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In re Cushman

Supreme Court of Montana

April 30, 2018

IN THE MATTER OF JON E. CUSHMAN, An Attorney at Law, Respondent.

         ODC File No. 15-112

          Michael W. Cotter Chief Disciplinary Counsel P.O. Box 1 Disciplinary Counsel

          Michael W. Cotter Chief Disciplinary Counsel

          Jon E Cushman (Respondent), Shelly Smith (Court Reporter) Office Administrator, Shelly Smith (Court Reporter) Office Administrator

          AMENDED COMPLAINT MRPC 8.4(C), 8.4(D), 3.1, 3.4, 1.7, 1.8, 8.1, AND 3.3

          Upon leave of the Commission on Practice granted on April 19, 2018, the Office of Disciplinary Counsel for the State of Montana ("ODC") hereby amends its complaint[1] and charges Jon E. Cushman with professional misconduct as follows:

         1. Jon E. Cushman, hereinafter referred to as "Respondent, " is licensed to practice law in Washington, having been admitted in 1986. He is also licensed to practice law in Oregon. He has been admitted pro hac vice to appear in Montana state courts, as follows:

a. In 2003, Respondent was granted pro hac vice status to appear on behalf of Donald Abbey in Lake County District Court and Flathead County District Court.
b. On October 3, 2011, Respondent was admitted pro hac vice to appear on behalf of the defendant Glacier Construction Partners, LLC (hereinafter "GCP") in Abbey/Land, LLC v. Glacier Construction Partners, Defendant, and James River Insurance Company, Intervenor, Flathead County District Court, Cause No. DV-09-1198(A);
c. On October 25, 2011, Respondent was admitted pro hac vice to appear on behalf of plaintiff GCP in Glacier Construction Partners v. Interstate Mechanical, Inc., Abbey/Land, LLC, et al., Lake County District Court, Cause No. DV-11-276;

         Pertinent here, on August 5, 2011, Respondent appeared on behalf GCP as defendant in Charter Oaks Fire Insurance Company, et al. v. Interstate Mechanical, Inc., Glacier Construction Partners, LLC, et al, United States District Court for the District of Oregon, Case No. 3:10-cv-01505-PK.

         2. At the time of his most recent admission pro hac vice, Respondent agreed to comply with all the applicable statutes, laws, and procedural rules of the State of Montana, and be bound by the Montana Rules of Professional Conduct. Respondent further agreed to submit to the pro hac vice rules and the Montana Rules for Lawyer Disciplinary Enforcement.

         3. The Montana Supreme Court has approved and adopted the Montana Rules of Professional Conduct ("MRPC")» governing the ethical conduct of attorneys licensed to practice in the State of Montana, which Rules were in effect at all times mentioned in this Complaint.

         4. In 2001, Donald Abbey (hereinafter "Abbey"), a real estate developer from Southern California, purchased Shelter Island, a small island in Flathead Lake, in order to build a personal residence. Abbey bought the island through Abbey/Land, LLC (hereinafter "Abbey/Land"). Abbey/Land is a corporation wholly owned by Abbey.

         5. Abbey/Land began construction of a large residence on the island but fell into disputes with the original general contractor. In 2003, Abbey formed GCP to act as a new general contractor for the project. GCP was also solely owned by Abbey. GCP's only construction project was the residence on Shelter Island.

         6. On May 1, 2006, Abbey signed the Abbey/Land-GCP construction contract (hereinafter "General Contract") on behalf of each entity. The General Contract included a mandatory arbitration clause (¶3.4), which limited the prevailing party's recovery by excluding consequential, punitive or other damages beyond the prevailing party's actual damages.

         7. GCP was not an independent at-risk general contractor because its sole function was to serve as a construction agent for Abbey/Land; GCP was reimbursed for the cost of work performed and relied on Abbey as its sole source of funds. The General Contract contained no provision for a profit for GCP.

          8. GCP entered a $1.4 million contract with Interstate Mechanical, Inc. (hereinafter "IMI") for the design and installation of the plumbing and heating-cooling system (HVAC) for the house. Subsequent change orders increased the value of that contract by approximately $1 million.

         9. In 2009, disputes arose among IMI and GCP and other subcontractors and insurers. As a result of these disputes, multiple lawsuits were initiated in state and federal courts between 2009 and 2011, and arbitration was also conducted and concluded.[2]

          10. On September 23, 2009, in Flathead County District Court, Abbey/Land and GCP, as co-plaintiffs, filed a lawsuit against multiple defendants, including IMI. The matter was styled: Abbey/Land LLC and Glacier Construction Partners, LLC v. Interstate Mechanical, Inc., et al. Federal District Court Judge Donald Molloy compelled GCP and IMI to arbitrate their disputes and stayed the Flathead County case by Order entered May 12, 2010 pending arbitration.

         11. In the IMI v. GCP Arbitration, IMI sued GCP for breach of contract, violation of the Montana Prompt Payment Act, negligence and other claims; and GCP made affirmative claims against IMI for damages. The Arbitrator awarded damages to GCP in the amount of $497, 549.11 on its affirmative claims and $83, 525.00 to IMI, resulting in a net award to GCP in the sum of $414, 021.11. Among other things, the Arbitrator found that GCP "was in complete control of the construction project...when the HVAC system caused an air handler to freeze, resulting in broken water pipes..." which flooded the Main House. Some of the claims were rejected because the arbitrator found fault with GCP in the way the project was managed and that the categories of damages were the shared responsibility of both GCP and IMI. Subsequently, the award was affirmed in the Montana Federal District Court by U.S. District Court Judge Donald Molloy on March 1, 2011. Accordingly, although Abbey wholly owned both Abbey/Land and GCP, Respondent ultimately concluded that Abbey/Land could state a cause of action for damages against GCP, their interests being adverse.

         12. On March 15, 2011, one of Abbey/Land and GCP's lawyers, Michael Black, advised Abbey that if Abbey/Land were to file a formal claim against GCP, the language of the arbitration clause in the General Contract would limit Abbey/Land to the recovery of only actual damages against GCP.

         13. At some point in time subsequent to the March, 2011 confirmation of the Arbitrator's award, Abbey/Land and GCP entered into a First Amendment to General Contract, deleting the Section 3.4 arbitration clause in its entirety and stating the agreement was "entered into as of June 9, 2009...." This document was signed by Abbey for both entities. The document was not created on June 9, 2009, but was actually created after the arbitration award was affirmed with the intention to allow Abbey/Land to sue GCP for both actual damages, and consequential and punitive damages. Respondent, as the attorney for GCP and Abbey/Land, knew as early as February 2012, that the First Amendment to the General Contract had been signed and backdated by Donald Abbey on or about April 15, 2011, deleting Section 3.4 of the General Contract (the arbitration clause), which was intended to allow Abbey's corporations to claim actual, consequential and punitive damages from various insurance companies.

         14. Throughout 2011, 2012 and well into 2013, the First Amendment to General Contract was unknown to GCP's attorney, James Cumming, and to Trent Baker, who replaced Cumming at the Respondent's insistence. This amendment did not surface in any Abbey/Land or GCP litigation until July 19, 2013, when Respondent's co-counsel George Best (hereinafter "Best") attached it to a declaration after a $12 million confession of judgment had been filed in the Flathead County case. (See, ¶¶27-3O, below.)

         15. On April 8, 2011, following the Arbitrator's Award and Judge Molloy's Order affirming that award, GCP dismissed its claims in the Flathead County case against all defendants without prejudice.

         16. On September 1, 2011, Respondent petitioned the State Bar of Montana for admission to appear pro hac vice in the Flathead County case on behalf of his client, GCP. In his application, Respondent advised that George Best would appear as counsel of record and Respondent would appear as co-counsel.

         17. Subsequently, on September 23, 2011, Abbey/Land filed its Second Amended Complaint, adding GCP as a party defendant. In this newly amended complaint, Abbey/Land sought the consequential and punitive damages from all the defendants, including GCP, that had been precluded under the arbitration clause. GCP admitted all allegations of the newly amended complaint against it, and did not contest the claims for consequential and punitive damages. Representing GCP, Respondent then tendered Abbey/Land's claims to James River Insurance Company ("James River"), which refused to defend or ...

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