Collateral Estoppel, Sanctions and Attorney Discipline

Matter of Dunn,

___ NY3d ___, 2015 NY Slip Op 01556 [February 24, 2015]

The other day I had the privilege of giving a CLE presentation at a joint meeting of the General Practice Section and the Committee on Professional Discipline of the NYS Bar Association. After I finished my “CPLR Update,” I sat down and listened to a panel discussion of “Sanctions in Criminal and Civil Proceedings and the Implications for Ethics and Professional Discipline.”

One of the major points made by the panel was that disciplinary committees can, and frequently do, accept findings of sanctions imposed against lawyers as establishing the fact of ethical violations by way of collateral estoppel. In other words, in such a case the lawyer will not be able to re-litigate the issue of whether there was any misconduct. The only question left will be the form and extent of discipline to be imposed.

I was aware, of course, that a conviction of a crime establishes the underlying facts for the purpose of disciplinary proceedings. That sanctions might be given the same effect was new to me, and put them in a whole new light. The stakes on a motion for sanctions against an attorney are raised exponentially.  There are situations where it might pay not to contest sanctions too strongly, since the procedural apparatus surrounding the sanctions bears directly on the potential for collateral estoppel. As one of the panelists put it, “Money is only money, but an admonition is forever.” (I’m paraphrasing.) Much the same can be said for a motion to disqualify counsel for a conflict of interest.

One of the many cases discussed by the panel was the Third Department decision here, where the  lawyer had been sanctioned by a US Magistrate Judge for making certain “knowingly false” statements. The Magistrate Judge imposed the sanction of admonishment. The Second Circuit dismissed the lawyer’s appeal, finding the Magistrate Judge’s order to be non-final and hence non-reviewable.

The Third Department gave the Magistrate Judge’s findings collateral estoppel effect, precluding relitigation of the facts. Accepting, therefore, that the lawyer had made a false statement “knowingly and in bad faith,” the court imposed the sanction of public censure.

As the panel spoke, the matter was still before the Court of Appeals, and the question was whether the Court would accept that sanctions can ever be given collateral estoppel effect in disciplinary matters. We didn’t have long to wait. The Court’s decision was handed down yesterday.

The Court restated the general proposition that “the doctrine of collateral estoppel has been applied to attorney disciplinary matters in the past and can continue to be applied where the necessary prerequisites have been met — i.e., where the attorney has had a full and fair opportunity to litigate in the prior proceeding.” That is, after all, the basis for giving preclusive effect to criminal convictions.

Here, however, the Court found that the sanctions had been imposed after a motion heard on papers only, with no opportunity to cross-examine the movant’s witnesses or call witnesses for the attorney. The Court found that the proceeding before the Magistrate Judge had been “cursory,” and that the attorney had not had a full and fair opportunity to litigate the issue. The Court rejected the notion that the disciplinary proceeding had to be delayed until the underlying action reaches a conclusion. The continued pendency of the action is no bar to proof of misconduct. Therefore, the order imposing censure was reversed, and the matter remitted to the Appellate Division.

The attorney, of course, is far from out of the woods. The Committee on Professional Standards can still present its own case that discipline is merited. It will not be able to take the collateral estoppel shortcut.

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