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The North Carolina State Bar v. Livingston

Court of Appeals of North Carolina

December 19, 2017

THE NORTH CAROLINA STATE BAR, Plaintiff
v.
CHRISTOPHER W. LIVINGSTON, Attorney, Defendant

          Heard in the Court of Appeals 5 September 2017.

         Appeal by defendant from orders entered 1 July 2015, 8 and 24 February 2016, 8, 9, and 18 March 2016, and 14 July 2016, by the Honorable Beverly T. Beal, Hearing Panel Chair of the North Carolina State Bar No. 15 DHC 15, Disciplinary Hearing Commission.

          Deputy Counsel David R. Johnson and Counsel Katherine Jean for plaintiff-appellee, The North Carolina State Bar.

          Christopher W. Livingston, defendant-appellant pro se.

          BRYANT, Judge.

         Where the Disciplinary Hearing Commission's conclusions that Christopher W. Livingston violated the Rules of Professional Conduct are supported by the findings of fact which are in turn supported by the evidence, and where Livingston's conduct caused significant harm or potentially significant harm to the public, the profession, or the administration of justice, we affirm the order disciplining Livingston and imposing a five year suspension of a law license with an opportunity to petition for a stay after two years.

         In March 2008, defendant Christopher W. Livingston, an attorney, entered into an agreement with a business known as Credit Collections Defense Network ("CCDN") to serve as an "Associate Attorney." In that position, Livingston agreed to accept referrals of debt-laden consumers from CCDN, which is not a law firm, whereby CCDN would collect fees from customers and convey a portion to Livingston for his legal services to those customers. Per the agreement, Livingston was responsible for "legal advice, litigation, filing of pleadings, discovery responses (if necessary), and . . . cover[ing] court appearances (if necessary)" for CCDN's customers.

         Around 20 April 2008, Livingston concluded that CCDN was engaged in the unauthorized practice of law by preparing court documents for CCDN's customers to file pro se. Livingston so advised CCDN through its representative, Colleen Lock, but did not terminate his relationship with CCDN. As such, CCDN continued to represent to North Carolina residents that CCDN was affiliated with licensed North Carolina lawyers, namely Livingston.

         In September 2008, Livingston filed three lawsuits against CCDN (respectively, "Lawsuits 1, 2, and 3") in Bladen County District Court on behalf of three CCDN customers-William Harrison, Sheryl Lucas, and Cathy Hunt-alleging fraud, unfair and deceptive trade practices, gross and willful legal malpractice, and violations of both the North Carolina and federal Racketeer Influenced and Corrupt Organizations Acts ("RICO"). Livingston named a number of individuals and out-of-state business entities, including Robert Lock, Philip Manger, and R.K. Lock & Associates d/b/a "CCDN, " but did not name the legal entity "CCDN, LLC" as a defendant. After making appearances to challenge personal jurisdiction over the named defendants, counsel for CCDN informed Livingston that CCDN was a limited liability company organized in Nevada. Livingston confirmed that fact but did not amend the complaints he had filed.

         On 7 January 2009, while Lawsuits 1, 2, and 3 were still pending, Livingston filed another lawsuit ("Lawsuit 4") in Bladen County Superior Court against many of the same individual named defendants. Lawsuit 4 also named CCDN, LLC as a defendant. Livingston framed Lawsuit 4 as a class action and named an individual plaintiff, Sharon Southwood, as the class representative.[1] In a motion to certify the class, Livingston stated that he would not provide notice to class members as required by law. No class was ever certified.

         In May 2009, the trial court dismissed Lawsuits 1, 2, and 3 for failure to name a necessary party-CCDN, LLC-and for lack of personal jurisdiction over the remaining defendants. The trial court concluded that none of the individual defendants had sufficient minimum contacts for personal jurisdiction before a North Carolina court. See Lucas v. R.K. Lock & Assocs., Nos. COA10-874, COA10-875, COA10-891, 2011 WL 721289, at **5-6 ( N.C. Ct. App. Mar. 1, 2011) (unpublished), rev. denied, 365 N.C. 347');">365 N.C. 347 (2011).[2]

         On 11 November 2009, Livingston commenced a RICO class action against CCDN and other named defendants in U.S. District Court for the Eastern District of North Carolina ("Lawsuit 5"). On or about 17 November 2009, Livingston contacted a South Carolina attorney, Andrew Arnold, who was representing CCDN in South Carolina litigation. Livingston left Arnold a voicemail message stating that he represented a "national class" in his suit, that Arnold had participated in a money laundering scheme by accepting legal fees from CCDN, and demanded that Arnold forfeit to Livingston all fees he had received from CCDN. Livingston also threatened to join Arnold in Lawsuit 5.

         A week later, Livingston filed an amended complaint in Lawsuit 5, adding Arnold, Arnold's firm, the North Carolina lawyer who represented CCDN in Lawsuits 1-4 (Lee Bettis), Bettis's firm, and individual members of Bettis's firm who had not participated in representing CCDN. Livingston accused the lawyers and their firms of having knowledge of their clients' fraudulent conduct and participating in the fraud by accepting legal fees and representing CCDN clients. The federal court later dismissed the aforementioned lawyers and their firms from Lawsuit 5 as Livingston had no basis in law or fact to sue them. See Taylor v. Bettis, 976 F.Supp.2d 721, 733-34, 736-39, 741-42, 745-47, 752-54 (E.D. N.C. 2013) (denying defendants' motion to dismiss but finding for defendants on their motion for judgment on the pleadings and dismissing plaintiffs' claims).

         While Lawsuit 5 was still pending, on 7 January 2011, Livingston filed Lawsuit 6 in Columbus County Superior Court against the North Carolina attorneys on substantially the same underlying facts as alleged in Lawsuit 5. By email, Livingston informed Philip Collins, opposing counsel for the North Carolina attorneys in Lawsuit 6, that he planned to file suits against them each month for the remainder of the year. On 22 February 2011, the Columbus County Superior Court dismissed Lawsuit 6, which dismissal was affirmed by this Court. Cullen v. Emanuel & Dunn, PLLC, No. COA11-921, 2012 WL 3573696, at *3, *11 ( N.C. Ct. App. Aug. 21, 2012) (unpublished).

         On 10 April 2015, the North Carolina State Bar filed a complaint with the Disciplinary Hearing Commission (the "DHC") against Livingston alleging attorney misconduct in violation of the North Carolina Rules of Professional Conduct ("RPC"). Livingston filed his answer on 4 May 2015.

         A hearing was held before the DHC from 17 to 20 May 2016. On 14 July 2016, the DHC entered its Order of Discipline suspending Livingston's law license for five years with the possibility of a stay after two years. On 5 August 2016, Livingston filed notice of appeal from the Order of Discipline and other orders entered against him.[3]

         On appeal, Livingston argues the DHC (I) violated his due process and equal protection rights; (II) erroneously found RPC violations; and (III) ordered excessive discipline.

         I

         Livingston first argues the DHC violated his due process and equal protection rights, arguing that he received "no meaningful evidentiary hearing." Specifically, Livingston argues the DHC took an insufficient amount of time to consider the evidence presented, the State Bar engaged in prosecutorial misconduct, and the findings of fact in the DHC's order are vague. We disagree.

         "The standard of review for alleged violations of constitutional rights is de novo." State v. Graham, 200 N.C.App. 204, 214, 683 S.E.2d 437, 444 (2009) (citation omitted). However, "a constitutional question which is not raised and passed upon in the trial court will not ordinarily be considered on appeal." State v. Hunter, 305 N.C. 106, 112, 286 S.E.2d 535, 539 (1982) (citations omitted).

         To the extent Livingston makes a constitutional challenge for the first time on appeal, he contends he received "no meaningful evidentiary hearing, violating his Fourteenth Amendment due process and equal protection and N.C. Const. Art. I § 19 Law-of-the-Land rights[.]" We briefly address this argument.

         Based on our thorough review of the record in this case, we are satisfied that "the DHC conducted a fair and unbiased process that fully comported with the principles of due process." See N.C. State Bar v. Sutton, ___ N.C.App. ___, ___, 791 S.E.2d 881, 891 (2016), appeal dismissed, ___ N.C. ___, 797 S.E.2d 296 (2017). Due process was satisfied where Livingston was given notice of the allegations against him, he filed an answer to the DHC's complaint, served discovery on the DHC, took depositions, attended the trial, examined witnesses, and made arguments before the DHC, availing himself of a full and fair opportunity to participate. See N.C. State Bar v. Braswell, 67 N.C.App. 456, 458, 313 S.E.2d 272, 274 (1984) ("The filing of a formal complaint satisfies [a] defendant's right to be informed of and respond to the charges against him."). Contrary to Livingston's argument, due process does not require the DHC to deliberate for any prescribed length of time. Livingston also alleges the State Bar engaged in prosecutorial misconduct by failing to correct false testimony given by Bettis. But Livingston is unable to show that Bettis's testimony was false, and is therefore unable to sustain a claim of prosecutorial misconduct based on "failure to correct false testimony." Finally, as set forth in Section II, infra, the findings of fact in the Order of Discipline are not vague. Indeed, the DHC "ruled on numerous motions filed by [Livingston] and issued orders containing detailed findings of fact and conclusions of law. Therefore, the record belies [Livingston's] assertion that he was denied due process in connection with his disciplinary proceeding." Sutton, ___ N.C.App. at ___, 791 S.E.2d at 891. Accordingly, Livingston's argument that the DHC violated his due process and equal protection rights, as well as his N.C. Constitutional rights, is overruled.

         II

         Livingston next argues the DHC erroneously found that he violated the Rules of Professional Conduct because the findings of fact are not supported by the evidence. We disagree.

         Appeals from orders of the DHC "are conducted under the 'whole record test, ' which requires the reviewing court to determine if the DHC's findings of fact are supported by substantial evidence in view of the whole record, and whether such findings of fact support its conclusions of law[.]" N.C. State Bar v. Talford, 356 N.C. 626, 632, 576 S.E.2d 305, 309 (2003) (internal citations omitted).

Such supporting evidence is substantial if a reasonable person might accept it as adequate backing for a conclusion. The whole-record test also mandates that the reviewing court must take into account any contradictory evidence or evidence from which conflicting inferences may be drawn. Moreover, in order to satisfy the evidentiary requirements of the whole-record test in an attorney disciplinary action, the evidence used by the DHC to support its findings and conclusions must rise to the standard of "clear[, cogent, ] and convincing."

Id. at 632, 576 S.E.2d at 309-10 (alteration in original) (internal citations omitted) (quoting In re Suspension of Palmer, 296 N.C. 638, 648, 252 S.E.2d 784, 790 (1979)). "Ultimately, the reviewing court must apply all the aforementioned factors in order to determine whether the decision in the lower body, e.g., the DHC, 'has a rational basis in the evidence." Id. at 632-33, 576 S.E.2d at 310 (citation omitted) (quoting In re Rogers, 297 N.C. 48, 65, 253 S.E.2d 912, 922 (1979).

[U]nder the whole record test, . . . the following steps are necessary as a means to decide if a lower body's decision has a "rational basis in the evidence": (1) Is there adequate evidence to support the order's expressed finding(s) of fact? (2) Do the order's expressed finding(s) of fact adequately support the order's subsequent conclusion(s) of law? and (3) Do the expressed findings and/or conclusions adequately support the lower body's ultimate decision? . . . [I]n cases such as . . . those involving an "adjudicatory phase" (Did the defendant commit the offense or misconduct?), and a "dispositional phase" (What is the appropriate sanction for committing the offense or misconduct?), the whole-record test must be applied separately to each of the two phases.

Id. at 634, 576 S.E.2d at 311.

         A. Conclusions 2(a) and 2(b)

         Livingston challenges Conclusions 2(a) and 2(b) as unsupported by the findings of fact, specifically Findings of Fact Nos. 4-12, as he contends those findings are not supported by competent evidence. Conclusions 2(a) and 2(b) state as follows:

(a) By entering into a contractual agreement with CCDN which contemplated the sharing of legal fees with a nonlawyer in violation of Rule 5.4(a), Livingston attempted to violate the Rules of Professional Conduct in violation of Rule 8.4(a);
(b) By affiliating with CCDN and providing legal services to customers of CCDN, which was engaged in the unauthorized practice of law in North Carolina, Livingston assisted another in the unauthorized practice of law in violation of Rule 5.5(d)[.]

         Findings of Fact Nos. 4-12 are as follows:

4. In March 2008, Livingston entered into a contractual agreement with Credit Collections Defense Network, LLC ("CCDN"), whereby CCDN would refer debtors seeking debt-relief assistance to Livingston for legal representation (this contract hereinafter referred to as "the Associate Attorney Agreement").
5. CCDN was not a law firm, and was not authorized to engage in the practice of law in North Carolina.
6. The Associate Attorney Agreement provided that CCDN would collect fees from customers and then remit a portion of those fees to Livingston for legal services Livingston rendered to those customers.
7. The Associate Attorney Agreement provided that CCDN would "prepare drafts of all [court] filings for review and approval" by Livingston.
8. The Associate Attorney Agreement prohibited Livingston from "directly or indirectly attempting in any manner to persuade any client of CCDN to cease to do business with or to reduce the amount of business which any such client has customarily done or actively contemplates doing with CCDN."
9. On or about 20 April 2008, Livingston determined that CCDN and/or its marketing partners had prepared legal documents for CCDN customers to file pro se or to be used to otherwise guide pro se litigation and thus had engaged in the unauthorized practice of law.
10. On or about 20 April 2008, Livingston advised a CCDN representative, Colleen Lock, that, in preparing pleadings to be filed pro se, CCDN was engaged in the unauthorized practice of law.
11. Despite becoming aware, at least as early as April 2008, that CCDN was engaged in the unauthorized practice of law, Livingston accepted additional clients from CCDN rather than immediately terminate his contractual relationship with CCDN.
12. Livingston aided CCDN's unauthorized practice of law in North Carolina by maintaining his affiliation with CCDN. This allowed CCDN to continue to represent to North Carolina residents that it was affiliated with licensed lawyers in the state.

         1. Conclusion 2(a)-Sharing of Legal Fees

         Livingston contends that because he at most agreed to share fees, and binding precedent holds that "agreement" falls short of "attempt, " Findings of Fact 4-12 are "legally erroneous, " and the DHC's conclusions that he violated Rule 5.4(a) (sharing legal fees with a nonlawyer) and attempted to violate Rule 8.4(a) (violating/attempting to violate the RPC or knowingly assist another to do so) should be vacated.

         Rule 5.4(a) states that "[a] lawyer or law firm shall not share legal fees with a nonlawyer . . . ." N.C. Rev. R. Prof. Conduct, Rule 5.4(a) (2015). Although the Rules of Professional Conduct are not criminal statutes, Livingston's conduct in agreeing to share fees with CCDN met each of the required elements for criminal attempt: "(1) the intent to commit the substantive offense, and (2) an overt act done for that purpose which goes beyond mere preparation, but (3) falls short of the completed offense." State v. Coble, 351 N.C. 448, 449, 527 S.E.2d 45, 46 (2000) (citation omitted) (quoting State v. Miller, 344 N.C. 658, 667, 477 S.E.2d 915, 921 (1996)). Here, the findings of fact show that Livingston (1) intended to improperly share fees with CCDN, a nonlawyer entity, and entered into a contract for that purpose; (2) performed his services under the contract; and (3) expected to be paid, but was not. These findings, which support Conclusion 2(a), are also supported by the evidence.

         First, Livingston has offered no evidence that contradicts the findings other than his declaration that it was not his intent to share fees with a nonlawyer.[4] Second, Livingston testified he entered into the agreement, the agreement itself was entered into evidence at trial, and one of Livingston's own witnesses testified the only reason fee sharing never happened was because CCDN failed to make the payments. Accordingly, the findings of fact are supported by the evidence, which in turn support the DHC's conclusion that Livingston entered into an agreement which contemplated the sharing of legal fees with a nonlawyer entity in violation of Rule 5.4(a).

         2. Conclusion 2(b)-Assisting Another in the Unauthorized Practice of Law

         The version of Rule 5.5(d) in effect at the time of Livingston's conduct provided that "[a] lawyer shall not assist another person in the unauthorized practice of law." N.C. R. Prof. Cond., Rule 5.5(d) (2016).[5] The unauthorized practice of law in North Carolina is defined by statute, see N.C. Gen. Stat. § 84-2.1 (2015), which prohibits the practice of law by corporations:

It shall be unlawful for any corporation to practice law . . . or hold itself out to the public or advertise as being entitled to practice law; and no corporation shall organize corporations, or draw agreements, or other legal documents, or draw wills, or practice law, or give legal advice, or hold itself out in any manner as being entitled to do any of the foregoing acts, by or through any person orally or by advertisement, letter or circular.

N.C. Gen. Stat. § 84-5(a) (2015). Under North Carolina law, a business corporation may not provide legal services or the services of lawyers even if those services are performed by licensed North Carolina attorneys. See Gardner v. The N.C. State Bar, 316 N.C. 285, 294, 341 S.E.2d 517, 523 (1986).

         Here, Livingston concedes that CCDN was engaged in the unauthorized practice of law. Livingston claims to have learned that CCDN was so engaged in April 2008, after CCDN customers referred to him told him what CCDN was doing. Livingston also concedes that he did not end his relationship with CCDN for another six weeks. Thus, even if Livingston did not become aware that CCDN was engaged in the unauthorized practice of law before April 2008, by his own concession, his failure to immediately terminate his relationship with CCDN when he did become aware of its unauthorized practice of law enabled CCDN to continue to promote having a North Carolina attorney (Livingston) available for its customers. Livingston's challenges to Conclusion 2(b) and the supporting findings of fact are unavailing and are overruled.

         B. Conclusion 2(c)

         Livingston challenges the DHC's Conclusion 2(c) as unsupported by the findings of fact, specifically Findings of Fact Nos. 13-29, as he contends those findings are not supported by competent evidence. Conclusion 2(c) states that "[b]y filing civil actions against defendants in a court that he knew lacked the ability to obtain jurisdiction over the defendants and by failing to join necessary defendants in those actions, Livingston engaged in conduct prejudicial to the administration of justice in violation of Rule 8.4(d)[.]" Findings of Fact Nos. 13-29 are as follows:

13. Later in 2008, after undertaking representation of several clients that CCDN referred to Livingston, Livingston concluded that CCDN practices were frivolous and fraudulent and began representing CCDN customers against CCDN.
14. In September 2008, Livingston filed three complaints against CCDN on behalf of clients CCDN had referred to Livingston.
15. Livingston filed these three complaints in Bladen County District Court (hereinafter collectively referred to as "the Bladen County actions").
16. The Bladen County actions were captioned as follows: (i) Hunt v. R.K. Lock & Associates, an Illinois general partnership d/b/a Credit Collections Defense Network or CCDN; Robert K. Lock Esp.; Colleen Lock; Philip M. Manger Esq.; Tracy Webster; and Lawgistix, LLC, a Florida limited liability company, Defendants, Bladen County District Court file no. 08 CVD 883; (ii) Lucas v. R.K. Lock & Associates, an Illinois general partnership d/b/a Credit Collections Defense Network or CCDN; Robert K. Lock Esq.; Colleen Lock; Philip M. Manger Esq.; and Mark A. Cella, Bladen County District Court file no. 08 CVD 884, (iii) Harrison v. Aegis Corporation, a Missouri corporation; Debt Jurisprudence, Inc., a Missouri corporation; R.K. Lock & Associates, an Illinois general partnership d/b/a Credit Collections Defense Network or CCDN; Robert K. Lock Esq.; Colleen Lock; Philip M. Manger Esq.; David Kramer; Marcia M. Murphy; and Tracy Webster, Defendants, Bladen County District Court file no. 08 CVD 885.
17. Livingston alleged on behalf of his clients in the Bladen County action that the defendants' actions constituted unfair and deceptive trade practices, fraud, breach of contract, gross and willful legal malpractice, violations of the "North Carolina Racketeer and Corrupt Organizations Act", violations of the "Credit Repair Organizations Act", and violations of the Racketeer Influenced and Corrupt Organizations Act."
18. Livingston further alleged that "CCDN sometimes refers to itself as 'CCDN LLC' but no limited liability company by that name can be found meaning that CCDN is a general partnership."
19. None of the other defendants Livingston named in the Bladen County actions had personal minimum contacts with the State of North Carolina.
20. Those defendants only had contact with North Carolina by and through their employment by or ...

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