Kentucky Court Report - SCOKY & COAKY

GOVERNMENT - Ethics: Turbyfill v. Executive Branch Ethics Commission (COA 11/20/2009)

Turbyfill v. Executive Branch Ethics Commission
2008-CA-001394 11/20/09 2009 WL 3878046

Opinion by Judge Wine; Judges Nickell and Thompson concurred.

The Court affirmed an order of the circuit court denying appellant’s petition for judicial review and declining to order dismissal of administrative proceedings opened by the Kentucky Executive Branch Ethics Commission (EBEC) for the purpose of sanctioning appellant. Although, appellant had been previously pardoned by the Governor, the EBEC filed “Allegations of Violations” in which it sought to fine appellant and publicly reprimand him for violating KRS 11A.020. The Court held that the allegation that appellant violated KRS 11A.020 was not criminal in nature and was collateral to the criminal proceedings for which he was pardoned. Therefore, the EBEC proceedings were not subject to the pardon.

The Court further held that the statutory scheme was not so punitive in purpose or effect so as to transform it into a criminal penalty. The Court rejected appellant’s argument that the pardon could not preclude civil actions by private individuals but could preclude civil actions by a state agency seeking to enforce violations of state law. First, because the EBEC proceeding was a collateral civil action, the pardon could not preclude its action. Second, the language of the pardon itself did not purport to include EBEC administrative actions.

Torts - Legal negligence, conflict of interest in insurance representation: Stephen R. Chappell, Individually and as partners and/or employees of Landrum & Shouse, et al. v. Kuhlman Electric Corp. AND Kuhlman Electric Corp. v. Chappell (SC 10/29/2009)

Stephen R. Chappell, Individually and as partners and/or employees of Landrum & Shouse, et al. v. Kuhlman Electric Corp. AND Kuhlman Electric Corp. v. Stephen R. Chappell, Individually and as partners and/or employees of Landrum & Shouse, et al.
2006-SC-000140-DG October 29, 2009
2006-SC-000144-DG October 29, 2009
Opinion by Special Justice Crittenden; Justice Noble and Justice Schroder
not sitting.

From 1977 until1988 Kuhlman Electric was covered under a workers’ compensation insurance policy issued by Amerisure. Among other things, the insurer agreed to provide legal representation to Kuhlman against workers’ compensation claims. In 1977, Burgess, a Kuhlman employee, was injured on the job and filed for benefits. Amerisure retained the firm of Landrum & Shouse to defend Kuhlman. In 1988, Kuhlman ended its relationship with Amerisure and opted to become selfinsured. Amerisure remained obligated to Kuhlman for future claims that arose from the period of coverage.

In 1991, Burgess sought to reopen his award and Amerisure again retained Landrum & Shouse to defend Kuhlman. Landrum & Shouse filed a motion on Kuhlman’s behalf to add Kuhlman as a party, suggesting that Burgess may have actually suffered a new injury rather than reaggravating the one from 1977. The ALJ granted the motion and Burgess subsequently filed a motion of his own claiming he had suffered a new injury. Since Kuhlman was now a self-insured entity, it, and not Amerisure, would be liable for a new injury, Kuhlman objected to Burgess’ new injury theory. However, the ALJ held that Kuhlman was estopped from raising a defense on that point since the motion to join Kuhlmann as a party had originally suggested the 1991 injury was new. The ALJ subsequently ruled Burgess had incurred a new injury and Kuhlman was ordered to pay him benefits.

In 2001, Kuhlman filed suit claiming legal malpractice against Landrum & Shouse and bad faith against Amerisure. The trial court awarded summary judgment to Landrum & Shouse and Amerisure. On appeal, the Supreme Court rejected Landrum & Shouse’s argument that Kuhlman Electric / Self-Insured was somehow a different entity from Kuhlman Electric—one to whom Landrum & Shouse owed no duty. The Court held that the fact that Kuhlman Electric was Landrum & Shouse’s client did not change once Kuhlman’s interests became adverse to Amerisure’s. However, the Court held that even if Landrum & Shouse had withdrawn from representing Kuhlman once the conflict of interest became apparent, it would not have changed the outcome of the case since the medical evidence that the injury was new would not have changed. To prevail on a legal negligence claim, a party must show that but for the attorney’s negligence the result of the case would have been different. Since Kuhlman could not meet that standard, the Court held that summary judgment had been proper. Special Justice Vesper (joined by Justice Scott) concurred in part and dissented in part, contending that if Landrum & Shouse had shared its conclusions about the “new injury theory” with Kuhlman, it might not have been estopped from later defending that point, thus possibly avoiding the adverse ruling. The minority would have remanded back to the trial court for further consideration of the motion for summary judgment.

LEGAL NEGLIGENCE - conflicts of interest, insurance representation: Stephen R. Chappell, Individually and as partners and/or employees of Landrum & Shouse, et al. v. Kuhlman Electric Corp. AND Kuhlman Electric Corp.

Stephen R. Chappell, Individually and as partners and/or employees of Landrum & Shouse, et al. v. Kuhlman Electric Corp. AND Kuhlman Electric Corp. v. Stephen R. Chappell, Individually and as partners and/or employees of Landrum & Shouse, et al.
2006-SC-000140-DG October 29, 2009
2006-SC-000144-DG October 29, 2009
Opinion by Special Justice Crittenden; Justice Noble and Justice Schroder not sitting.

From 1977 until 1988 Kuhlman Electric was covered under a workers’ compensation insurance policy issued by Amerisure. Among other things, the insurer agreed to provide legal representation to Kuhlman against workers’ compensation claims. In 1977, Burgess, a Kuhlman employee, was injured on the job and filed for benefits. Amerisure retained the firm of Landrum & Shouse to defend Kuhlman. In 1988, Kuhlman ended its relationship with Amerisure and opted to become selfinsured. Amerisure remained obligated to Kuhlman for future claims that arose from the period of coverage.

In 1991, Burgess sought to reopen his award and Amerisure again retained Landrum & Shouse to defend Kuhlman. Landrum & Shouse filed a motion on Kuhlman’s behalf to add Kuhlman as a party, suggesting that Burgess may have actually suffered a new injury rather than reaggravating the one from 1977. The ALJ granted the motion and Burgess subsequently filed a motion of his own claiming he had suffered a new injury. Since Kuhlman was now a self-insured entity, it, and not Amerisure, would be liable for a new injury, Kuhlman objected to Burgess’ new injury theory. However, the ALJ held that Kuhlman was estopped from raising a defense on that point since the motion to join Kuhlmann as a party had originally suggested the 1991 injury was new. The ALJ subsequently ruled Burgess had incurred a new injury and Kuhlman was ordered to pay him benefits.

In 2001, Kuhlman filed suit claiming legal malpractice against Landrum & Shouse and bad faith against Amerisure. The trial court awarded summary judgment to Landrum & Shouse and Amerisure. On appeal, the Supreme Court rejected Landrum & Shouse’s argument that Kuhlman Electric / Self-Insured was somehow a different entity from Kuhlman Electric—one to whom Landrum & Shouse owed no duty. The Court held that the fact that Kuhlman Electric was Landrum & Shouse’s client did not change once Kuhlman’s interests became adverse to Amerisure’s. However, the Court held that even if Landrum & Shouse had withdrawn from representing Kuhlman once the conflict of interest became apparent, it would not have changed the outcome of the case since the medical evidence that the injury was new would not have changed. To prevail on a legal negligence claim, a party must show that but for the attorney’s negligence the result of the case would have been different. Since Kuhlman could not meet that standard, the Court held that summary judgment had been proper. Special Justice Vesper (joined by Justice Scott) concurred in part and dissented in part, contending that if Landrum & Shouse had shared its conclusions about the “new injury theory” with Kuhlman, it might not have been estopped from later defending that point, thus possibly avoiding the adverse ruling. The minority would have remanded back to the trial court for further consideration of the motion for summary judgment.

ATTORNEY DISCIPLINES: March 2009

A. Kentucky Bar Association v. Bryan Kent Burlew
2008-SC-000500-KB March 19, 2009

The Supreme Court adopted the KBA Board of Governor’s recommendation that attorney be suspended from the practice of law for three years. Attorney was found to have filed a motion for temporary custody on behalf of a client then done nothing further, and failed to communicate or issue a refund to the client. In a second matter, the attorney accepted a case in Indiana, where he was not admitted to practice law, made no attempt to be admitted pro hac vice or even appear in court. In a third matter, the attorney represented a juvenile in court even though his license was under suspension at the time. The attorney did not respond to any of the charges against him. The Court ruled that the three-year suspension would run consecutively to a three-year suspension given to the attorney in 2008 and that any attempt to have his license restored would first be processed by the KBA’s Character & Fitness committee.

B. Kentucky Bar Association v. Steven O. Thornton
2008-SC-000768-KB March 19, 2009

The Supreme Court issued a public reprimand to attorney for failing to explain his fee structure to a first-time client and for failing to respond to request from the KBA for information regarding the ethics charges.

C. Kentucky Bar Association v. Kirk S. Bierbauer
2008-SC-000792-KB March 19, 2009

The Supreme Court ordered the permanent disbarment of attorney, after the KBA Board of Governors could not reach a decision on the appropriate discipline. In 2006, the attorney pled guilty in federal court to attempted manufacture of methamphetamine. The KBA determined the attorney had also failed to return unearned fees, failed to diligently represent four clients, failed to keep the clients reasonably informed, and failed to act with reasonable diligence. The Court also found that the attorney had failed to respond to a lawful demand for information from the KBA.

D. Kentucky Bar Association v. Chris Miniard
2008-SC-000928-KB March 19, 2009

Supreme Court ordered attorney suspended from the practice of law for 61 days. The attorney did not respond to the complaint or subsequent charge stemming from a real estate transaction.

E. Kentucky Bar Association v. Charles C. Leadingham
2008-SC-000934-KB March 19, 2009

Supreme Court ordered attorney suspended from the practice of law for 61-days. The attorney was found to have failed to file a lawsuit despite accepting a fee to do so. Further, the attorney was found to have failed to act with reasonable diligence and to keep his client reasonably informed. The day before the KBA Board of Governors was to meet on this matter, the attorney tendered a response with a motion to file a late answer. The request was denied.

F. Kentucky Bar Association v. Vickie Lynn Howard
2008-SC-000935-KB March 19, 2009

Supreme Court adopted recommendation of the Board of
Governors to suspend attorney from the practice of law for 181 days. The matter concerned three separate clients who claimed attorney had failed to see cases through to their completion and did not adequately communicate with them. The attorney responded to two of the complaints, referring to an unspecified illness which interfered with her “ability to clearly think.” However, the attorney did not respond to the formal charges or otherwise provide evidence of a mitigating illness.

G. Kentucky Bar Association v. Jennifer Sue Whitlock
2008-SC-000936-KB March 19, 2009

Supreme Court adopted recommendation of the Board of Governors to suspend attorney from the practice of law for 181 days for multiple counts of misconduct. In one case, attorney accepted a fee, but never filed the bankruptcy petition. In another, attorney never informed her client that their bankruptcy petition had been dismissed. The petition had in fact been dismissed for the attorney’s failure to file the required Attorney Fee Disclosure. The attorney was found to have failed to act with reasonable diligence, failed to keep her client reasonably informer, failed to take reasonable steps to protect her clients’ interests upon termination of litigation and failed to provide competent representation. Since she also failed to answer the charges against her, she was also adjudged to have failed to respond to a lawful request for information from a disciplinary authority.

Ethics commission jurisdiction: LOUISVILLE/JEFFERSON COUNTY METRO ETHICS COMM. V. SCHARDEIN (COA 7/18/2008)

LOUISVILLE/JEFFERSON       COUNTY METRO ETHICS COMM. V. SCHARDEIN
GOVERNMENT: Ethics commission       
      2007-CA-001356
PUBLISHED: AFFIRMING
      PANEL: VANMETER PRESIDING; CLAYTON, KNOPF CONCUR
      JEFFERSON COUNTY
      DATE RENDERED: 7/18/2008

The issue presented is whether the Metropolitan Sewer District (MSD) is an agency of the urban county government, Louisville Metro. As a separate corporate entity, the MSD was not an agency of the Louisville/ Jefferson County Metro Government (“Louisville Metro”), and that the Ethics Commission therefore had no jurisdiction over the MSD or its officials

Digested by Michael Stevens

Rule 11 sanctions not pend time for appeal and appellate review on imposition of thereof per "abuse of discretion": HINES V. BARNETT BANK OF TAMPA, NA (COA 3/28/2008)

HINES V. BARNETT BANK OF TAMPA, NA
CIVIL PROCEDURE:  RULE 11; new standard of review on imposition of sanctions relying on abuse of discretion
2006-CA-000216
PUBLISHED: DISMISSING IN PART AND AFFIRMING IN PART
PANEL: ACREE PRESIDING; CLAYTON, WINE CONCUR
JEFFERSON COUNTY
DATE RENDERED: 3/28/2008

This appeal follows on a failed intervention in which the time for appealing had expired and the attorney and litigants were hit with Rule 11 sanctions for the attempted intervention.

A motion for sanctions under Rule 11 was collateral to the merits of the case and does not extend or toll the time for filing an appeal of a final judgment.  In reviewing the facts of this case, the COA believed that where sanctions have been denied, then appellate review is limited to a determination of whether the trial court abused its discretion.

A trial court should not impose sanctions without a hearing; this means "opportunity to be heard.”  Since a trial court ‘would necessarily abuse its discretion if it based its ruling on an erroneous view of the law or on a clearly erroneous assessment of the evidence,’ the COA adopted the unitary abuse-of-discretion standard for review of all aspects of the imposition of Rule 11 sanctions by a trial court.

If a litigant could purge his violation of Rule 11 merely by taking a dismissal he would lose all incentive to "stop think and investigate more carefully before serving and filing papers.”

As the Rule 11 violation is complete when the paper is filed ”Hines ’ withdrawal from representation “does not expunge the violation.”

By Michael Stevens

Judicial disqualification learned after the case: KESSLER HOMES, IC. V. PETZOLD (COA 1/18/2008)

KESSLER HOMES, IC. V. PETZOLD
JUDGES:  Disqualification
2006-CA-001127
PUBLISHED: VACATING AND REMANDING
PANEL: LAMBERT PRESIDING; DIXON, ROSENBLUM CONCUR
COUNTY: FAYETTE
DATE RENDERED: 01/18/2008

This action began when Kessler Homes sued the Petzolds for the outstanding balance on a house construction contract. The Petzolds denied liability and counter claimed, seeking compensatory damages for substandard workmanship. The circuit court conducted a bench trial on the parties' claims, ruling nearly uniformly in favor of the Petzolds in which the judge awarded the Petzolds, the customers, over $30,000.00 in compensatory damages and over $100,000.00 in litigation costs.

Following the entry of judgment, Kessler Homes learned that the Petzolds's daughter was the trial judge's personal tax accountant, and during the pendency of the litigation, also served as treasurer of the judge's reelection campaign. Kessler then petitioned to vacate the judgment on the ground that the trial judge had a conflict of interest in this case.

A judge is disqualified from presiding over a case “whenever the judge's impartiality might reasonably be questioned."  Recusal is mandatory when a judge's impartiality might reasonably be questioned.  Neither the court nor counsel dispute that had the trial judge's relationship to the Petzolds come to light prior to the entry of judgment, the trial judge should have, and would have, recused herself to avoid any appearance of impartiality.

The trial judge's ignorance of his conflict of interest during the pendency of the litigation was irrelevant because the legal standard is whether “a reasonable person, knowing all the circumstances, would expect that the judge would have actual knowledge.”

Where a judge lacks actual knowledge of facts indicating an appearance of partiality during litigation, but gains it postjudgment in circumstances in which a reasonable observer would have expected the judge to have been aware of the relationship, he must “take the steps necessary to maintain public confidence in the impartiality of the judiciary” by disqualifying himself and vacating his judgment. Liljeberg v. Health Services Acquisition Corp., 486 U.S. 847, 860-61, 108 S.Ct. 2194, 2203, 100 L.Ed.2d 855 (1988).

The overriding policy concern here is not judicial veracity but rather public confidence in the impartiality of the judicial system. The typical, objective observer might well find it somewhat implausible that a judge running for reelection would be unaware that her campaign treasurer's parents were litigants in her court. Moreover, because this case was not tried by jury, but was rather conducted as a bench trial in which virtually all claims were resolved in the Petzolds's favor, including the award of litigation costs trebling the compensatory damages award, the same observer might well question the judge's impartiality.

While the COA did NOT find actual partiality, it did find there can be no question that the rule against appearance of impartiality has been violated and held that the extraordinary remedy of vacating the judgment is also appropriate here.  The verdict was vacated and remanded with directions to the trial court that the trial judge recuse and a new trial be granted.

Michael Stevens

CLIENT PERJURY AND COUNSEL'S DUTIES: BROWN V. COMMONWEALTH (SC 6/21/2007)

BROWN V. COMMONWEALTH
ETHICS: RULE 3.3 AND CLIENT'S INTENT TO COMMIT PERJURY AT TRIAL; AND RULE 1.63 DUTY OF CONFIDENTIALITY
2005-SC-000078-DG.pdf
PUBLISHED: REVERSING AND REMANDING
MAJORITY OP BY NOBLE; CUNNINGHAM CONCURS BY SEP. OP WITH LAMBERT, MINTON JOIN; SCOTT DISSENTS BY SEP. OP. WITH MCANULTY JOINING; SCHRODER NOT SITTING
LOWER:  JEFFERSON
DATE RENDERED: 6/21/2007

SC ordered new trial for Defendant whose counsel withdrew from representation during trial.  Here, defense counsel told the court that his client wanted to testify, and had the right to do so, but that counsel felt his ethical limitations created a conflict with the client.  Under SC Rule 3.3, a lawyer is prohibited from offering evidence known to be false, may refuse to offer evidence that she reasonably believes to be false, and shall inform the tribunal of all material facts known to her so that the tribunal can make an informed decision whether the facts are adverse.  The plain language of this rule contemplates that a lawyer will not advance false testimony of any witness, and that she will inform the court if such testimony is imminent and what facts support that belief. However, Rule 1.63 creates a duty of confidentiality that prohibits a lawyer from revealing information related to the representation of a client. Moreover, the client has a right to testify in his own defense and a right to counsel. This creates an apparent conflict when an attorney knows that a client intends to offer false testimony. (No such conflict exists when the witness is not a client).

TC erred in advising Brown and counsel that counsel could leave the courtroom during the narrative testimony. They either chose this option together or defense counsel chose his preference the record does not disclose which.  By completely leaving the courtroom, in the presence of the jury, counsel telegraphed a problem to the jury. This was improper absent a knowing and voluntary waiver of counsel by Brown as to representation beyond the perjured testimony.  Counsel should have remained to assist when he could, since only counsel knew what he believed to be a proper question or an improper one.  It remains unknown whether counsel had a good faith, firm factual basis to believe the testimony would be perjury.  Had counsel remained and assisted when he could, the need for specific findings would not have arisen until a motion for a new trial was filed. However, given that no one other than counsel and Brown knew the contested area of testimony, requiring Brown to testify wholly on his own and without benefit of counsel's objections on cross examination (which would have been directed at evidentiary rules rather than content), Brown was unconstitutionally deprived of his right to assistance of counsel.  This was compounded by requiring him to make his own closing argument and allowing counsel to return to conduct the sentencing phase.

Note:  This opinion demonstrates the ethical dilemma for a defense attorney who has a client that intends to lie on the stand.  It is rare when a client will outright admit this to you, but when it happens, the question becomes what to do.  Although the opinion of the court lays out a pretty good roadmap, the dissent makes clear that while safeguards are in place for the protection of the accused, the accused doesn't have to use them.

By Scott Byrd @ www.OlginandByrd.com