K. William Clauson (2007)

2003, including multiple attachments, Mr. Cole alleged that Mr. Clauson had engaged in New Hampshire attorney is David N. Cole of Hanover, N.H. By letter of November 24, 3. This matter was initiated by referral under N.H. R. Prof. Conduct S.3(a). The referring Clauson, Struckhoff & Kelly and Clauson, Smith & Whelan. proceeding, Mr. Clauson practiced alone and as a partner in the Hanover firms of Spaneas at Buck Road in Hanover, New Hampshire. At other times material to this 2. Mr. Clauson's current place of business is the Law Offices of Clauson Atwood & admitted to practice in this state in 1971. 1. Respondent K. William Clauson is licensed to practice law in New Hampshire. He was convincing evidence: The Professional Conduct Committee makes the following Findings of Fact by clear and

Ie FACTUAL FINDINGS

Simon from its deliberations. The Professional Conduct Committee voted to exclude testimony of Professor Mitchell

Tenn, Jr. abstained. Connair. David N. Cole and David N. Page were recused, Gerald A. Daley was absent, James J. Alan J. Cronheim, Richard H. Darling, Gretchen Rule Hamel, James R. Martin and Thomas P. Committee. Members present included: Margaret H. Nelson, Chair, Toni M. Gray, Reporter, On September IS, 2007, this matter was deliberated by the Professional Conduct

Clauson, K. William advs. Attorney Discipline Office # 03-099

Gerald A. Daley* Holly B. Fazzino, Admin. Coordinator Alan J. Cronheim * non attorney member Thomas P. Connair James J. Tenn, Jr. David N. Cole David N. Page* Toni M. Gray, * Vice Chair 603-224-5828. Fax 228-9511 James R. Martin Benette Pizzimenti, Vice Chair Concord, New Hampshire 03301 Gretchen Rule Hamel Margaret H. Nelson, Chair 4 Chenell Drive, Suite 102 Richard H. Darling*

for each physician owner to sign, as well a buy-out agreement. agreement and, in the following September, drafted a proposed employment agreement 9. In January 1979, Mr. Clauson conferred with FHC about a proposed shareholder's

and Stock Redemption Agreements for FHC 1979-80: Mr. Clauson Prepared Original Employment

then handled the incorporation ofFHC, which was completed in January 1979. under which Dr. Kowles might buy in to the business as a one-third owner. Mr. Clauson pertaining to the medical practice, including the possibility of incorporation and terms 8. In December, 1978, Mr. Clauson first analyzed various business matters and alternatives the partnership. Partnership Agreement. Dr. Kowles had joined the practice in 1977 as an employee of of Drs. Hugh Bower and Dennis McCullough, operating at the time under a 1976 7. In 1978, Mr. Clauson was retained to serve as counsel to the original medical partnership

1978: Mr. Clauson Began Serving as Corporate Counsel

matters, including the contractual relationship it had with Dr. Kowles. partnership that existed prior to incorporation) in connection with various business 6. From 1978 to 1995, Mr. Clauson and his firm represented FHC (or the medical Health Center, P.A., Grafton County Superior Court Docket No. 03-E-0203). behalf of Dr. Kowles (James Kowles v. Ernst Oidtman, Carrie Webber, and Family became the subject of a Petition in Equity filed by Mr. Clauson on August 20, 2003, on interest in the Mascoma River Medical Group, a real estate partnership. These disputes medical practice in Lebanon, New Hampshire. A related dispute involved Dr. Kowles' former employer, Family Health Center, P.A. (hereinafter referred to as"FHC"), a 5. The conflict issue arose in the context of a dispute between Dr. James Kowles and his 4. Mr. Clauson responded to the complaint through counsel by letter of January 6,2004. Hampshire Rules of Professional Conduct. professional misconduct by operating under a conflict of interest in violation of the New p. 3 Page 3 of 13

valued on a"modified accrual basis." shareholders' stock would be redeemed and sold, and provided that FHC stock would be the participating physician shareholders, addressed conditions under which the collaboration with Mr. Gourley provided for the equal ownership ofFHC stock among 16. The 1980 Stock Redemption Agreement prepared and/or reviewed by Mr. Clauson in Stock Redemption Agreement"). Redemption Agreement dated February 1, 1980 (hereinafter referred to as the"1980 15. The four physician shareholders ofFHC, including Dr. Kowles, executed a Stock 14. Mr. Clauson drafted the right of first refusal and employment agreements. agreements for each of the doctors. and right of first refusal in connection with the practice's property, as well as employment forwarded it to FHC for its review. He also recommended that his client consider a lease 13. In September 1980, Mr. Clauson drafted a proposed shareholder buy-out agreement and Gourley. how the buy-in would be accomplished and suggested reviewing the transaction with Mr. stock to a fourth physician, Dr. Ernst Oidtman. Mr. Clauson addressed the question of 12. In July, 1980, Mr. Clauson consulted further with FHC in anticipation ofthe sale of stock, including reference to"cash basis" and"modified accrual basis." conversations with Mr. Gourley included discussion of a formula for valuation ofFHC business management consultant, W.J. Godfrey ("Zeke") Gourley. Mr. Clauson's 11. In connection with the foregoing analysis and plan, Mr. Clauson collaborated with FHC's relationship of all three doctors as employees ofFHC. the prior partnership agreement), governing the employment and compensation also enclosed the proposed draft employment agreement he had prepared (also based on and which Mr. Clauson expected to revise in 1980 to include Dr. Kowles. Mr. Clauson shareholder's agreement, which was based in part on the existing partnership agreement and sale and distribution of stock. Mr. Clauson referenced his work on the initial regarding the new professional association, including capitalization, transfer of assets, 10. In his letter of October 15, 1979, Mr. Clauson provided FHC with further legal analysis p. 4 Page 4 of 13

associated with Dr. Fraser's arrival, including the 1983 Employment and 1983 Stock Smith was thereafter involved in drafting, preparing, and/or reviewing any documents handle the transaction associated with the arrival of Dr. Fraser. To the extent that Mr. 22. In or about May 1983, Mr. Clauson assigned his then-associate, Daniel G. Smith, Esq., to inception of that relationship. contractual relationship between FHC and Dr. Kowles that had been in effect from the Stock Redemption Agreement," contained the same basic features governing the hereinafter referred to respectively as the"1983 Employment Agreement" and the"1983 updated, revised employment and stock redemption agreements. These agreements, 21. In 1983, Dr. Linda Fraser"bought in" to the practice and each of the doctors signed

and as corporate counsel to FHC. 20. Mr. Clauson and his firm served for several years thereafter as custodian of the records and records thereof. Mr. Clauson also made recommendations regarding shareholder and directors' meetings proposed changes in the stock redemption agreement and that he agreed with all of them. each ofthe shareholders, including Dr. Kowles. He confirmed he had reviewed the 19. On March 27, 1981, Mr. Clauson wrote to FHC, enclosing original stock certificates for redemption agreement prepared by the client and/or Mr. Gourley. 18. Prior to March 27, 1981, Mr. Clauson reviewed proposed revisions to the stock on the practice of any departing physician. dealing with the departure or termination of any of the physicians, as well as limitations of profits while employed, resolution of disputes through arbitration, and provisions the employee physicians, including provisions relating to compensation and distribution 1980 Employment Agreement set forth the duties and responsibilities ofFHC and each of with Mr. Gourley (hereinafter referred to as the"1980 Employment Agreement"). The an employment agreement prepared and/or reviewed by Mr. Clauson in collaboration 17. On or about December 2, 1980, each ofthe doctors, including Dr. Kowles, also executed p. 5 Page 5 of 13

served to preserve and extend the original contractual relationship between FHC (hereinafter referred to as the"2002 Shareholders Agreement") signed by Dr. Kowles to as the"2002 Employment Agreement") and the renamed stock redemption agreement Oidtman and Webber in January 2002. The employment agreement (hereinafter referred firm, prepared updated, revised contract documents which were executed by Drs. Kowles, 27. Consistent with Mr. Bridgman's recommendations, Mr. Smith, now with his own law physician, Dr. Carrie Webber. 26. In December, 2001, FHC consulted with Mr. Bridgman about the buy-in of a new

opened his own practice, and FHC decided to retain Mr. Smith as corporate counsel. 25. In or about 1995, the Clauson firm ceased representing FHC. Mr. Smith left the firm,

prepared by Attorney Lawrence Kelly at Daschbach, Kelly, and Cooper in Lebanon. hereinafter referred to as the"Mascoma Real Estate Partnership Agreement," was lease real property, more particularly the office premises ofFHC. The agreement, agreement. The"Mascoma River Medical Group" was formed to purchase, hold, and 24. On March 23, 1988, Drs. Oidtman, Kowles, and Glazer executed a real estate partnership

agreement and conferred with Mr. Gourley. FHC regarding the stock transfers to Dr. Fraser. He also reviewed the stock redemption 23. In July and August, 1983, Mr. Smith prepared documents and provided legal counsel to consultation with, Mr. Clauson. performed such services under the general supervision of, and occasionally in Redemption Agreements, he did so as an associate in the Clauson firm. He also p. 6 Page 6 of 13

FHC further advised that it would inform Dr. Kowles' patients of his change in practice the underlying 2002 Employment Agreement remained in force until December 31, 2004. employment contract and cautioned Dr. Kowles that the restrictive covenant contained in 34. On March 3, 2003, FHC notified Dr. Kowles it was unwilling to negotiate a part-time Smith. cormection with the change in the employment relationship with FHC. FHC retained Mr. 33. Dr. Kowles retained the office ofR. Peter Decato, Esq. to represent his interests in Agreement. longevity payments to Dr. Kowles, as contemplated under the 2002 Employment 32. At approximately the same time in February, 2003, FHC started making severance and 2002 Shareholders' Agreements in accordance with Mr. Bridgman's analysis. practicing and to agree to resolve any issues under the existing 2002 Employment and calculations. He urged the remaining partners to accommodate his desire to continue 31. In his letter of February 3,2003, Dr. Kowles indicated he accepted Mr. Bridgman's of record. work hours and that Dr. Kowles had requested that his patients select a new doctor 30. On January 20,2003, FHC issued a notice announcing that Dr. Kowles had reduced his FHC stock under the 2002 Shareholders' Agreement. receivable"buy-in." Mr. Bridgman also calculated the value of Dr. Kowles' shares of pay, severance pay, and Dr. Kowles' remaining share of Dr. Webber's accounts calculations under the terms of the 2002 Employment Agreement regarding longevity 29. In letters dated January 16,2003, to FHC, Mr. Bridgman provided analysis and Bridgman regarding financial questions arising under the contracts. anticipation of Dr. Kowles withdrawal and/or termination, FHC consulted with Mr. part-time. FHC agreed temporarily to pay Dr. Kowles as a part-time employee. In 28. In the latter part of2002, Dr. Kowles notified FHC of his desire to reduce his practice to

and Dr. Kowles. p. 7 Page 7 of 13

that Mr. Clauson had formerly represented FRe. 43. When Mr. Clauson first entered the case on behalf of Dr. Kowles, Dr. Kowles recalled interest associated with his representation of Dr. Kowles against FRC. 42. Mr. Clauson did not research his records to determine ifthere might be a conflict of matter. contract issues concerning which the Clauson firm had represented FRC in the Glazer 41. Contract issues on which the subject dispute focused also bore a material resemblance to Clauson had previously devoted his professional time on behalf ofFRC. 40. The Kowles dispute with FRC was a substantially similar matter to that which Mr. his firm were involved as counsel to FRC for approximately 15 years. between the two parties at least since 1980, and a relationship in which Mr. Clauson and appearance on behalf of Dr. Kowles, involved a contractual relationship that had existed 39. The dispute between Dr. Kowles and FRC, concerning which Mr. Clauson entered his in this matter. 38. FRC was never asked, nor did it consent to Mr. Clauson's representation of Dr. Kowles Clauson's former client. 37. Dr. Kowles' interests in this regard were materially adverse to those ofFRC, Mr. Agreement and the 2002 Employment Agreement. out of Dr. Kowles' interests in the practice and his rights under the 2002 Shareholders counsel for Dr. Kowles and to identify areas of disagreement regarding the proposed buy­ 36. On April 1, 2003, Mr. Clauson wrote to Mr. Smith to announce his involvement as

April, 2003: Mr. Clauson Retained By Dr. Kowles To Proceed Against FHC

not receive a full share. in, Mr. Bridgman observed that, because Dr. Kowles was no longer an owner, he should With respect to Dr. Kowles' anticipated share of Dr. Webber's accounts receivable buy­ 35. On March 5 and 6,2003, Mr. Bridgman provided additional and revised calculations. discuss the dissolution of the agreement with any patient." and warned Dr. Kowles that"as per your employment agreement you are not allowed to p. 8 Page 8 of 13

entitled under the 2002 Employment Agreement; c. Mr. Bridgman had not properly calculated longevity pay to which Dr. Kowles was January 16, 2003; accounts receivable buy-in, as earlier calculated by Mr. Bridgman in his letter of Mr. Clauson, Dr. Kowles was entitled to a full one-third share of Dr. Webber's b. Pursuant to an alleged"Prior Agreement as to Accounts Receivable," so-called by such manner and form as may be agreed upon"; the 2002 Employment Agreement, requiring the parties"to notify the parties in a. FHC had issued notices of Dr. Kowles' departure from the practice in violation of in letters of April 1 and May 1, 2003:

48. Among other things, Mr. Clauson asserted the following claims on behalf of Dr. Kowles of Dr. Kowles as outlined herein. 47. Mr. Clauson did not withdraw and persisted with the demands and negotiations on behalf Smith was representing the personal interests of Dr. Kowles. preparation of employment and shareholders' agreements, did Dr. Kowles think that Mr. 46. At no time during Mr. Smith's representation ofFHC, with particular regard to Mr. Smith to represent FHC against Dr. Kowles. medical practice in the past was done on Dr. Kowles' behalf and that it was improper for further alleged that Dr. Kowles had thought Mr. Smith's work on agreements for the claiming as follows:"I do not recall ever representing the Family Health Center." He Rather, on April 11, 2003, Mr. Clauson replied to Mr. Smith on the conflict issue, 45. Mr. Clauson did not research his records to determine ifthere was a conflict as alleged. interest under N.H. R. Prof. Conduct 1.9, and that Mr. Clauson should withdraw. representation of Dr. Kowles in the present dispute with FHC represented a conflict of agreements between the physicians." Mr. Smith asserted that Mr. Clauson's Redemption and [1980] Employment Agreement[s] which form the core of current that Mr. Clauson had been"personally involved in drafting the original [1980] Stock while partners in the same law firm, had represented FHC for many years until 1995, and 44. By letter of April 10, 2003, Mr. Smith reminded Mr. Clauson that he and Mr. Smith, p. 9 Page 9 of 13

Employment Agreement and requiring FHC to resume severance and longevity payments 55. Mr. Clauson sought an order rescinding the restrictive covenant contained in the 2002 agreements. of Dr. Kowles against FHC and the other physicians, asserting claims under various 54. On August 20, 2003, Mr. Clauson filed the above-referenced Petition in Equity on behalf he was free to compete. that agreement was discharged and unenforceable. Mr. Clauson advised Dr. Kowles that of its contract with Dr. Kowles and that, accordingly, the restrictive covenant contained in that, by discontinuing severance and longevity payments to his client, FHC was in breach 53. By copy of his letter of September 10,2003, to Dr. Kowles, Mr. Clauson notified FHC the parties' differences. to Dr. Kowles, and to make such payments into a separate account pending resolution of had instructed his client to cease making any severance and longevity payments directly in connection with the pending dispute with Dr. Kowles. Mr. Cole also advised that he 52. On August 11,2003, Mr. Cole notified Mr. Clauson that he would be representing FHC However, they were unable to reach an accord. 51. In the ensuing months, counsel exchanged correspondence on the various issues. shareholders' agreement did not provide for arbitration. shareholders' agreement be resolved through arbitration, on grounds that the 50. Mr. Clauson rejected Mr. Smith's proposal that the parties' differences under the Kowles think that Mr. Smith was representing the personal interests of Dr. Kowles. particular regard to preparation of employment and shareholders' agreements, did Dr. valuation of stock in FHC. At no time during Mr. Smith's representation ofFHC, with was not properly applying principals originally designed by Mr. Gourley regarding 49. Among other issues in the 2003 contract dispute, Dr. Kowles was concerned that FHC f. Dr. Kowles had not been fairly compensated for part-time work done in 2003. stock under the 2002 Shareholders' Agreement; and e. Mr. Bridgman had not properly calculated a redemption price for Dr. Kowles' Employment Agreement was unenforceable; d. Because Dr. Kowles was fired, the covenant not to compete provision ofthe 2002 p. 10 Page 10 of 13

executed a settlement agreement on April 15, 2004. 61. The pending matter was transferred to successor counsel for Dr. Kowles and the parties the present respondents." substantially similar matter to that which Attorney Clauson devoted his time on behalf of ...." The court also found that"the current dispute between these parties is a performed, or supervised a duty of loyalty which prevented him from"attacking, or interpreting, work [he] Mr. Clauson. It found that FHC was a former client and that Mr. Clauson owed the client 60. On October 13,2003, the Grafton County Superior Court granted the motion to disqualify partner provided counsel to FHC. had no recollection or knowledge of the matters concerning which he or his former was a tactical move and that, until he read the exhibits filed in support of the motion, he 59. Mr. Clauson filed Plaintiffs Response to Motion to Disqualify, claiming in part that it R. Prof. Conduct 1.9. Disqualify Plaintiff s Counsel (Mr. Clauson) because of a conflict of interest under N.H. 58. On behalf of all of the respondents in the equity action, Mr. Cole filed a Motion to Partnership Agreement. terminated, liquidation was required under the terms of the Mascoma Real Estate partners had not undertaken to buyout Dr. Kowles in a timely fashion after he was 57. With respect to the real estate, Mr. Clauson took the position that, because the other properly account for and pay the redemption value of his client's stock. 56. Under the 2002 Shareholders' Agreement, Mr. Clauson claimed that FHC had failed to distribution of shares of Dr. Webber's buy-in. Agreement as to Accounts Receivable," an alleged oral agreement pertaining to due Dr. Kowles under that agreement. He also sought payment under the so-called"Prior p. 11 Page 11 of 13

2) The interests of the former and present client are materially adverse; and

1) The existence of a valid attorney-client relationship; determine conflict of interest. They are: 141 NH 479 (1996), the New Hampshire Supreme Court established a four-prong test to 70. In the case of Sullivan County Regional Refuse Disposal District v. Town of Acworth, relationship. and interpretation of documents and agreements relating to the aforesaid contractual 69. Mr. Clauson's representation of Dr. Kowles in his dispute with FHC involved analysis consent ofFHC. 68. Mr. Clauson undertook to represent Dr. Kowles in the aforesaid dispute without the the interests ofFHC. 67. Dr. Kowles' interests in connection with the aforesaid dispute were materially adverse to contractual relationship. 66. The dispute between Dr. Kowles and FHC was substantially related to the aforesaid to the contractual relationship between FHC and Dr. Kowles. 65. Mr. Clauson and his firm owed FHC a duty ofloyalty in connection with matters relating thereafter in connection with such contractual relationship. with Dr. Kowles. The firm continued representing FHC for approximately 15 years 64. Mr. Clauson and his firm represented FHC at the inception of its contractual relationship employees, entering, participating in, and leaving the medical practice. contractual relationship between FHC and the various doctors, as shareholders and 63. The aforesaid attorney-client relationship included matters having to do with the attorney-client relationship with FHC. 62. During the approximate period 1978 to 1995, Mr. Clauson and his firm had a valid

II. RULINGS OF LAW p. 12 Page 12 of 13

The Professional Conduct Committee orders Mr. Clauson to pay the expenses incurred by

proceedings. unable to pass the examination, the matter shall be referred back to the Committee for further Multi-state Professional Responsibility Exam within one year ofthis Order. If Mr. Clauson is Conditions. Mr. Clauson must take and submit supporting documentation of passage of the The Committee found that the appropriate sanction in this matter is a Public Censure with

Rule 1.9 (Docket No. 02-092, January 21,2005). attorney who has been in practice for many years, and that he received a prior warning regarding conflict was brought to his attention and not addressed; that Mr. Clauson is an experienced Aggravating factors included: harm to a former client in terms of expense and delay; that the violated the Rules, as confirmed by Grafton County Superior Court (October 13,2003). 152 N.H. at 513. The mitigating factor was Mr. Clauson's good faith beliefthat he had not The Committee further considered aggravating and mitigating factors see Coffey's Case,

Association Standards for Imposing Lawyer Sanctions (1992), section 4.3. In determining an appropriate sanction, the Committee considered the American Bar

violated NH R. Prof. Conduct 1.9(a) thereby also violating 8.4(a). prong test had been satisfied and thus finds by clear and convincing evidence that Mr. Clauson Given the facts enumerated above, the Professional Conduct Committee found the four­

4) The current matter and the former matter are the same or substantially related.

3) That the former client has not consented to the new representation. p. 13 Page 13 of 13

File George Spaneas, Esquire James L. Kruse, Assistant Disciplinary Counsel Distribution:

conditions to K. William Clauson for violating N.H. Prof. Conduct Rules 1.9(a) and 8.4(a). For the above reasons, the Professional Conduct Committee issues a Public Censure with

v. CONCLUSION

the Committee in the investigation and prosecution of this matter.