Court Opinion

ID: 9786282
Source: CourtListenerOpinion
Date Created: 2023-08-30 23:52:26.630674+00
Date Added: 2024-06-11T07:36:43.805757
License: Public Domain

BRYNER, Justice,
dissents.
I. INTRODUCTION
I disagree with the court's use of its independent fact-finding power to conclude that Friedman acted dishonestly 1 and engaged in criminal misconduct 2 by intentionally misapplying settlement funds. The disciplinary board's recommendation of a four-year suspension leaned heavily on the hearing committee's finding that Friedman's conduct amounted to misapplication of property-a finding that the court affirms independently. If I thought that the committee had made this finding properly or that the board had properly approved it, I might be inclined to agree with Justice Matthews that Friedman's sanction should be governed by In re Mann.3 But the bar's finding of criminal misconduct reflects a fundamental misunderstanding of applicable law. And in my view the court compounds this error-and compromises its own precedent-by attempting to use its power of independent review as a cure for the bar's failure to accord Friedman due process.
II THE BAR'S DISCIPLINARY FINDINGS ARE LEGALLY FLAWED.
A. Referring to Friedman's Conduct as Intentional Is Ambiguous .
'they mean. The hearing committee, the disciplinary board, and the court have called Friedman's conduct "intentional" without specifying what But in ordinary usage, saying that someone acted intentionally can mean different things. As applied to Friedman's *636conduct, "intentional" could have several meanings. - It will help at the outset to clarify this ambiguity.
Friedman might be said to have acted intentionally (1) if he knowingly signed trust account checks without making a reasonable effort to determine what funds would actually pay them; (2) if he knowingly signed trust account checks to be paid out of specific settlement funds without making a reasonable effort to determine if the settlement was final and fully paid; (3) if he signed trust account checks out of settlement funds that he knew were not yet fully paid but mistakenly thought that such premature payments were proper; or (4) if he signed trust account checks that he actually knew to be premature, knowing that this conduct was improper.
The first and fourth of these meanings deserve special attention here. The first-that Friedman acted intentionally by voluntarily signing checks that turned out to be premature-is significant because the disciplinary committee adopted this meaning in finding that Friedman had committed intentional misconduct. The fourth-that Friedman acted intentionally because he knew that he was writing premature checks and knew that his conduct was improper-is vital because it is the only form of intent that qualifies as criminal misapplication of property. Alaska law uses this narrow meaning to define the essential elements of the crime: under the Alaska Criminal Code's definition, a person who commits misapplication of property must knowingly engage in conduct that is listed within the statutory definition of "misapply" with actual knowledge that this conduct is improper.4
B. The Hearing Committee Improperly Applied a Conclusive Presumption of Intentional Conduct.
I agree with Justice Matthews's partial dissent that if Friedman wrote checks from his trust account knowing that he was wrongfully "borrowing" money from client or settlement funds, he would deserve a severe sanction: this conduct would indeed amount to a misapplication of property, would make Friedman's case at least as serious as In re Mann, and would therefore presumptively warrant disbarment under section 4.11 of the ABA Standards. But this is not what the hearing committee and disciplinary board found that Friedman actually did.
Friedman unequivocally testified that he knew it would be improper to make advance payments to himself-or "borrow"-from trust funds; he insisted that he never would have done so knowingly. On two separate occasions in his pre-hearing correspondence with the bar, he expressly represented that the entire $81,000 Cal-Alaska payment on the Uyak II settlement actually remained untouched in his trust account until after the case was completely settled. The bar later proved these statements to be untrue. But Friedman nevertheless insisted that he believed them to be true when he made them.
At the sanctions hearing before the hearing committee, Friedman portrayed himself as a disorganized and unsophisticated solo practitioner who lacked business experience; during the period at issue, he was beset by a variety of problems-a nagging back injury, a disintegrating marriage, and a burgeoning caseload. Given these cireumstances, Friedman claimed, he naively trusted his staff-an inexperienced secretary and a part-time bookkeeper-to know what checks to write and when to write them. According to Friedman, he usually told his staff that a case had settled, the amount of the settlement, and the basic fee agreement. But he ordinarily gave them no further direction, paying little attention to what checks they prepared for his signature. From time to time they left piles of checks on his desk for *637his signature, and he would just sign them. As Friedman's counsel put it in arguing the point to the disciplinary board: "[Ylou asked why did he, quote, take the money. He didn't take the money. He signed checks. And the short answer is because it was sloppy." The essence of Friedman's claim, then, was that he never actually understood what he was doing.
If this claim is true (and the committee's sanctions findings suggest that it is), it would preclude a finding that Friedman acted intentionally in the sense required to prove criminal misapplication of property. But the hearing committee never determined Friedman's actual intent. Before the committee conducted its hearing on the merits of the disciplinary petition, the bar moved for summary judgment. In advancing this motion, the bar relied on Friedman's early correspondence claiming that the entire $81,000 Uyak II settlement payment remained in his trust account until after the case was completely settled. The bar had subsequently obtained, and filed with the committee, bank records establishing that Friedman's claim was untrue-that Friedman had in fact drawn down the Uyak II settlement funds prior to final settlement. Because Friedman did not dispute these records showing premature payments, the bar asserted that the undisputed evidence before the committee conclusively established that Friedman had made trust account payments to himself prematurely. The bar bridged the gap from conduct to intent by invoking a legal presumption. The bar contended that Friedman's guilt of intentional misconduct was conclusively established by the undisputed evidence that he had written premature trust account checks.
This contention prevailed. Despite substantial evidence indicating that Friedman did not actually know that his trust account payments were premature, and even though Friedman had not yet been able to mount his full defense, the hearing committee granted the bar's motion for summary judgment. Noting that Friedman had knowingly written trust account checks that were in fact premature, the hearing committee relied on In re West5 and In re Triem6 to conclusively presume that he acted intentionally:
[The impairment and misapplication of settlement funds and the corresponding breach of Friedman's fiduciary duties were "the natural and probable consequences of his ... knowing actions" in writing checks against the Uyak II settlement proceeds before the express conditions of his trust allowed him to do so. Friedman's misapplication of trust funds was therefore intentional as defined by the Alaska Supreme Court in West and Triem.
But the committee's reasoning is legally flawed. West and Triem speak of a permissive inference, not a conclusive presumption: the rule they describe permits a fact-finder to infer intent from knowing conduct, but does not require it.7 Indeed, in cases involving proof of criminal conduct, a rule that requires intent to be presumed from the natural consequences of the accused's conduct has been denounced as flatly unconstitutional.8 The law recognizes that intent is an issue of fact and so, like other facts, must be determined by the totality of the circumstances in each case. Hence, for purposes of deciding the bar's summary judgment motion, the committee was required to view the evidence in the light most favorable to Friedman and to draw all inferences in his favor.9 Here, even if Friedman's intent to write premature checks might be inferred from his acts of writing checks that he should have known would be premature, he nonetheless *638disputed this inference, maintaining that he did not actually know. In ruling on summary judgment, the committee was obliged to draw the inference in Friedman's favor.
The committee's treatment of "knowledge" as an undisputed point and of "intent" as a conclusively presumed matter thus blurred the critical question raised by Friedman's defense: whether Friedman actually intended the natural and probable consequences of his conduct, that is, whether he actually knew that the trust account checks were prema ture or merely knew that he was writing trust account checks and should have known that the checks were premature.
At first blush, one might read the hearing committee's findings to mean that Friedman actually knew that he was "borrowing" client funds: the summary judgment decision stated that "Friedman's actions in writing checks against his settlement funds that had not yet been received, thus 'borrowing' against the $81,000 that he held in trust .. ., were 'know ing"" Yet two factors preclude interpreting this language as a finding that Friedman actually knew that he was writing premature checks, or "borrowing" his client's funds.
First, because it was ruling on a summary judgment motion, the committee ostensibly based this finding on the undisputed eviden-tiary record then before it. In so doing, it relied on Friedman's affidavit. Yet when the affidavit is read in the light most favorable to Friedman, as the committee presumably read it, it hardly concedes knowledge of prematurity; rather, it only acknowledges that Friedman knowingly signed trust account checks that he should have recognized would be premature and that did turn out to be premature. Indeed, had Friedman conceded knowing that his payments were premature he would have abandoned his core defense-that he never knew what checks he was signing. To read the summary judgment decision as saying that Friedman actually knew his checks were premature, then, we would have to conclude that the committee misapplied the basic rules of summary judgment and construed his affidavit as a total surrender.
Second, the committee's later sanctions hearing findings affirmatively establish its belief that Friedman signed the checks without actually knowing that they were premature. At the end of the sanctions hearing, the bar challenged as implausible Friedman's claim that he had written the trust account checks without knowing that the payments were premature. In advancing this argument, the bar accused Friedman of lying when he falsely informed the bar that Cal-Alaska's entire $81,000 Uyak II payment "remained in my attorney-client trust account until August of 1991." Yet the committee rejected the bar's argument on this point; refusing to find that Friedman had lied, it expressly determined that he had only been negligent:
Friedman made several significant false statements in correspondence to Bar counsel during the disciplinary process. Although we do not find that these misrepresentations were knowing or intentional, we believe that Friedman, upon reasonable investigation, should have known that the statements were false at the time they were made.
(Emphasis added.)
It would have been self-contradictory for the committee to make this finding at the sanctions stage if it had already found, in its summary judgment ruling, that Friedman actually knew that the checks were premature when he signed them. Had that been the case, Friedman certainly would have known when he corresponded with the bar that his statements concerning the Uyak II trust funds were false. Yet the committee's sane-tions decision found only that Friedman "should have known." Similarly, had the committee earlier found that Friedman signed checks that he actually knew were premature, it would have been senseless for the committee to suggest in its sanctions decision that the bar's inquiry concerning the trust account payments should have prompted Friedman to undertake a "reasonable investigation" before responding: he already would have known. The sanctions decision, then, confirms that after hearing Friedman's defense at the sanctions hearing, the committee believed that he did not actually know that he had written premature checks-that he "just wouldn't have done that."
*639Yet despite its obvious acceptance of Friedman's defense, the hearing committee never revisited or questioned the legal underpinnings of its prior summary judgment decision. The only logical explanation for this is that the committee still felt constrained by its mistaken understanding of Triem and West-cases that it continued to view as establishing a mandatory presumption of intentional conduct.
The committee's continued reliance on this mandatory presumption also suggests a sible explanation for both its lenient sanctions recommendation and its effort to rest that recommendation on a strained distine-' tion between the wrongfulness of "borrowing" and permanently converting client funds. Believing itself bound as a matter of law to presume that Friedman had acted with an intent that the committee believed he had not actually had, the committee may well have been strongly motivated to ameliorate his situation by attempting to draw technical distinetions-no matter how implausible-between these two forms of criminal intent. Although the disciplinary board and the court have rightly condemned these distinctions as legally untenable, the committee's reliance on them is nonetheless telling, for it betrays the committee's discomfort with the notion that the law conclusively deemed Friedman's - conduct - "intentional," - even though he did not actually know that his checks were premature.
If the committee had realized that it was not bound by a mandatory presumption-that it was free to determine Friedman's actual intent as it would determine any other ordinary factual matter-it no doubt would have found that his conduct amounted to negligent-or perhaps even reckless-professional misconduct. I certainly do not suggest otherwise. But the foregoing circumstances also establish that the committee would not have found that he actually intended to "borrow" client funds. For it makes no sense to suppose that the committee would find in one breath that Friedman knew he was writing trust checks prematurely, yet would conclude in the next that he deserved a break because he only wanted to "borrow" his client's money. That conclusion would have flown in the face of Friedman's own statements insisting that he knew that "borrowing" trust funds was wrong and never would have done it. Hence, if the committee believed that Friedman actually intended to write premature checks, it would have had to conclude that he lied in his pre-hearing correspondence and perjured himself at the sanctions hearing.
In summary, then, the only plausible explanation for the hearing committee's recommendation of leniency and for its unequivocal finding that Friedman's pre-hearing correspondence did not intentionally misrepresent the condition of his trust accounts is that the committee did not believe that Friedman actually knew he was "borrowing" client funds when he wrote the disputed checks; it legally presumed that he knew. Given the committee's mistaken reliance on this conclusive presumption, its finding of intentional misconduct is factually and legally flawed.
C. The Disciplinary Board's Recommendation - Incorporates the Hearing Committee's Erroneous Finding of Intentional Conduct.
The disciplinary board's subsequent action did nothing to correct the committee's mistaken reliance on a mandatory presumption of intent. The board expressly adopted the hearing committee's summary judgment findings, including its finding of knowing and intentional conduct.10 The board's only point of disagreement with the committee was with the committee's analysis of the legal consequences of finding an intentional misapplication of funds. In accepting the committee's findings on this point at face value, the board mistook them to mean that the committee found that Friedman actually knew that his trust payments were premature. Acting on this interpretation, the board understandably *640rejected the committee's recommendation for leniency as untenable.
D. The Court's Reliance on Independent Fact-finding Compounds the Disciplinary Board's and Hearing Com-maittee's Errors.
Today's opinion chooses to overlook the significance of these procedural flaws; by so doing, it invokes the court's independent fact-finding powers to cure a denial of due process.11 In giving short shrift to the fundamentally flawed process below, the court tacitly views Friedman's defense as too implausible to warrant serious consideration. Yet this is a profoundly troubling view. It ignores the hearing committee's unmistakable conclusion that Friedman did present a credible defense. Even though the hearing committee heard Friedman's defense in the procedural context of the sanctions hearing, where the issue of intentional conduct had been foreclosed by its earlier summary judgment ruling, the committee concluded that Friedman might not have known that the trust account checks were premature when he signed them. Having seen and heard the testimony, the committee was far better positioned to judge the issue of Friedman's intent than we are.
In my view, then, the committee's acceptance of Friedman's defense strongly counsels restraint in the exercise of our independent fact-finding powers. Sound precedent counsels restraint, too. This court is certainly empowered to "review[ ] the evidence adduced before the hearing committee independently while giving deference to the findings of the board.12 Yet we can receive no appropriate guidance from the board without a meaningful and complete set of findings that reflect a correct understanding of applicable law:
Though this court has the authority, if not the obligation, to independently review the entire record in disciplinary proceedings, findings of fact made by the Board are nonetheless entitled to great weight. The deference owed to such findings derives from the responsibility to conduct disciplinary proceedings which this court has delegated to the Bar Association. Where findings of fact entered by the Board are challenged on appeal to this court, we therefore hold that the respondent attorney bears the burden of proof in demonstrating that such findings are erroneous. As a general rule, moreover, we ordinarily will not disturb findings of fact made upon conflicting evidence, or where such findings reflect the relative credibility of witnesses.[13]
Here, because Friedman's defense turns largely on testimonial credibility and the hearing committee's factual findings incorporate a mistaken understanding of applicable law-one that indelibly colored its sanctions decision and tainted the disciplinary board's ultimate recommendation-I would find it inappropriate to invoke our original fact-finding power without first remanding to the bar for clarification.
By exercising original fact-finding power to reject Friedman's defense without first clarifying precisely what the hearing committee found and how it reached its findings, the court today bypasses the very process that our rules establish as the starting point for independent review; it thus leaves no room at all for the guidance and deference that we have previously found crucial in cases turning on testimonial credibility. In my view, the supreme court must use its independent review power sparingly, as a supplement to, not as a substitute for, the carefully structured process of hearings and recommendations that is supposed to precede, illuminate, and enable independent review.
III. CONCLUSION
Because I would decline to exercise independent fact-finding power in these cireum-stances and would instead remand for proper findings, I dissent from the court's opinion.

. DR 1-102(A)(4) (dishonest conduct).

. DR 1-102(A)(3) (illegal conduct involving moral turpitude).

. 853 P.2d 1115 (Alaska 1993).

. Specifically, AS 11.46.620(a) provides: "A person commits the crime of misapplication of property if the person knowingly misapplies property that has been entrusted to that person as a fiduciary or that is property of the government or a financial institution." Subsection (c) of the statute defines "misapply" as meaning "to deal with or dispose of property contrary to (1) law; (2) a judicial rule or order; or (3) the obligations of a fiduciary relationship." When read together, these provisions require that, to be guilty of misapplying property, a person must engage in knowing conduct arnd must also know that the conduct is contrary to law, a judicial rule or order, or a fiduciary duty. See Moore v. State, 740 P.2d 472, 475 (Alaska App.1987).

. 805 P.2d 351 (Alaska 1991).

. 929 P.2d 634 (Alaska 1996).

. Cf, Alaska REvid. 303(a); see generally Marrone v. State, 653 P.2d 672, 676-79 (Alaska App.1982).

. See, eg., Walker v. State, 652 P.2d 88, 91 (Alaska 1982) (quoting Sandstrom v. Montana, 442 U.S. 510, 523-24, 99 S.Ct. 2450, 61 LEd.2d 39 (1979))("[A] jury instruction providing that 'the law presumes that a person intends the ordinary consequences of his voluntary acts' violates a defendant's right to due process, because it constitutes either a burden-shifting presumption or a conclusive presumption on the element of intent.' ").

. See Wilson v. Pollet, 416 P.2d 381, 383 (Alaska 1966).

. I find it highly unlikely that the board would independently redetermine disputed factual issues without giving the parties advance notice or making its decision to do so clear in its opinion-particularly when the Bar Rules do not give the board authority to independently redcetermine disputed facts in the context of an appeal from a hearing committee's recommendations. - See Alaska Bar Rules 22(/ )-(m), 25.

. Slip Op. at 626-627.

. In re Frost, 863 P.2d 843, 844 (Alaska 1993).

. In re Simpson, 645 P.2d 1223, 1226-27 (Alaska 1982) (citations omitted).