriate sanction, which may include
an order to pay to the other party or parties the amount of the reasonable
expenses incurred because of the filing of the document, including a reasonable
attorney's fee.
"(b)  Verification.  Except as otherwise
specifically provided by these rules, papers filed in a case under the Code
need not be verified.  Whenever verification is required by these rules, an
unsworn declaration as provided in 28 U.S.C. Sec. 1746 satisfies the
requirement of verification.
"(c)  Copies of Signed or Verified Papers. 
When these rules require copies of a signed or verified paper, it shall suffice
if the original is signed or verified and the copies are conformed to the
original."
11. In
1997, Rule 11 provided:
"(a)  Signature.  Every pleading, written
motion, and other paper shall be signed by at least one attorney of record in
the attorney's individual name, or, if the party is not represented by an
attorney, shall be signed by the party.  Each paper shall state the signer's
address and telephone number, if any.  Except when otherwise specifically
provided by rule or statute, pleadings need not be verified or accompanied by
affidavit.  An unsigned paper shall be stricken unless omission of the
signature is corrected promptly after being called to the attention of the
attorney or party.
"(b)  Representations to Court.  By
presenting to the court (whether by signing, filing, submitting, or later
advocating) a pleading, written motion, or other paper, an attorney or
unrepresented party is certifying that to the best of the person's knowledge,
information, and belief, formed after an inquiry reasonable under the
circumstances, --
"(1)  it is not being presented for any
improper purpose, such as to harass or to cause unnecessary delay or needless
increase in the cost of litigation;
"(2)  the claims, defenses, and other legal
contentions therein are warranted by existing law or by a nonfrivolous argument
for the extension, modification, or reversal of existing law or the
establishment of new law;
"(3)  the allegations and other factual
contentions have evidentiary support or, if specifically so indentified,
are likely to have evidentiary support after a reasonable opportunity for
further investigation or discovery; and
"(4)  the denials of factual contentions
are warranted on the evidence or, if specifically so identified, are reasonably
based on a lack of information or belief."
FRCP 11(a) and (b) (1997) (emphases added).
12. FRBP
9011 was modified effective December 1, 1997, to impose a Rule 11-type
requirement on attorneys who file and submit documents. 
13. 
The Bar also alleges that MLP failed to disclose on its schedules that DSR had
taken over the functions of MLP, including the collection of note payments. 
However, the Bar does not indicate in its brief the particular portion of
the schedules that it contends requires that disclosure.  That is not to say
that payments to or by DSR are not relevant.  DSR's role is relevant to our
consideration whether MLP was hiding its assets or income diverting them to
DSR.
14. The
Bar did establish that MLP failed to report the funds that it had received from
investors as at least funds "held for others" on the bankruptcy
schedules.  However, the Bar did not seek to hold the accused responsible for
that failure.
15. For
that reason, we do not discuss the Bar's argument that the accused failed to
fulfill the requirement found in Local Rule 110-2(b) (1997), United States
District Court, District of Oregon, that local counsel "meaningfully
participate" in the case.
16. The
accused contends that the trustee's independent awareness of those facts should
figure in our analysis of whether he engaged in misrepresentation or
dishonesty.  The Bar is correct that neither the intent to deceive nor reliance
are required to prove a violation of DR 1-102(A)(3).  See In re Kluge,
332 Or 251, 256, 27 P3d 102 (2001) (reliance not required to prove violation of
DR 1-102(A)(3); In re Claussen, 322 Or 466, 482, 909 P2d 862 (1996)
(intent to deceive not required to prove violation of DR 1-102(A)(3).
17. At
the time of the proceedings at issue, Section 329 provided:
"(a)  Any attorney representing a debtor in
a case under this title, or in connection with such a case, whether or not such
attorney applies for compensation under this title, shall file with the court a
statement of the compensation paid or agreed to be paid, if such payment or
agreement was made after one year before the date of the filing of the
petition, for services rendered or to be rendered in contemplation of or in
connection with the case by such attorney, and the source of such compensation.

"(b)  If such compensation exceeds the
reasonable value of any such services, the court may cancel any such agreement,
or order the return of any such payment, to the extent excessive, to--
"(1)  the estate, if the property
transferred--
"(A)  would have been property of the
estate; or 
"(B)  was to be paid by or on behalf of the
debtor under a plan under chapter 11, 12, or 13 of this title; or 
"(2) the entity that made such
payment."
11 USC § 329 (1997).
18. The
Bar also argues that the accused had a likely current-client conflict of
interest because he represented the investor partnerships in the Chapter 11
proceeding at the same time that he represented MLP in the Chapter 7
proceeding.  The Bar contends that, in the Chapter 11 proceeding, the accused
was required to assert and did assert that MLP had significant assets, while,
in the Chapter 7 proceeding, he took the opposite position.  We do not accept
the Bar's argument, because, in fact, the accused's assertions in both
proceedings were consistent.  In the Chapter 11 proceeding, the accused argued,
on behalf of the investor partnerships, that those partnerships had the
financial means to maintain their herds and that their payments would enable
the obligors to fulfill their obligations under the settlement agreement.  In
the Chapter 7 proceeding, the accused also took the position that the
investors' payments were payments to conserve their herds.