S45845 Coast Security Mortgage Corp. v. Real Estate Agency

SUPREME COURT CASES

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State: Oregon

Docket No: 995-E-409G

Case Date: 12/07/2000

Filed: December 7, 2000

IN THE SUPREME COURT OF THE STATE OF OREGON

COAST SECURITY MORTGAGE CORPORATION,

Petitioner on Review,

REAL ESTATE AGENCY,

Respondent on Review.

(995-E-409G; CA A95785; SC S45845)

On review from the Court of Appeals.*

Argued and submitted September 9, 1999.

Gary Roberts, Portland, argued the cause for petitioner on review. With him on the petition and brief was Schwabe, Williamson & Wyatt, P.C., Portland.

Jas. Jeffrey Adams, Assistant Attorney General, Salem, argued the cause for respondent on review. With him on the brief were Hardy Myers, Attorney General, and Michael D. Reynolds, Solicitor General.

Before Carson, Chief Justice, and Gillette, Van Hoomissen, Durham, Leeson, and Riggs, Justices.**

CARSON, C.J.

The decision of the Court of Appeals and the order of the Real Estate Agency are reversed.

*Judicial review from the Real Estate Agency. 155 Or App 579, 964 P2d 306 (1998).

**Kulongoski, J., did not participate in the consideration or decision of this case.

CARSON, C.J.

In this administrative law case, we must construe ORS 696.511(1), the escrow agent licensing statute, which requires a person to obtain a license if that person "act[s] in the capacity of an escrow agent." The Real Estate Agency (Agency) issued a final order concluding that Coast Security Mortgage Corporation (Coast Security), a mortgage broker that was not licensed as an escrow agent, had violated ORS 696.511(1) when it explained escrow instructions and settlement statements to its customers, obtained and notarized their signatures, and subsequently sent the documents to an escrow company. The Court of Appeals affirmed the agency's final order. Coast Security Mortgage Corp. v. Real Estate Agency, 155 Or App 579, 964 P2d 306 (1998). We allowed review to consider whether such acts constitute "act[ing] in the capacity of an escrow agent" under ORS 696.511(1). For the reasons that follow, we conclude that they do not. We therefore reverse the decision of the Court of Appeals and the order of the Agency.

We take the facts from the Court of Appeals' opinion and from the record. Coast Security is a licensed mortgage broker in Oregon. (1) As part of its business plan, Coast Security attempted to differentiate itself in the marketplace by providing, as a convenience and service to its customers, the opportunity to sign refinancing loan documents, settlement statements, and escrow instructions at home or at Coast Security's office, rather than at the office of a licensed escrow agent. Paget, an employee of Coast Security, handled 47 such residential refinancings. His activities in those refinancings provide the basis for the complaint at issue here.

In each of the transactions, a lender prepared the loan documents, and a California escrow company prepared the escrow instructions and settlement statements. Once prepared, the lender and escrow company sent the documents to Coast Security, which forwarded them to Paget to take to the customers. Paget visited the customers in their homes or met them at Coast Security's office. He introduced himself with his business card, which identified him as an employee of Coast Security. Paget then presented and discussed with the customers all the documents that the customers were to sign.

The documents that Paget explained to the customers included the escrow instructions and settlement agreements. The escrow instructions were directed to the escrow company that had drafted them. Similarly, the escrow company that had drafted the settlement statements was listed as the settlement agent. The settlement statements also set out the amount of money that the escrow company would disburse to the mortgage broker and other entities, such as the taxing authority or the insurance company.

After Paget explained the documents to the customers, the customers signed the documents in front of him, and, where appropriate, Paget notarized their signatures. In each case, Paget represented to the customers that signing at their home, or at Coast Security's office, was in lieu of signing at an escrow office. After the customers signed, Paget sent the documents back to Coast Security, which then sent them to the California escrow company for closing. None of the 47 customers involved in the refinancings at issue signed their escrow documents at an office of a licensed escrow company, and neither Coast Security nor Paget was licensed to conduct escrow activity in Oregon.

In May 1995, Eckardt, one of the 47 customers, filed a complaint with the Oregon Department of Justice, claiming that Coast Security had defrauded him in arranging refinancing for his home. The Department of Justice forwarded Eckardt's complaint to the Agency, which charged Coast Security with violating ORS 696.511(1) by acting, through Paget, in the capacity of an escrow agent without a license. After a contested case hearing, the Agency issued a final order, ruling that Coast Security had violated the statute. The Agency imposed a civil penalty of $100 for the first offense and $500 for each of the 46 remaining offenses. The fines totaled $23,100 -- the minimum civil penalty allowable under ORS 696.590(1). (2)

Coast Security petitioned for judicial review of the Agency's order, arguing that the Agency erred in concluding that Coast Security had "act[ed] in the capacity of an escrow agent," ORS 696.511(1), when neither Coast Security nor Paget had undertaken any of the activities identified in the statutory definitions of "escrow" and "escrow agent." (3) Specifically, Coast Security argued that, to act in the capacity of an escrow agent, a person must engage in the business of receiving escrows. Coast Security also argued that the Agency's order was not supported by substantial evidence and that Oregon law required the Agency to define the phrase "act in the capacity of an escrow agent" by rule and not through a contested case proceeding.

The Court of Appeals affirmed the Agency's order. The court first concluded that, although acting in the capacity of an escrow agent is not the same as engaging in the business of an escrow agent, Coast Security nonetheless had violated ORS 696.511(1). Coast Security Mortgage Corp., 155 Or App at 583. The Court of Appeals also held that the Agency was not required to promulgate a rule to establish the meaning of the phrase "act in the capacity of an escrow agent" under ORS 696.511(1), but, instead, could do so through a final order in a contested case. Coast Security Mortgage Corp., 155 Or App at 584. Finally, the court held that the Agency's order was based on substantial evidence. Id. at 584-85. We allowed Coast Security's petition for review.

We begin with the issue whether Coast Security, through Paget, was acting in the capacity of an escrow agent. ORS 696.511(1) provides:

"No person directly or indirectly shall engage in or carry on, or purport to engage in or carry on the business or act in the capacity of an escrow agent without first obtaining a license as an escrow agent under the provisions of ORS 696.505 to 696.590."

(Emphasis added.) Coast Security contends that the Agency misinterpreted that statutory provision when it concluded that Paget, in behalf of Coast Security, had acted in the capacity of an escrow agent. In response, the Agency argues that, under ORS 696.385(3), (4) the legislature has given the Agency the authority to enforce ORS 696.511(1) and that the Agency was within its authority to conclude that a person who delivers escrow documents to customers, explains those documents to customers, and obtains the customers' signatures is acting in the capacity of an escrow agent.

Although the legislature has given the Agency the authority to enforce ORS 696.511(1), "[t]he determination of the meaning of a statute is one of law, ultimately for the court." Springfield Education Assn. v. School Dist., 290 Or 217, 224, 621 P2d 547 (1980). We begin our analysis by considering the appropriate standard for reviewing the Agency's construction of the phrase "act in the capacity of an escrow agent" in ORS 696.511(1).

When an agency's interpretation or application of a provision of law is at issue, the reviewing court's standard of review depends upon whether the phrase at issue is an exact term, an inexact term, or a delegative term. Springfield Education Assn., 290 Or at 223. "Exact terms" impart relatively precise meanings, and their applicability in a particular case involves only agency factfinding. Id. at 223-24. This court reviews agency application of "exact terms" for substantial evidence. Id. at 224. "Inexact terms" are less precise. Although they embody a complete expression of legislative meaning, that meaning always may not be obvious. Id. As to "inexact terms," the task of the agency, and ultimately of the court, is to determine what the legislature intended by using those words. Id. "Delegative terms" express incomplete legislative meaning that the agency is authorized to complete. Id. at 228. As to "delegative terms," the agency's task is to complete the general legislative policy decision. Id. This court reviews the agency decision concerning a "delegative term" to determine whether it is within the range of discretion allowed by the more general policy of the statute. Id. at 229.

Both parties assert that the phrase "act in the capacity of an escrow agent" in ORS 696.511(1) is a delegative term. We disagree. That phrase does not express incomplete legislative meaning; other parts of the escrow licensing statutes define the terms "escrow" and "escrow agent." Further, interpretation of the meaning of the phrase "act in the capacity of" does not require a legislative policy determination by the Agency. Neither is that phrase so precisely defined as to be an "exact term." Although the terms "escrow" and "escrow agent" are defined by statute, neither ORS 695.511(1) nor any other applicable statute define the phrase "act in the capacity." We conclude that the phrase "act in the capacity of an escrow agent" is an "inexact term" because, although parts of that phrase are defined by statute and embody a complete expression of legislative meaning, the phrase is open to various interpretations.

As noted above, we review the Agency's interpretation of inexact terms for consistency with legislative intent. Springfield Education Assn., 290 Or at 224. In this case, doing so requires us to construe ORS 696.511(1) to determine the intended meaning of the phrase "act in the capacity of an escrow agent." To determine the legislature's intent, we first examine the text and context of the statute. PGE v. Bureau of Labor and Industries, 317 Or 606, 610, 859 P2d 1143 (1993). Context includes other provisions of the same statute and other related statutes. Id. at 611. In analyzing text and context, "words of common usage typically should be given their plain, natural, and ordinary meaning." Id. If the legislature's intent is clear from the examination of text and context, then our inquiry is at an end. Id.

To determine the legislature's intent here, we divide the phrase, "act in the capacity of an escrow agent," into its essential parts -- "act in the capacity" and "escrow agent." As noted, the escrow statutes do not define the word "capacity." The word "capacity" has many definitions; in this case, the relevant dictionary definition provides:

"4b: a position, character, or role either duly assigned or assumed without sanction <in his [capacity] as legal adviser> <served the government in several capacities>[.]"

Webster's Third New Int'l Dictionary, 330 (unabridged ed 1993) (emphasis added). Therefore, to "act in the capacity of an escrow agent," a person need only act in the role of an escrow agent.

As noted, the term "escrow agent" is defined by statute. ORS 696.505(3) provides:

"'Escrow agent' means any person who engages in the business of receiving escrows for deposit or delivery and who receives or is promised any fee, commission, salary or other valuable consideration, whether contingent or otherwise, for or in anticipation of performance."

Consequently, to be an escrow agent a person must meet two requirements. First, a person must receive or be promised a "fee, commission, salary or other valuable consideration" for his or her services. Second, those services must include "receiving escrows for deposit or delivery * * *." (Emphasis added.)

The term "escrow" is defined in ORS 696.505(2), which provides, in part:

"'Escrow' means any transaction wherein any written instrument, money, evidence of title to real or personal property or other thing of value is delivered to a person:

"(a) Not otherwise having any right, title or interest therein for the purpose of effecting the sale, transfer, encumbrance or lease of real or personal property, to be held by that person as a neutral third party until the happening of a specified event or the performance of a prescribed condition, when it is then to be delivered by such person to a grantee, grantor, promisee, promisor, obligee, obligor, bailee, bailor, or any agent or employee of any of them pursuant to the written instructions of the principals to the transaction[.]" (5)

We conclude that, when the foregoing statutory definition of "escrow" is read together with the statutory definition of "escrow agent" in ORS 696.505(3), a person "acts in the capacity of an escrow agent" when, pursuant to the written instructions of the principals, and for a fee, commission, salary, or other valuable consideration, that person: (1) receives any written instrument, money, evidence of title to real or personal property or other thing of value (collectively, "matters in escrow"), to which they have no right, title, or interest therein; (2) holds the matters in escrow as a neutral third party until the happening of an event or the performance of a condition specified by the principals; and (3) upon the happening of the event or condition, delivers the matters in escrow to a person who has right, title, or interest therein.

In order to compare Paget's actions against the foregoing definition of the phrase "acting in the capacity of an escrow agent," we next turn to an analysis of the specific activities included in receiving, holding, and delivering matters in escrow. We begin with the concept of receipt.

Under ORS 696.581(1), (6) escrow agents may not receive matters in escrow without written instructions from the principals to the transaction or a written agreement between the principals. Nothing in the statutes requires the escrow agent to receive matters in escrow in a face-to-face exchange with the principals. The principals, therefore, need not prepare, review, or sign the escrow instructions or other agreement in the physical presence of an escrow agent or at a licensed escrow office. Neither does the statute require the escrow agent to answer any questions from the principals about the instructions or settlement statement. All that the escrow agent must do is accept the instructions at the same time when the escrow agent receives any funds, instruments, or property. In short, the escrow agent operates as a depository, in which the principals deposit matters in escrow, together with their instructions regarding those matters.

The escrow statutes contemplate that, in some instances, the principals may deposit a written agreement with the escrow agent rather than escrow instructions. In those instances, ORS 696.581(3) allows the escrow agent to prepare the instructions. If the escrow agent does so, then the instructions must contain the following warning:

"It is understood by the parties signing the above or attached instructions that the instructions are the complete instructions between this firm as an escrow agent and you as a principal to the escrow transaction. These instructions may not include all the terms of the agreement which is the subject of this escrow. Read these instructions carefully, and do not sign them unless they are acceptable to you."

ORS 696.581(3). Although the legislature requires that warning when the escrow agent prepares the instructions, nothing in the statutes mandates that the escrow agent be present when the principals review and sign the escrow instructions and other closing documents. Further, that warning does not require the escrow agent to assist the principals in understanding the escrow instructions prepared by the escrow agent by explaining their meaning. Indeed, the law otherwise forbids an escrow agent from drafting, selecting, or giving advice regarding real estate documents whenever such activities require the exercise of informed or trained discretion. State Bar v. Security Escrows, Inc., 233 Or 80, 89, 377 P2d 334 (1962).

We next consider the concept of holding matters in escrow. Upon receiving the matters in escrow and the principals' written instructions or agreement, the escrow agent holds the matters in escrow under ORS 696.505(2)(a) "as a neutral third party until the happening of a specified event or the performance of a prescribed condition," as outlined in the escrow instructions. The specific condition or event can require the escrow agent to hold the matters in escrow until notified to deliver them to another escrow agent, or upon a condition that, once satisfied, requires the escrow agent to disburse the funds to other persons or entities.

Finally, as to the concept of delivery, when an escrow agent delivers matters in escrow, the escrow agent must do so pursuant to the escrow instructions. See ORS 696.581(2) ("[a]n escrow agent may not close an escrow or disburse any funds or property in an escrow without obtaining dated, separate escrow instructions in writing from the principals"). The delivery function ultimately is dependant upon the "receipt" and "hold" functions, because, under ORS 696.581(2), the escrow agent must have received funds and documents from the lender and the principal before disbursing matters in escrow.

To summarize, the receipt of matters in escrow involves accepting the matters in escrow, together with either signed written instructions from the principals directing how the escrow agent is to hold and deliver them, or a written agreement from the principals. No law requires the principals to visit a licensed escrow agent office to sign the closing documents or to meet with the principals in person to accept the property. Rather, mailing the closing documents to the escrow agent is sufficient. Further, an escrow agent may not draft documents when informed or trained discretion is required. However, the agent may prepare escrow instructions pursuant to the principals' agreement, if the principals do not wish to do so themselves. Neither is the escrow agent entitled to advise the principals concerning the documents, including the escrow instructions, other than answering questions for which no informed or trained discretion is required. Finally, the escrow agent must deliver the matters in escrow upon the happening of the particular event or performance of a specified condition that is set out in the escrow instructions.

With the foregoing in mind, we turn to the determination whether Coast Security, through Paget's acts in the transactions at issue, engaged in the acts of receiving, holding, and delivering matters in escrow, thereby "act[ing] in the capacity of an escrow agent" under ORS 696.511(1). As noted, Coast Security provided Paget with prepared loan documents from the loan companies and prepared escrow instructions and settlement statements from the California escrow companies. Neither Paget, nor Coast Security, were asked by the principals to prepare those instructions, or to hold the other documents pursuant to any instructions. Paget presented the documents to the customers, (7) notarized their signatures, (8) and forwarded the documents to Coast Security, which then sent the documents to the California escrow companies. Here again, Paget was not acting pursuant to written escrow instructions from the principals; neither was he required to wait for a specific event or condition to forward the documents to Coast Security. As to those activities, it is apparent that Paget acted merely as a messenger between the escrow companies and the principals, and, therefore, cannot be said to have received, held, or delivered matters in escrow pursuant to the principals' instructions.

The Agency argues that, even if Paget did not receive, hold, or deliver matters in escrow, he acted in the capacity of an escrow agent because he explained to Coast Security's customers the contents of the closing documents, which included escrow instructions, settlement statements, and loan documents. We disagree, for two reasons. First, as we already have noted, the act of explaining the nature and terms of certain documents can fall outside the scope of an escrow agent's duties, when such an explanation requires informed or trained discretion. See Security Escrows, Inc., 233 Or at 89 (so stating). Second, if Paget's explanations did not require informed or trained discretion and therefore were the type in which an escrow agent may engage, those explanations alone could not have transformed Paget into an escrow agent. That is so because, as already explained, acting in the capacity of an escrow agent requires a person to receive, hold, and deliver matters in escrow pursuant to escrow instructions for consideration. The act of explaining documents alone does not constitute receiving matters in escrow or holding the matters until the occurrence of some specified event or condition. (9)

In summary, we conclude that the escrow statutes, taken as a whole, do not support the Agency's conclusion that Coast Security's actions, through its employee, Paget, were those of an escrow agent. Accordingly, we hold that Coast Security did not "act in the capacity of an escrow agent" under ORS 696.511(1) and, therefore, was not required to obtain an escrow agent license for its activities. In light of that holding under ORS 656.511(1), we need not address the other issues raised by Coast Security on review.

The decision of the Court of Appeals and the order of the Real Estate Agency are reversed.

1. A "mortgage broker" is one who, "[f]or compensation, or in the expectation of compensation, either directly or indirectly makes, negotiates or offers to make or negotiate a mortgage loan." ORS 59.840(6)(C).

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2. ORS 696.590 provides, in part:

"(1) Any person who violates ORS 696.511(1) may be required by the Real Estate Commissioner to forfeit and pay to the General Fund of the State Treasury a civil penalty in an amount determined by the commissioner of:

"(a) Not less than $100 nor more than $500 for the first offense of unlicensed professional escrow activity; and

"(b) Not less than $500 nor more than $1,000 for the second and subsequent offenses of unlicensed professional escrow activity."

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3. ORS 696.505(2) and (3) define those terms. We set out those statutory provisions later in this opinion.

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4. ORS 696.385 provides, in part:

"The Real Estate Agency shall have the power to:

"* * * * *

"(3) Make and enforce any and all such reasonable rules as shall be deemed necessary to administer and enforce the provisions of, and enforce and discharge the duties defined in, any law with the administration or enforcement of which the agency is charged."

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5. ORS 696.505(4) defines a "principal" as, among other things, "[t]he borrower in an escrow transaction involving the refinancing of real or personal property * * *."

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6. ORS 696.581(1) provides:

"An escrow agent may not accept funds, property or documents in any escrow transaction without dated, written escrow instructions from the principals to the transaction or a dated executed agreement in writing between the principals to the transaction."

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7. Neither party asserts that a person who simply presents closing documents to his or her customers must have an escrow agent license.

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8. Neither party asserts that a notary public must have an escrow agent license to notarize closing documents.

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9. In contending that Paget acted in the capacity of an escrow agent, the Agency also relied upon the fact that Paget told the customers that the signing at home or in Coast Security's office was in lieu of a closing in an escrow office. That fact is irrelevant, particularly in light of our determination that an escrow agent need not be present when the principal executes the closing documents.

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Filed: June 30, 2011 IN THE SUPREME COURT OF THE STATE OF OREGON In Re: Complaint as to the Conduct of J. MARK LAWRENCE, Accused. (OSB 08-115; SC S058778) En Banc On review of the decision of a trial panel of the Disciplinary Board. Argued and submitted May 2, 2011. Paula Lawrence, McMinnville, argued and cause and filed the briefs for accused. Stacy Hankin, Assistant Disciplinary Counsel, Tigard, argued the cause and filed the brief for the Oregon State Bar. PER CURIAM The complaint is dismissed. PER CURIAM The issue in this lawyer disciplinary proceeding is whether the accused, by releasing a partial transcript of a juvenile hearing to the press, violated Rule of Professional Conduct (RPC) 8.4(a)(4), which prohibits a lawyer from engaging in conduct that is prejudicial to the administration of justice. A trial panel found the accused guilty of violating RPC 8.4(a)(4) and suspended him for 60 days. We review the decision of the trial panel de novo. ORS 9.536(2); BR 10.6. Because we conclude that

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the Bar failed to prove by clear and convincing evidence that the accused's conduct caused prejudice to the administration of justice, we dismiss the complaint. The facts are straightforward and largely undisputed. In 2007, the accused represented a juvenile male who, along with another male friend, allegedly had touched or swatted several female classmates on the buttocks and had danced in front of the females in a lascivious manner. The incident occurred at the students' middle school. After being informed of the youths' behavior, the vice principal and a police officer interviewed the victims. Based on those interviews, the accused's client and his friend were arrested by a McMinnville Police Officer on February 22, 2007. On February 23, the Yamhill County Juvenile Department filed a delinquency petition alleging that the accused's client had committed acts that, if done by an adult, would have constituted five counts of first-degree sexual abuse and five counts of third-degree sexual abuse. At an initial detention hearing that same day, the court ordered the youths to remain in custody. The events giving rise to this disciplinary action arose out of a second detention hearing held on February 27, 2007, before Judge John Collins. The accused called two of the victims to testify on behalf of his client. The female victims testified that the youths were their friends and that they did not find the youths to be threatening in any way. Regarding the alleged sexual abuse, the female victims testified that the touching or swatting was not sexual in nature but rather was mere horseplay. The victims also testified that they felt pressured by the vice principal and the police officer to make the touching sound hurtful and uncomfortable when it was not. By the second detention hearing, the case was receiving substantial media 2

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attention. Judge Collins allowed the press to attend the detention hearing, but prohibited the press from recording the proceedings. The parties dispute whether the judge prohibited only video recordings or also prohibited audio recordings.1 A number of newspaper and television stories reported the events and testimony at the hearing. After the hearing, the accused obtained a copy of the official audio recording of the hearing and had a partial transcript prepared that contained the victims' testimony. In March 2007, a reporter contacted the accused about the February 27 hearing. The reporter, who was not present at the hearing, expressed disbelief that the female victims had felt pressured by the vice principal and the police officer to make the youths' actions seem sexual. The accused offered to give the reporter a copy of the partial transcript when it was available. The accused believed that it would have been improper to give the reporter the official audio recording of the hearing but thought that the transcript could be released. The accused contacted Deborah Markham, the deputy district attorney handling the case, to see if she objected to releasing the transcript. Markham told the accused that she believed that the court would have to consent. The accused then released the transcript to the reporter without obtaining permission from Judge Collins. Deputy District Attorney Deborah Markham testified that Judge Collins prohibited video recording. Judge Collins testified that he might have prohibited the press from recording the detention hearing, but that he did not remember whether he did so or not. He did remember allowing video recording at a later hearing in the proceeding. The accused testified that Judge Collins prohibited video recording but that he could not remember if the judge prohibited audio recording.
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When Judge Collins learned that the transcript had been released -following news reports that cited the transcript -- he called a meeting with Markham and the accused and told them to release no other transcripts. The testimony from the accused, Markham, and Judge Collins differs regarding that meeting. The accused described the meeting as relaxed and said that Judge Collins had stated that the release of the transcript was permissible. Markham testified that Judge Collins was "very concerned" about the release of the transcript and that Judge Collins said that the accused's disclosure violated the law. Judge Collins testified that the accused did not get his consent to release the transcript, but that he was not sure if the accused needed to do so under the circumstances of the case, particularly given the presence of the press at the hearing. In Judge Collins's description, the meeting was not contentious; although he requested that the parties refrain from releasing any additional transcripts, he did not "feel like [he] needed to be firm" and so did not issue an order barring further releases. In April 2008, several months after the juvenile case was resolved, Tim Loewen, director of the Yamhill County Juvenile Department, reported the accused's action of releasing the transcript to the Bar. After investigating the matter, the Bar charged the accused with violating RPC 8.4(a)(4)2 by releasing to the press "information
2

RPC 8.4(a) provides, in relevant part: "It is professional misconduct for a lawyer to: "* * * * * "(4) engage in conduct that is prejudicial to the administration of

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appearing in the record" of a juvenile case without court consent, in violation of ORS 419A.255(1) and (3).3 The Bar alleged that the accused had "usurped" Judge Collins's authority to control the proceeding by not seeking the court's consent before releasing the transcript, and thereby had caused prejudice to the administration of justice. In the proceeding before the trial panel, the accused argued that his release of the transcript did not violate ORS 419A.255 for each of three independent reasons: (1) the transcript that he had prepared was not a part of the record of the case and so was not subject to ORS 419A.255; (2) Judge Collins had consented to the release of the information contained in the transcript when he allowed the press to attend and report on

justice[.]"
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ORS 419A.255 provides, in relevant part:

"(1) The clerk of the court shall keep a record of each case, including therein the summons and other process, the petition and all other papers in the nature of pleadings, motions, orders of the court and other papers filed with the court, but excluding reports and other material relating to the child, ward, youth or youth offender's history and prognosis. The record of the case shall be withheld from public inspection but is open to inspection by the child, ward, youth, youth offender, parent, guardian, court appointed special advocate, surrogate or a person allowed to intervene in a proceeding involving the child, ward, youth or youth offender, and their attorneys. The attorneys are entitled to copies of the record of the case. "* * * * * "(3) Except as otherwise provided in subsection (7) of this section, no information appearing in the record of the case or in reports or other material relating to the child, ward, youth or youth offender's history or prognosis may be disclosed to any person not described in subsection (2) of this section without the consent of the court * * * ."

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the hearing; and (3) the information in the transcript could be released under ORS 419A.255(5)(b) and (d), which list certain exceptions to the confidentiality of juvenile records. Even assuming that he did violate ORS 419A.255, the accused asserted, he did not violate RPC 8.4(a)(4), because his conduct was not prejudicial to the administration of justice. That was so, according to the accused, because the defendant and the victims supported releasing the transcript and because the information contained in the transcript had already been made public as a result of the press attending and reporting on the hearing. Thus, in the accused's view, no harm -- actual or potential -- resulted from his conduct. The trial panel found by clear and convincing evidence that the accused had violated RPC 8.4(a)(4) and suspended the accused from the practice of law for 60 days. The trial panel first determined that ORS 419A.255(3) prohibited the accused from releasing the partial transcript to the press without the consent of the trial court and that the accused had violated the statute in doing so. With little discussion, the trial panel then found that the evidence that the accused had violated the statute also was sufficient to show prejudice to the administration of justice and thus that the accused had violated RPC 8.4(a)(4). The accused sought review in this court. To prove a violation of RPC 8.4(a)(4), the Bar must prove (1) that the accused lawyer's action or inaction was improper; (2) that the accused lawyer's conduct occurred during the course of a judicial proceeding; and (3) that the accused lawyer's conduct had or could have had a prejudicial effect upon the administration of justice. See In re Kluge, 335 Or 326, 345, 66 P3d 492 (2003) (citing In re Haws, 310 Or 741, 746-48, 6

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801 P2d 818 (1990)) (so stating for identically worded former DR 1-102(A)(4)). Because we find the issue to be dispositive, we begin by examining the third element -- whether the accused's conduct had or could have had a prejudicial effect on the administration of justice -- and assume, without deciding, that the accused's conduct violated ORS 419A.255(3) and otherwise satisfied the test set out in Kluge and Haws. Prejudice to the administration of justice "may arise from several acts that cause some harm or a single act that causes substantial harm to the administration of justice." Kluge, 335 Or at 345. This court has identified two components to the "administration" of justice: "1) The procedural functioning of the proceeding; and 2) the substantive interest of a party in the proceeding." Haws, 310 Or at 747. "A lawyer's conduct could have a prejudicial effect on either component or both." Id. The Bar argues that the accused's conduct, a single act, resulted in prejudice to the administration of justice because it had the potential to cause substantial harm to the procedural functioning of the court. The Bar asserts, "Substantial potential harm to the administration of justice occurs whenever a lawyer interferes in or usurps the court's ability to do its job in a proceeding pending before it." The Bar states that the accused "usurped" the court's authority by not seeking Judge Collins's consent prior to releasing the transcript. The Bar cites three disciplinary cases to support its position that the accused's conduct resulted in substantial potential harm to the administration of justice. First, in In re Eadie, 333 Or 42, 36 P3d 468 (2001), this court found a violation of former DR 1-102(A)(4) where the accused lawyer submitted a proposed order containing a 7

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misrepresentation that was intended to influence the judge in changing the trial date. Id. at 58. That conduct substantially harmed the procedural functioning of the court because it resulted in the judge acquiescing to a trial date preferred by the accused and made it necessary for the judge to resolve a dispute resulting from the accused's misrepresentation and to redraft an order. Id. Second, in In re Morris, 326 Or 493, 953 P2d 387 (1998), this court concluded that the accused lawyer had engaged in a single act of conduct that had the potential to cause substantial harm, either to the procedural functioning of the court or to the substantive interests of the parties, when she knowingly filed a notarized document that she had altered. Id. at 502-03. Third, in In re Thompson, 325 Or 467, 940 P2d 512 (1997), this court found a violation of former DR 1-102(A)(4) where the accused lawyer physically confronted a judge after receiving an adverse decision. That conduct caused substantial harm to the administration of justice because the accused's ex parte communication with the judge "unfairly attack[ed] the independence, integrity, and respect due a member of the judiciary." Id. at 475. The conduct also had the potential to cause substantial harm, because it could have influenced the judge to change her decision or to recuse herself from the case. Id. In each of the preceding cases, the accused lawyer engaged in conduct that had the potential to disrupt or to improperly influence the court's decision-making process, Thompson, 325 Or at 475; that created unnecessary work for the court, Eadie, 333 Or at 58; or that had the potential to mislead the court, Morris, 326 Or at 503. Moreover, in Eadie and Morris, the accused lawyers made knowing misrepresentations to the court. Similarly, in Kluge, the accused lawyer's conduct in knowingly filing an 8

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untimely motion to disqualify the trial judge and then failing to serve the motion on opposing counsel caused prejudice to "the procedural functioning of the judicial system by imposing a substantial burden upon both opposing counsel and [the trial judge] to undo the accused's actions." 335 Or at 346. In this case, the Bar has made no showing, as required by Kluge and Haws, that the accused's conduct harmed the procedural functioning of the judicial system, either by disrupting or improperly influencing the court's decision-making process or by creating unnecessary work or imposing a substantial burden on the court or the opposing party. Nor has the Bar shown that his conduct had the potential to result in any of the above. Certainly, Judge Collins did not testify that the accused's actions interfered with Judge Collins's conduct of the juvenile proceeding. Although the Bar correctly asserts that ORS 419A.255 gives the trial court control over the release of protected information in a juvenile record -- and, as noted, we assume without deciding that the accused acted improperly in not seeking the trial court's consent -- the Bar's theory fails to take into account the fact that the information contained in the partial transcript that the accused released was presented in open court and had already been reported by the press.4 It is difficult to see how the accused's release of the same information, in the context of this case, had the potential to cause any harm to the proceeding, much less substantial harm.

Article I, section 10, of the Oregon Constitution grants members of the public, including the press, the right to attend juvenile hearings. State ex rel Oregonian Pub. Co. v. Deiz, 289 Or 277, 284-85, 613 P2d 23 (1980).

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See Kluge, 335 Or at 345 (prejudice to the administration of justice may arise from "several acts that cause some harm or a single act that causes substantial harm"). Indeed, the Bar makes no effort to show that the accused's conduct could have resulted in new information being made public or that the release of the partial transcript itself had any potential impact on the proceeding. In fact, after the press attended the hearing and the accused released the transcript, Judge Collins allowed members of the press to listen to the official audio recording of the hearing. Nevertheless, the Bar asserts that Judge Collins was sufficiently "concerned" about the release of the information to call the accused and Markham to his chambers to discuss the incident. The fact that Judge Collins was "concerned" and met with the accused and Markham does not, by itself, demonstrate the potential for substantial harm to the procedural functioning of the court. Judge Collins himself stated that, although "in a perfect world," he probably would not have wanted the transcript released, in the context of this case and the open court provision of Article I, section 10, of the Oregon Constitution, the release of the partial transcript was likely permissible without his consent because "if [the press is] * * * going to know the information and report the information, at least get it right." Judge Collins's testimony, then, does not demonstrate that the accused's conduct impacted the procedural functioning of the court, even if the accused's conduct was cause for "concern." Nor does the Bar offer any evidence to prove that the release of the partial transcript harmed the substantive interests of the accused's client, the victims, or the state. The accused released the transcript, with the support of his client, in response to an 10

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inquiry from the media and in order to respond to inaccuracies appearing in some media reports. The accused maintained the confidentiality of the victims' names in the transcript, referring to them by their initials, consistent with an earlier order by Judge Collins. In this proceeding, the accused also submitted letters from the two victims who testified (and their parents) that stated their support for the release of the partial transcript. Finally, there was no testimony from the Yamhill County Juvenile Department that the release of the partial transcript had any effect on its substantive interests or its ability to prosecute the case. The Bar appears, instead, to take the position that virtually any violation of a statute, rule, or court order that occurs during the course of a court proceeding and relates to the conduct or any procedural aspect of that proceeding necessarily is prejudicial to the administration of justice. The Bar asserts, in effect, that "substantial potential" harm is implicit in the accused's conduct. Our cases, however, require proof by clear and convincing evidence that an accused's conduct in a specific judicial proceeding caused actual or potential harm to the administration of justice and, when only one wrongful act is charged, that actual or potential harm must be "substantial." Kluge, 335 Or at 345; Haws, 310 Or at 748. Here, the Bar's evidence did not prove that substantial harm resulted or could have resulted from the accused's conduct. We conclude that the Bar has not proved by clear and convincing evidence that the accused violated RPC 8.4(a)(4). The accused's conduct did not result in such prejudice, because there is no evidence that the release of the partial transcript, which contained solely information already presented in open court and reported by the press, 11

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harmed the procedural functioning of the judicial system. Nor is there any evidence that the substantive rights of the accused's client, the other juvenile defendant, the victims, or the state were harmed. "Prejudice to the administration of justice" requires such a showing. Haws, 310 Or at 747-48. The complaint is dismissed.

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