IN THE



## S UPREME 

## C OURT OF THE 

## S TATE OF 

## A RIZONA

G RAEME H ANCOCK , P etitioner

,

v.

H ON

. W ILLIAM J. O ’ N EIL , P RESIDING D ISCIPLINARY J UDGE
,

Respondent Judge,

S TATE B AR OF A RIZONA , Real Party in Interest.

No

. CV

- 2 1

- 0 145

- SA

Filed August 29, 2022

Special Action from the Office of the Presiding Disciplinary Judge

No

. PDJ2019

- 9040 JURISDICTION ACCEPTED, RELIEF GRANTED

COUNSEL :

Dominic E. Draye (argued), Andrew F. Halaby, William E. Eye, Greenberg Traurig, LLP, Phoenix, Attorneys for Graeme Hancock

David L. Sandweiss , Senior Bar Counsel (argued), Kelly J. Flood, David E. Wood, State Bar of Arizona, Phoenix, Attorneys for State Bar of Arizona

J . Scott Rhodes, In Propria Persona, Phoenix, Attorney for Amicus Curiae J.

Scott Rhodes

C HIEF JUSTICE BRUTINEL authored the O pinion of the Court, in which

VICE CHIEF JUSTICE TIMMER and JUSTICES BOLICK, LOPEZ, BEENE,

MONTGOMERY

, and PELANDER ( R ETIRED ) joined

. *

 Justice Kathryn Hackett King has recused h erself from this case. Pursuant to article 6, section 3 of the Arizona Constitution, Ju stice John Pelander ( R et.) , was designated to sit in this matter

.GRAEME HANCOCK v

. HON. O'NEIL /STATE BAR OF ARIZONA Opinion of the Court

2 CHIEF JUSTICE BRUTINEL

, O pinion of t he Court:

¶1 In this special action, we are asked to decide whether

offensive issue preclusion applies in attorney disciplin ary proceedings

. The Arizona Rules of the Supreme Court governing attorney discipline give preclusi ve effect to two types of prior judgments in attorney disciplin ary

matters : (1) criminal convictions

, Rule 54(g), and (2) attorney discipline imposed in other jurisdictions, Rule 54( h)

. Because our rules dictate when a prior judgment may have preclusive effect in attorney disciplin ary proceedings, we hold that offensive issue preclusion does not apply

. Therefore, a sanctions order in a prior lawsuit does not have preclusive effect in an attorney disciplin ary proceeding.

I. BACKGROUND

¶2 This case arises from one of many lawsuits concerning Goodyear’s G159 tire. The plaintiffs in the underlying action, the Haegers, suffered serious injuries when the front tires to their motor home failed. The Haegers sued Goodyear in state court, and Goodyear subsequently

removed the case to federal district court

.

¶3 Goodyear appointed Basil Musnuff, an Ohio lawyer , as “national coordinating counsel” on all G1 59 cases across the country to oversee discovery requests, coordinate the search for documents, and draft

responses . Goodyear hired Arizona attorney Graeme Hancock as local

counsel.

¶4 During discovery, the Haegers requested test records for the G159, but Goodyear, through its counsel , repeatedly denied the existence of such tests and otherwise refused to produce them. The Haegers and Goodyear settled on the first day of trial after extensive pre

- trial litigation

.

¶5 Almost a year after the Haeger settlement, a newspaper article reporting on another G159 case mentioned testing data, the same data Goodyear and its counsel denied existed. The Haegers filed a motion for sanctions alleging discovery fraud. Following sanc tions proceedings, theGRAEME HANCOCK v

. HON. O'NEIL /STATE BAR OF ARIZONA Opinion of the Court

3 d istrict c ourt issued a lengthy sanctions order against Goodyear, Musnuff, and Hancock, detailing each party’s involvement in defrauding the court. 1

¶6 Subsequently, the State Bar of Arizona ( the “Bar”) initiated an investigation into Hancock’s conduct. Upon completi ng the investigation, the Bar recommended an Order of Probable Cause to the Attorney Discipline Probable Cause Committee. The committee found probable cause, and the Bar filed a formal complaint against Hancock

. S ee Ariz. R. Sup. Ct. 47 (outlining attorney discipline procedural matters).

¶7 At the disciplinary proceeding

, the Presiding Disciplinary Judge (“PDJ”) granted the Bar’s motion for partial summary judgment, applying offensive non

- mutual issue preclusion to preve nt Hancock from relitigating the district court’s fact findings

.

¶8 Hancock filed a petition for special action in this Court challenging the applicability of issue preclusion in Bar disciplinary proceedings. We have jurisdiction under article 6, section 5(3 ) of the

Arizona Constitution.

II. DISCUSSION

¶9 “Application of issue preclusion is an issue of law, which we

review de novo.” Picaso v. Tucson Unified Sch

. Dist. , 217 Ariz. 178, 180 ¶ 6 (2007).

A

.

¶10 Issue preclusion is a judicial doctrine that, when applicable, prevents a party from relitigating an issue of fact decided in a prior judgment. Crosby

- Garbotz v. Fell ex. rel. Cnty

. of Pima , 246 Ariz. 54, 55 ¶ 1 (2019)

. 2 Offensive issue preclusion occurs when the party invoking the

doctrine uses it as a sword against another party who lost on the issue in a prior judgment. See i d. at 60 ¶ 26. Our Court , as well as the United States Supreme Court, has noted that offensive issue preclusion is “a situation

that

. . . present[s] different considerations” beyond the four elements state

1 Haeger v. Goodyear Tire & Ru bber Co. , 906 F. Supp. 2d 938 (D. Ariz. 2012), aff ’ d , 813 F.3d 1233 (9th Cir. 2016), rev’d and remanded, 581 U.S. 101 (2017)

. 2 Issue preclusion is also known as collateral estoppel. Id.GRAEME HANCOCK v

. HON. O'NEIL /STATE BAR OF ARIZONA Opinion of the Court

4 and federal law require for defensive issue preclusion. 3 Id. ; see Parklane Hosiery Co

. v. Shore , 439 U.S. 322, 3 29

– 31 (1979). 4

¶11 T he law of the jurisdiction of the court from which the underlying initial judgment issues determines whether that judgment has preclusive effect. In re Gen

. Adjudication of All R ts

. to Use Water in Gila River Sys

. & Source , 212 Ariz. 64, 69 ¶ 13 (2006)

. But in federal diversity cases, such as the Haeger case, federal law incorporates “the law that would be applied by state courts in the State in which the federal diversity court sits.” Semtek Int’l Inc. v. Lockheed Martin Corp. , 531 U.S. 497, 508 (2001). As a result

, Arizona law governs the preclusive effect of a judgmen t from a District of

Arizona federal court sitting in diversity. And this Court is the ultimate authority on Arizona law, to which the federal courts must defer. See Erie R. Co. v. Tompkins , 304 U.S. 64, 79 (1938). Thus, it is our duty to decide whether Arizona law would give effect to such a judgment.

3 For defensive issue preclusion, federal and state law require that: (1) T he issue at stake must be the same in both pr oceedings; (2) the issue must have been actually litigated and decided in the prior proceedings; (3) the party against whom the doctrine is to be invoked must have had a full and fair opportunity to litigate the issue; and (4) the issue must have been nece ssary to decide the merits of the prior action. Janjua v. Neufeld , 933 F.3d 1061, 1065 (9th Cir. 2019) (quoting Oyeniran v. Holder, 672 F.3d 800, 806 (9th Cir. 2012),

as amended (May 3, 2012)) ; Chaney Bldg. Co. v. City of Tucson , 148 Ariz. 571,

573 (1986).

4 Because offensive, non

- mutual use of the doctrine may lead to perverse outcomes, federal courts employ a four

- factor “fairness” test before giving a judgment preclusive effect on an issue when the parties are not identical in both suits and the p arty invoking the doctrine uses it offensively , that is

as a sword

, not a shield

. See Parklane , 439 U.S. at 330

– 32 ; Off. of Disciplinary

Couns

. v. Kiesewetter , 889 A.2d 47, 52 (Pa. 2005) (“(1) [W]hether the plaintiff could have joined the earlier action; (2) whether the subsequent litigation

was foreseeable and therefore the defendant had an incentive to defend the first action vigorously; (3) whether the judgment relied upon as a basis for

collateral es toppel is inconsistent with one or more previous judgments in favor of the defendant; and (4) whether the second action would afford the defendant procedural opportunities unavailable in the first action that could produce a different result.”) (summarizin g Parklane fairness factors ).GRAEME HANCOCK v

. HON. O'NEIL /STATE BAR OF ARIZONA Opinion of the Court

5 ¶12 This Court is not only the ultimate authority on Arizona law,

but also “the ultimate body wielding the State’s power over the practice of

law.” Bates v. State Bar of Ariz. , 433 U.S. 350, 360 (1977) ; see also Ariz. Const.

art. 6, § 3 (entrusting this Court with administrative supervision over state

courts ); Scheehle v. Justi ces of the Sup

. C t. of the State of Ariz

. , 211 Ariz. 282,

290 ¶ 3 1 (2005) (concluding that article 6, section 3 provides for this Court’s “constitutional power over attorneys as officers of the court”)

. We are therefore not required to give preclusive effect to any prior judgment in a n attorney disciplin ary matter

, other than that which is already provided

under our rules or caselaw

. Thus, in the exercise of our regulatory authority

o ver the practice of law in this state , we hold as a matter of Arizona law that the doctrine of offensive issue preclusion does not apply to attorney disciplinary proceedings. Instead, our rules determine the preclusive effect of prior judgments in attorney discip lin ary proceedings.

B

.

¶13 The Arizona Supreme Court Rules governing attorney disciplin ary matters do not explicitly reference issue preclusion. But the

rules do enumerate grounds for disciplin e, and two grounds arise from prior judgments: (1) discipline for the conviction of a crime, Rule 54(g), and (2) discipline imposed by other jurisdictions, Rule 54(h). The practical effect

of these subsections is that

, if an attorney is convic ted of a crime or discipline d by another jurisdiction , the atto rney is precluded from relitigating whether he or she committed the underlying crime or ethical

violation , subject to the provisions of Rule 57 (b) in the context of discipline by another jurisdiction

.

¶14 Although the practical effect of these subsections is effectively issue preclusion, Rules 54(g) and 54(h) do not apply the doctrine of issue preclusion. Rather, the rules prescribe the procedure. If an attorney is convicted of a crime or disciplined in a nother jurisdiction, then the attorney may be disciplined. The rules provide further instruction for recognizing and imposing discipline ordered in another jurisdiction: 5

5 The findings that would prevent the imposition of discipline stemming from discipline in another jurisdiction are in large part akin to the Parklane

fairness factors. See Parklane , 439 U.S. at 330

– 32

. Though we note these
similarities, we refrain from characterizing our rules as permitting issueGRAEME HANCOCK v

. HON. O'NEIL /STATE BAR OF ARIZONA Opinion of the Court

6 [T] he presiding disciplinary judge shall impose the identical or substantially simi lar discipline, unless bar counsel or respondent establishes by a preponderance of the evidence, through affidavits or documentary evidence, or as a matter of law by reference to applicable legal authority, or the presiding disciplinary judge finds on the face of the record from which the discipline is predicated, it clearly appears that:

A. the procedure was so lacking in notice or opportunity to be heard as to constitute a deprivation of due process; or

B. there was such infirmity of proof establishing th e misconduct as to give rise to the clear conviction that the presiding disciplinary judge could not, consistent with its duty, accept as final the other jurisdiction ’ s conclusion on that subject; or

C. the imposition of the same discipline would result in grave injustice; or

D. the misconduct established warrants substantially different discipline in this state.

Ariz. R. Sup. Ct. 57( b)(3). Thus, when a United States D istrict C ourt avails itself of the federal attorney disciplin ary process , see D. Ariz. L R Civ 83.2

,

we will recognize and impose its decision so long as the attorney has the opportunity to explain why he or she should not be bound by the federal court’s disciplin ary order

. 6 But the judgment here was not an exercise of disciplinary authority by the district court; this is a n order for sanction s in

a civil case.

preclusion in certain cases. Issue preclusion is a well

- studied doctrine with its own body of caselaw, which has no bearing on our rules.

6 Federal and state courts have independent disciplinary authority. See
Chambers v. NASCO, Inc. , 501 U.S. 32, 43 (1991) (“[A] federal court has the power to control admission to its bar and to discipline attorneys who appear before it.”); In re Smith , 189 Ariz. 144, 146 (1997) (explaining that this

Court determines who c an practice law in Arizona and under what

conditions ).GRAEME HANCOCK v

. HON. O'NEIL /STATE BAR OF ARIZONA Opinion of the Court

7 ¶15 U nder the interpretive canon expressio unius est exclusio

alterius

, “ the expression of one item implies the exclusion of others.” Ci ty of Surprise v. Ariz. Corp. Comm’n , 246 Ariz. 206, 211 ¶ 13 (2019). Our rules provide only two instances in which a prior judgment would effectively prevent an attorney from relitigating the underlying facts in a disciplinary hearing

. Therefore, under our rules, the doctrine of issue preclusion is not applicable to attorney disciplin ary hearings in Arizona ; rather, our rules define when a prior judgment has preclusive effect

.

¶16 Our caselaw ’s requirement for indepen dent fact finding in attorney disciplinary proceedings supports this conclusion. In re Levine

, 174 Ariz. 146, 1 5 0 (1993) (“In reviewing disciplinary proceedings [

, ]

. . . [this Court is] an independent trier of both fact and law

. . . .”); In re Wolfram

, 174 Ariz. 49, 5 2 (1993) (“In disciplinary proceedings, this [C]ourt acts as an independent trier of fact and law in the exercise of our supervisory responsibility over the State Bar.”). Giving a prior judgment preclusive

effect

, other than as pr o vided by our rules

, abrogates this Court’s authority and duty to act as an independent trier of fact.

¶17 Moreover

, i f the Bar relied on a state court sanctions order to discipline Hancock

, such an order would n ot have preclusive effect under

our rules because it is n either a criminal conviction n or discipline from another jurisdiction. It is incongruous to apply offensive issue preclusion

to a federal court order where we would n o t apply it to an identical state

court order

, especially in a matter where state law applies

.

¶18 The Bar nonetheless contends that rejecting issue preclusion here breaks from Arizona courts’ treatment of issue preclusion in disciplinary proceedings of other regulated professions, positing that today’s ho lding “exempt[s] lawyers from a rule that applies to everyone else.” The Bar warns that this will “create a public perception that lawyers form a clubby group of elitists who rig laws in our self

- interest, knowing we can count on friendly courts for shelt er.”

¶19 But a ny differential treatment of lawyers, if it exists, comes from our constitutional authority under article 6, section 3 of the Arizona

Constitution . We have administrative supervision over the courts, id.

, and lawyers are officers of the court, S cheehle , 211 Ariz . at 290 ¶ 3 1

. Under this authority, we have crafted rules governing the attorney disciplin ary

process

— rules that, of course, are inapplicable to other professions. The rules governing disciplinary matters are the result of a carefully craftedGRAEME HANCOCK v

. HON. O'NEIL /STATE BAR OF ARIZONA Opinion of the Court

8 rulemaking process . This process benefits greatly from public input and can readily be modified when appropriate

.

¶20 Furthermore

, nothing in our decision today precludes the Bar

f rom pursuing its prosecution and using the sanctions proceeding in the

district court as evidence. T he inapplicability of the issue preclusion doctrine in attorney disciplin ary matters does not render collateral proceedings irrelevant to the resolution of disciplinary proceedings. A PDJ is not bound by the rules of evidence and “may conduct the hearing in any manner that will achieve substantial justice.” Ariz. R. Sup. Ct. 61(c)(2)(B). Although the Bar cannot p revent an attorney from relitigating issues
determined in a sanctions order, a PDJ is permitted to admit transcripts and other evidence of collateral proceedings and credit the persuasiveness of

such evidence , so long as the PDJ affords an attorney the opp ortunity to contest such evidence and introduce additional evidence as appropriate. 7

¶21 Moreover, we reject the Bar’s assertion that our holding

exempt s lawyers from a rule that applies to everyone else. The Bar cites two cases involving the use of issue pr eclusion in disciplinary proceedings for other regulated professions to support this argument: In re Marquardt

, 161 Ariz. 206 (1989), and Wetzel v. Ariz. State Real Est

. Dep’t , 151 Ariz. 330 (App. 1986). Both cases are inapposite.

¶22 In Marquardt , a n Arizona superior court judge was convicted

in a Texas state court of possessing marijuana. 161 Ariz. at 207. In a subsequent judicial misconduct case, this Court ruled that the judge was bound by the criminal conviction and was precluded from arguing tha t he did not intend or know that he was in possession of the drug. Id. at 213. Judicial disciplinary proceedings are different from attorney disciplin ary proceedings and are subject to different rules. See Ariz. Const. art. 6.1,
§§ 1

– 3 (establishing a judicial conduct commission and prescribing parameters for suspension or disqualification of state judges ); Ariz. Comm’n on Ju d. Conduct R. 20

– 34. Nevertheless, if attorney disciplin ary rules governed, this Court would still have given the criminal conviction preclusive effect because Rule 54(g) allows for the use of a criminal

7 As to the admissibility of the collateral court order finding improper attorney conduct and conclusive reliance thereon , because a PDJ is not bound by the order, we struggle to imagine a scenario in which admitting the order achieves substantial justice when the evidence from the proceeding is available.GRAEME HANCOCK v

. HON. O'NEIL /STATE BAR OF ARIZONA Opinion of the Court

9 conviction as a basis for attorney discipline. See Ariz. R. Sup. Ct. 54(g).
Thus, Marquardt’s criminal conviction would have had the same preclusiv e effect unde r our rules if he was facing attorney discipline rather than judicial misconduct charges

.

¶23 Wetzel involved a real estate broker who was also a recently disbarred lawyer. 151 Ariz. at 332. The Arizona State Department of Real Estate ( the “ Department”) revoke d the broker’s real estate license based solely on this Court’s disbarment orders. Id. A fter exhausting his administrative remedies, the broker challenged the Department’s use of

offensive non

- mutual issue preclusion in court. Id. Th e court of appeals

affirmed. Id. at 333

– 34

. 8

¶24 The hearing officer gave the disbarment orders preclusive

effect pursuant to Department rules

. Id. at 332

. This is markedly different from the PDJ here who felt obliged to apply issue preclusion under federal

law

. Other administrative agencies are free to adopt procedural rules or apply judicial doctrines in their discretion ; here the issue is the PDJ ’s application of our rules for attorney disciplin ary proceedings.

¶25 Unlike Marquardt and the case at hand

, Wetzel involved an administrative proceeding in a profession over which we have no regulatory authority. Here, we are vested with authority over attorney disciplinary proceedings. Ariz. Const. art. 6, § 3; Scheehle , 211 Ariz . at 290 ¶ 31. And our rules speak on the matter. We hold that under our rules, issue preclusion is not applicable in attorney disciplinary procee dings ; only criminal convictions and disciplin ary orders from other jurisdictions may be given preclusive effect.

8 Although Wetzel approved the use of offensive, non

- mutual issue preclusion, the court noted that in Arizona, non

- mutual issue preclusion

“has been limited to the defensive use of the doctrine.” Id. (citing Standage
Ventures, Inc. v. State , 114 Ariz. 480 (1977)). Indeed, in Standage Ventures

, this Court expressly prohibited offensive use of issue preclusion. 114 Ariz.

at 484. Other courts have noted that the law is unclear in Arizona. Am. Fam. Mut. Ins. Co. v. Clancy , 512 F. App’x 674, 676 (9th Cir. 2013) (noting disag reement between Standage and Wetzel ). Because our rules, rather than the issue preclusion doctrine, govern here, this case does not require us to clarify this point

.GRAEME HANCOCK v

. HON. O'NEIL /STATE BAR OF ARIZONA Opinion of the Court

10 III. CONCLUSION

¶26 W e accept jurisdiction and grant relief , vacating the PDJ ’s order and remanding for further proceedings

.