Court Opinion

ID: 2826734
Source: CourtListenerOpinion
Date Created: 2015-08-12 19:13:44.693144+00
Date Added: 2024-06-11T13:39:49.965046
License: Public Domain

STATE OF MINNESOTA

                                  IN SUPREME COURT

                                         A14-0834

Original Jurisdiction                                                          Per Curiam
                                                                      Took no part, Stras, J.

In re Petition for Disciplinary Action against                      Filed: August 12, 2015
William Bernard Butler, a Minnesota Attorney,                    Office of Appellate Courts
Registration No. 227921

                              ________________________

Martin A. Cole, Director, Timothy M. Burke, Senior Assistant Director, Office of
Lawyers Professional Responsibility, Saint Paul, Minnesota, for petitioner.

William Bernard Butler, Minneapolis, Minnesota, pro se.
                            ________________________

                                        SYLLABUS

       1.     The referee’s findings of fact and conclusions regarding respondent’s rule

violations are not clearly erroneous.

       2.     An indefinite suspension from the practice of law with no right to petition

for reinstatement for 2 years is the appropriate discipline for respondent’s lengthy pattern

of misconduct, which includes the pursuit of frivolous litigation, the fraudulent joinder of

defendants, the refiling of previously dismissed cases, and the failure to pay sanctions.

                                             1
                                       OPINION

PER CURIAM.

       The Director of the Office of Lawyers Professional Responsibility filed a petition

for disciplinary action against respondent William Bernard Butler on May 20, 2014.1 On

June 5, 2014, we referred the matter to a referee, who heard the matter on September 29,

2014. Following the hearing, the referee found that Butler pursued a pattern of frivolous

litigation, fraudulently joined law firms and attorneys as defendants, refiled previously

dismissed matters, and failed to pay sanctions imposed by the United States District

Court for the District of Minnesota, in violation of Minn. R. Prof. Conduct 3.1, 3.2, and

3.4(c). The referee recommended that we indefinitely suspend Butler from the practice

of law for a minimum of 2 years. We conclude that the referee did not clearly err in his

findings of fact and conclusions that Butler violated the Minnesota Rules of Professional

Conduct. We also agree with the referee’s recommended discipline. We, therefore,

indefinitely suspend Butler from the practice of law with no right to petition for

reinstatement for a minimum of 2 years.

1
        At oral argument, the attorney for the Director stated that this matter first came to
the attention of the Office of Lawyers Professional Responsibility in 2012. The Director
agreed to Butler’s request to stay the disciplinary proceedings pending the resolution of
Butler’s appeal to the United States Court of Appeals for the Eighth Circuit challenging
sanctions that the Minnesota federal district court had imposed. When Butler’s challenge
to the federal sanctions was completed in mid-2013, the Director’s disciplinary
investigation began. The Director submitted charges of professional misconduct to a
panel of the Lawyers Professional Responsibility Board in February 2014. See Rule 8(e),
Rules on Lawyers Professional Responsibility (RLPR) (addressing an attorney’s right to
have charges of professional misconduct submitted to a panel of the Lawyers Board).
Following the panel’s determination that a petition for disciplinary action should be filed
against Butler, see Rule 9(j), RLPR, the Director served the petition in May 2014.

                                             2
                                            I.

       Butler was admitted to the practice of law in Minnesota in 1992. He has not been

the subject of prior discipline. The present disciplinary action involves professional

misconduct in more than 40 matters.       The referee found that Butler filed frivolous

lawsuits, fraudulently joined defendants, refiled previously dismissed cases, and failed to

pay sanctions.2 The referee concluded that Butler’s conduct violated Minn. R. Prof.

Conduct 3.1, 3.2, and 3.4(c).

       We first address Butler’s challenges to the referee’s findings of fact and

conclusions that Butler violated the Minnesota Rules of Professional Conduct. Because

Butler ordered a transcript of the disciplinary hearing, the referee’s findings of fact and

conclusions are not conclusive.         Rule 14(e), Rules on Lawyers Professional

Responsibility (RLPR); In re Ulanowski, 800 N.W.2d 785, 793 (Minn. 2011). We “give

2
        Butler argues that the referee made “no independent factual findings from
evidence presented at trial” and that the federal pleadings and court orders on which the
referee relied are inadmissible hearsay. This argument is akin to that of the respondent in
In re Murrin, 821 N.W.2d 195 (Minn. 2012). In Murrin, the respondent argued that the
referee failed to conduct an independent review of the facts underlying the
admonishments contained in the court orders that were admitted as evidence against
Murrin. Id. at 204-05. We concluded that, “while the referee included excerpts from the
court orders in his findings of fact, there is no indication in the record that the referee
failed to independently review the facts of the three cases and the facts presented during
the hearing.” Id. at 205. Similarly, there is no evidence that the referee in this matter
failed to review the facts or make independent factual findings. Additionally, although
“[t]he Minnesota Rules of Evidence apply to disciplinary hearings,” In re Dedefo, 752
N.W.2d 523, 528 (Minn. 2008), in the proceeding before the referee, Butler did not object
to the admission of the federal district court orders and pleadings on hearsay grounds.
Furthermore, the evidence on which the referee relied has sufficient “circumstantial
guarantees of trustworthiness” to meet the requirements for the residual exception to the
hearsay rule. Minn. R. Evid. 807.

                                            3
great deference to the referee’s findings of fact and will not reverse those findings if they

have evidentiary support in the record and are not clearly erroneous.” In re Coleman,

793 N.W.2d 296, 303 (Minn. 2011) (citation omitted). A finding is “clearly erroneous”

when we are “left with the definite and firm conviction that a mistake has been made.” In

re Lyons, 780 N.W.2d 629, 635 (Minn. 2010). With regard to the referee’s conclusions,

we review de novo the interpretation of the Minnesota Rules of Professional Conduct,

and we review for clear error the application of the rules to the facts of the case. In re

Aitken, 787 N.W.2d 152, 158 (Minn. 2010).

                                             A.

       We begin by considering the referee’s findings of fact and conclusions regarding

Butler’s pattern of frivolous litigation. The referee found that Butler filed more than 40

lawsuits on behalf of homeowners, claiming that the foreclosures of their properties were

invalid. A main theory of Butler’s mortgage litigation was that, in order to foreclose on a

property, the mortgagee (frequently a bank or the Mortgage Electronic Registration

System (MERS)) must hold both the mortgage, which allows the mortgagee to foreclose,

and the underlying promissory note, which grants the mortgagee (or other payee) the

right to receive payments from the mortgagor.

       The referee found that Butler’s theory is contrary to Minnesota law and was

expressly rejected by our court in Jackson v. MERS, 770 N.W.2d 487, 501 (Minn. 2009),

as well as by the Eighth Circuit and the federal district court. In Jackson, the plaintiffs

argued that “a mortgagee cannot hold legal title to a mortgage unless that mortgagee also

                                             4
has at least some interest in the underlying indebtedness.”3 Id. at 499. Thus, according to

the plaintiffs’ theory in Jackson, a mortgagee would need to have legal title4 to the

mortgage and hold the promissory note underlying the mortgage in order to foreclose by

advertisement. Id. at 498-99. We rejected this argument and concluded that a mortgagee

does not need to have an interest in the underlying debt in order to have legal title to the

mortgage and the right to foreclose. Id. at 501. In Stein v. Chase Home Finance, LLC,

662 F.3d 976, 980 (8th Cir. 2011), the Eighth Circuit expressly adopted our holding in

Jackson.

       The referee also found that Butler advanced frivolous claims by arguing

repeatedly that the federal district courts should apply the “possibility” pleading standard

to his clients’ claims, rather than the “plausibility” pleading standard articulated in

Ashcroft v. Iqbal, 556 U.S. 662 (2009) and Bell Atlantic Corp. v. Twombly, 550 U.S. 544

(2007).5 Federal pleading standards apply to claims in federal court even when those

claims are based on Minnesota law. See Council Tower Ass’n v. Axis Specialty Ins. Co.,

630 F.3d 725, 730 (8th Cir. 2011). The federal district court and the Eighth Circuit

3
       The underlying debt in Jackson was a promissory note. 770 N.W.2d at 491.
4
      “Legal title” is defined as a title that “evidences apparent ownership but does not
necessarily signify full and complete title or a beneficial interest.” Legal title, Black’s
Law Dictionary (8th ed. 2004).
5
        The United States Supreme Court articulated the plausibility standard for civil
pleadings in federal court in Iqbal and Twombly. This standard requires a complaint to
contain “enough facts to state a claim to relief that is plausible on its face.” Walsh v. U.S.
Bank, N.A., 851 N.W.2d 598, 601 (Minn. 2014) (quoting Twombly, 550 U.S. at 570). In
Walsh, we declined to adopt the plausibility standard for civil pleadings in Minnesota
state court, instead deciding to retain the traditional notice pleading standard. Id. at 606.
                                              5
rejected Butler’s pleading argument as well. See, e.g., Karnatcheva v. JPMorgan Chase

Bank, N.A., 704 F.3d 545, 548 (8th Cir. 2013) (affirming the district court’s dismissal of

state law claims because the plaintiffs did not sufficiently plead them according to federal

pleading standards).

       The record supports the referee’s findings concerning Butler’s arguments as to the

validity of the foreclosures at issue and the applicable pleading standard. Therefore,

these findings are not clearly erroneous. The referee identified more than 40 mortgage-

related cases in which Butler advanced legal theories that mortgage foreclosures were

defective because the mortgagees did not possess the promissory notes associated with

the mortgages or because the federal court applied the wrong pleading standard. Each

case was filed after our decision in Jackson, 770 N.W.2d 487, and approximately 30 of

them were filed after the Eighth Circuit’s decision in Stein, 662 F.3d 976. All were filed

after Iqbal, 556 U.S. 662.     Butler also filed more than 20 cases after he was first

sanctioned by the federal district court for his “unreasonable and vexatious conduct” in

bringing these types of claims, which, based on the federal pleading standard, were

dismissed for failure to state a claim on which relief can be granted.

       Based on his factual findings, the referee concluded that Butler’s conduct violated

Minn. R. Prof. Conduct 3.1, which provides that a lawyer will not bring a proceeding

“unless there is a basis in law and fact for doing so that is not frivolous.” This rule does

not prohibit “a good faith argument for an extension, modification, or reversal of existing

law.” Minn. R. Prof. Conduct 3.1. The relevant standard for determining whether an

argument has a good-faith basis in law and fact is an objective standard that requires us to

                                             6
consider what a reasonable attorney, in light of that attorney’s professional duties, would

do under similar circumstances. In re Michael, 836 N.W.2d 753, 762 (Minn. 2013). We

have concluded that an attorney violated Rule 3.1 by engaging in a pattern of bad-faith

litigation, In re Nett, 839 N.W.2d 716, 717-18 (Minn. 2013), filing lawsuits that lacked a

good-faith basis in law or fact, In re Van Sickle, 744 N.W.2d 374, 374 (Minn. 2008), or

filing frivolous motions as part of a “pattern of harassing and frivolous litigation,” In re

Nathan, 671 N.W.2d 578, 580, 584 (Minn. 2003).

       Butler’s arguments regarding a foreclosure’s validity and the appropriate pleading

standard were rejected by multiple federal district court judges and the Eighth Circuit.

See, e.g., Karnatcheva, 704 F.3d at 548. By ignoring precedent that was clearly contrary

to his arguments and failing to make a good-faith argument for the modification or

reversal of that law, Butler has not acted as a reasonable attorney would under the same

or similar circumstances. Michael, 836 N.W.2d at 762. His arguments completely

lacked any good-faith basis in law. See id. Therefore, the referee did not clearly err

when he concluded that Butler repeatedly violated Minn. R. Prof. Conduct 3.1.

                                             B.

       We next consider the referee’s findings and conclusions regarding Butler’s

fraudulent joinder of defendants.     The referee found that Butler fraudulently joined

Minnesota law firms and attorneys in approximately 20 cases without any good-faith

basis to assert claims against them in an attempt to obstruct the exercise of federal

jurisdiction. During the course of this fraudulent joinder scheme, Butler repeatedly

moved to remand these cases to state court for lack of diversity jurisdiction.

                                             7
       The federal district court denied all but one motion for remand, consistently

concluding that Butler had no good-faith basis for the claims against the Minnesota law

firms and attorneys. The referee explained that “[t]here is no evidence of any case in

which the joinder of the Minnesota attorneys was found not to be fraudulent.” The

referee concluded that Butler’s repeated fraudulent joinder of Minnesota law firms and

attorneys violated Rule 3.1 because there is “no evidence of any good faith argument for

modification or reversal of existing law to allow such a joinder.”

       The record supports the referee’s findings of fact and conclusion that Butler

repeatedly violated Minn. R. Prof. Conduct 3.1. According to federal court documents,

in numerous cases the federal district court found that Butler’s joinder of Minnesota law

firms and attorneys was fraudulent and without a factual basis. Therefore, the referee did

not clearly err in his findings or conclusions regarding Butler’s fraudulent joinder of

parties.

                                            C.

       We next review the referee’s findings and conclusions regarding Butler’s practice

of refiling in state court cases that he had voluntarily dismissed in federal court. The

referee found that Butler filed five cases in state district court that the defendants

removed to federal district court. After each removal, Butler filed a notice of dismissal

without prejudice. Butler then refiled each case under a different name in state district

court within one week of the prior dismissal. The referee concluded that this practice

violated Minn. R. Prof. Conduct 3.2 because the tactic of dismissing and refiling the same

                                             8
lawsuit “use[s] delay to harass defendants or deny them a timely resolution of the claims

against them.”

       “A lawyer shall make reasonable efforts to expedite litigation consistent with the

interests of the client.” Minn. R. Prof. Conduct 3.2. We have held that an attorney

violated Rule 3.2 when the attorney repeatedly filed amended and voluminous

complaints, causing delays to proceedings and increasing costs to defendants. Murrin,

821 N.W.2d at 207.

       Butler does not contest that he dismissed multiple cases that had been removed to

federal court and refiled them in state court. Butler denies only that his actions were

intended to delay litigation. In light of the dispositions of Butler’s previous filings,

however, it is impossible to conceive of any purpose for Butler’s course of action other

than to delay the proceedings or, as suggested by one federal district judge, to avoid

assignment to certain judges.      The referee rejected Butler’s asserted reasons for

dismissing the cases from federal court. See In re Voss, 830 N.W.2d 867, 874-75 (Minn.

2013) (stating that we defer to the referee’s findings “when they are based on a credibility

determination” and that a referee is free to reject the testimony of an attorney as “not

credible”). In doing so, the referee relied on pleadings filed in federal court, which

provide ample evidence to support the referee’s determination that Butler’s actions

violated Rule 3.2. Contrary to Butler’s arguments, the referee did not clearly err.

                                            D.

       We next review the referee’s findings and conclusions that Butler failed to pay

court-imposed sanctions and attorney fees. The referee found that Butler failed to pay

                                             9
court-imposed sanctions of $50,000 and $75,000 and attorney fees of $29,746.70,

$50,000, $11,437.65, $26,602.15, and $56,451.97. The referee concluded that Butler’s

failure to pay the sanctions and attorney fees violated Minn. R. Prof. Conduct 3.4(c).

       A lawyer is prohibited from “knowingly disobey[ing] an obligation under the rules

of a tribunal except for an open refusal based on an assertion that no valid obligation

exists.” Minn. R. Prof. Conduct 3.4(c). Accordingly, an attorney’s failure to pay court-

ordered sanctions may violate Rule 3.4(c). In re Moe, 851 N.W.2d 868, 871 (Minn.

2014) (holding that attorney violated Rule 3.4(c) when he failed to pay a $5,000 sanction

imposed because he had acted in bad faith when discharging his duties as a guardian and

conservator); Nathan, 671 N.W.2d at 582-83 (holding that attorney violated Rule 3.4(c)

when he failed to pay approximately $4,600 in sanctions and attorney fees imposed

because the attorney violated a court order and engaged in frivolous and harassing

conduct).

       The record supports the referee’s finding that Butler knowingly failed to pay any

of the sanctions or attorney fees ordered by the federal district court. In the hearing

before the referee, Butler acknowledged that he had not paid the sanctions. Butler also

testified before the referee: “[A]s a matter of principle, if I had [the money to pay the

sanctions], it’s—there’s a real question of could I, in good conscience, pay when I know

what I know.” This testimony supports the conclusion that his failure to pay any of the

sanctions was a conscious decision to disregard a court order.

       Additionally, two federal district court judges found Butler in contempt of court

for failing to pay court-ordered sanctions after each conducted an evidentiary hearing. In

                                            10
a contempt proceeding, the burden is on the violator of a court order to demonstrate an

inability to comply with the court order. Chicago Truck Drivers v. Bhd. Labor Leasing,

207 F.3d 500, 505 (8th Cir. 2000).      The only evidence Butler provided during the

contempt proceedings (and in this discipline proceeding) for his inability to pay court-

imposed sanctions was his testimony that he was unable to pay. Butler’s testimony was

countered, however, by evidence that Butler’s law firm had significant revenue during

this same period of time. Regarding Butler’s testimony, the federal district court ruled:

“Even if a conclusory assertion of inability to pay could theoretically be sufficient to

avoid a finding of contempt, it would not be sufficient in this particular case, because

Butler was not a credible witness.” Butler’s actions before the federal district court and

that court’s two contempt orders provide additional support for the referee’s finding that

Butler knowingly failed to pay the sanctions. Accordingly, the referee did not clearly err

by finding that Butler knowingly failed to pay the sanctions imposed by the federal

district court. The referee’s conclusion that Butler’s conduct violated Minn. R. Prof.

Conduct 3.4(c) is legally sound.

                                           II.

      Having concluded that Butler violated the rules of professional conduct, we now

address the appropriate discipline for Butler. We impose discipline for professional

misconduct “not to punish the attorney but rather to protect the public, to protect the

judicial system, and to deter future misconduct by the disciplined attorney as well as by

other attorneys.” In re Rebeau, 787 N.W.2d 168, 173 (Minn. 2010); see also In re

De Rycke, 707 N.W.2d 370, 373 (Minn. 2006). We place “great weight on the referee’s

                                           11
recommended discipline” but “retain ultimate responsibility for determining the

appropriate sanction.” Rebeau, 787 N.W.2d at 173.

       To determine the appropriate sanction for attorney misconduct, we consider four

factors: “(1) the nature of the misconduct; (2) the cumulative weight of the disciplinary

violations; (3) the harm to the public; and (4) the harm to the legal profession.” In re

Grigsby, 764 N.W.2d 54, 62 (Minn. 2009). We look to similar cases for guidance in

deciding what discipline to impose, but we ultimately determine the appropriate

discipline on a case-by-case basis after considering aggravating and mitigating

circumstances. In re Lundeen, 811 N.W.2d 602, 608 (Minn. 2012).

       We first consider the nature of Butler’s misconduct. Butler brought frivolous

lawsuits, fraudulently joined parties, or refiled dismissed cases in more than 40 matters.

This misconduct occurred over approximately 3 years, until Butler’s suspension from

practice before the Eighth Circuit and the District of Minnesota in 2013. We have held

that such an abuse of the litigation process constitutes “serious” misconduct and warrants

a suspension. See Murrin, 821 N.W.2d at 207-08 (suspending for 6 months an attorney

who, over the course of 2 years, failed to comply with several court orders, continued to

name defendants in his pleadings even after the defendants had been dismissed from the

actions by the court, and continued to assert claims after the claims had been dismissed);

In re Selmer, 568 N.W.2d 702, 704-05 (Minn. 1997) (suspending for 12 months an

attorney who pursued a pattern of frivolous litigation, in addition to committing other rule

violations); In re Jensen, 542 N.W.2d 627, 633-34 (Minn. 1996) (suspending for 18

months an attorney who filed frivolous claims, in addition to committing other rule

                                            12
violations); see also In re Daly, 291 Minn. 488, 492-93, 189 N.W.2d 176, 180 (1971)

(disbarring an attorney who repeatedly filed lawsuits to harass banking institutions and

refused to comply with court orders).

       Butler also has failed to pay approximately $300,000 in court-ordered sanctions

and attorney fees. Failure to pay court-ordered sanctions also warrants discipline. See

Nathan, 671 N.W.2d at 580; see also id. at 582-86 (suspending for 6 months an attorney

who failed to pay approximately $4,600 in sanctions and attorney fees, engaged in a

pattern of harassing and frivolous litigation, and made false statements to the court).

       We next examine the cumulative weight of Butler’s misconduct.                  “[T]he

cumulative weight and severity of multiple disciplinary rule violations may compel

severe discipline even when a single act standing alone would not have warranted such

discipline.” In re Oberhauser, 679 N.W.2d 153, 160 (Minn. 2004). The violation of

multiple rules of professional conduct, the commission of such violations in multiple

instances, and a pattern of attorney misconduct that occurs over a lengthy period of time

may merit the imposition of a serious sanction. Ulanowski, 800 N.W.2d at 801.

       The cumulative weight of Butler’s misconduct is substantial. Butler’s misconduct

involved more than 40 matters and occurred over a 3-year period, despite the federal

court’s deterrent efforts. See, e.g., In re Rooney, 709 N.W.2d 263, 269 (Minn. 2006)

(deeming it important that the attorney’s misconduct occurred over the course of a year

and “was not a single, isolated incident or a brief lapse in judgment”).

       The third and fourth factors that we consider are the harm to the public and the

harm to the legal profession. In doing so, we examine “ ‘the number of clients harmed

                                             13
[and] the extent of the clients’ injuries.’ ” Coleman, 793 N.W.2d at 308 (quoting In re

Randall, 562 N.W.2d 679, 683 (Minn. 1997)). Butler has caused serious harm to the

public and the legal profession. Because of his actions, the federal district court has

sanctioned Butler’s clients directly.6    The federal court system also has expended

significant judicial resources because of Butler’s many frivolous claims. See Murrin, 821

N.W.2d at 208 (“[F]rivolous claims harm the legal profession because the claims waste

court resources.”). The defendants in these cases, including those fraudulently joined by

Butler, also have incurred legal expenses directly attributable to Butler’s misconduct. See

Ulanowski, 800 N.W.2d at 801 (concluding that attorney harmed the legal profession

because his frivolous claims cost opposing parties approximately $46,000 in legal fees);

In re Albrecht, 779 N.W.2d 530, 542 (Minn. 2010) (concluding that attorney’s neglect

harmed the legal profession by causing needless expenditure of the resources of opposing

counsel).

       The referee found several other factors that aggravate the severity of Butler’s

misconduct, none of which has been challenged by Butler. First, Butler’s misconduct

was intentional. He purposely filed cases based on theories rejected by our court, the

federal district court, and the Eighth Circuit; and he continued his misconduct after being

sanctioned by the federal district court. See In re Fru, 829 N.W.2d 379, 390 (Minn.

2013) (listing the intentional nature of attorney’s misconduct as an aggravating factor).

Second, Butler refuses to recognize his misconduct. In fact, he demonstrates absolutely

6
       In one case filed by Butler, each of his clients was ordered to pay $487.66 in costs.
In another case, each of Butler’s clients was ordered to pay $649.36 in costs.
                                            14
no remorse. See Rebeau, 787 N.W.2d at 176 (“The lack of remorse also constitutes an

aggravating circumstance.”). Third, having practiced law for more than 20 years, Butler

has substantial legal experience, which also aggravates the severity of his misconduct.

See Voss, 830 N.W.2d at 878 (concluding that an attorney’s 35 years of experience was

an aggravating factor).

       Therefore, having considered the nature of the misconduct and the aggravating

factors that exist, as well as our prior decisions, we conclude that the appropriate sanction

for Butler’s misconduct is an indefinite suspension with no right to petition for

reinstatement for a minimum of 2 years.

       Accordingly, we order that:

       1.     Respondent William Bernard Butler is indefinitely suspended from the

practice of law, effective 14 days from the date of the filing of this opinion, and he shall

be ineligible to petition for reinstatement for a minimum of 2 years from the effective

date of the suspension.

       2.     Respondent shall comply with the requirements of Rule 26, RLPR

(requiring notice of suspension to clients, opposing counsel, and tribunals).

       3.     Respondent shall pay $900 in costs, plus disbursements, pursuant to

Rule 24, RLPR.

       4.     As a condition for reinstatement, respondent must establish that he has

made a good-faith effort to satisfy the outstanding amount of $299,238.47 in court-

ordered sanctions and attorney fees. To the extent full payment has not been made at the

time a petition for reinstatement is filed, respondent must provide a detailed disclosure of

                                             15
his financial condition since the date the court-ordered sanctions and attorney fees were

originally imposed and prove that his financial condition prevents further compliance

with the court orders.

       5.     If respondent seeks reinstatement, he must comply with the requirements of

Rule 18(a)–(e), RLPR.

STRAS, J., took no part in the consideration or decision of this case.

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