In Re Clark

SUPREME COURT OF ARIZONA
En Banc

In the Matter of ) Arizona Supreme Court
) No. SB-03-0113-D
RICHARD E. CLARK, )
Attorney No. 9052 ) Disciplinary Commission
) No. 00-1066
Respondent. )
) O P I N I O N
__________________________________)

REVIEW FROM DISCIPLINARY COMMISSION

REVERSED IN PART; AFFIRMED IN PART; REMANDED

Richard E. Clark Scottsdale
Respondent Pro Se

State Bar of Arizona, Phoenix
by Patricia A. Sallen, Bar Counsel
Attorney for State Bar of Arizona

M c G R E G O R, Vice Chief Justice

¶1 In this lawyer disciplinary proceeding, a hearing

officer concluded that Richard E. Clark violated Rule 42 of the

Rules of the Supreme Court of Arizona, Ethical Rule (ER) 8.4(c)

(stating that it is professional misconduct for a lawyer to

“engage in conduct involving dishonesty, fraud, deceit or

misrepresentation”) and ER 8.4(d) (prohibiting lawyers from

“engag[ing] in conduct that is prejudicial to the administration

of justice”). The hearing officer recommended censure, one year

of probation, and an order of restitution to Clark’s former

client, Edward Kosac, Jr. The Disciplinary Commission expressly
adopted the hearing officer’s findings of fact, but recommended

increased discipline and urged that Clark receive a two-year

suspension, two years of probation, and be ordered to pay

restitution. We granted review to clarify the standard of

review that the Disciplinary Commission must apply when

reviewing factual findings of a hearing officer. We review this

matter pursuant to Article VI, Section 5.3 of the Arizona

Constitution and Rule of the Supreme Court of Arizona 59(a).

I.

¶2 The facts, as found by the hearing officer and adopted

by the Disciplinary Commission, are as follows. Clark began

practicing law in Arizona in 1983 and, in the early 1990s,

represented Kosac in a lawsuit arising out of a real estate

claim (the Kosac lawsuit). The lawsuit resulted in a judgment

against Kosac.

¶3 Because of factors unrelated to the Kosac lawsuit,

Clark filed a petition for bankruptcy. Based upon Clark’s

conduct during the Kosac lawsuit, conduct for which Clark

received an informal reprimand from the State Bar, Kosac filed a

claim against Clark in bankruptcy court. The bankruptcy court

entered a non-dischargeable judgment for Kosac against Clark.

This proceeding arises from Kosac’s attempts to collect that

judgment.

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¶4 Kosac hired attorney Steven W. Cheifetz to collect the

judgment against Clark. Among other efforts, Cheifetz served

writs of garnishment on three of Clark’s clients, all of whom

denied owing any amounts to Clark. Cheifetz next scheduled a

debtor’s examination and served a subpoena upon Clark. The

subpoena required Clark to bring to Cheifetz’s office records

identifying those clients who owed Clark money and other

financial information related to his legal practice.

¶5 At the judgment debtor’s exam in May 2000, Clark

informed Cheifetz that, on the previous day, he had formed a

professional corporation, Richard Clark, P.C., and had

transferred all of the assets from his sole proprietorship law

practice to his professional corporation. At both the debtor’s

examination and in his testimony during disciplinary

proceedings, Clark stated that he formed the professional

corporation to establish a medical reimbursement plan and to

facilitate payment of income taxes. During disciplinary

proceedings, Clark also testified that he formed the

professional corporation to limit what he believed were

inappropriate contacts between Cheifetz and Clark’s clients. At

the debtor’s examination, Clark indicated that the corporation

had already been garnished by another of Clark’s creditors after

Clark told that creditor about the transfer of assets.

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¶6 Cheifetz subsequently served a writ of garnishment on

Richard Clark, P.C. in connection with the proceedings in the

United States Bankruptcy Court for the District of Arizona.1 In

the interim, Kosac filed the State Bar complaint that led to

these proceedings.

¶7 The State Bar filed a formal complaint against Clark

in December 2001, charging him with one count of conduct

involving dishonesty, fraud, deceit or misrepresentation in

violation of ER 8.4(c) and one count involving conduct

prejudicial to the administration of justice in violation of ER

8.4(d). After conducting a several-day hearing, the hearing

officer issued his report.

¶8 Before concluding that Clark’s conduct violated the

Arizona Rules of Professional Conduct and recommending

1
Upon the suggestion of the bankruptcy judge, Kosac
transferred his case against Clark from the bankruptcy court to
the superior court. The superior court found that Clark’s
conduct with regard to the transfer of assets constituted a
fraudulent conveyance in violation of Arizona Revised Statutes
(A.R.S.) section 44-1004 (2003). That statute provides:

A transfer made or obligation incurred by a debtor is
fraudulent as to a creditor, whether the creditor’s
claim arose before or after the transfer was made or
the obligation was incurred, if the debtor made the
transfer or incurred the obligation . . . [w]ith
actual intent to hinder, delay, or defraud any
creditor or the debtor.

A.R.S. § 44-1004.A.1. Subsection B lists a number of factors
that the court may consider to determine actual intent. A.R.S.
§ 44-1004.B.

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discipline, the hearing officer made several findings related to

Clark’s state of mind. Those findings are critical to our

review.

¶9 Throughout his factual findings, both those related to

the alleged misconduct and those related to appropriate

discipline, the hearing officer found that Clark did not

knowingly or intentionally violate his ethical duties. In

evaluating Clark’s motive for transferring property to his

professional corporation, the hearing officer stated that he had

no doubt that Clark, “in his heart of hearts,” believed that the

property he transferred to his professional corporation had no

value. Nevertheless, the hearing officer concluded that Clark’s

conduct constituted a fraudulent transfer in violation of A.R.S.

section 44-1004 because the professional corporation did not

give Clark fair consideration for the transferred property. The

hearing officer also expressly found that Clark’s conduct did

not involve dishonesty, deceit or misrepresentation. In

recommending discipline, the hearing officer stated that Clark

“negligently violated a duty to the courts and to his former

client” and that “his mental state did not demonstrate a state

of mind of maliciousness or avarice.” In determining the

appropriate sanction to impose, the hearing officer looked to

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the ABA Standards for Imposing Lawyer Sanctions (Standards)2 and

recommended discipline that is appropriate when a lawyer acts

negligently rather than intentionally.3 The mitigating factors

found by the hearing officer included absence of a prior

disciplinary record (Standard 9.32(a)) and absence of a selfish

or dishonest motive (Standard 9.32(b)). In addition, the

hearing officer rejected the State Bar’s argument that he should

find, as aggravating circumstances, prior disciplinary offense

(Standard 9.22(a)), selfish or dishonest motive (Standard

9.22(b)), substantial experience in the practice of law

(Standard 9.22(i)), and indifference to paying restitution

(Standard 9.22(j)).

2
This court has held that the Standards provide
suitable guidelines for determining the appropriate sanctions
for lawyer misconduct. See, e.g., In re Shannon, 179 Ariz. 52,
68, 876 P.2d 548, 564 (1994) (stating that “[w]e look to the
American Bar Association’s Standards for Imposing Lawyer
Sanctions . . . for guidance in determining the appropriate
sanction to impose” (citing In re Tarletz, 163 Ariz. 548, 554,
789 P.2d 1049, 1055 (1990))); In re Kaplan, 179 Ariz. 175, 177,
877 P.2d 274, 276 (1994) (stating that “[i]n determining the
appropriate sanctions, the Court considers the American Bar
Association’s Standards for Imposing Lawyer Sanctions a suitable
guideline” (citing In re Rivkind, 164 Ariz. 154, 157, 791 P.2d
1037, 1040 (1990))).
3
Standard 4.63 provides that “[r]eprimand [censure in
Arizona] is generally appropriate when a lawyer negligently
fails to provide a client with accurate or complete information,
and causes injury or potential injury to the client.” Standard
6.13 provides that “[r]eprimand is generally appropriate when a
lawyer is negligent either in determining whether statements or
documents are false . . . and causes injury or potential injury
to a party to the legal proceeding, or causes an adverse or
potentially adverse effect on the legal proceeding.”

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¶10 Based on these Standards, the mitigating factors, and

the absence of any aggravating circumstances, the hearing

officer recommended discipline that included censure, one year’s

probation, and restitution.

¶11 The Disciplinary Commission adopted the hearing

officer’s findings of fact in their entirety, but modified de

novo what it described as his conclusions of law. The

Disciplinary Commission held that Clark’s conduct was knowing,

if not intentional, rather than negligent, and caused actual

injury to Kosac and to the legal system. Further disagreeing

with the hearing officer, the Disciplinary Commission found de

novo four aggravating factors: prior disciplinary offenses

(Standard 9.22(a)), dishonest or selfish motive (Standard

9.22(b)), substantial experience in the practice of law

(Standard 9.22(i)), and indifference to making restitution

(Standard 9.22(j)). The Disciplinary Commission also disagreed

with the hearing officer’s finding of two mitigating factors:

absence of a prior disciplinary record (Standard 9.32(a)) and

absence of a selfish or dishonest motive (Standard 9.32(b)).

Considering Clark’s intentional misconduct in conjunction with

the factors present in aggravation and mitigation, the

Disciplinary Commission recommended a two-year suspension, two

years of probation with terms and conditions, and restitution.

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¶12 This court granted review to determine whether the

Disciplinary Commission may reject a hearing officer’s factual

findings absent a determination that the findings were clearly

erroneous. Based on the analysis below, we conclude that it may

not.

II.

¶13 Clear standards govern the Disciplinary Commission’s

review of a hearing officer’s factual findings and legal

conclusions. In reviewing questions of law, the Disciplinary

Commission applies a de novo standard of review, but “[i]n

reviewing findings of fact made by a hearing officer, the

commission shall apply a clearly erroneous standard.” Ariz. R.

Sup. Ct. 58(b).4 In In re Tocco, 194 Ariz. 453, 456 ¶ 9, 984

P.2d 539, 542 (1999), this court stated: “The Disciplinary

Commission adopted the hearing committee’s findings of fact in

their entirety. It then independently made additional findings.

This it may not do under current rules.” In this action, as in

Tocco, the Disciplinary Commission adopted the hearing officer’s

findings of fact in their entirety. Nevertheless, the

Disciplinary Commission then effectively disregarded the hearing

officer’s findings related to Clark’s state of mind.

4
When the Disciplinary Commission engaged in its review
of the hearing officer’s factual findings and legal conclusions
in this case, this rule was numbered Rule of the Supreme Court
of Arizona 53(d)(2). This change in numbering has no bearing on
our decision.

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 ¶14 Determining a person’s mental state requires the

resolution of questions of fact. See Republic Ins. Co. v.

Feidler, 178 Ariz. 528, 531, 875 P.2d 187, 190 (App. 1993)

(stating that “intent to injure is a fact question”). In

disciplinary proceedings, a respondent’s mental state can both

determine whether an ethical violation occurs and affect the

appropriate discipline for a violation.

A.

¶15 The hearing officer’s finding that Clark acted

negligently rather than intentionally or knowingly determines

whether he violated ER 8.4(c). As the State Bar recognizes, a

lawyer cannot violate ER 8.4(c) by acting negligently; a

violation of ER 8.4(c) must rest upon behavior that is knowing

or intentional and purposely deceives or involves dishonesty or

fraud. See Ariz. R. Sup. Ct. 42, ER 1.0(d) (defining “fraud” or

“fraudulent” as conduct that “has a purpose to deceive”); In re

Owens, 182 Ariz. 121, 125, 893 P.2d 1284, 1288 (1995) (stating

that “ER 8.4(c) requires dishonesty, fraud, deceit or

misrepresentation, not just negligence”). Because a violation

of ER 8.4(c) requires knowing or intentional misconduct, the

factual finding that Clark’s conduct was merely negligent

necessarily establishes that both the hearing officer and the

Disciplinary Commission erred in concluding that Clark violated

that ethical rule. The Disciplinary Commission erroneously

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reasoned that, because ER 8.4(c) requires knowing or intentional

conduct, the hearing officer’s conclusion that Clark violated ER

8.4(c) permitted the Disciplinary Commission to ignore the

factual finding that Clark acted negligently. The factual

finding must precede and support the legal conclusion. We

therefore vacate the Disciplinary Commission’s conclusion that

Clark violated ER 8.4(c).

B.

¶16 Whether Clark’s negligent mental state permits a

conclusion that he violated ER 8.4(d), however, presents a

different question. Although this court has not specifically

addressed the issue of the requisite mental state for ER 8.4(d),

the rule does not require a mental state other than negligent.

If the Ethical Rules require a higher mental state, they usually

specify the mental state required. See, e.g., Ariz. R. Sup.

Ct. 42, ER 8.4(f) (describing misconduct as “knowingly

assist[ing] a judge or judicial officer in conduct that is a

violation of applicable Code of Judicial Conduct or other law”)

(emphasis added).

¶17 In the current action, the hearing officer found that

Clark negligently engaged in conduct prejudicial to the

administration of justice and thus violated ER 8.4(d). Clark’s

act of transferring assets to his professional corporation and

notifying another creditor of the transfer may have deprived

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Kosac of partial recovery on his judgment. We agree with the

hearing officer and the Disciplinary Commission that Clark’s

negligent conduct and its impact supported a conclusion that his

conduct was prejudicial to the administration of justice in

violation of ER 8.4(d).

C.

¶18 The Disciplinary Commission also erred by effectively,

although not expressly, rejecting the hearing officer’s factual

findings central to determining appropriate discipline.

Although the hearing officer specifically found that Clark

lacked a selfish or dishonest motive and rejected the State

Bar’s argument that Clark exhibited an indifference to affording

restitution, the Disciplinary Commission found Clark’s selfish

or dishonest motive and indifference to restitution to be

aggravating circumstances. Just as the Disciplinary Commission

may not ignore the hearing officer’s findings of fact to support

a different conclusion as to misconduct, it may not reject the

hearing officer’s findings of fact related to discipline unless

it determines that the factual findings are clearly erroneous.5

In determining the appropriate sanction for Clark’s violation of

5
Other aggravating and mitigating circumstances that
the Disciplinary Commission regarded differently than did the
hearing officer, such as the effect of prior disciplinary
proceedings and substantial experience in the practice of law,
did not depend upon factual findings. The Disciplinary
Commission was entitled to weigh or characterize such factors
differently than did the hearing officer.

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ER 8.4(d), therefore, the Disciplinary Commission must rely upon

the hearing officer’s factual findings related to mitigating and

aggravating circumstances, unless those findings are clearly

erroneous.

III.

¶19 For the foregoing reasons, we reverse the Disciplinary

Commission’s conclusion that Clark violated ER 8.4(c), affirm

its conclusion that Clark violated ER 8.4(d), and remand to the

Disciplinary Commission to consider the appropriate discipline

for Clark’s violation of ER 8.4(d).

____________________________________
Ruth V. McGregor, Vice Chief Justice

CONCURRING:

__________________________________
Charles E. Jones, Chief Justice

__________________________________
Rebecca White Berch, Justice

__________________________________
Michael D. Ryan, Justice

__________________________________
Andrew D. Hurwitz, Justice

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