Collateral estoppel in attorney disciplinary proceedings: a Hobson's choice.

• Author: Lawrence, Abbye
• Position: Thomas Hobson

During the course of a civil proceeding, the court often makes findings of misconduct on the part of counsel. The court may find that a lawsuit is frivolous, that a conflict of interest existed, or that there was a breach of good faith or fiduciary duty (1) while representing the client. (2) At this point, attorneys may be sanctioned or even removed from the case (3) and the client often retains new counsel. In this situation, there is typically no means to challenge or appeal the finding of misconduct until the trial ends (4) and there is a final judgment. (5)

In this scenario, the client has no financial or strategic interest to appeal the finding of misconduct because new counsel has been retained or an appeal may disadvantage the client. (6) Out of loyalty to the client, (7) counsel often elects not to exercise his or her right to appeal the finding of misconduct, essentially creating a final judgment on the issue. Yet by declining to take the appeal, counsel may lose its opportunity to litigate the adverse misconduct finding in the first place. This decision may create a binding collateral estoppel effect, which would preclude counsel from relitigating the issue. (8) Such a result would deny counsel a true full and fair opportunity to be heard regarding the finding, even though all of the requirements of collateral estoppel have not been met. (9)

In this kind of situation, courts addressing this issue have not considered otherwise valid reasons or considerations for the attorney's decision not to exercise his right to appeal when applying collateral estoppel. Courts have generally found that the existence of a full and fair opportunity for the attorney to appeal satisfies the requirements for collateral estoppel to apply. (10) In instances where counsel did not have an opportunity to fully litigate the finding of misconduct before the court, collateral estoppel should not be applied. (11) Because counsel did not have a full and fair opportunity, it is questionable whether the issue of misconduct was fully before the court; these two requirements of collateral estoppel are closely related. Identity of issue and a full and fair opportunity to be heard on that issue are two closely related requirements of collateral estoppel. (12)

In the middle of a sanctions case, counsel may not be prepared to explain to the court why the attorney acted in a particular manner that resulted in a finding of sanctions. (13) Or, concerns of harming the client may have led counsel to not fully litigate the issue, despite the harm to himself. (14) In this situation, counsel is faced with a Hobson's choice: (15) owing professional duties to his or her client, counsel had no free choice to appeal the finding of sanctions. The attorney must accept the sanctions imposed upon him.

This article argues that courts should develop an exception to the doctrine of collateral estoppel in attorney disciplinary proceedings to allow the attorney to have a full and fair opportunity to be heard. The limited number of published decisions in the current case law illustrates the problem that attorneys face in the application of collateral estoppel to findings of misconduct. (16)

Although most attorney disciplinary proceedings are private (17) and little has been written on the subject, practitioners face this issue on a regular basis. (18)

This article begins by providing background on the doctrine of collateral estoppel, the requirement of a full and fair opportunity to challenge the judgment of the civil action, and the procedural aspects of attorney disciplinary proceedings relating to the application of collateral estoppel, including reciprocal disciplinary proceedings. This article then analyzes the problems faced by counsel in attorney disciplinary proceedings with consideration of disciplinary proceedings of other licensed professionals, illustrating that the unfettered use of collateral estoppel in attorney disciplinary proceedings contains too great a risk of "unfairly imposed discipline" in contrast to the small amount of economy gained. (19) This article concludes by proposing an exception or rules that limit the application of collateral estoppel in attorney disciplinary proceedings.

1. Background

   1. Collateral Estoppel

      The doctrine of collateral estoppel protects litigants from having to endure the burden of relitigating an identical issue already litigated with the same party or someone in privity with that party, (20) except where equitable considerations or other circumstances "justify affording [the defendant] an opportunity to relitigate the issue." (21) Collateral estoppel does not reexamine any fact decided in the first action. (22) Instead, the principle of collateral estoppel prevents any further fact finding because the issue has already been resolved in the first action, resulting in a final judgment. (23) Courts have recognized two general uses of the collateral estoppel doctrine: offensive and defensive. (24) Offensive use of collateral estoppel involves a plaintiff who is seeking to enforce the doctrine to estop a defendant from relitigating an issue that the defendant already litigated and lost against the plaintiff in the previous action. (25) Defensive use of collateral estoppel involves a plaintiff who was prevented from asserting a claim that the plaintiff had already litigated and lost in the prior action against another defendant. (26) Courts have questioned whether the doctrine should "be used offensively as readily as it is used defensively," (27) since offensive use of the doctrine may violate the deep-rooted historical tradition that Everyone is entitled to have a full and fair opportunity to challenge a claim. (28)

   2. Final Judgment and Identity of Issue

      Before collateral estoppel can be invoked, an issue must be identified that was actually litigated (29) and decided in the prior action that is also decisive of the issue in the present action. (30) Identity of issue preserves the rights and interests of the parties that were previously determined in the first action. (31) In order for the doctrine to apply, the adverse finding on the issue must have been rendered in a judgment by a court of competent jurisdiction (32) and the defendant must have had a full and fair opportunity to challenge the decision. (33) The judgment from the first action only estops the raising of the issue that was determined in the first action and does not act as estoppel to other issues that could have been raised, litigated, and determined in the first action. (34) The inquiry focuses on whether the issue was actually litigated and determined in the first action and is not limited to any points that might have been previously determined. (35)

      There are exceptions to the preclusive effect of final judgments. (36) A judgment may be final as an estoppel to only one issue in an action where the action continues to be litigated as to the rest of the claim. (37) If an issue of fact or law that is essential to adjudicating the claim is reserved for a later determination, the judgment is not final. (38) There are also certain exceptional interstate situations in which a final judgment is not given full faith and credit and is denied collateral estoppel effect in a state other than the forum state. (39) Another state may deny the final effect of a judgment as long as it is possible for the judgment to be modified in the forum state (40) or if the judgment improperly interferes "with important interests of a sister State." (41) The second state is not required to give collateral estoppel effect to the judgment in the forum state, but the current trend is for the judgment to have a preclusive effect. (42)

      The requirement of a final judgment is strictly interpreted, especially when an issue may be barred from litigation by a prior judgment due to collateral estoppel. (43) To determine whether a decision is final for the purpose of collateral estoppel, the Restatement (Second) of Judgments considers whether the parties had a full opportunity to be heard, whether the court's decision was supported with a reasoned opinion, and whether the decision was subject to appeal or was reviewed on appeal. (44)

   3. Full and Fair Opportunity to Litigate

      For collateral estoppel to apply in a disciplinary proceeding, the issue in the underlying action must be identical to the issue raised in the disciplinary proceeding and the defendant "must have a full and fair opportunity to litigate those issues" in the underlying action. (45) A non-party in the underlying lawsuit has generally not had a full and fair opportunity to litigate any issues and claims deemed to be settled in that action. (46) If the party against whom collateral estoppel is sought claims that he did not have a full and fair opportunity to challenge an issue in the first action, he must be allowed to have such a full and fair opportunity. (47)

      Historically, the doctrine of collateral estoppel has been regarded as a "flexible doctrine based on fairness, and thus not subject to automatic application merely because its formal prerequisites are met." (48) Because collateral estoppel is a flexible doctrine, there is no set formula to determine whether the defendant had a full and fair opportunity to challenge a previous judgment. (49) This determination cannot be made simply by finding that the defendant was entitled to due process in the previous action. (50)

      To decide whether a full and fair opportunity existed for the plaintiff to litigate the issue in the previous action, courts consider a variety of factors relating to the lawsuit; including the realities of the litigation in the first action, and the context and circumstances that may have deterred or discouraged the defendant from fully challenging and litigating the judgment in the first action that is now being asserted in a preclusive manner against him. (51) Several factors used to evaluate whether a full and fair opportunity...