Opinion ID: 2570265
Heading Depth: 1
Heading Rank: 1

Heading: facts

Text: On November 14, 2000, Petitioner Office of Disciplinary Counsel (the ODC) petitioned the Board to recommend sanctions against Au based on alleged violations of the Hawai'i Rules of Professional Conduct (HRPC) in three separate disciplinary matters.
The ODC alleged that, in the course of representing a client before the Circuit Court of the First Circuit, State of Hawai'i, Au drafted and filed two documents that cited to Sherry v. Ross, 846 F.Supp. 1424 (D.Haw. 1994) ( Sherry ). Au made the following representations to Circuit Court Judge Daniel G. Heely:  that Sherry was decided on the attorney-client crime-fraud provisions [of Rule 503 of the Hawai'i Rules of Evidence (HRE)] and the Fraudulent Conveyance Act ... [under] HRS 651 C-4;  that, in Sherry, the debtor conveyed real property to his wife with the help of an attorney who prepared the conveyance;  that the United States Court of Appeals for the Ninth Circuit upheld the Federal Court; and  that the Court [presumably the Ninth Circuit] found that fraudulent intent was not proven under the fraudulent conveyances provision as under the common law provision. In fact, Au's description of Sherry was not accurate because  Sherry addresses neither the attorney-client privilege nor the crime-fraud exception to the attorney-client privilege;  Sherry does not mention a relationship between an attorney and a client, nor does it mention an attorney or an attorney assisting in a conveyance;  Sherry was decided under neither the Fraudulent Conveyance Act nor the Uniform Fraudulent Transfer Act, but rather, Sherry was decided under the common law;  in Sherry, a third party (not the debtor) conveyed property to a debtor's wife, and a subsequent creditor challenged the conveyance; and  Magistrate Judge Francis I. Yamashita of the United States District Court for the District of Hawaii authored Sherry, and there was no Ninth Circuit opinion. The circuit court judge and opposing counsel complained separately to the ODC about Au's misconduct.
The ODC alleged that, with respect to several different clients, Au committed the following misconduct:  improperly deposited his clients' settlement proceeds into his office account;  improperly paid costs from his client trust account;  improperly deposited unearned fees into his office account;  improperly reimbursed his trust account;  failed to withdraw funds from his client trust account;  improperly deposited clients' settlement proceeds into his office account;  falsely certified in his annual registration statements for the Hawai'i State Bar Association (HSBA) that he was maintaining clients' funds and property in compliance with HRPC Rule 1.15; and  paid fees to a non-lawyer runner in exchange for the non-lawyer runner's referral of clients for legal services to Au.
The ODC alleged that, with respect to a particular client, Au improperly deposited unearned fees into his office account.
On December 18, 2000, Au answered the ODC's petition for discipline. On March 19, 2002, Au filed a first amended answer to the ODC's petition for discipline.
On September 28, 2001, the Board appointed three persons to serve as the hearing committee for the ODC's petition against Au: (1) attorney Paul Alston (Chairperson Alston) as the chairperson of the hearing committee; (2) attorney Christobel Kealoha, as a member; and (3) Terri Needles, Ph.D., as a member. During the next year, the parties conducted discovery under the supervision of the hearing committee. The hearing committee held pre-hearing conferences to address disputes and controversies regarding evidence that the parties intended to introduce. For example, one controversy involved the ODC's allegations that a non-lawyer, Wayne Yoshimoto (Yoshimoto), had an agreement with Au under which Yoshimoto found legal clients and referred them to Au in exchange for Au's payment of five percent of the gross amount of any settlement that Au recovered for the clients. The ODC intended to prove the allegations by introducing copies of some of Au's checks to Yoshimoto, settlement statements, witness testimony, as well as some audiotapes and corresponding transcripts from some of Yoshimoto's conversations with Au that Yoshimoto surreptitiously recorded on August 16 and 29, 1994. Yoshimoto recorded the conversations with Au because Au was allegedly not paying Yoshimoto some of the client referral fees that Au owed to Yoshimoto, and Yoshimoto wanted to obtain proof that Au acknowledged the existence of their agreement for client referral fees. Au contested the authenticity of Yoshimoto's tape recordings and corresponding transcripts. Au also claimed that someone had deleted exculpatory statements from Yoshimoto's tape recordings. Consequently, on October 24, 2002, the hearing committee issued a pre-hearing order that provided, among other things, that, by November 17, 2002, Au could submit to the hearing committee an annotated copy of the transcripts that would show: (1) the portions of the transcripts that Au accepted as accurate; (2) the portions of the transcripts that Au contended were audible but incompletely or inaccurately transcribed, as well as Au's suggested changes to remedy the incompleteness or inaccuracy; and (3) the portions of the transcripts that Au contended were inaudible and therefore inaccurately transcribed. However, Au did not submit an annotated copy of the transcripts to the hearing committee.
The hearing committee held formal evidentiary hearings on January 21, January 22, and April 29, 2003. At these hearings, the ODC adduced substantial evidence in support of the ODC's various allegations relating to Au's misrepresenting the holding of a published case, mishandling client funds, misusing a client trust account, and paying a non-lawyer runner a fee in exchange for client referrals. The ODC's evidence included, among other things, Yoshimoto's testimony that he had an agreement with Au under which Yoshimoto found and referred several legal clients to Au in exchange for Au's payment of five percent of the gross amount of any settlement that Au recovered for the clients. The ODC also adduced copies of some of Au's checks to Yoshimoto for his referral fees, Au's settlement statements, as well as the audiotapes and corresponding transcripts from the conversations with Au that Yoshimoto surreptitiously recorded on August 16 and 29, 1994. One of the clients whom Yoshimoto referred to Au was Cindy Labrador (Labrador). Labrador had two personal injury matters. Au eventually settled Labrador's two personal injury matters for (1) $27,000.00 and (2) $19,000.00, or a total settlement amount of $46,000.00. At about the time when Au settled the second of Labrador's two personal injury matters, Au gave Yoshimoto a check for only $500.00. Yoshimoto learned from Labrador that Au had settled the two personal injury matters for a total amount of $46,000.00. Consequently Yoshimoto met with Au on August 16 and 29, 1994, for the purpose of discussing various unpaid fees that Au owed Yoshimoto, including Yoshimoto's five percent fee for Labrador's two personal injury matters. Following the discussions, Au wrote Yoshimoto two checks, dated August 29, 1994, in the amounts of $850.00 and $950.00. Although writing on the two checks purported that the checks were payments for Yoshimoto's investigative services in Labrador's personal injury matters, Au's three payments (i.e., $500.00, $850.00 and $950.00) to Yoshimoto for his services in Labrador's two personal injury matters added up to $2,300.00, which was exactly five percent of the $46,000.00 settlement amount. In contrast to the ODC's evidence, Au testified, among other things, that Au did not have an agreement with Yoshimoto to pay Yoshimoto a fee in exchange for client referrals. For example, Au claimed that he paid Yoshimoto in Labrador's two personal injury matters because Yoshimoto had performed investigative services. At the conclusion of the evidentiary hearing on April 29, 2003, Chairperson Alston told the ODC and Au to submit their proposed findings of fact and conclusions of law to the hearing committee. However, on October 28, 2003, Chairperson Alston ordered the parties to appear at a newly scheduled hearing on October 31, 2003. Chairperson Alston informed the parties that the hearing committee would address the following two issues at the October 31, 2003 hearing: If the Panel determines that the Respondent [Au] has given false testimony and/or made frivolous arguments and/or made groundless accusations against witnesses, to what extent may the Panel consider such matters in deciding (1) the Respondent [Au]'s guilt; and (2) the appropriate discipline, if any[?] Chairperson Alston began the October 31, 2003 hearing by informing Au that the hearing committee members believed Au's prior testimony was not truthful, and that Au had an improper client referral agreement with Yoshimoto: THE CHAIRMAN: We have convened this morning to do one thing, Mr. Au, and that is to listen to portions of the audiotape, and to get your comment on what we hear in those audiotapes. I will tell you that, as we sit here this morning, it's the unanimous view of the Panel that, in fact, you have not testified truthfully today. I think it is the unanimous view of the Panel, subject to the outcome of today's proceeding, that, in fact, you had an agreement with Mr. Yoshimoto. And before we make our decisions based on those view, I wanted to give youthe Panel wanted to give you an opportunity to speak directly to the content of the tape because there has been a lot of paper and a lot of argument about the accuracy of the transcript, and the content of the tape, but what we hear in your own words appears to be very damning to you. We wanted to hear you speak directly to those matters. All right? (Emphases added.) In response to Chairperson Alston's opening statement, Au asserted, once again, that he did not have an agreement with Yoshimoto to pay Yoshimoto in exchange for client referrals. Near the conclusion of the hearing, Chairperson Alston indicated to Au that the hearing committee did not believe Au's testimony: THE CHAIRMAN: Mr. Au, I'm going to give you one final opportunity MR. AU: To comment. THE CHAIRMAN: No. To consider recanting your testimony today and the position you've taken in this hearing about whether there was an agreement with this fellow to pay him referral fees. Nevertheless, Au denied that he paid client referral fees to Yoshimoto.
Six days later, on November 6, 2003, Au moved the hearing committee for the recusal or disqualification of Chairperson Alston and the designation of a new panel of members for the hearing committee. Au asserted that Chairperson Alston's and Au's pecuniary interests in two disputes created conflicts of interest that required Chairperson Alston's recusal or disqualification under Canons 2 and 3(E) of the Code of Judicial Conduct.
The first purported conflict of interest involved a dispute between Au and Chairperson Alston's law firm, Alston, Hunt, Floyd & Ing (AHFI), over the apportionment of an award of $176,287.80 in attorneys' fees that Alteka Co., Ltd. (Alteka), won in an appeal entitled Shanghai Investment Company, Inc., v. Alteka Co., Ltd., 92 Hawai'i 482, 993 P.2d 516 (2000) [1] (hereinafter referred to as the Alteka Matter). The Alteka Matter involved two consolidated cases and multimillion-dollar contract claims: (a) Alteka and Shanghai Investment Company, Inc. (Shanghai), in Shanghai Investment Company, Inc. v. Alteka Co., Ltd ., Civil No. 94-2683-07; and (b) Alteka and Windward Park, Inc. (Windward), in Alteka Co., Ltd. v. Windward Park, Inc., et al., Civil No. 95-3483-09. Au represented Alteka in these consolidated cases while they were pending before a trial court. According to Au, he had a contingent fee agreement with Alteka. Alteka prevailed in some, but not all, of the disputed claims. For example, although the trial court awarded Alteka $1,171,949.76 on Alteka's breach of contract claim against Windward, the trial court awarded Windward $5,000,000.00 on Windward's breach of contract counterclaim against Alteka. See Shanghai Investment Company, Inc., v. Alteka Co., Ltd., 92 Hawai'i at 491, 993 P.2d at 525. Furthermore, the trial court denied Alteka's motion for an award of attorneys' fees, even though Alteka successfully defended itself against all of Shanghai's claims. Id. Although Alteka intended to appeal from the judgment, Au withdrew as Alteka's counsel, and Chairperson Alston and his law firm, AHFI, appeared as Alteka's substitute counsel. On behalf of Alteka, Chairperson Alston and AHFI appealed to this court. On appeal, Chairperson Alston and AHFI succeeded in convincing us that the trial court erred in (1) awarding Windward $5 million in damages against Alteka; and (2) denying Alteka's request for attorney fees and costs in successfully defending against the claims made by Shanghai.... We therefore vacate the $5 million damage award to Windward and remand to the trial court with instructions to (1) enter judgment in favor [of] Alteka for $1,171,949.76 plus interest and (2) determine and award reasonable attorneys' fees to Alteka against Windward and Shanghai in accordance with this opinion.... Shanghai Investment Company, Inc., v. Alteka Co., Ltd ., 92 Hawai'i at 505, 993 P.2d at 539 (emphasis added). Because Alteka prevailed in the appeal, we awarded attorneys' fees in the amount of $176,287.80 to Alteka: Upon careful consideration of Defendant-Appellant Alteka Co., Ltd.'s First Request for Attorneys' fees, the papers in support and opposition, and the records and files in this case, IT IS HEREBY ORDERED that the motion is granted in part, and attorneys' fees totaling $176,287.80 are approved and awarded to Alteka. Said sum shall be imposed against Shanghai Investment Company, Inc. and Windward Park, Inc., jointly and severally. (Emphasis added.) Although Au had withdrawn as Alteka's counsel prior to the appeal, Au believed that he was entitled to a portion of Alteka's award of attorneys' fees pursuant to Au's contingent fee agreement with Alteka. Based on Alteka's refusal to give Au a portion of the award of attorneys' fees, Au asserted that he had a financial dispute with Chairperson Alston that warranted Chairperson Alston's disqualification in the ODC's disciplinary proceedings. In an attempt to show the hearing committee the alleged dispute between Au and Chairperson Alston, Au submitted, among other things, a photocopy of a letter that Au had written to Alston more than three and one-half years earlier, dated March 29, 2000, in which Au threatened to impose a lien on Alteka's award of attorneys' fees resulting from Alteka's successful appeal: Dear Mr. Alston: Have you had an opportunity to discuss our claims for attorney's fees in the Shanghai case[?] I am certainly open to any reasonable arrangement. If we cannot reach an agreement by Friday, March 31, 2000, I am compelled to file an attorney's lien on the case. I appreciate your personal efforts. May I hear from you[?] Sincerely, [Signature] RONALD G.S. AU (Emphasis added.) Au additionally submitted a letter from Chairperson Alston to Au, also dated March 29, 2000. In the March 29, 2000 letter, Chairperson Alston stated, on behalf of Alteka, (1) that the attorney-client agreement between Au and Alteka did not entitle Au to receive any additional attorneys' fees from Alteka and (2) that Au's mistakes as Alteka's trial counsel contributed to the trial court's initial judgment against Alteka: Dear Mr. Au: I have received your letter dated March 29[, 2000]. I still have not received any decision from Alteka about your demands, so I cannot promise it will be possible to reach any agreement by the end of the month (two days from now). In any event, you are not now owed any money based upon my reading of the agreements, so I am not sure what causes your sense of urgency. In addition, there are troublesome questions about how the failure timely to raise the penalty/liquidated damages issue in the trial court contributed to (1) the judgment against Alteka, and (2) the cost of the appeal. I do not think it is in your interest to provoke discussion of those issues. I will follow up with Mr. Matsumura tomorrow and report to you as soon as possible on the progress Alteka is making toward making a decision on your demands. PAUL ALSTON (Emphases added.) Despite the three-year delay between (1) the commencement of the purported conflict between Chairperson Alston and Au in the Alteka Matter and (2) Au's motion to disqualify Chairperson Alston in the disciplinary proceedings, Au explained that he did not raise the issue of Chairperson Alston's alleged conflict prior to, or during, the disciplinary hearings because Respondent [Au] had the highest degree of respect for the integrity and impartiality of ALSTON[.]
The second purported conflict of interest arose out of Au's August 2003 appearance on behalf of a client, Gary Shigemura, in a foreclosure action in which both Shigemura and AHFI's client, Beneficial Hawaii, Inc. (Beneficial), foreclosed on their respective mortgages against the same debtor, Donald Kida, and, inevitably, Shigemura and Beneficial disputed the priority of their respective mortgages (hereinafter referred to as the Kida Matter). The Kida Matter arose out of two consolidated cases: (a) Donald M. Kida v. Michele Kobayashi, et al., Civil No. 97-4838-11, and (b) Beneficial Hawaii, Inc. v. Donald Mueno Kida, et al., Civil No. 01-1-2275-08. Au did not initially represent any of the parties in the Kida Matter. For example, while the hearing committee was conducting the disciplinary hearings regarding Au on January 21, January 22, and April 29, 2003, Au was not yet involved in the Kida Matter. However, in August 2003, Au began appearing as legal counsel for Shigemura in the Kida Matter. At that time, the circuit court required Shigemura to hire an attorney because, after Shigemura had rendered several years of legal services on Kida's behalf, Kida had allowed Shigemura to obtain a second mortgage on Kida's real property in an amount equivalent to the attorney's fees that Kida owed Shigemura. Beneficial held the first mortgage on Kida's real property. When Shigemura's mortgage became an issue in the Kida Matter, the circuit court required Shigemura to hire an attorney to advocate on behalf of Shigemura's mortgage interest. On September 15, 2003, Au moved the circuit court (on Shigemura's behalf) to disqualify Chairperson Alston's law firm, AHFI, from representing Beneficial in the Kida Matter. Kida joined the motion. The circuit court denied Au's motion to disqualify AHFI and ordered the parties in the case to participate in mediation prior to trial. The mediation concluded with the parties agreeing to settle the litigation.
On November 26, 2003, the hearing committee denied Au's motion for the recusal or disqualification of Chairperson Alston.
On November 26, 2003, the hearing committee also filed its forty-seven-page findings of fact, conclusions of law, and recommendation for discipline. The hearing committee found, among other things, that Au falsely testified  that Au first paid his clients and then deposited the clients' settlement checks into Au's office account,  that Au had no client referral agreement with Yoshimoto, and  that the fees Au paid Yoshimoto for Labrador's two personal injury matters were for Yoshimoto's investigative services. The hearing committee further found that, instead of testifying truthfully, Au attempted to mislead and deceive the ODC and the hearing committee regarding his dealings with Yoshimoto. When the hearing committee gave Au opportunities to recant his false testimony, Au refused. The hearing committee concluded that Au violated the HRPC as follows:
With respect to ODC XX-XXX-XXXX, the hearing committee concluded that Au misrepresented the holding of a published court opinion, Sherry v. Ross, 846 F.Supp. 1424 (D.Haw.1994), to Judge Heely in violation of:  HRPC Rule 1.1 (requiring a lawyer to provide competent representation);  HRPC Rule 3.3(a)(1) (prohibiting a lawyer from knowingly making a false statement of material fact or law to a tribunal); and  HRPC Rule 8.4(c) (prohibiting a lawyer from engaging in conduct involving dishonesty, fraud, deceit, or misrepresentation).
With respect to ODC XX-XXX-XXXX, the hearing committee concluded that, in several instances, Au improperly deposited his clients' settlement proceeds into his office account in violation of:  HRPC Rule 1.15(a)(1) (requiring a lawyer to maintain a client trust account into which the lawyer must deposit all funds that are entrusted to the lawyer's care);  HRPC Rule 1.15(c) (prohibiting a lawyer from commingling client funds with the lawyer's own funds or misappropriating such funds for the lawyer's own use or benefit);  HRPC Rule 1.15(c) (requiring a lawyer to deposit into a client trust account any funds that belong in part to a client and in part presently or potentially to the lawyer); and  HRPC Rule 1.15(d) (requiring a lawyer to deposit intact into a client trust account all funds entrusted to the lawyer except for non-refundable retainers earned upon receipt). [2] The hearing committee concluded that, in several instances, Au paid for certain litigation costs by using funds from his client trust account in violation of:  HRPC Rule 1.15(a)(1) (requiring a lawyer to maintain a client trust account into which the lawyer must deposit all funds that are entrusted to the lawyer's care);  HRPC Rule 1.15(c) (prohibiting a lawyer from commingling client funds with the lawyer's own funds);  HRPC Rule 1.15(c) (requiring a lawyer to deposit into a client trust account any funds that belong in part to a client and in part presently or potentially to the lawyer, but additionally requiring the lawyer to withdraw any portion belonging to the lawyer when due); and  HRPC Rule 1.15(e) (requiring that, when a lawyer withdraws earned fees from a client trust account, the lawyer must distribute the earned fees by check to the named lawyer). The hearing committee concluded that Au improperly deposited unearned fees into his office account, rather than his client trust account, in violation of:  HRPC Rule 1.15(a)(1) (requiring a lawyer to maintain a client trust account into which the lawyer must deposit all funds that are entrusted to the lawyer's care);  HRPC Rule 1.15(c) (prohibiting a lawyer from commingling client funds with the lawyer's own funds or misappropriating such funds for the lawyer's own use or benefit);  HRPC Rule 1.15(c) (requiring a lawyer to deposit into a client trust account any funds that belong in part to a client and in part presently or potentially to the lawyer); and  HRPC Rule 1.15(d) (requiring a lawyer to deposit intact into a client trust account all funds entrusted to the lawyer except for non-refundable retainers earned upon receipt). [3] The hearing committee concluded that Au improperly reimbursed his client trust account in violation of:  HRPC Rule 1.15(c) (prohibiting a lawyer from commingling client funds with the lawyer's own funds);  HRPC Rule 1.15(c) (requiring a lawyer to deposit into a client trust account any funds that belong in part to a client and in part presently or potentially to the lawyer, but additionally requiring the lawyer to withdraw any portion belonging to the lawyer when due); and  HRPC Rule 1.15(e) (requiring that, when a lawyer withdraws earned fees from a client trust account, the lawyer must distribute the earned fees by check to the named lawyer). The hearing committee concluded that Au failed to withdraw funds from his client trust account in violation of:  HRPC Rule 1.15(c) (prohibiting a lawyer from commingling client funds with the lawyer's own funds);  HRPC Rule 1.15(c) (requiring a lawyer to deposit into a client trust account any funds that belong in part to a client and in part presently or potentially to the lawyer, but additionally requiring the lawyer to withdraw any portion belonging to the lawyer when due); and  HRPC Rule 1.15(e) (requiring that, when a lawyer withdraws earned fees from a client trust account, the lawyer must distribute the earned fees by check to the named lawyer). The hearing committee concluded that Au falsely certified that he had complied with client trust account requirements in violation of:  HRPC Rule 8.4(a) (prohibiting a lawyer from violating or attempting to violate the HRPC); and  HRPC Rule 8.4(c) (prohibiting a lawyer from engaging in conduct involving dishonesty, fraud, deceit, or misrepresentation). The hearing committee concluded that Au improperly paid fees to a non-lawyer runner in exchange for client referrals, and, in so doing, Au also inflated his contingency fee in violation of:  HRPC Rule 1.5(c) (requiring that a contingent fee agreement must be in writing and must state the method by which the fee is to be determined);  HRPC Rule 7.2(c) (prohibiting a lawyer from giving anything of value to a person for recommending the lawyer's services);  HRPC Rule 8.4(a) (prohibiting a lawyer from violating or attempting to violate the HRPC); and  HRPC Rule 8.4(c) (prohibiting a lawyer from engaging in conduct involving dishonesty).
With respect to ODC XX-XXX-XXXX, the hearing committee concluded that Au deposited a client's payment for legal fees into Au's personal business account before Au earned the fees in violation of:  HRPC Rule 1.15(a)(1) (requiring a lawyer to maintain a client trust account into which the lawyer must deposit all funds that are entrusted to the lawyer's care);  HRPC Rule 1.15(c) (prohibiting a lawyer from commingling client funds with the lawyer's own funds or misappropriating such funds for the lawyer's own use or benefit);  HRPC Rule 1.15(c) (requiring a lawyer to deposit into a client trust account any funds that belong in part to a client and in part presently or potentially to the lawyer); and  HRPC Rule 1.15(d) (requiring a lawyer to deposit intact into a client trust account all funds entrusted to the lawyer except for non-refundable retainers earned upon receipt). [4]
The hearing committee recommended that this court impose two forms of discipline against Au: (1) public censure for (a) all of Au's misconduct in ODC XX-XXX-XXXX and (b) Au's mishandling of clients' funds in ODC XX-XXX-XXXX and ODC XX-XXX-XXXX; and (2) disbarment for Au's improper use of a non-lawyer runner to obtain client referrals in ODC XX-XXX-XXXX.
When Au's case proceeded to the Board, Au obtained the Board's permission to file a brief regarding, among other things, his prior motion to disqualify Chairperson Alston. Au appended additional documents to his brief that showed in greater detail how Chairperson Alston and Au had disputed whether Au was entitled to any of Alteka's award of attorneys' fees. After reviewing the evidence, the Board accepted the hearing committee's order denying Au's motion for the recusal or disqualification of Chairperson Alston from the hearing committee. The Board also accepted the hearing committee's findings of fact and conclusions of law. However, the Board rejected the hearing committee's recommendation to publicly censure and disbar Au. Instead, the Board recommended that this court suspend Au from the practice of law for two years.