[00:00:01] Speaker 03:
Case number 14-7084, Henry Barry John Nates, respondent.

[00:00:06] Speaker 03:
Mr. Nates for the respondent, Mr. Mills for the amicus curi.

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Thank you, Your Honors.

[00:00:40] Speaker 02:
May it please the Court?

[00:00:41] Speaker 02:
My name is Christopher Nace here on behalf of Respondent Barry J. Nace, who is present in the courtroom today.

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Just by way of brief introduction, Mr. Nace has been a member of this bar for several decades.

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He's the only person twice elected president of the Trial Lawyers Association of Metropolitan Washington, D.C.

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He's a past president of what was then the Association of Trial Lawyers of America,

[00:01:05] Speaker 01:
He was president of the National Board of Legal Specialty Certification, also an elected position by... I think the order establishing oral argument was pretty clear that we want to talk about the legal issues involved, and I don't believe those touched upon any legal issues today.

[00:01:22] Speaker 02:
Well, only to the extent that mitigation of punishment, and that's something that is an issue in this case, which

[00:01:28] Speaker 02:
your honor, goes to the infirmity of proof at the lower court.

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And these are all facts that you wouldn't know if you read the West Virginia Supreme Court's opinion in this case.

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And those are relative factors that are outlined in the court's opinion but aren't addressed.

[00:01:45] Speaker 04:
The Supreme Court of West Virginia did consider Mr. Nance's back

[00:01:54] Speaker 02:
You know, when you look through the opinion, Your Honor, no, you don't see that they said other than to say that he's been practicing for years and is esteemed by his peers.

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That was all the consideration given.

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There was no consideration given to a 40-year history.

[00:02:07] Speaker 04:
Let me ask you a question.

[00:02:09] Speaker 04:
Your argument is that we have the right to determine what the appropriate penalty should be under our rules.

[00:02:17] Speaker 02:
Yes, Your Honor.

[00:02:18] Speaker 04:
Does that mean if we think it was too little a suspension that we can

[00:02:24] Speaker 04:
agree to suspend for a much longer period of time?

[00:02:28] Speaker 02:
I don't believe so because it is a reciprocal disciplinary proceeding.

[00:02:34] Speaker 04:
But your argument is we can evaluate whether it's the proper penalty.

[00:02:38] Speaker 04:
Does that mean we can also increase the penalty

[00:02:42] Speaker 02:
Well, if you look at the basis for our challenge to adhere in our argument here, the four categories that are provided for in the rules, my reading of them, Your Honor, is that they provide the respondent an opportunity to have less punishment or no punishment, not to... It doesn't say that.

[00:03:02] Speaker 02:
No, it doesn't.

[00:03:02] Speaker 04:
It says whatever punishment we think is appropriate, doesn't it?

[00:03:05] Speaker 02:
No, it actually says this court shall impose the identical discipline unless the attorney demonstrates where this court is satisfied that the procedure was so lacking in notice or opportunity to be heard.

[00:03:20] Speaker 04:
There are other provisions, aren't there?

[00:03:23] Speaker 02:
There are four provisions that are provided for.

[00:03:25] Speaker 04:
One provision gives us authority to come up with what we think is the appropriate remedy, doesn't it?

[00:03:32] Speaker 02:
Well, the last, number four says the misconduct weren't substantially different disciplines.

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But I think that that still falls under

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that the court shall impose the identical discipline unless the attorney demonstrates and the court is satisfied that the misconduct warrants substantially different discipline.

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So I think under that reading of it, it's allowing the respondent to show that different discipline should apply.

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I don't think the respondent would make the argument that more discipline is necessary.

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So I'm not sure that I do agree with your honor on that.

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This is, again, it is a reciprocal proceeding.

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And the reason for that is that,

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This court hasn't held an investigation of the facts.

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We're taking the record as it is.

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Now, if this court wanted to appoint a panel to conduct an investigation, we would welcome that, quite honestly.

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We would welcome somebody taking a fresh look at the facts in this case.

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Our position from a legal standpoint has been the same throughout.

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We don't understand why nobody wants to look at the relationship between a trustee and special counsel that is detailed and outlined by a federal statute.

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for at least 18 months?

[00:04:49] Speaker 02:
In what regard?

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Because that is something that keeps... Do you have any questions?

[00:04:53] Speaker 02:
I'm asking you.

[00:04:55] Speaker 02:
Well, I'm just... I'm rhetorically... It's in the West Virginia Supreme Court.

[00:04:57] Speaker 02:
So, one of, if not the only argument the West Virginia Supreme Court makes in that regard is that when asked if there was a settlement in this case, Mr. Nace responded by saying there wasn't a settlement, there was a jury verdict.

[00:05:13] Speaker 04:
What about the September 2006...

[00:05:16] Speaker 02:
What the letter says that was an issue in this case is that I need to talk to your bankruptcy lawyer.

[00:05:26] Speaker 02:
Let's keep in mind, there was no evidence anywhere.

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There's no evidence in the record to suggest that didn't happen.

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There's no evidence one way or the other.

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What we do know is that at the time of the deposition of Mrs. Miller, the client in the underlying case, she testified she had been discharged.

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So contrary to the suggestion in the amicus brief that there was evidence that Mr. Nates did not follow up on that letter, there is no evidence.

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And the burden on the West Virginia proceeding was clear and convincing evidence.

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So how you go from no evidence to clear and convincing evidence on that point is beyond me.

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And that's why one of the reasons we think there's been an infirmity of proof

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in this case.

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There is no evidence that there was not a conversation with the Bankruptcy Council and with Mr. Nace.

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Let's keep in mind the original affidavit, the application to employ that the trustee submitted says right in it to retain for a personal injury matter coming out of an automobile accident.

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Mr. Nace didn't handle that matter.

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And after that communication, sending, merely sending the affidavit to Mr. Nate's husband... Wait a minute.

[00:06:38] Speaker 04:
What do you mean he didn't handle that matter?

[00:06:39] Speaker 04:
I thought he did.

[00:06:40] Speaker 02:
He did not.

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This was a medical malpractice case.

[00:06:43] Speaker 02:
The affidavit that was asked... Oh, I'm sorry.

[00:06:46] Speaker 04:
Is this a new argument you're making now that he was retained for a different case?

[00:06:50] Speaker 02:
Absolutely not.

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We've made this argument throughout.

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In fact, in the West Virginia Supreme Court.

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This case was different from the automobile accident case.

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What we're saying, Your Honor.

[00:07:00] Speaker 04:
Except there are two different matters.

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What we're saying.

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How did all of it arise out of an automobile accident?

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It did not arise out of an automobile accident case.

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And therein lies one of the problems we've had.

[00:07:10] Speaker 02:
If the trustee had ever communicated with Mr. Nace, ever, until after the disbursement of funds, we might not be having this discussion.

[00:07:18] Speaker 04:
Why was it an obligation of Mr. Nace to communicate with his client?

[00:07:21] Speaker 02:
Because he never was retained to have a client.

[00:07:24] Speaker 04:
Well, he certainly was.

[00:07:25] Speaker 04:
He signed an affidavit.

[00:07:28] Speaker 04:
He signed an affidavit that says... Well, the Virginia Supreme Court says that created an attorney-client relationship.

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And so there's two... I have two responses to that, Your Honor.

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Number one, the affidavit says that Mr. Nace is willing to be employed if the court permits him to do so and the trustee retains him.

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That didn't happen because there was never a communication with Mr. Nace after the bankruptcy court said, signed the application to employ.

[00:07:55] Speaker 02:
The way... The U.S.

[00:07:55] Speaker 04:
Virginia Supreme Court made a different decision on that as to whether an attorney-client relationship was created.

[00:08:04] Speaker 04:
Yes and no.

[00:08:07] Speaker 02:
the West Virginia Supreme Court absolutely not your honor because this is this is why it matters what the West Virginia Supreme Court found was that an attorney client relationship existed under their common law

[00:08:19] Speaker 02:
This, the relationship between trustee and special counsel, something that no court has considered in this matter at this point, is it's not common law.

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In fact, it's not even attorney-client relationship.

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It's one of the trustee who has a duty to supervise the employees that he, the special counsel that he retains.

[00:08:38] Speaker 02:
In fact, your honor, if you look at section 327, which is the only statute that authorizes a trustee to go out and hire somebody to represent

[00:08:47] Speaker 02:
the estate in a matter like this, it specifically says, and this is 11 USC 327E, the trustee with the court's approval may employ for a specified special purpose other than to represent the trustee in conducting the case.

[00:09:04] Speaker 02:
Other than to represent the trustee, this is not an attorney-client relationship that's developed, and it's not contemplated to be such a relationship.

[00:09:14] Speaker 02:
This is why this court does not have to adhere to the West Virginia Supreme Court's finding, because the West Virginia Supreme Court applied common law

[00:09:23] Speaker 02:
And it did not look at all.

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It doesn't even consider federal bankruptcy law.

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And that's the only place that authorizes a trustee to hire special counsel.

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You must look at the federal law in understanding this relationship.

[00:09:38] Speaker 02:
And it wasn't done.

[00:09:39] Speaker 04:
When a trustee hires special counsel, to whom does the special counsel qualify this year?

[00:09:47] Speaker 02:
Well, I would argue that the special counsel, assuming that they have been retained properly, owes it to the estate, to the bankruptcy estate.

[00:09:55] Speaker 02:
The trustee has a fiduciary relationship, right?

[00:09:57] Speaker 02:
Well, the trustee has a fiduciary relationship, too.

[00:10:00] Speaker 02:
The trustee is not the estate.

[00:10:01] Speaker 04:
But he represents the estate, right?

[00:10:02] Speaker 02:
He does.

[00:10:02] Speaker 04:
Okay, so the fiduciary relationship is to the trustee.

[00:10:06] Speaker 02:
That's fine, but that doesn't create an attorney-client relationship.

[00:10:10] Speaker 04:
No.

[00:10:10] Speaker 02:
What is it?

[00:10:11] Speaker 02:
Because an attorney client, this creates a relationship.

[00:10:14] Speaker 04:
This is a relationship that is not an attorney client?

[00:10:15] Speaker 02:
This is the same type of relationship that if an attorney brought in an appellate counsel to argue a case.

[00:10:23] Speaker 02:
This is hiring a special lawyer to handle a different matter.

[00:10:27] Speaker 02:
That's why the section says that you can't bring in someone to actually handle the case.

[00:10:32] Speaker 02:
The trustee has to be involved.

[00:10:34] Speaker 04:
So when the special counsel come in, who is the special counsel's client?

[00:10:38] Speaker 02:
The special counsel's client is the estate, the bankruptcy estate.

[00:10:43] Speaker 03:
You're going around in circles.

[00:10:45] Speaker 03:
I don't understand that.

[00:10:46] Speaker 03:
If you brought in this counsel, even if it's under someone above you who has a larger role, I don't understand how you don't have a relationship that is attorney-client relationship to the person for whom you're arguing.

[00:11:00] Speaker 03:
When we bring in counsel here to argue on behalf of

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folks are certainly they're in some kind of a relationship I would have assumed as attorney-client.

[00:11:10] Speaker 03:
Even though they didn't try the case and they're not even retained with money, they're representing people.

[00:11:18] Speaker 02:
The Supreme Court of West Virginia's opinion found a violation of an attorney-client relationship between Mr. Trumbull and Mr. Nace.

[00:11:27] Speaker 02:
There is no attorney-client relationship

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between those two entities.

[00:11:32] Speaker 02:
There may be a relationship.

[00:11:34] Speaker 02:
There may be a relationship between them.

[00:11:37] Speaker 02:
But as far as ethical proceedings and finding violation of the rules, more importantly than that even, the analysis was not done under federal law.

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And there was no consideration of federal bankruptcy law that creates the relationship.

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In other words, the West Virginia Supreme Court said,

[00:11:58] Speaker 02:
We get to decide what the relationship is, regardless of 11 United States Code 32070.

[00:12:06] Speaker 02:
Now, how do they get to do that when the only statute that authorizes the relationship at all is 327?

[00:12:13] Speaker 02:
In fact, this matter should be considered by the Federal Bankruptcy Court.

[00:12:18] Speaker 02:
And that court hasn't made any ruling, let alone one of impropriety or ethics violations.

[00:12:25] Speaker 04:
It's waiting for this proceeding, Mike.

[00:12:27] Speaker 02:
Well, I don't know what it's waiting for.

[00:12:28] Speaker 04:
It's waiting for a trust.

[00:12:31] Speaker 02:
No, no, no, not the West Virginia Bankruptcy Court.

[00:12:34] Speaker 02:
The West Virginia Bankruptcy Court, we do have, there's an adversary proceeding pending, but there's no issues in that case of ethics.

[00:12:42] Speaker 02:
That's not even been raised.

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That's simply to collect money.

[00:12:45] Speaker 04:
The question here is whether or not Mr. Nason, Mrs. Miller took too much money that might have been owed to debtors of the estate.

[00:12:55] Speaker 04:
Is that correct?

[00:12:55] Speaker 02:
no not i don't think that's exactly correct.

[00:12:58] Speaker 03:
You're saying that he never asserted that there was a settlement?

[00:13:02] Speaker 02:
No I didn't say that your honor.

[00:13:03] Speaker 02:
What I said is that to suggest that that the statement that there was not a settlement but was a jury verdict look it was a mistake but there was never any any dispute there was never any misleading as far as what the dollar amount was if you look at that letter that says there was a there was a jury verdict the amount collected

[00:13:23] Speaker 02:
in the jury verdict, after the jury verdict that the judgment entered, was a total of $500,000.

[00:13:27] Speaker 02:
That was disclosed from the minute the letter came, went out to the trustee, that that was the total amount.

[00:13:33] Speaker 02:
And it's not disputed that that was the total amount.

[00:13:36] Speaker 02:
Moreover, and importantly, the total amount owed the debtors was just less than $13,000.

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And in addition, Mr. Nates, the way the debtors

[00:13:47] Speaker 02:
I'm sorry, the creditors.

[00:13:48] Speaker 02:
I'm sorry, I misspoke.

[00:13:49] Speaker 02:
The creditors.

[00:13:51] Speaker 04:
In addition... So the creditors are owed $13,000 that they never got, huh?

[00:13:56] Speaker 02:
That's right.

[00:13:56] Speaker 02:
And that money, Your Honor, has been deposited into the court registry for three, three and a half years.

[00:14:02] Speaker 03:
I thought that was a settlement apart from the jury amount.

[00:14:04] Speaker 03:
There was, and that's what I'm trying to- Well, I thought they said that they were misleading, whatever you call it, that he did not report that, and that twice.

[00:14:13] Speaker 03:
So there was not any settlement when in fact there was a settlement.

[00:14:15] Speaker 02:
And I guess that's what I'm saying, Your Honor.

[00:14:17] Speaker 02:
There was a mistake in the letter that came- there was a letter written from Mr. Nace to the trustee that said- Saying there was no settlement.

[00:14:23] Speaker 02:
That's right.

[00:14:24] Speaker 02:
But what I'm saying is it was a mistake to suggest that it's unethical or misleading when the total dollar amount disclosed is no different.

[00:14:34] Speaker 02:
In other words, if Mr. Nason said, I didn't collect the $75,000 settlement, all we collected was $425,000, that would be misleading.

[00:14:42] Speaker 02:
What you have is a trial lawyer who tried a case two years before that, three years before that maybe, went up on appeal and had a $500,000 jury verdict affirmed.

[00:14:52] Speaker 02:
You don't remember the partial settlements.

[00:14:55] Speaker 02:
And so the fact that he wrote a letter saying, I don't know what you're talking about, settlement.

[00:14:58] Speaker 02:
I remember we had a jury verdict in this case for $500,000.

[00:15:02] Speaker 02:
Your Honor, if that's misleading, if that's something.

[00:15:06] Speaker 02:
But misleading isn't a mistake.

[00:15:08] Speaker 03:
I totally understand your concern that attorneys are busy sometimes.

[00:15:15] Speaker 03:
don't always take account of the details of what's in the office, but that also puts us in jeopardy if we do that too.

[00:15:21] Speaker 02:
Is it an unethical mislead or is it a mistake that was cured by the fact that the full amount was disclosed?

[00:15:27] Speaker 02:
Nobody's arguing otherwise than that.

[00:15:29] Speaker 02:
The full amount was disclosed.

[00:15:30] Speaker 04:
But counsel, that is only one point.

[00:15:34] Speaker 04:
As I read the West Virginia Supreme Court, they pointed out that your client

[00:15:41] Speaker 04:
lied repeatedly concerning various matters involving this investigation.

[00:15:48] Speaker 02:
And I guess I've always wondered, what was the lie?

[00:15:51] Speaker 02:
What is this big lie that happened?

[00:15:53] Speaker 02:
Is the lie that he said that the $500,000 was Jury Bird?

[00:15:56] Speaker 04:
I'm talking about the other matters, the communications.

[00:15:59] Speaker 04:
Was it September 2006 letter?

[00:16:02] Speaker 02:
That there was one letter in the file?

[00:16:04] Speaker 02:
And you're right, Your Honor.

[00:16:06] Speaker 02:
I mean, this was a file that, by the time this all happened, had been in storage for years.

[00:16:12] Speaker 04:
But it's under investigation.

[00:16:14] Speaker 04:
Yes.

[00:16:15] Speaker 04:
And it's a little thick to say, well, I forgot about that letter.

[00:16:19] Speaker 02:
Well, but did anybody put in the West Virginia opinion?

[00:16:23] Speaker 04:
They're not normally authorized to ask questions of the judges.

[00:16:28] Speaker 02:
Well, I'm sorry.

[00:16:28] Speaker 02:
Maybe I felt like I was on jeopardy.

[00:16:31] Speaker 02:
I was phrasing it like a question.

[00:16:32] Speaker 02:
But the West Virginia Supreme Court does not state in its opinion that, in fact,

[00:16:39] Speaker 02:
With regard to going down to bar counsel, when Mr. Nace first went and met with bar counsel in Charleston, he took all the documents he could find when he was asked to go, and he told bar counsel, if you think you need anything else, let me know.

[00:16:54] Speaker 02:
My file is several bankers' boxes.

[00:16:56] Speaker 02:
I pulled it from storage.

[00:16:58] Speaker 02:
Let me know if you think you need something else.

[00:17:00] Speaker 02:
Nobody ever asked them for anything else.

[00:17:02] Speaker 02:
Our council drove him to the airport that day and said, don't worry about it.

[00:17:05] Speaker 02:
We'll let you know if we need anything else.

[00:17:07] Speaker 03:
Well, how would people know if there was anything else if they're trying to figure out what there was?

[00:17:11] Speaker 02:
Well, that doesn't make any sense.

[00:17:13] Speaker 02:
I don't disagree, but you're right.

[00:17:15] Speaker 03:
But that argument doesn't make sense.

[00:17:17] Speaker 03:
I don't want you to think it makes sense.

[00:17:18] Speaker 03:
It doesn't make sense.

[00:17:19] Speaker 03:
I understand your argument, Jim, but that one makes no sense.

[00:17:21] Speaker 02:
No, but here's why it makes sense.

[00:17:22] Speaker 03:
You ask someone to give me all of what's relevant, and they give you less than all.

[00:17:27] Speaker 03:
How is that person supposed to know that you gave less than all when they're trying to figure out the all?

[00:17:32] Speaker 02:
Here's why it makes sense.

[00:17:33] Speaker 02:
Here's why it's relevant, Your Honor, to this argument.

[00:17:36] Speaker 02:
I started off by talking about Mr. Nace's history with the bar.

[00:17:40] Speaker 02:
And it's relevant to that point.

[00:17:42] Speaker 02:
The Court has sat here, and the West Virginia Supreme Court has said Mr. Nace was dishonest by clear and convincing evidence.

[00:17:50] Speaker 02:
And this is why the 40-year history of service to the bar and an unblemished record is important.

[00:17:55] Speaker 02:
Because is it more likely that he was dishonest when there was no allegation of financial gain?

[00:18:01] Speaker 02:
There's nothing in this case that suggests improper financial gain.

[00:18:05] Speaker 02:
That's never been asserted, and it wouldn't be based in any reality.

[00:18:09] Speaker 04:
Is it more likely that... That's a question for the bankruptcy court, isn't it?

[00:18:12] Speaker 02:
No, it's not.

[00:18:14] Speaker 04:
It's not because... In other words, if the trustee in bankruptcy makes a claim for the proceeds or part of the proceeds of the...

[00:18:25] Speaker 04:
either the settlement or the jury verdict in behalf of the estate, then there would be something at stake, wouldn't there?

[00:18:35] Speaker 02:
Well, yes, Your Honor, but that's a different statement, though.

[00:18:38] Speaker 04:
What?

[00:18:38] Speaker 02:
That's a different statement.

[00:18:39] Speaker 02:
Mr. Nace's speed.

[00:18:40] Speaker 04:
No, no, that would be something.

[00:18:41] Speaker 04:
In other words, there would be a clawback possibility, and money would come from Mr. Nace or Mrs. Miller, or both.

[00:18:50] Speaker 04:
into the estate.

[00:18:51] Speaker 02:
Sure, that's right.

[00:18:52] Speaker 02:
That's right.

[00:18:52] Speaker 04:
There is money at stake, isn't there?

[00:18:54] Speaker 02:
Well, but what I said is that there was never an allegation that his fee would have been different.

[00:18:58] Speaker 02:
And it wouldn't have been.

[00:18:59] Speaker 04:
Well, that's a separate question.

[00:18:59] Speaker 04:
Maybe he wasn't entitled to, maybe he got approximately half, 50% of the jury verdict, because I saw that.

[00:19:10] Speaker 02:
40% plus the reimbursement of costs.

[00:19:13] Speaker 04:
OK, is that it?

[00:19:14] Speaker 04:
All right.

[00:19:16] Speaker 04:
But it's not clear at all what the

[00:19:23] Speaker 02:
Oh, no.

[00:19:24] Speaker 02:
Oh, no, Your Honor.

[00:19:24] Speaker 02:
I disagree.

[00:19:25] Speaker 02:
I entirely disagree.

[00:19:26] Speaker 02:
Yes.

[00:19:27] Speaker 02:
No, that's not correct.

[00:19:29] Speaker 02:
If, in fact, the court were to say Mr. Nace was retained... Which court?

[00:19:33] Speaker 02:
Any court.

[00:19:35] Speaker 02:
If the court were to say Mr. Nace was properly retained, we'd dispute that he was, then Mr. Nace would have been entitled to 40 percent plus costs, exactly the amount... Mrs. Miller may not have been... That may be, but Mrs. Miller wasn't joined as a party.

[00:19:50] Speaker 04:
Well, she's a party in the bankruptcy... She's been discharged.

[00:19:53] Speaker 02:
She was discharged before the medical malpractice suit was filed.

[00:19:58] Speaker 02:
So who pays the debtors?

[00:20:00] Speaker 02:
Well, that's why Mr. Nace took it upon himself to deposit the money into the court registry three years ago to say, if I am in fact found responsible.

[00:20:11] Speaker 04:
That was after the ethics issue.

[00:20:12] Speaker 02:
That was as soon as the dollar amount was brought to his attention.

[00:20:15] Speaker 02:
No, it was not after the ethics.

[00:20:18] Speaker 02:
It was during the simultaneous proceeding of the adversary proceeding and the ethics proceeding.

[00:20:22] Speaker 02:
In fact, we had to go through discovery and deposition discovery of the trustee to find out the dollar amount.

[00:20:29] Speaker 02:
It was never disclosed.

[00:20:30] Speaker 02:
It was never sent in those letters saying, where's my money?

[00:20:35] Speaker 02:
It was never disclosed that we're talking about $13,000.

[00:20:38] Speaker 02:
Within 48 hours of finding out the amount that the creditors were owed, Mr. Nace filed a motion and deposited the amount with the court to say, if I was wrong, if I'm found wrong by the bankruptcy court, the money is there.

[00:20:52] Speaker 02:
Now, is that dishonest?

[00:20:53] Speaker 02:
Is that not taking responsibility?

[00:20:56] Speaker 02:
There's a difference between not taking responsibility.

[00:21:01] Speaker 02:
They don't even mention it.

[00:21:02] Speaker 04:
I know.

[00:21:03] Speaker 02:
They don't even mention it.

[00:21:04] Speaker 02:
So it's not relevant.

[00:21:05] Speaker 02:
It is relevant because this court can consider those factors in determining if the proof was sufficient.

[00:21:11] Speaker 04:
I'm not sure if we consider those factors at studio advantage.

[00:21:14] Speaker 02:
Well, Your Honor, when an attorney finds out of a potential mistake,

[00:21:21] Speaker 02:
And that attorney then takes the funds that may be due and puts them into a court deposit and says, I'm going to go through the justice system.

[00:21:31] Speaker 02:
And if I'm found to be wrong, I put that there.

[00:21:34] Speaker 02:
With all due respect to the West Virginia court and to any court, this is a textbook case of how you should handle a situation like this.

[00:21:42] Speaker 02:
Mr. Nace has gone through, he should be allowed to defend himself, but at the same time, he's deposited the money into the court, so it's there, so the creditors can be made whole.

[00:21:52] Speaker 02:
The question is, why has the trustee not tried to resolve it to get the creditors paid?

[00:21:58] Speaker 02:
Why is the trustee's law firm billed $100,000 on this file at this point, when the money's been sitting in the court?

[00:22:06] Speaker 02:
There are all sorts of problems with this case.

[00:22:09] Speaker 01:
And Mr. Vasey's... Mr. Vasey, thank you very much.

[00:22:11] Speaker 01:
We have your argument.

[00:22:12] Speaker 01:
We'll give you back two minutes on your problem.

[00:22:14] Speaker 01:
Thank you.

[00:22:27] Speaker 00:
May it please the Court, Christopher Mills, Court-appointed amicus.

[00:22:31] Speaker 00:
We've heard a lot today about Mr. Trumbull, the bankruptcy trustee.

[00:22:35] Speaker 00:
But this case is ultimately not about Mr. Trumbull or about preemption or about Section 327.

[00:22:41] Speaker 00:
Instead, it's about a unanimous, well-supported state Supreme Court determination that Mr. Nace committed at least six ethical violations.

[00:22:50] Speaker 00:
And it's about Rule 4, which requires this Court to impose identical discipline in all but the most extraordinary circumstances

[00:22:57] Speaker 04:
Can we raise the discipline?

[00:23:00] Speaker 00:
Yes, Your Honor, you can.

[00:23:01] Speaker 00:
Under Rule 4C, the court can impose different discipline if the attorney demonstrates or the court is satisfied that different discipline is warranted.

[00:23:12] Speaker 00:
Every court to consider this matter has imposed an identical 120-day suspension, and this court should do the same.

[00:23:21] Speaker 00:
My friend today repeated something he said in his reply brief that there's no evidence, Judge Shilderman, you asked about the September 2006 letter from Mr. Nace to Ms.

[00:23:29] Speaker 00:
Miller, inquiring whether she had a bankruptcy attorney and asking for that person to contact her.

[00:23:34] Speaker 00:
My friend says that, quote, there is no evidence that there was not a follow-up conversation with the bankruptcy attorney.

[00:23:40] Speaker 00:
He said the same thing in his reply brief, quote, there simply was no testimony one way or the other that Mr. Nace did or did not follow up with the bankruptcy counsel.

[00:23:49] Speaker 00:
Your Honors, that's just not accurate.

[00:23:51] Speaker 00:
There was uncontroverted testimony that Mr. Nace did not follow up with the Bankruptcy Council.

[00:23:56] Speaker 00:
In fact, the testimony came from Mr. Nace himself.

[00:23:59] Speaker 00:
Supplemental appendix, page 252, line 3, Mr. Nace under oath, quote, I never talked to her bankruptcy attorney.

[00:24:07] Speaker 00:
He says it over and over again.

[00:24:08] Speaker 00:
Supplemental appendix, page 247, quote, I didn't even hear anything from her attorney that she had, this guy, whatever his name is, O'Brien.

[00:24:16] Speaker 00:
His own proposed finding-of-fact supplemental appendix, page 72, Mr. Nace had, quote, no contact with Mr. O'Brien, Ms.

[00:24:24] Speaker 00:
Miller's bankruptcy counsel.

[00:24:26] Speaker 00:
This led the West Virginia Supreme Court to decide, appendix page 14, that Mr. Nace did not follow up with Ms.

[00:24:34] Speaker 00:
Miller or her bankruptcy counsel after sending that September 2006 letter.

[00:24:39] Speaker 00:
My friend admits that it was a mistake and an error to say that there was no settlement when in fact there was a settlement.

[00:24:45] Speaker 00:
But the West Virginia Supreme Court found that Mr. Nace was knowingly untruthful about this fact.

[00:24:53] Speaker 00:
And so what my friend's asking this court to do is review a credibility determination of the state hearing panel and the state Supreme Court.

[00:25:01] Speaker 00:
And under Rule 4, I don't think that's this court's appropriate role.

[00:25:05] Speaker 00:
Moreover, I note that the D.C.

[00:25:06] Speaker 00:
Court of Appeals carefully examined these issues and found the same.

[00:25:11] Speaker 00:
On the issue of whether an attorney-client relationship was formed,

[00:25:16] Speaker 00:
Again, the DC Court of Appeals explained that under their rules, just like the West Virginia rules, there was a client desire to employ an attorney and the attorney consented to be employed and to provide legal services.

[00:25:30] Speaker 00:
Mr. Trumbull clearly expressed his desire to employ Mr. Nace by sending him a letter asking that Mr. Nace sign an affidavit accepting to employ a special counsel.

[00:25:40] Speaker 00:
If the affidavit, the application, and the proposed order met his approval, Mr. Nace expressed his consent by signing that affidavit, sending it back.

[00:25:48] Speaker 00:
The affidavit on Appendix Page 4 is a formal document, makes very clear that he's consenting to provide legal services on behalf of the estate.

[00:25:56] Speaker 00:
It's notarized.

[00:25:57] Speaker 04:
Is there an argument that that was conditioned on the

[00:26:00] Speaker 04:
bankruptcy court authorizing that transaction?

[00:26:06] Speaker 00:
Yes, Your Honor.

[00:26:07] Speaker 00:
The West Virginia Supreme Court and the D.C.

[00:26:10] Speaker 00:
Court of Appeals explained that assuming the order was conditioned on entry of the order, that order was in fact entered in the bankruptcy court.

[00:26:18] Speaker 00:
So the court can assume that it was conditional on the entry of the actual order of employment, and that is what happened.

[00:26:34] Speaker 00:
Well, I don't think that's likely to happen as the bankruptcy court has already found a denied summary judgment, footnote six of the bankruptcy court denial of summary judgment.

[00:26:45] Speaker 00:
The court acknowledges that West Virginia found that an attorney-client relationship existed.

[00:26:50] Speaker 04:
Is it still open before the bankruptcy court as to whether it was an attorney-client relationship?

[00:26:54] Speaker 00:
That doesn't seem to be an open issue in the bankruptcy court.

[00:27:04] Speaker 00:
I think it would still not raise a conflict between federal and state law.

[00:27:08] Speaker 00:
For state law purposes, there would have been an attorney-client relationship forum, and as a member of the state bar of West Virginia, Mr. Nace would be subject to the West Virginia disciplinary authorities there, even if under federal law there was not an attorney-client relationship.

[00:27:26] Speaker 04:
You wouldn't have a preemption question?

[00:27:28] Speaker 00:
I don't think there would necessarily be a conflict there if the federal law required something that the state law required not to do.

[00:27:35] Speaker 00:
In those circumstances, there might be preemption.

[00:27:38] Speaker 00:
But just the fact that for state law purposes, there may have been an attorney-client relationship.

[00:27:43] Speaker 00:
And for federal law purposes, there may not have been.

[00:27:45] Speaker 00:
I don't think that alone would raise a preemption problem.

[00:27:51] Speaker 00:
As for the issue of whether the application that Mr. Nace received said vehicular accident rather than medical malpractice, it's undisputed that all the lawyers understood what it meant.

[00:28:04] Speaker 00:
As an initial matter, Mr. Nace claimed for some time that he didn't even receive this application.

[00:28:09] Speaker 00:
So it's a bit much now to assert that he saw this application and, because of the application, didn't realize what he was being hired to do.

[00:28:16] Speaker 00:
But even assuming he had seen it,

[00:28:19] Speaker 00:
He testified, supplemental appendix page 351.

[00:28:23] Speaker 00:
I didn't make any issue of it.

[00:28:25] Speaker 00:
It just wasn't important to me at the time.

[00:28:27] Speaker 00:
His co-counsel, Mr. Burke, testified to the same.

[00:28:30] Speaker 00:
All the lawyers understood what they were receiving and what they were signing.

[00:28:35] Speaker 00:
And as the D.C.

[00:28:37] Speaker 00:
Court of Appeals explained in footnote four of their opinion, there's no reason why that minor error would affect the question whether an attorney-client relationship had formed.

[00:28:46] Speaker 00:
As for the issue of whether Mr. Nace was Mr. Trumbull's attorney or the bankruptcy estate's attorney, again, that really makes no difference to the ultimate findings of misconduct here.

[00:28:59] Speaker 00:
It's essentially undisputed that Mr. Nace failed to contact Mr. Trumbull on behalf of Mr. Trumbull or the bankruptcy estate for a period of over three and a half years.

[00:29:10] Speaker 04:
Well, wait a minute.

[00:29:11] Speaker 04:
I don't understand your last statement.

[00:29:14] Speaker 04:
It doesn't matter whether

[00:29:16] Speaker 04:
Mr. Mays had an attorney client relationship with Mr. Trumbull or not.

[00:29:21] Speaker 04:
I don't understand that point.

[00:29:23] Speaker 00:
Well, I think the point is, and the DC Court of Appeals explained this at page 21 of their opinion, changing the identity of the client would not affect the West Virginia Supreme Court's conclusion that Mr. Nace failed to fulfill his professional responsibilities to either the estate or Mr. Trumbull by timely contacting Mr. Trumbull.

[00:29:43] Speaker 04:
I don't see.

[00:29:43] Speaker 04:
How can there be a difference between the trustee and the estate?

[00:29:46] Speaker 04:
I don't get it.

[00:29:46] Speaker 00:
I don't think there is.

[00:29:47] Speaker 00:
I think that's right.

[00:29:49] Speaker 00:
There is no difference.

[00:29:53] Speaker 04:
Right.

[00:29:54] Speaker 00:
That's right.

[00:29:55] Speaker 00:
I agree.

[00:29:55] Speaker 00:
It doesn't make sense to say that, for instance, Mr. Nace failed to contact the estate for over three and a half years.

[00:30:01] Speaker 00:
There is no estate.

[00:30:03] Speaker 00:
Right.

[00:30:04] Speaker 00:
That's right.

[00:30:04] Speaker 00:
So the point is that the conduct that formed the basis for the suspension in West Virginia is essentially conceded here.

[00:30:15] Speaker 00:
What Mr. Nason said is asking this Court to make new credibility determinations and replace its judgment for that of the West Virginia Supreme Court, but under Rule 4 and this Court's decisions in Sibley and Stratovich, that's not this Court's role.

[00:30:29] Speaker 00:
It's conceded that Mr. Nason failed to contact Mr. Trumbull for over three and a half years while the case was ongoing, that he failed to notify Mr. Trumbull regarding the settlement funds,

[00:30:40] Speaker 00:
that he sent a letter in December 2008 stating multiple times there was no settlement when in fact there was a settlement and that he didn't bring relevant documents when subpoenaed and stated that he had not received some documents that he had received.

[00:30:52] Speaker 00:
These are essentially conceded.

[00:30:54] Speaker 00:
Mr. Nates does not contend there is any due process problem.

[00:30:58] Speaker 00:
Given the findings of misconduct, there would be no grave injustice.

[00:31:02] Speaker 00:
And 120-day suspension is appropriate given the misconduct found by the West Virginia Supreme Court, which included six separate ethical violations.

[00:31:14] Speaker 00:
This court has any additional questions?

[00:31:20] Speaker 01:
Mr. Nates, we'll give you back a minute and a half.

[00:31:24] Speaker 02:
The only point that I want to wrap up on,

[00:31:29] Speaker 02:
I don't understand why we are all taking for granted, every court is taking for granted that this is an attorney-client relationship without ever considering the relationship contemplated by the bankruptcy rules.

[00:31:42] Speaker 02:
It's just it hasn't happened.

[00:31:44] Speaker 02:
It hasn't happened anywhere that this is a relationship, and it's in our brief.

[00:31:50] Speaker 02:
The analysis should have been conducted under the five series of rules.

[00:31:53] Speaker 02:
They were not.

[00:31:55] Speaker 02:
The West Virginia Supreme Court ignored.

[00:31:57] Speaker 02:
It even says in its opinion, we are not making any determinations under bankruptcy law.

[00:32:03] Speaker 02:
The only law that permits an assistant trustee to go and retain special counsel and even bring special counsel into a bankruptcy is 327.

[00:32:13] Speaker 02:
The analysis must start with that relationship.

[00:32:18] Speaker 04:
So where does it take you?

[00:32:19] Speaker 02:
It takes you to a relationship that this was not an attorney-client relationship.

[00:32:24] Speaker 02:
because it specifically says that under 327 that the that the council or that the trustee is not retaining council to represent what read that coming out exactly like that

[00:32:46] Speaker 02:
The trustee with the court's approval may employ for a specified special purpose other than to represent the trustee in conducting the case.

[00:32:56] Speaker 02:
An attorney that has represented the debtor, if in the best interest of the estate and if such attorney does not represent or hold any interest adverse to the debtor or to the estate with respect to the matter on which such attorney is to be employed.

[00:33:09] Speaker 04:
I don't understand where that came from.

[00:33:11] Speaker 02:
It does not create an attorney client.

[00:33:13] Speaker 04:
I don't understand it.

[00:33:14] Speaker 03:
It doesn't foreclose it.

[00:33:15] Speaker 03:
I've been sitting here perplexed about the argument too.

[00:33:19] Speaker 03:
I don't see how that forecloses it.

[00:33:21] Speaker 02:
Let me point to one other document.

[00:33:23] Speaker 03:
It certainly says the person is not the trustee.

[00:33:25] Speaker 02:
That's right.

[00:33:26] Speaker 02:
I understand that.

[00:33:27] Speaker 02:
But that's all it says.

[00:33:29] Speaker 02:
What it also does is

[00:33:31] Speaker 02:
An attorney-client relationship contemplates one party in power over the other as far as the legal process, as far as understanding what's going on, as far as the obligations.

[00:33:41] Speaker 02:
What 327 says is that the trustee retains all the obligations to the estate, and that's in the handbook.

[00:33:48] Speaker 01:
Is there any authority, any case law, anywhere that supports your interpretation?

[00:33:54] Speaker 02:
No, I haven't found any case law any which way, Your Honor.

[00:33:56] Speaker 02:
And we looked, and I don't see it any which way that says that, in fact, it is an attorney-client relationship either.

[00:34:03] Speaker 02:
But in this case, the trustee is asking someone, the trustee is the one charged with administering the estate.

[00:34:12] Speaker 02:
And the reason is that the trustee had an obligation.

[00:34:14] Speaker 02:
I know that it's easy to say that Mr. Nace doesn't want to talk about his actions, but the trustee, once the order entered, permitting him to go employ special counsel, that's all it is.

[00:34:27] Speaker 02:
It's an order permitting him to employ special counsel.

[00:34:31] Speaker 02:
There was no communication after that order entered until after the disbursement.

[00:34:37] Speaker 02:
How could the trustee have employed special counsel without ever communicating with them?

[00:34:42] Speaker 02:
And these are determinations that go to whether there was an ethical violation.

[00:34:46] Speaker 02:
This is a very serious matter, obviously, that goes to the ethics of an attorney with 40-year history.

[00:34:52] Speaker 02:
So why not look at was he properly retained?

[00:34:56] Speaker 02:
by the sophisticated trustee whose duty it is, is to make sure these things happen.

[00:35:02] Speaker 02:
Ask if the trustee had even done one ounce of his job and reached out one time, one time, would the creditors have not been whole already.

[00:35:11] Speaker 01:
Thank you.

[00:35:12] Speaker 01:
We have your argument.

[00:35:12] Speaker 01:
Thank you very much, Mr. Nix.

[00:35:16] Speaker 01:
Mr. Mills, you were appointed by the court to help us as an amicus curiae.

[00:35:24] Speaker 01:
We thank you very much for your assistance.

[00:35:26] Speaker 01:
With that, the case is submitted.