Court Opinion

ID: 2828884
Source: CourtListenerOpinion
Date Created: 2015-08-20 15:12:34.180251+00
Date Added: 2024-06-11T13:40:08.376813
License: Public Domain

TO BE PUBLISHED

                  ,i5uprrtur (Court of 7{,firufurkg
                                  2015-SC-000128-KB

KENTUCKY BAR ASSOCIATION                                                     MOVANT

V.                               IN SUPREME COURT

RICHARD GROVE WARD                                                        RESPONDENT
KBA Member No. 91705

                                 OPINION AND ORDER

       Richard Grove Ward was admitted to practice law in the Commonwealth

of Kentucky on April 23, 2007. His bar roster address is 119 East Court

Street, Suite 309, Cincinnati, OH 45202, and his KBA number is 91705. The

Ohio Supreme Court suspended Ward from the practice of law for one (1) year

on January 29, 2015. 1 On March 16, 2015, the Kentucky Bar Association

(KBA) filed a petition asking this Court to order Ward to show cause why we

should not impose reciprocal discipline and, in the event we found cause

lacking, to impose that discipline pursuant to Supreme Court Rule (SCR)

3.435. On May 14, 2015, we issued a show cause order, and on June 3, 2015,

Ward filed a response objecting to the imposition of reciprocal discipline.

      Pursuant to SCR 3.435(4), an attorney may contest the imposition of

reciprocal discipline by proving with substantial evidence: "(a) a lack of

      1   Disciplinary Counsel v. Ward, Slip Opinion No. 2015 Ohio 237.
                                                            -     -
jurisdiction or fraud in the out-of-state disciplinary proceeding, or (b) that

misconduct established warrants substantially different discipline in this

State." Having reviewed Ward's response to our show cause order, we conclude

that he has failed to establish either. Therefore, we grant the KBA's petition to

impose reciprocal discipline.

                                  I. BACKGROUND.

      Ward's Ohio discipline arose from his handling of various trusts and a

real estate transaction. We briefly set forth below what occurred.

A. The Ohio Supreme Court Opinion

1.     The Trusts.

      The Ohio Supreme Court set forth the following set of facts. Ward's

father, Richard H. Ward (Dick Ward), was a close friend, confidant, and

attorney for John F. "Bud" Koons (Bud Koons), principal owner of a successful

bottling company associated with Pepsi, Central Investment Corporation (the

Corporation). Dick, who formed the law firm Drew 86 Ward, served on the

board of directors of the Corporation, formed 25 trusts for Koons and his

family, and served as trustee for at least 11 of those trusts.

      In 1976, Bud Koons's parents formed a trust for the benefit of their

grandchildren and divided that trust into two shares. Share A was for the

benefit of Bud Koons's family and Share B was for the benefit of the family of

Bud Koons's sister, Betty Lou Cundall. The original corpus of the trust

consisted of shares in the Corporation, and Bud Koons served as trustee of the

trust. In 1984, the Corporation redeemed the shares of stock from Share B

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and Bud Koons invested the proceeds. The Corporation did not redeem the

shares of stock from Share A. In 1992, the trust was divided into two trusts,

with Share A becoming Trust A, which continued to benefit the Koons family,

and Share B becoming Trust B, which continued to benefit the Cundall family.

Bud Koons resigned as trustee of Trust A and was replaced by Dick Ward,

another attorney, and Jeffrey Koons. Bud Koons remained trustee of Trust B.

      In 2004, Ward joined Drew 86 Ward as a partner, and he assisted Dick

with handling Bud Koons's business and personal interests. In January 2005,

the Corporation sold its business to PepsiAmericas, Inc. for approximately

$400 million and Central Investment LLC (the LLC) was formed to handle the

assets from the sale. Initially, Dick was placed on the board of managers of the

LLC but, at Bud Koons's request, Dick resigned from that position and from his

position as trustee of Trust A. By the end of February 2005, Dick and Drew &

Ward had essentially ended the attorney-client relationship with respect to Bud

Koons and his interests.

      In March 2005, Bud Koons died, and, pursuant to the terms of Trust B,

Dick became a co-trustee of that trust. Thereafter, Dick asked Ward to review

Trust B to determine how its assets should be distributed. In conducting that

review, Ward had access to the law firm's records regarding the trusts as well

as to the accountant for the trusts. As a result of his review, Ward believed

that Bud Koons had not properly administered Trust B. Ward suggested to his

friend and Trust B beneficiary, Michael Cundall, that the Trust B beneficiaries

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might want to consider suing Bud Koons's estate. Michael Cundall agreed and

asked Ward to represent Trust B.

      After agreeing to represent Michael Cundall, Ward contacted the local bar

association's ethics hotline to determine if there would be a conflict of interest.

Following his discussion, Ward concluded that there was no reason for him to

disqualify himself. Ward then discussed the possible conflict with Michael

Cundall and the members of Drew 86 Ward and went forward with the lawsuit.

The complaint alleged that Bud Koons violated his fiduciary duty by coercing

the Trust B beneficiaries (the Cundalls) to sell their shares of the Corporation

for less than their true value. The Supreme Court of Ohio ultimately

determined that the suit was not timely filed and ordered the trial court to

dismiss it. A legal malpractice action against Ward, Dick, and Ward 86 Drew

followed and the parties ultimately settled for $5 million.

      Following an investigation and hearing, the Supreme Court of Ohio found

that Ward, through his father and Drew 86 Ward, had access to confidential

documents related to not only Trust B but to many of Bud Koons's personal

and business interests. Through those documents, Ward obtained confidential

information which he was able to use in the lawsuit he filed against Bud

Koons's estate. The Court found that Ward's actions violated: DR 4-101(B)(2),

which prohibits a lawyer from knowingly using the confidences or secrets of a

client to that client's disadvantage; DR 4-101(B)(3) which prohibits using client

confidences for the advantage of the lawyer or a third party; DR 5-101(A)(1),

which prohibits a lawyer from accepting employment when his judgment may

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 be affected by his own financial, business, property, or personal interests; 2 and

 DR 1-102(A)(6), which prohibits a lawyer from engaging in conduct adversely

reflecting on his fitness to practice law.

2. The Real Estate.

           On July 30, 2003, Michael Cundall's wife, Ann, sold a house. Ward

testified that he attended the closing and accepted the proceeds as a qualified

intermediary for purposes of effectuating a like-kind exchange. Following the

closing, Ward deposited the funds into his trust account. On August 1, 2003,

Ward transferred $10,000 of the sale proceeds to Michael Cundall and then

loaned himself the remainder of the proceeds, which he invested in his

personal securities account. At some point Michael Cundall asked Ward for

the balance of the proceeds, which Ward paid with 5% interest.

       Ann testified that she did not know what a like-kind exchange was and

that she had never had any intention of participating in one. Furthermore, she

stated that she had never told Ward to invest the proceeds of the sale. Michael

Cundall's testimony was essentially the same as his wife's. Ward provided

evidence to the contrary.

       The Board of Commissioners found that Ward's testimony was not

credible, noting in particular that Ward did not have a written agreement,

which is necessary to act as a qualified intermediary. Based on that finding,

the Board found that Ward violated DR 1-102(A)(4) and 9-102(A), which require

       2The Court noted that Ward was angry that his father had been forced out of
Bud Koons's business affairs, and he filed suit to "gain satisfaction" and to right what
he perceived to be a wrong.

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a lawyer to hold a client's property separate from the lawyer's and that he

violated DR 1-102(A)(6).

3. The Sanction.

       Based on its finding that Ward acted with selfish motive, mitigated by his

history of no prior discipline, and that he made timely restitution, the Board

recommended a one-year suspension from the practice of law. The Supreme

Court agreed with the Board's recommendation, although not with all of its

findings.

B. Ward's Response to the Show Cause Order.

      Ward argues that we should not impose reciprocal discipline because

"there was fraud in the out-of-state proceeding" and the Ohio discipline is

substantially different than Kentucky's would be. We address each in turn.

      As to the matter of fraud regarding the trusts, Ward's argument is simply

that the Ohio Supreme Court got it wrong by, among other things: (1)

overemphasizing the length of time Drew 86 Ward and Dick represented Bud

Koons and his interests; (2) failing to recognize that Bud Koons's alleged self-

dealing took place without Dick's or Ward's knowledge; (3) failing to sufficiently

recognize that, following the sale of CIC, a substantial amount money had to be

distributed to various individuals and trusts and Dick, with Ward as his legal

counsel, was responsible for verifying the accuracy of the distribution of those

funds; (4) failing to recognize the red flags raised by Bud Koons's failure to

personally communicate with Dick about changes to the trusts made just

weeks before Bud Koons died; (5) failing to consider or at least downplaying
Ward's contention that he learned of the discrepancies between Trust A and

Trust B from the beneficiaries, not from confidential client materials; (6) stating

that Dick initially "acquiesced to his role as a co-successor-trustee of Trust B,"

but then declined to serve, when Dick actually accepted his role as trustee then

resigned; (7) failing to recognize that, because he had accepted his role as

trustee of Trust B, Dick had responsibilities to the trust and its beneficiaries;

(8) failing to recognize that an attorney from the Ohio Ethics Hotline testified

that Ward was "trying to do the right thing" by seeking advice about any

potential conflict; (9) underemphasizing the fact that the settlement of the

malpractice action involved not just Dick and Ward but the law firm; (10)

misinterpreting its own ethical rules and failing to recognize how those rules

conflict with the legal obligations of a trustee and counsel for a trust or trustee;

and (11) engaging in pseudo-judicial psychoanalysis when it determined that

Ward acted in order to gain satisfaction because Dick had been fired by Bud

Koons.

      Presumably, the Ohio Supreme Court could have chosen to believe

Ward's representation of the facts. Furthermore, it presumably could have

adopted Ward's interpretation of Ohio's ethics code and his interpretation of

how that code should interact with trust law. However, the fact that the Ohio

Supreme Court did not do so did not constitute fraud.

      As to the matter of fraud regarding the real estate transaction, Ward

argues that the Cundalls' testimony, which occurred 9 years after the sale, was

"knowingly false - or at least recklessly false." Furthermore, he argues that his

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version of events is supported by documents indicating that he had been asked

to assist with and did assist with a like-kind exchange; that he initially

deposited the money from the sale in his IOLTA account to effectuate the

transfer of the $10,000 to Michael Cundall; and that he invested the remaining

money from the sale of Ann's house in order to protect it. According to Ward,

because he was acting as an intermediary rather than as an attorriey at the

closing, he was not governed by the rules regarding attorney escrow accounts.

Although Ward asserts that the .Cundalls' testimony amounted to fraud, the

same testimony was available to the Supreme Court of Ohio and the Court

found them to be more credible than Ward. Therefore, while Ward and the

Cundalls have different memories of what transpired with regard to the sale of

Ann's house, that does not constitute fraud.

      As to the discipline imposed, Ward argues that under Kentucky law a

one year suspension is excessive.

      Pursuant to Section 116 of the Kentucky Constitution, "the
      Supreme Court shall, by rule, govern admission to the bar and the
      discipline of members of the bar." For this reason, we have never
      given a sister state "carte blanche" authority to exercise our
      constitutional disciplinary prerogatives within the confines of this
      Commonwealth. We said as much in Kentucky Bar Association v.
      Shane, 553 S.W.2d 467 (Ky. 1977), wherein we announced that
      "[t]his Court is not bound by the disciplinary penalties imposed .. .
      in a foreign jurisdiction for the same conduct for which [one] is to
      answer in Kentucky." "Moreover, SCR 3.435(4)(b) gives this Court
      sufficient discretion to impose a lesser degree of discipline when
      and where appropriate." Kentucky Bar Association v. Fish, 2
S.W.3d 786, 787 (Ky. 1999).

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Kentucky BarAss'n v. Hardin, 219 S.W.3d 188, 190 (Ky. 2007), as modified

(Apr. 25, 2007). Thus, we must determine what the appropriate discipline

would be for Ward had he violated the equivalent Kentucky ethical rules.

      The Supreme Court of Ohio ultimately found that Ward violated the

following: DR 4-101(B)(2) - using the confidences or secrets of a client to the

disadvantage of a client - which is substantially the same as our Rules of the

Supreme Court (SCR) 3.130(1.6)(a) and 3.130(1.8)(b); DR 4-101(B)(3) - using

the confidences or secrets of a client for the advantage of the lawyer or a third

person without consent of the client - which is substantially the same as SCR

3.130(1.6)(a) and 3.130(1.7)(a)(2); DR 5-101(A)(1) - accepting employment if the

exercise of the lawyer's professional judgment will be or reasonably may be

affected by the lawyer's financial and personal interests - which is similar to

SCR 3.130(1.7); DR 1-102(A)(6) - engaging in conduct that adversely reflects on

the lawyer's fitness to practice law - which is similar to SCR 3.130(8.4); DR 1-

102(A)(4) - engaging in conduct that involves fraud, dishonesty, deceit, or

misrepresentation - which is substantially the same as SCR 3.00(8.4)(c)); and

DR 9-102(A) - failing to hold client funds separately from personal funds -

which is substantially the same as SCR 3.130(1.15)(a).

      The violations fall within two general categories - co-mingling client and

personal funds and violating client confidences. This Court has imposed

sanctions for co-mingling funds ranging from a public reprimand (Rose v.

Kentucky BarAss'n, 398 S.W.3d 432 (Ky. 2013)) to a suspension of 181 days

(Kentucky BarAss'n v. Francis, 439 S.W.3d 750, 753 (Ky. 2014)). This Court

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has imposed sanctions for violating client confidentiality ranging from a public

reprimand (Kentucky BarAss'n v. Hines, 399 S.W.3d 750, 773 (Ky. 2013)) to a

two-year suspension (Kentucky Bar Ass'n v. Newcomer, 977 S.W.2d 20, 21 (Ky.

1998)). Therefore, we hold that the one-year suspension imposed by the

Supreme Court of Ohio is not unduly harsh.

      However, we note that Ward will have served 203 days of his Ohio

suspension by the time this opinion is rendered on August 20, 2015, leaving

162 days to serve. If we were to run our one-year suspension from August 20,

2015 to August 20, 2016, Ward would serve a total suspension of 568 days, a

suspension we believe would be unduly harsh. We recognize that Ward has

had the opportunity to continue practicing law in Kentucky while suspended in

Ohio. Nevertheless, his practice has no doubt suffered because of that

suspension and will continue to suffer when this suspension goes into effect.

Furthermore, we note that Ward voluntarily re-paid the Cundalls and has no

history of prior disciplinary actions. In light of the preceding, Ward is

suspended from the practice of law for a period of one-year, to run concurrently

with the Ohio suspension for an effective suspension of 162 days.

      IT IS HEREBY ORDERED:

      1)     Richard Grove Ward is suspended from the practice of law in the

Commonwealth of Kentucky for a period of one-year to run concurrently with

his Ohio suspension for an effective Kentucky suspension of 162 days.

      2)     Under SCR 3.390, Ward shall notify, in writing, within ten days

from the entry of this Opinion and Order, all courts in which he has matters

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pending and all clients he is currently representing of his inability to provide

further legal services and provide the Office of Bar Counsel with a copy of all

such notice letters, or with a certification that he has no active clients,

whichever is applicable. To the extent possible, Ward must immediately cancel

and cease any advertising activities in which he is engaged;

      3)     In accordance with SCR 3.450, Ward shall pay all costs associated

with these disciplinary proceedings against him, and for which execution may

issue from this Court upon finality of this Opinion and Order; and

      4) Ward shall comply with the provisions of SCR 3.510 prior to

reinstatement.

      All sitting. All concur.

      ENTERED: August 20, 2015.

                                             0112.' 014/"A"."F
                                       CH JUSTICE

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