In re Murphy

312 Kan. 203

473 P.3d 886

In the MATTER OF Mark D. MURPHY, Respondent.

No. 122,036

Supreme Court of Kansas.

Opinion filed October 16, 2020.

Deborah L. Hughes, Deputy Disciplinary Administrator, argued the cause, and Stanton A. Hazlett, Disciplinary Administrator, was with her on the brief for petitioner.

Daniel F. Church, of Morrow Willnauer Church, LLC, of Kansas City, Missouri, argued the cause and was on the briefs for respondent. Mark D. Murphy, respondent, argued the cause pro se.

ORIGINAL PROCEEDING IN DISCIPLINE

Per Curiam:

This is a contested attorney discipline proceeding against Mark D. Murphy, of Overland Park, Kansas. He was admitted to practice law in the state of Kansas in 1987. A panel of the Kansas Board for Discipline of Attorneys made lengthy findings of fact and concluded Murphy violated the Kansas Rules of Professional Conduct (KRPC). The violations include representing both parties in a business transaction that was not disclosed to a federal bankruptcy court which had jurisdiction and related matters.

In December 2016, the Disciplinary Administrator's office filed a formal complaint alleging violations of the KRPC against Murphy. Almost two years later, and after several continuances and a remand on behalf of the Disciplinary Administrator's office, an amended formal complaint was filed in January 2019. Murphy's answer to the amended formal complaint was filed in February 2019.

A panel of the Kansas Board for Discipline of Attorneys began a hearing on March 5, 2019, but was unable to finish the presentation of evidence on that day so the hearing was continued to April 10, 2019. The hearing panel determined respondent violated KRPC 1.1 (2019 Kan. S. Ct. R. 295) (competence), 1.2(c) (2003 Kan. Ct. R. Annot. 332) (scope of representation), 1.7 (2003 Kan. Ct. R. Annot. 372) (conflict of interest), 2.1 (2019 Kan. S. Ct. R. 345) (independent judgment), and 8.4(d) (2019 Kan. S. Ct. R. 387) (conduct prejudicial to the administration of justice).

The Disciplinary Administrator's office recommended disbarment. Counsel for the respondent recommended reprimand. The hearing panel unanimously recommended one year's suspension.

The respondent filed exceptions to the panel's final hearing report, although he concedes several KRPC violations, albeit with explanations in mitigation. Before this court, the Disciplinary Administrator's office endorses the panel's findings and continues to recommend disbarment. Respondent recommends reprimand with a plan of probation. We quote the report's pertinent parts below.

"Procedural history

....

"10. On February 25, 2019, the respondent filed an untimely answer to the amended formal complaint.

"11. On March 4, 2019, at 4:07 p.m., on the eve of the hearing, the respondent filed two motions. The respondent filed a motion to strike paragraph 22 of the formal complaint and a motion to prohibit a collateral attack. The hearing panel denied the respondent's motions.

....

"Findings of Fact

"16. The hearing panel finds the following facts, by clear and convincing evidence:

"17. Mark D. Murphy (hereinafter ‘the respondent’) is an attorney at law, Kansas attorney registration number 13129. His last registration address with the clerk of the appellate courts of Kansas is 6640 West 143rd Street, Suite 250, Overland Park, Kansas 66223. The Kansas Supreme Court admitted the respondent to the practice of law in the State of Kansas on April 15, 1987.

"18. A.H. operated a limousine service. A.H.'s company was known by a variety of names. A.H. and his wife, I.H., incorporated the limousine service under two of the names. A.H. did not follow corporate formalities and in 2003, the corporations' charters were forfeited. During their existence, the corporations did not issue any stock.

"19. In April, 2003, A.H. listed his limousine business for sale with a broker. The initial asking price was $800,000. Later, A.H. reduced the asking price to $695,000. The broker was unable to sell the limousine business.

"20. A.H. was interested in building a soccer complex in the Kansas City area. To that end, A.H. and B.S. formed a company to do so, called IFC. A.H. and B.S. named themselves co-presidents. To raise capital to fund the soccer complex, A.H. and B.S. entered into an advisory fee agreement with B.C., a firm which raises capital for other companies.

"21. S.L. was the chief operating officer and 50% owner of B.C. S.L. was also the respondent's neighbor. Prior to 2004, the respondent provided legal services to S.L. and B.C. From time to time, S.L. referred other clients to the respondent.

"22. S.L. referred IFC to the respondent. As a result, the respondent became counsel for IFC. The respondent drafted IFC's shareholder agreement to memorialize the relationship between its partners.

"23. On February 3, 2004, A.H. and his wife filed for the protections of chapter seven of the bankruptcy code. On a bankruptcy schedule, A.H. and his wife listed the limousine business as an asset, but valued it at $0. Regardless of the value, the limousine business was part of the bankruptcy estate.

"24. A.H. and S.L. discussed the sale of the limousine business as a means to raise capital to fund IFC. S.L., through B.C., agreed to assist A.H. in selling the limousine business.

"25. A.H.'s son and A.M.'s son played soccer together in the Kansas City area. Following a soccer practice, on March 26, 2004, A.H. and A.M. discussed A.M. purchasing A.H.'s limousine business. During their discussions regarding the possible transaction, A.H. indicated that he would be willing to sell the business for $550,000. A.H. asserted that the business netted $12,000 - $15,000 monthly. A.H., however, did not inform A.M. that he filed a chapter seven bankruptcy case nearly two months earlier.

"26. On May 5, 2004, S.L. contacted the respondent and requested the respondent assist A.H. and A.M. with the business transaction.

"27. On May 17, 2004, the respondent, S.L., A.H., and A.M. met. Thereafter, the respondent drafted an engagement letter addressed to A.H. (personally and as president of the limousine business), A.M., and his wife, D.M. The letter provided:

‘This letter is to confirm our agreement with regard to our representation upon the following terms:

‘You hereby employ The Murphy Law Firm, P.A. to prepare all necessary documentation and advise both [A.H.], as the seller, and [A.M.], as the purchasers, of all of the capital stock of Kansas Express International, Inc., which is owned by [A.H.]. I have disclosed the potential conflicts in doing so; however, after acknowledging such conflicts you all agree to waive any such conflict and retain us nonetheless pursuant to the terms of this letter and the enclosed Standard Terms of Engagement. Should a conflict arise which cannot be resolved, we will withdraw from this transaction with regard to all parties in this matter, and you should then retain your own legal counsel to advise you.

‘The legal fees and expenses will be paid by you, jointly and severally. ...’

The respondent, A.H. (personally and as president of the limousine business), A.M., and D.M. signed the engagement letter.

"28. The respondent has repeatedly asserted that he represented only the transaction, he did not provide legal advice to either party, and he acted as a mere scrivener. In an affidavit, the respondent swore that the engagement letter ‘expressly provided that [he] would provide no legal advice to [A.M.] and [A.H.].’ In a deposition, the respondent testified under oath that he ‘didn't give legal advice to either side.’

"29. Despite the respondent's statements to the contrary, the engagement letter does not expressly provide that the respondent ‘would provide no legal advice to either party;’ it expressly provided the opposite (‘You hereby employ The Murphy Law Firm, P.A. to prepare all necessary documentation and advise both [A.H.], as the seller, and [A.M.], as the purchasers ...’)

"30. The respondent admitted this during a deposition. The respondent testified under oath, ‘[a]ctually, the engagement letter shows that they are both employing me to prepare the documentation and advise them both of the transfer of that business.’ In the same deposition, the respondent later testified:

‘The intent was to represent the seller and the buyer and basically represent the transaction, and, again, my role was basically as a scribe to do that without, again, giving any kind of, you know, standard legal advice to either side about whether it was a good deal, bad deal, terms, negotiations.’

When asked whether he explained what a stock purchase was to A.H. and A.M., the respondent stated that he ‘probably did explain the differences between an asset purchase and a stock purchase transaction to them.’ Finally, the respondent admitted that he ‘probably made some general statements ... in the presence of everyone [about due diligence].’

"31. The bankruptcy court later concluded that the respondent's assertion that he was a mere scrivener came ‘close to being "so utterly implausible in light of conceded or irrefutable evidence that no rational person could believe [it]." ’

"32. In the engagement letter, the respondent included the following: ‘I have disclosed all the potential conflicts ..., after acknowledging such conflicts you all agree to waive any such conflict and retain us nonetheless ...’ While the testimony of A.M. and the respondent are not in direct conflict on this subject, after observing all the witnesses testify and after reviewing all the evidence, the hearing panel accepts A.M.'s testimony and where the respondent's testimony is inconsistent with A.M.'s testimony on this subject, the hearing panel rejects the respondent's testimony.

"33. A.M. testified that the respondent did not explain any potential conflict. A.M. testified that the respondent spent seven to 20 seconds on that provision of the engagement letter and the gist of the conversation was that if A.H. and A.M. reached an impasse in the negotiations, they would each need to

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