NMSC Suspends Attorney for Claiming not to Own Ferrari

The New Mexico Supreme Court published In re Ferguson today, an attorney discipline case. The facts are longer than the analysis, because the holding is simple: an attorney should not lie to the courts. The Court, concluding that Mr. Ferguson had done so, suspended him for 90 days.

Background

In addition to his law firm, Mr. Ferguson operated a number of companies related to selling and enhancing the performance of vehicles. One of these companies, Motiva, was a car dealer. Motiva was issued “demonstrator” plates for use on vehicles it acquired for resale. It was not required to pay excise taxes on cars registered under these plates.  In 2014, Mr. Ferguson purchased a $200,000 Ferrari which he intended to use as his personal vehicle. However, he titled and dealer-registered it to Motiva. By doing so, he avoided some $6,000 in taxes.

In 2016, the Ferrari was damaged by one of his tenants. He sued the tenant, naming Motiva as the plaintiff, and repeatedly represented to the court that Motiva owned the vehicle. After winning about $50,000 in the suit, he deposited the money not in his trust account for Motiva, but directly into his personal account.

The following year, one of Motiva’s customers sued it for faulty work that had destroyed his vehicle. A jury awarded the customer $200,000. Four days after the verdict, Mr. Ferguson transferred title of the Ferrari from Motiva to DealerBank, another company he controlled. According to the Court, he freely admitted that he had done so to avoid execution of the judgment against Motiva. He also transferred other assets out of Motiva, ceased operations, and declared it bankrupt.

The customer then sought to obtain the Ferrari and other assets that had been shifted from Motiva. In the course of those proceedings, Mr. Ferguson “strenuously argued that he was the sole and exclusive owner of the Ferrari and that Motiva never owned the Ferrari.” The district court disagreed, finding that Motiva owned the vehicle, and enjoining Mr. Ferguson from selling it or causing it to leave the state. Subsequent to that, Mr. Ferguson apparently used the vehicle as collateral to a loan, and it remained encumbered at the time today’s opinion was written.

Analysis

The Court’s analysis was necessarily simple. When it suited him, Mr. Ferguson stated to both the courts and the state that Motiva owned the Ferrari, allowing him to avoid taxes and the bad optics of a plaintiff’s attorney suing his paraplegic tenant. On the other hand, when the Ferrari was at risk because of the verdict against Motiva, he told the court that Motiva did not own the Ferrari. As the Court succinctly observed, “both of these statements cannot be true.”

Attorneys in New Mexico are subject to the Rules of Professional Conduct. One of these rules states that “Lawyers are officers of the court and are always under an obligation to be truthful to the court.” The Rules also prohibit lawyers from engaging in “conduct involving dishonesty, fraud, deceit or misrepresentation.” The Court found that Mr. Ferguson had violated both of these rules.

A 90-day suspension may strike some people has too small given the conduct at issue here. After all, as an attorney, Mr. Ferguson might reasonably be expected to know that his actions were, at the very least, violations of the Rules of Professional Conduct. And an attorney that lies to a court undermines the public’s confidence not just in himself, but in all attorneys.

The Court seemed cognizant of this. Although the Court made clear its anger over the attorney’s conduct, it admonished that “no member of the bar should understand this censure to in any way condone or encourage similar conduct.” This seems to refer to the relatively short suspension. The Court also expressly limited its opinion to the lack of candor issue. It noted that it took no position on other issues raised by the facts, such as whether Mr. Ferguson’s conduct was meant to evade taxes, or the consequences of his use of the Ferrari as collateral when it was subject to a preliminary injunction. It observed, however, that if the record on these issues is developed, it would “not hesitate to impose further sanctions as may be appropriate.”

These disciplinary proceedings are always somewhat jarring. I don’t ever really expect to see an attorney violate the rules, except perhaps negligently. Most of us could tell you exactly how to go after a judgment debtor who tried to hide assets. And so it once or twice a year, when the Court publishes a disciplinary board opinion like this, it somehow always comes as a surprise to me. But they are always a good reminder that we are bound by rules and that sometimes there are consequences for breaking them.

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