In the Matter of Jill A. Dunn, An Attorney. Committee on Professional Standards, Respondent; Jill A. Dunn, Appellant.

Brief

N.Y.January 15, 2015

To be Argued by: MICHAEL G. GAYNOR DEPUTY CHIEF ATTORNEY (Time Requested: 30 Minutes) APL-2014-00029 Court of Appeals of the State of New York In the Matter of JILL A. DUNN, an Attorney. –––––––––––––––––––––––––––––– COMMITTEE ON PROFESSIONAL STANDARDS, Petitioner-Respondent, JILL A. DUNN, Respondent-Appellant. BRIEF FOR PETITIONER-RESPONDENT MICHAEL G. GAYNOR, DEPUTY CHIEF ATTORNEY ALISON M. COAN, PRINCIPAL ATTORNEY APPELLATE DIVISION, THIRD DEPARTMENT COMMITTEE ON PROFESSIONAL STANDARDS Attorneys for Petitioner-Respondent 286 Washington Avenue Extension, Suite 200 Albany, New York 12203 Tel.: (518) 285-8350 Fax: (518) 453-4643 Date Completed: June 16, 2014 i TABLE OF CONTENTS Page TABLE OF AUTHORITIES .................................................................................... ii COUNTER-STATEMENT OF QUESTION PRESENTED .................................... 1 PRELIMINARY STATEMENT ............................................................................... 1 COUNTER-STATEMENT OF FACTS AND PROCEDURAL HISTORY ............ 2 ARGUMENT ............................................................................................................. 9 THE THIRD DEPARTMENT PROPERLY APPLIED COLLATERAL ESTOPPEL TO APPELLANT'S DISCIPLINARY CASE ....................................... 9 A. Magistrate Judge Homer’s Sanctions Order was “Final” for Purposes of Applying Collateral Estoppel in a Disciplinary Proceeding ............................................................................................. 9 B. Appellant was Afforded Adequate Procedural Protections Before Sanctions Were Imposed Against Her. Thus, Collateral Estoppel Was Properly Applied in the Disciplinary Proceeding ........................................................................................... 24 CONCLUSION ........................................................................................................ 26 ii TABLE OF AUTHORITIES Page(s) Cases: Anonymous v. Dobbs Ferry Union Free School District, 19 A.D.3d 522 (2nd Dept. 2005) ............................................................. 21, 22 Ashe v. Swenson, 397 U.S. 436 (1970)....................................................................................... 11 Bannon v. Bannon, 270 N.Y. 484 (1936) ...................................................................................... 11 Caldwell v. Gutman, Mintz, Baker & Sonnenfeldt, P.C., 2012 U.S. Dist. Lexis 43280 (E.D.N.Y. 2012) ........................................ 21-22 Cunningham v. Hamilton Co., 527 U.S. 198 (1999)....................................................................................... 15 D’Arata v. New York Cent. Mut. Fire Ins. Co., 76 N.Y.2d 659 (1990) .................................................................................... 10 Franklin Development Co., Inc. v. Atlantic Mutual Insurance Company, 60 A.D.3d 897 (2nd Dept. 2009) ................................................................... 21 Gilberg v. Barbieri, 53 N.Y.2d 285 (1981) .............................................................................. 10, 18 Hennessy v. Cement & Concrete Worker’s Union Local 17A, 963 F. Supp. 334 (S.D.N.Y. 1997) ................................................................ 11 In re Flannery, 274 A.D.2d 940 (3rd Dept. 2000) .................................................................... 9 In re Seiffert, 65 N.Y.2d 278 (1985) .................................................................................... 26 In re Troung, 2 A.D.3d 27 (1st Dept. 2003) .................................................................... 9, 10 Interconnect Planning Corp. v. Feil, 774 F.2d 1132 (Fed. Cir. 1985) ..................................................................... 17 Kay-R Electric Corporation v. Stone & Webster Const. Co., Inc., 23 F.3d 55 (2d Cir. 1994) .............................................................................. 12 iii Lummus Co. v. Commonwealth Oil Ref. Co., Inc., 297 F.2d 80 (2d Cir. 1961), cert. denied, 368 U.S. 986 (1962) .................... 12 Matter of Amica Mutual Insurance Company v. Jones, 85 A.D.2d 727 (2nd Dept. 1981) ................................................................... 21 Matter of Babigan, 247 A.D.2d 817 (3rd Dept. 1998) .................................................................... 9 Matter of Beard v. Town of Newburgh, 259 A.D.2d 613 (2nd Dept. 1999) ................................................................. 22 Matter of Capoccia, 59 N.Y.2d 549 (1983) .................................................................................... 26 Matter of Capoccia, 272 A.D.2d 838 (3rd Dept. 2000) .................................................................. 22 Matter of Kramer, 235 A.D.2d 87 (1st Dept. 1997) ................................................................ 9, 10 Matter of Miller, 246 A.D.2d 35 (1st Dept. 1998) .................................................................... 21 Matter of Osborne, 1 A.D.3d 31 (1st Dept. 2003) .......................................................................... 9 Matter of Yao, 231 A.D.2d 346 (1st Dept. 1997) .................................................................. 10 McGrath v. Gold, 36 N.Y.2d 406 (1975) .............................................................................. 10-11 People v. Cunningham, 62 Misc. 2d 515 (1970) .................................................................................. 11 Riley v. Southern Transp. Co., 278 A.D. 605 (3rd Dept. 1951) ...................................................................... 13 Ryan v. New York Tel. Co., 62 N.Y.2d 494 (1984) .................................................................................... 10 Samhammer v. Home Mutual Insurance Company, 120 A.D.2d 59 (3rd Dept. 1986) .................................................................... 22 Schwartz v. Public Administrator of County of Bronx, 24 N.Y.2d 65 (1969) ...................................................................................... 10 iv Securities and Exchange Commission v. Wojeski, et al., 2011 U.S. Dist. Lexis 158201 (N.D.N.Y. 2011) ..................................... 19-20 Staatsburg Water Co. v. Staatsburg Fire Dist., 72 N.Y.2d 147 (1988) .................................................................................... 23 Statutes & Other Authorities: 28 U.S.C. § 1291 .................................................................................................. 8, 12 28 U.S.C. § 1927 ...................................................................................................... 13 Fed. R. Civ. P. 11 ............................................................................................... 13, 25 Fed. R. Civ. P. 11(c)(4) ............................................................................................ 25 22 NYCRR § 806.5 .............................................................................................. 8, 22 COUNTER-STATEMENT OF QUESTION PRESENTED Question Presented: May a decision of a United States Magistrate Judge, which while non-final for purposes of appeal, constitute a conclusive adjudication of a question of law or fact such that collateral estoppel effect may be given to that decision? Short Answer: Yes. The Appellate Division, Third Department, correctly gave collateral estoppel effect to an order of the United States District Court for the Northern District of New York, which was not final for purposes of appeal, but which constituted a conclusive adjudication of the issue of Appellant's credibility and ethical conduct. PRELIMINARY STATEMENT The Appellate Division, Third Department, properly gave collateral estoppel effect in the context of a disciplinary proceeding to an assessment of Appellant Jill A. Dunn's credibility made by the United States District Court for the Northern District of New York, which resulted in the imposition of sanctions against her. The issues involved in the matter which gave rise to both the imposition of sanctions by the Northern District of New York and the State disciplinary charges against her are identical, and Appellant had a full and fair opportunity to litigate the issues before the Northern District of New York. The fact that a final decision has not yet been References to Appellant's Appendix are hereinafter denoted as "(A-_)."1 2 rendered in the underlying litigation in which the sanctions decision was issued, thereby precluding Appellant from appealing the sanctions decision to the United States Court of Appeals for the Second Circuit, does not automatically render the sanctions decision non-final for the purpose of collateral estoppel. The imposition of sanctions against Appellant is fixed; it is not temporary or provisional in nature and, therefore, the decision is sufficiently final for the purposes of applying collateral estoppel. Accordingly, the Appellate Division, Third Department, was correct in applying collateral estoppel to the sanctions decision, and Appellant's appeal to this Court should be denied. COUNTER-STATEMENT OF FACTS AND PROCEDURAL HISTORY Appellant, Jill A. Dunn (hereinafter referred to as "Appellant"), was admitted to practice as an attorney and counselor-at-law in the State of New York by an order of the Appellate Division, Third Department (the "Third Department"), in 1994. (A- 4,7)1 By order of the United States District Court, Northern District of New York, dated July 20, 2011, United States Magistrate Judge David R. Homer ordered that Appellant disgorge certain funds and publically admonished her for misconduct The preliminary injunction also froze the assets of McGinn, Smith & Co., Inc. and the2 individual defendants. (A-157) 3 relating to her having deliberately filed a false declaration during proceedings on motion by the United States Securities and Exchange Commission ("SEC"). (A-191- 222) Appellant's misconduct stemmed from her representation of a Trust which is one of the subjects of a civil enforcement action commenced by the SEC for securities violations, alleging that a financial services firm, McGinn, Smith & Co., Inc., and its principals, among other things, misrepresented to investors the true nature of the funds they managed and how the funds would be invested. (A-155; 196-197) David Wojeski, the Trustee of a trust owned by a principal's wife (hereinafter referred to as the "Trust") intervened in the SEC action. (A-155; 197) A series of motions ensued regarding the SEC's application for a preliminary injunction granted to the SEC, freezing, in part, the assets of the Trust. The Trust,2 represented by Appellant, cross-moved to vacate the temporary restraining order with respect to the Trust assets. (A-197) Following an evidentiary hearing, an order was entered on July 7, 2010, granting the Trust's cross-motion. (A-197) The SEC subsequently moved for reconsideration as to the Trust and for an order freezing the Trust assets pending the outcome of the action. (A-176-191) The basis for the reconsideration motion was newly discovered evidence of a private annuity contract References to Respondent's Appendix are hereinafter denoted as "(RA-___)".3 Defendant Lynn Smith, David Wojeski and Thomas Urbelis are not parties to this4 appeal. 4 which required that the Trust make annual payments to the principals. (A-176;180) On reconsideration, the Court specifically found, based on documentary evidence and after a full evidentiary hearing on November 16, 2010, at which Appellant testified (A-182; 207; RA-38-67) , that Appellant filed a false declaration3 in Federal Court on or about September 3, 2010, asserting that she was unaware of the existence of an annuity agreement at the time of a conversation she had with SEC attorneys on July 22, 2010. (A-183-184) The Court determined that respondent had received a copy of the subject annuity agreement on July 21, 2010, the day before the conversation she had with the SEC attorneys. (A-183-184) The Court further determined that false statements made by Appellant in a written declaration she filed and her explanation for her false statements in her September 3, 2010 declaration were belied by substantial evidence and, therefore, were not credible. (A-183-185; 208) On November 22, 2010, the Court granted the SEC's motion for reconsideration and further granted the SEC a preliminary injunction as to the Trust. (A-177-190) In addition, the Court, sua sponte, granted the SEC leave to move for sanctions against Appellant, the Defendant Trust, Defendant Lynn Smith, David Wojeski, and Thomas Urbelis based on their conduct. (A-190)4 5 Appellant, as attorney for the Trust, sought reconsideration of Magistrate Judge Homer's November 22, 2010 Memorandum-Decision and Order on behalf of the Trust. (RA-130-132) Among the issues reconsidered were Appellant's credibility and the findings as to her ethical conduct. In a Memorandum-Decision and Order dated January 11, 2011, Magistrate Judge Homer reviewed the record in light of the Trust's new arguments and upheld its determination that Appellant's testimony in the prior proceedings was not credible (RA-131), and that she and the others "conceal[ed] the existence of the Annuity Agreement in the face of legal, ethical and professional obligations to the contrary." (RA-132) The Trust's motion for reconsideration was denied in all respects. (RA-132) On January 31, 2011, the SEC moved for, among other things, an order awarding sanctions against Appellant. (A-191-222) The SEC argued that Appellant knew or should have known of the private annuity agreement prior to the Trust moving to vacate the preliminary injunction and that evidence and arguments Appellant made to the contrary during the preliminary injunction proceedings were fraudulent. (A-205) The SEC further contended that Appellant submitted a declaration in opposition to the SEC's motion for reconsideration which falsely asserted that Appellant did not learn of the existence of the annuity agreement until after a telephone conversation with the SEC on July 22, 2010. (A-205) Appellant 6 denied the SEC's contentions. (A-205) Based upon the record, which included documentary evidence and testimonial evidence from Appellant elicited at an evidentiary hearing on November 16, 2010, (A-207; RA-37-67) Magistrate Judge Homer found by clear and convincing evidence that Appellant made material and knowingly false statements in her declaration filed with the Court on September 3, 2010, and left those statements uncorrected until the eve of the evidentiary hearing scheduled on November 16, 2010, thereby unnecessarily extending and complicating preparations for the hearing. (A- 209) The Court discredited Appellant's strained explanation concerning when she became aware of the subject annuity agreement. The Court concluded that Appellant engaged in subjective bad faith under Federal Rule 11(c)(3), and further held: [t]here remains the fact, however, that [Appellant] and Wojeski both knowingly filed declarations containing false statements in support of the trust's opposition to the SEC's motion for reconsideration. The bad faith with which [Appellant] and Wojeski acted in filing these declarations was mitigated only minimally by their last minute filings of corrective declarations. The deliberate filing of knowingly false declarations by an attorney and accountant servicing in a fiduciary position, if condoned, undermines any system of justice which relies on its participants to assert what they in good faith believe to be true, not merely to ignore or misstate inconvenient facts to obtain a desired result. Tolerance of such conduct undermines confidence in the outcome of judicial proceedings as well as in the professions of those involved. Therefore, the false statements of [Appellant] and Wojeski, even in the absence of demonstrable harm to the SEC, warrant sanctions. (A-200- 221) 7 In granting the SEC's motion for sanctions against Appellant, Magistrate Judge Homer ordered Appellant to disgorge certain funds, publically admonished her and directed the District Court Clerk of the Northern District of New York to forward a copy of his decision to the Respondent, Committee on Professional Standards (the "Committee"), for its review and consideration. (A-221) On or about December 7, 2011, the Committee filed a Petition of Charges and Specifications against Appellant based upon her ethical misconduct in connection with the SEC proceedings. (A-12-22) Appellant served and filed a Verified Answer to Petition on or about January 10, 2012, in which she argued, among other things, that collateral estoppel should not apply to Magistrate Judge Homer's sanctions decision because she had taken and perfected an appeal of that decision to the United States Court of Appeals for the Second Circuit (hereinafter the "Second Circuit"). (A-23-30) Appellant requested that the disciplinary proceeding be held in abeyance while the Second Circuit considered her appeal. (A-23;28; RA-133-134) That request was granted and the disciplinary proceedings were adjourned for approximately sixteen (16) months. (RA-133-137; 147-183) By Decision dated March 18, 2013, the Second Circuit affirmed in part, dismissed in part and remanded Magistrate Judge Homer's Memorandum-Decision and Order dated July 20, 2011. (A-223-235) Specifically, with respect to Appellant, 8 the Second Circuit declined to exercise jurisdiction over her appeal because the sanctions decision was non-final for purposes of 28 U.S.C. §1291. (A-230-232) By Notice of Motion dated April 22, 2013, the Committee moved on the basis of collateral estoppel for an order of the Third Department, pursuant to 22 NYCRR 806.5, declaring that no factual issues were raised and fixing a time for Appellant to be heard in mitigation. (A-31-33; RA-1-129) Appellant opposed the Committee's motion. By Memorandum and Order dated July 18, 2013, the Third Department held that collateral estoppel applied and granted the Committee's motion, finding that no factual issues existed and that Appellant was guilty of the charged professional misconduct. (A-7-9) Thereafter, Appellant was heard in mitigation and, by Memorandum and Order dated November 7, 2013, the Third Department determined that Appellant should be censured. (A-4-6) 9 ARGUMENT THE THIRD DEPARTMENT PROPERLY APPLIED COLLATERAL ESTOPPEL TO APPELLANT'S DISCIPLINARY CASE A. Magistrate Judge Homer's Sanctions Order was "Final" for Purposes of Applying Collateral Estoppel in a Disciplinary Proceeding It is submitted that the Third Department was correct when it collaterally estopped Appellant from re-litigating the issue of her credibility and misconduct which resulted in the imposition of sanctions against her by Magistrate Judge Homer on July 20, 2011. While the Magistrate Judge's decision may not have been "final" for the purposes of an appeal, it was sufficiently "final" for purposes of applying collateral estoppel in the context of the disciplinary proceeding against Appellant. The equitable doctrine of collateral estoppel has been consistently applied to disciplinary proceedings and is grounded in the facts and realities of the particular litigation. See, Matter of Osborne, 1 A.D.3d 31 (1st Dept. 2003); In re Flannery, 274 A.D.2d 940 (3rd Dept. 2000); Matter of Babigan, 247 A.D.2d 817, 818 (3rd Dept. 1998); Matter of Kramer, 235 A.D.2d 87 (1st Dept. 1997); In re Troung, 2 A.D.3d 27 (1st Dept. 2003). Collateral estoppel precludes a party from re-litigating in a subsequent action or proceeding an issue raised in a prior action or proceeding and 10 decided against that party or those in privity. Ryan v. New York Tel. Co., 62 N.Y.2d 494, 500 (1984). The policies underlying its application are avoiding re-litigation of a decided issue and the possibility of an inconsistent result. D'Arata v. New York Cent. Mut. Fire Ins. Co., 76 N.Y.2d 659, 664 (1990). Two requirements must be met to invoke collateral estoppel. There must be an identity of issue which has necessarily been decided in the prior action and is decisive of the present action, and there must have been a full and fair opportunity to contest the decision now said to be controlling. Gilberg v. Barbieri, 53 N.Y.2d 285, 291 (1981). In an attorney disciplinary proceeding, the legal issues raised and resolved in the underlying proceeding must be identical to those which would be decided by a court in a disciplinary proceeding, and that the attorney must have had a full and fair opportunity to litigate those issues before the lower court. Schwartz v. Public Administrator of County of Bronx, 24 N.Y.2d 65 (1969); Matter of Kramer, supra, 235 A.D.2d 87; Matter of Yao, 231 A.D.2d 346 (1st Dept. 1997); Matter of Truong, supra, 2 A.D.3d 27. The party to be precluded from re-litigating the issues bears the burden of demonstrating the absence of a full and fair opportunity to contest the prior determination. The Committee acknowledges that one of the cornerstones of the doctrines of collateral estoppel and res judicata is finality. In McGrath v. Gold, 36 N.Y.2d. 406 11 (1975), this Court expressly held, "Collateral estoppel means simply that 'when an issue of ultimate fact has once been determined via valid and final judgment, that issue cannot again be litigated between the same parties in any future lawsuit.' " 36 N.Y.2d at 412 citing Ashe v. Swenson, 397 U.S. 436, 443; and People v. Cunningham, 62 Misc.2d 515, 519. Appellant argues that the Third Department was wrong as a matter of law in giving collateral estoppel effect to Magistrate Judge Homer's sanctions order against her because, according to the Second Circuit, that order is non-final and, therefore, non-appealable until the underlying civil proceeding is concluded. Appellant, however, fails to recognize there is a distinction between finality and appealability for res judicata and collateral estoppel purposes. See, Hennessy v. Cement & Concrete Worker's Union Local 17A, 963 F.Supp. 334 (S.D.N.Y. 1997). Contrary to Appellant's contention, the requirement of finality for purposes of res judicata and collateral estoppel does not necessarily mean there is a final, appealable judgment in an action. Specifically, in Bannon v. Bannon, 270 N.Y. 484, 489 (1936), this Court held: [The words 'final judgment'] may include any judicial decision upon a question of fact or law which is not provisional and subject to change and modification by the same tribunal... The essential element of a conclusive adjudication is finality of the proceedings. A judicial decision can constitute a conclusive adjudication of [a] question of fact or law only when rendered in a proceeding in which a court has jurisdiction to render an irrevocable and final decision upon such a question. 'The effect of an adjudication...must always depend upon the nature of the 12 proceeding.' Everett v. Everett, 180 N.Y. 452, 461, 73 N.E. 231, 233...The test then is not the form of the decision, but the nature of the proceedings in which the adjudication is made. 270 N.Y. at 489-91. See also, Kay-R Electric Corporation v. Stone & Webster Const. Co., Inc., 23 F.3d 55 (2nd Cir. 1994 )(a final judgment may include "'any prior adjudication of an issue in another action that is determined to be sufficiently firm to be accorded conclusive effect.'"). Significantly, the Second Circuit has expressly recognized that there the word "finality" as used in relationship to the law of judgments does not have the same meaning as "finality" does in 28 U.S.C. §1291. In Lummus Co. v. Commonwealth Oil Ref. Co., Inc., 297 F.2d 80, 89 (2nd Cir. 1961), cert. denied 368 U.S. 986 (1962), the Second Circuit held that: [w]hether a judgment, not 'final' in the sense of 28 U.S.C. §1291, ought nevertheless be considered 'final' in the sense of precluding further litigation on the same issues, turns upon such factors as the nature of the decision (i.e., that it was not avowedly tentative), the adequacy of the hearing, and the opportunity for review. 'Finality' in the context here relevant may mean little more than that the litigation of a particular issue has reached such a stage that a court sees no really good reason for permitting it to be litigated again. 297 F.2d 80, 89. In the instant matter, the Second Circuit determined only that Magistrate Judge Homer's sanction decision against Appellant was non-final in the context of 28 U.S.C. §1291. (A-230;232) However, the nature of the proceeding in which the sanction decision was rendered was a discrete motion by the SEC for an order awarding The SEC also sought sanctions against Defendant Lynn Smith and David Wojeski based 5 upon substantially similar conduct. 13 sanctions against Appellant after Magistrate Judge Homer determined, based on documentary and testimonial evidence, that Appellant acted with subjective bad faith when she knowingly submitted a false declaration with the court, which was left uncorrected until the eve of the evidentiary proceeding. (A-191-222) The relief5 granted by Magistrate Judge Homer on that motion, namely the disgorgement of certain funds and formal admonishment (A-221-222), was not in any way temporary or provisional in nature, nor were any further proceedings relative to Appellant contemplated by that sanctions decision. Magistrate Judge Homer's sanctions decision against Appellant has every indicia of finality and should be treated as a conclusive adjudication on the issue of her misconduct inasmuch as that decision finally disposes of the matter of her credibility and the issue of whether she made knowingly false assertions and arguments in papers submitted in federal court in violation of Fed.R.Civ.P. 11 [28 U.S.C. §1927]. See e.g.: Riley v. Southern Transp. Co., 278 A.D. 605 (3rd Dept. 1951) (an order granting summary judgment finally disposes of the action, determines the issues between the parties, "and as long as it stands unreversed, is final and conclusive as a judgment after trial"). 14 While the Second Circuit declined to exercise jurisdiction over Appellant's appeal, the Court did not address or consider the issue of whether Magistrate Judge Homer's sanction order against Appellant was "final" for the purposes of applying collateral estoppel. Significantly, the Second Circuit remanded the matter in part, only for the limited purpose of having the District Court provide direction to the Receiver as to the disposition of trust assets. (A-235) The Second Circuit went so far as to say that it "in no way suggests that the District Court should determine its prior order with regard to the Trust is inappropriate." (A-235) The Second Circuit did not remand the matter to the lower court with any instruction to reconsider the sanctions against Appellant, nor would that decision in any way be affected, or otherwise altered, by anything the District Court did with respect to the Receiver. It is also important to note that the Second Circuit determined that it had jurisdiction over Defendant Smith's appeal and, upon review, affirmed the sanctions imposed against her based on conduct substantially similar to Appellant's. (A-232-235) Appellant, herself, believed that Magistrate Judge Homer's sanctions order was sufficiently "final" and "appealable" when she argued that the Second Circuit should apply the collateral order doctrine and assert appellate jurisdiction over her matter. For the collateral order doctrine to apply, the decision at issue must be "conclusive, that [it] resolve important questions separate from the merits, and that [it is] The Second Circuit was careful to note as follows:6 The fact that the particular sanctions before us were imposed in the context of an ancillary proceeding, and required evaluation of the accuracy and truthfulness of appeallants, does not alter the analysis. Although the particular issue giving rise to the sanctions here - Lynn Smith's monetary interest in the Trust - does not necessarily implicate the merits of the underlying securities fraud prosecution, ancillary proceedings often do implicate the underlying claims... Therefore, sanctions in these contexts also "often will be inextricably intertwined with the merits of the action" (internal citation omitted), and even if that is not necessarily the case here, the requisite catagorical analysis is not altered." (A-232) (emphasis added) 15 effectively unreviewable on appeal from the final judgment in the underlying action." (A-230) The Second Circuit rigidly applied the collateral order doctrine and declined to exercise jurisdiction over Appellant's appeal, explaining that: ... the collateral order doctrine is not one requiring a fact-specific, case by case analysis. Rather it is applied categorically. Therefore, even if a particular appeal satisfies the three conditions, we still lack jurisdiction if the appeal is of a type that does not generally fall within the doctrine." (A-230) 6 The Second Circuit, relying on Cunningham v. Hamilton Co., 527 U.S. 198, 204 (1999), held that "a sanctions order imposed on an attorney is not a 'final decision' under §1291, and is therefore not immediately appealable." (A-230) The Second Circuit further stated: ... we recognize that our conclusion may create hardships for Dunn and Wojeski. However, that fact does not serve to grant jurisdiction. See Cunningham, 527 U.S. 209-10, 119 S.Ct. 1915 ("Should these hardships be deemed to outweigh the desirability of restricting appeals to 'final decisions,' solutions other than an expansive interpretation of §1291's 'final decision' requirement remain available."). (A-232, fn. 10) 16 Appellant disagreed with the Second Circuit's decision to decline jurisdiction and represented to the Third Department in the context of her disciplinary proceeding that she intended to seek appellate review of the Second Circuit's decision. Specifically, by letter dated April 4, 2013 (RA-177-178), Appellant notified the Third Department that, [d]espite Magistrate Homer's egregious error, the Court of Appeals did not reach the merits of Ms. Dunn's appeal; rather the court ruled that because the underlying civil action, SEC v. McGinn Smith & Co., Inc, N.D.N.Y Index No. 10-cv-457-GLS-CFH, has not reached final judgment, the Court of Appeals lacked jurisdiction to review Magistrate Homer's decision at this time. We believe that the ruling of the Court of Appeals decided an important question of federal law that has not been, but should be, settled by the United States Supreme Court, or decided an important federal question in a way that conflicts with the relevant decisions of the Supreme Court. Accordingly, Ms. Dunn intends to file a petition for certiorari to review the Court of Appeals decision. A petition for certiorari must be filed within 90 days of the entry of judgment. Judgment was entered in the Court of Appeals on March 18, 2013, and a petition for certiorari must be filed by June 17, 2013. Based on our understanding of Supreme Court practice, and assuming a timely petition for certiorari is filed, we expect that the Supreme Court will decide whether to review the Court of Appeals decision no later than the end of September 30, 2013. (RA-178) Although Appellant represented to the Third Department that she would seek appellate review of the Second Circuit's sanctions order, upon information and belief, Appellant subsequently chose not to seek appellate review. It is, therefore, respectfully 17 submitted that any hardship Appellant now claims as a result of having to await resolution of the underlying action before she can appeal the sanctions order is self- created. It is further respectfully submitted that Appellant's decision not to seek a writ of certiorari rendered Judge Homer's sanctions order against her final for the purposes of collateral estoppel. As was noted in Interconnect Planning Corp. v. Feil, 774 F.2d 1132, 1135-1136 (Fed. Cir. 1985): [f]or collateral estoppel to arise the prior decision need not have been final in the sense of 28 U.S.C. §1291 but, in the words of the Restatement, the prior adjudication must have been 'sufficiently firm to be accorded conclusive effect'. Restatement (Second) of Judgments §13 (1982). Sufficient firmness, according to the Restatement, requires that the party against whom the estoppel is asserted have had the right, even if not exercised, to challenge on appeal the correctness of the earlier decision. Appellant does not argue before this Court that there is a lack of identicality of issues between the conduct for which Magistrate Judge Homer sanctioned her and her conduct which forms the basis of the disciplinary charges against her. In fact, a comparison of the issues raised and decided in the federal court proceeding and in the instant disciplinary proceeding reveals that the disciplinary charges against Appellant stem directly from her involvement in her representation of the Trust which was the subject of litigation commenced by the SEC and as a result of the false and fraudulent declarations she filed with the Court in connection therewith. As the Third 18 Department properly concluded in applying the doctrine of collateral estoppel, "...the [disciplinary] petition gave [Appellant] notice of the false statements at issue, that the falsity of the statements is the common and decisive issue decided by the Magistrate Judge and to be decided in this proceeding.' " (A-8-9) Nor does Appellant argue that she was deprived of a full and fair opportunity to litigate the issue of her misconduct before Magistrate Judge Homer. See, Gilberg v. Barbieri , 53 N.Y.2d 285 (1981). A review of Magistrate Judge Homer's decision dated July 20, 2011, reflects that Appellant vigorously contested the SEC's allegations against her. Contrary to Appellant's assertion made in her brief submitted to this Court, Magistrate Judge Homer's decision was not made on papers alone; Appellant failed to disclose in her appellate brief that she testified in the matter at an evidentiary hearing on November 16, 2010. (A182; 207 RA-38-67) That hearing was scheduled and held for the very fact that an assessment of Appellant's credibility was crucial to Magistrate Judge Homer's determination. Interestingly, [o]n the evening of November 15, 2010, hours before the start of the evidentiary hearing at which she was to testify, Dunn filed another declaration in which she stated in part: In assisting with the Trustee's response to Plaintiff's discovery demands, and in preparing for the evidentiary hearing, ..., I became aware that on July 21, 2010, David Wojeski emailed to me the [Annuity Agreement].... (A-207) The standard of proof applied by Magistrate Judge Homer in imposing sanctions against7 Appellant was by clear and convincing evidence which is a higher standard of proof than applied in disciplinary proceedings. See: Subpoint B, infra, p.25. 19 The next day, Appellant testified at the evidentiary hearing (A-207), after which Magistrate Judge Homer found that the SEC had demonstrated by clear and convincing evidence that Appellant deliberately and knowingly made false7 statements which were left uncorrected until the eve of the evidentiary hearing, thus unnecessarily extended and complicated preparations for that hearing. (A-209) It must also be recognized that prior to the SEC's motion for sanctions, Appellant, as attorney for the Trust, sought reconsideration of the Magistrate Judge Homer's November 22, 2010 Memorandum-Decision and Order, which provided the basis for the sanctions motion against Appellant and the others. Among the issues reconsidered were Appellant's credibility and the findings as to her ethical conduct. In the District Court's Memorandum-Decision and Order dated January 11, 2011, Magistrate Judge Homer reviewed the record in light of the Trust's new arguments and upheld its determination that Appellant's testimony in the prior proceedings was not credible and that she and the others "conceal[ed] the existence of the Annuity Agreement in the face of legal, ethical and professional obligations to the contrary." Securities and Exchange Commission v. Wojeski, et al. 2011 U.S. Dist. Lexis 158201 Magistrate Judge Homer further stated: "[o]n this issue, the facts remain unaltered that8 Dunn received actual knowledge of the existence of the Annuity Agreement on July 21, 2010, thereafter prepared declarations for herself and Wojeski asserting that they had no knowledge of the existence of the Annuity Agreement until advised of it on July 27, 2010, and failed to disclose her receipt of notice of the Agreement on July 21, 2010 until the eve of the hearing four months later." (SA-131) 20 (N.D.N.Y.2011). (RA 130-132) The Trust's motion for reconsideration was then8 denied in all respects. (RA-132). In view of the foregoing, Appellant's conduct was thoroughly considered on three separate occasions by the District Court before the Third Department applied collateral estoppel to the sanctions decision. In fact, the Third Department specifically determined that "...[Appellant] was allowed and availed herself of a full opportunity to contest the allegations and the motion for sanctions." (A-9) Accordingly, it cannot be said that Appellant did not have a full and fair opportunity to litigate the issues surrounding the imposition of the sanctions. Although the impact of the Second Circuit's decision not to exercise jurisdiction appears to have left Appellant in the position of having to wait until a final decision is rendered in the underlying action by federal court at a future unknown date, Appellant stated that she was going to petition the United States Supreme Court for a writ of certiorari. (RA-178) At the time Appellant so advised the Third Department disciplinary charges had been pending against her for approximately sixteen (16) 21 months and multiple requests for extensions to respond to the disciplinary charges had been granted by the Third Department. (RA-133-183) The Committee consented to those adjournments until October 4, 2012, when it first took the position that the disciplinary proceeding should not be held in abeyance for an inordinate period, and further advised that the pendency of an appeal was no reason to delay a disciplinary action, citing Matter of Miller, 246 A.D.2d 35 (1st Dept. 1998). (RA-163; 168; 179) In Miller, a disciplinary action was brought against an attorney for disbarment based upon his conviction in Federal Court on several counts of fraud. (RA-163) In denying the respondent attorney's request to adjourn the disciplinary proceeding because the pendency of an appeal is not a basis to delay any action, the First Department noted that "any disciplinary sanction may be revoked in the event of a successful appeal...". Id at 36. (RA-163) It is well-settled in New York that the mere pendency of an appeal does not prevent the use of the challenged judgment as the basis for collaterally estopping a party to that judgment in a second proceeding. Franklin Development Co., Inc v. Atlantic Mutual Insurance Company, 60 A.D.3d 897 (2nd Dept. 2009); Matter of Amica Mutual Insurance Company v. Jones, 85 A.D.2d 727 (2nd Dept. 1981); Anonymous v. Dobbs Ferry Union Free School District, 19 A.D.3d 522 (2nd Dept. 2005); Caldwell v. Gutman, Mintz, Baker & Sonnenfeldt, P.C., 2012 U.S. Dist. Lexis 22 43280 (E.D.N.Y. 2012). For example, in Anonymous v. Dobbs Ferry Union Company, supra, the Second Department held that despite a pending appeal from a judgment of conviction, the plaintiffs were entitled to summary judgment against defendant on the issue of liability based upon the collateral estoppel doctrine. In the context of a disciplinary proceeding, the fact that an attorney took an appeal from an adverse sanctions finding against him did not prevent a court in imposing professional discipline against him while an appeal from that sanction was pending. Matter of Capoccia, 272 A.D.2d 838, 847 (3rd Dept. 2000); Matter of Beard v. Town of Newburgh, 259 A.D.2d 613 (2nd Dept. 1999); Samhammer v. Home Mutual Insurance Company, 120 A.D.2d 59 (3rd Dept. 1986). The Committee on Professional Standards ultimately moved pursuant to 22 NYCRR 806.5 on the grounds that no material question of fact existed and requested the Court apply the doctrine of collateral estoppel to the sanctions decision. (A-33-40) Upon assuring itself that all aspects of due process were complied with and that the issues were identical with respect to both proceedings, the Third Department by way of Confidential Memorandum dated July 18, 2013, granted the Committee's motion pursuant to 22 NYCRR §806.5. (A-7-9) The Third Department properly concluding that "the appellate status" should not prevent it from reviewing Magistrate Judge Homer's sanctions decision, applied collateral estoppel to the sanctions decision. (A-9) 23 Unlike the catagorical, rigid application of the collateral order doctrine, the Third Department recognized that the collateral estoppel doctrine is a flexible one, and its elements are intended merely as a framework, not a substitute, for case-by- case analysis of the facts and realities. In the end, the fundamental inquiry is whether re-litigation should be permitted in a particular case in light of ... fairness to the parties, conservation of the resources of the court and litigants, and the societal interests in consistent and accurate results. No rigid rules are possible, because even these factors may vary in relative importance depending on the nature of the proceedings. See, Staatsburg Water Co. v. Staatsburg Fire Dist., 72 N.Y.2d 147, 153 (1988). It is respectfully submitted that the foregoing case law regarding the fact that the pendency of an appeal does not forestall the application of collateral estoppel fully supports the Committee's position to go forward with the disciplinary proceeding. To have allowed Appellant to seek further appellate review of Magistrate Judge Homer's sanctions decision and the Second Circuit's decision declining jurisdiction over her appeal, while concomitantly delaying the review of her misconduct by the Third Department would be counterproductive to the interests of the Court in preserving the reputation of the bar and protecting the public in a timely fashion. Accordingly, the Third Department was correct in applying collateral estoppel in the context of the disciplinary proceeding and finding Appellant guilty of the charged professional misconduct. 24 B. Appellant was Afforded Adequate Procedural Protections Before Sanctions Were Imposed Against Her. Thus, Collateral Estoppel Was Properly Applied in the Disciplinary Proceeding. Appellant's contention that collateral estoppel should not have been applied by the Third Department because prior to being sanctioned by Magistrate Judge Homer she was denied procedural protections available to a party in a civil action, such as discovery, the opportunity to cross-examine adverse witnesses, and a trial before a neutral fact-finder, much less stringent protections available to defendants in criminal cases, is without merit. Prior to the imposition of sanctions, Appellant was afforded a full evidentiary hearing at which she testified on November 16, 2010. (A-182;107; RA-38-67) Appellant was afforded this evidentiary hearing because an assessment of her credibility was crucial to Magistrate Judge Homer's determination. Thereafter, the SEC moved for sanctions against Appellant and others. While a second evidentiary hearing was not held in connection with that motion, Magistrate Judge Homer relied on Appellant's written submissions, the record generated in connection with the motions for a preliminary injunction against the Trust and Appellant's testimony from the evidentiary hearing on November 16, 2010, when he held: The record here this demonstrates by clear and convincing evidence that Dunn's false statement in her declaration filed on September 3, 2010 that she did not learn of the Annuity Agreement until it was provided to her on July 27, 2010 by Urbelis was knowingly false. ... Dunn's false statement, left uncorrected until the eve of the evidentiary hearing on November 16, 2011, unnecessarily extended and complicated Brief for Appellant, pg. 28.9 25 preparations for that hearing. This suffice's to meet the SEC's burden of demonstrating subjective bad faith under Rule 11(c)(3), §1927, and the inherent power doctrine. Accordingly, the SEC's motion as to Dunn is granted as to the September 3 declaration. (A-209) Thus, her claim that the sanctions decision was made "on papers alone" , or otherwise9 lacked procedural protection, is a misrepresentation, and most significantly, is not credible. As the SEC aptly pointed out in its brief to the Second Circuit dated February 2012, "Notably, Dunn did not seek, before the magistrate judge, reconsideration of this aspect of the sanctions. Dunn should have known that an admonishment and referral were possible sanctions the judge could order against her. As an attorney practicing in federal court Dunn was responsible for being familiar with Rule 11, one of the provisions under which the Commission sought sanctions, and that Rule states that a sanction "may include nonmonetary directives." Fed. R. Civ.P. 11(c)(4). Respondent also respectfully notes that Magistrate Judge Homer's July 20, 2010 sanction order was rendered only after the issues resolved against Appellant were established by clear and convincing evidence (A-209), which is a higher standard of proof than that applied in an attorney disciplinary proceeding. This Court has consistently held that the standard of proof applicable to attorney disciplinary 26 proceedings in each of the Appellate Divisions is by a fair preponderance of the evidence. Matter of Capoccia, 59 N.Y.2d 549 (1983); In re Seiffert, 65 N.Y.2d 278 (1985). Thus, Appellant's misconduct already having been established in accordance with a higher standard of proof, there is no logical argument to be made that the sanctions decision should not be given conclusive effect in the disciplinary proceeding. Finally, Appellant's disciplinary proceeding was pending before the Third Department for approximately sixteen (16) months. The Committee on Professional Standards, as a matter of courtesy, consented to repeated adjournments despite its concern over the inordinate delay of resolution of the disciplinary proceeding. (RA- 163;168;179) In that the purpose of the attorney disciplinary process is to protect the public generally by enforcing the Rules of Professional Conduct to insure the competency, honesty and integrity of the profession, Appellant's disciplinary action could not be allowed to pend without date. The Third Department recognized this and, after a considerable period of adjournment, properly held that collateral estoppel applied regardless of the appellate status of the Magistrate Judge's decision and order. CONCLUSION Based upon the foregoing, it is respectfully submitted that the Appellate