author: JUSTICE WEBER JUSTICE TRIEWEILER

text:
    MICHAEL BLYTHE, Plaintiff and Appellant, v. RADIOMETER AMERICA, INC., COMMUNITY MEDICAL CENTER, INC., and MICHAEL BIGGINS, Defendants and Respondents.
    No. 92-333
    Submitted May 25, 1993.
    Decided December 22, 1993.
    50 St.Rep. 1640.
    262 Mont. 464.
    866 P.2d 218.

      For Plaintiff and Appellant: Thomas W. Frizzell, Tipp, Frizzell & Buley, Missoula.
    For Defendants and Respondents: Charles McNeil, Garlington, Lohn & Robinson, Missoula.
   JUSTICE WEBER

delivered the Opinion of the Court.

Plaintiff Michael Blythe appeals from an order of the District Court of the Fourth Judicial District, Missoula County, dismissing his complaint charging that defendants Community Medical Center, Inc. and Michael Biggins had injured him by requiring him to use a defective medical device. Plaintiff’s complaint against Radiometer America, Inc. has been dismissed and removed to United States District Court. We affirm.

The issues presented for review are restated as follows:

1. Does the Workers’ Compensation Act provide Blythe with the exclusive remedy for his injury resulting from his employer’s decision to require its employees to use defective Arterial Blood Gas kits?

2. Does the exclusivity clause apply to plaintiff’s claim for breach of contract?

In January 1989, Michael Blythe (Blythe) was employed by Community Medical Center, Inc. (CMC) as a Respiratory Therapist, a position he had held for ten years. Blythe worked with seriously ill patients, including those recovering from major heart surgery and those suffering from communicable diseases.

Blythe’s job duties included assisting patients with life support respirators and periodically testing their arterial blood. Testing a patient’s blood involved taking a blood sample from the patient using a device called an Arterial Blood Gas kit (ABG kit). An ABG kit is a syringe classified by the Food and Drug Administration (FDA) as a Class II medical device, defined by the FDA as a device involved in life-sustainingmeasures. The FDAregulates and monitors the manufacture of these devices. It is illegal to sell, receive, possess, or transport in interstate commerce any Class II device which is adulterated, misbranded, or not manufactured according to standards.

Defendant Michael Biggins (Biggins) was Blythe’s supervisor and the head of the CMC respiratory care department. In late 1988 or early 1989, Biggins agreed with a Radiometer America, Inc. (Radiometer) sales representative to accept certain ABG kits at little or no cost. These kits were defectively manufactured and could result in needle-stick injuries to the user if the hypodermic needle loosened. If that occurred, the user could be inoculated with the contents of the syringe.

Blythe alleges that Radiometer’s sales representative and Biggins explained to some but not all of the workers who used the ABG kits how the kits were defective and how to use them to try to avoid injury. The following comments were handwritten on the box in which the kits were stored in inventory:

“Free rejects?”
‘Yes”
“When using needle may screw past it’s mark into hub of serenge (sic) — can still use, but be aware of this”

These defective ABG kits were the only ABG kits available for use in CMC’s respiratory care unit.

On Januaiy 29, 1989, Blythe received a sample of arterial blood from a co-worker which had been taken from a patient who was infected with the HIV virus, had contracted AIDS and suffered from other AIDS-related infections. As Blythe uncapped the needle from the syringe containing the patient’s blood, he stuck himself in the hand with the needle. According to Blythe, he cleaned the wound and immediately went to CMC’s emergency room, where the physician on duty told him that he had probably five to six years before he came down with AIDS. As of the date of this appeal, Blythe had not tested positive for the HIV virus.

Although Blythe continued to work after the injury, he began having psychological problems, including auditory hallucinations such as loud demonic voices. According to Blythe, he was losing touch with reality and developing hopelessness and depression because of his fear of contracting AIDS. Although CMC provided Blythe with the services of a company psychologist, his symptoms grew worse. Blythe consulted other professionals in addition to the CMC psychologist. In October 1989, he was diagnosed as psychotic. Blythe has been unable to work since March 1991 and now receives medical and disability benefits under the Workers’ Compensation Act.

The District Court dismissed Blythe’s complaint against CMC and Biggins based on the exclusivity clause of the Workers’ Compensation Act. The standard of review for a district court’s interpretations of the law is whether they are correct. Steer, Inc. v. Department of Revenue (1990), 245 Mont. 470, 474, 803 P.2d 601, 603.

ISSUE I

Does the Workers’ Compensation Act provide Blythe with the exclusive remedy for his injury resulting from his employer’s decision to require its employees to use defective Arterial Blood Gas kits?

Section 39-71-411, MCA, of the Workers’ Compensation Act (the Act) provides that the provisions of the Act are the exclusive remedy available to a worker who is injured on the job. This is known as the “exclusivity clause.”

The Act provides an exception which allows an injured worker to sue in tort in certain limited circumstances, set forth in § 39-71-413, MCA, as follows:

Liability of fellow employee for intentional and malicious acts or omissions — additional cause of action. If an employee receives an injury while performing the duties of his employment and the injury or injuries so received by the employee are caused by the intentional and malicious act or omission of a servant or employee of his employer, then the employee ... shall, in addition to the right to receive compensation under the Workers’ Compensation Act, have a right to prosecute any cause of action he may have for damages against the servants or employees of his employer causing the injury. (Emphasis supplied.)

While § 39-71-413, MCA, covers intentional acts of a servant or employee, this Court has held further that employers may be sued for workplace injuries under limited circumstances. See Great Western Sugar Co. v. Dist. Court (1980), 188 Mont. 1, 610 P.2d 717. In Great Western, we also specified the degree of intent required to meet the standard set forth in § 39-71-413, MCA:

... “[I]ntentional harm” which removes an employer from the protection of the exclusivity clause of the Workers’ Compensation Act is such harm as it maliciously and specifically directed at an employee, or class of employee out of which such specific intentional harm the employee receives injuries as a proximate result. Any incident involving a lesser degree of intent or general degree of negligence not pointed specifically and directly at the injured employee is barred by the exclusivity clause as a basis for recovery against the employer outside the Workers’ Compensation Act. (Emphasis supplied.)

Great Western, 610 P.2d at 720.

This Court has allowed the employee to sue an employer for intentional torts in some cases. See, e.g., Sitzman v. Shumaker (1986), 221 Mont. 304, 718 P.2d 657 (employee was the victim of his employer’s assault and battery); and Vesel v. Jardine Mining Co. (1940) 110 Mont. 82, 100 P.2d 75 (employee received metal in eye and employer intentionally chose unqualified medical provider).

Unless the harm is “maliciously and specifically directed at an employee or a class of employees,” workers are limited to the remedy provided under the Act. For example, the plaintiff in Great Western had alleged that his employer “wantonly, maliciously and carelessly placed him in a position of danger, committing the equivalent of an intentional harm.” Because the complaint alleged no more than negligence, this Court held that the Act provided the plaintiff’s exclusive remedy. Great Western, 610 P.2d at 719-20.

Grossly negligent conduct of an employer or a co-employee has not been classified as “intentional and malicious.” See, e.g., Adsem v. Roske (1986), 224 Mont. 269, 728 P.2d 1352 (claimant was killed by collapsed walls in a deep trench which had no sloping or shoring); Enberg v. Anaconda Co. (1971), 158 Mont. 135, 489 P.2d 1036 (employer violated its own safety standards as well as other statutes in mine blasting); and Dvorak v. Matador Serv., Inc. (1986) 223 Mont. 98, 727 P.2d 1306 (employee injured by toxic materials inside tank of a truck when employer knew a tank could contain matter contaminated with hydrogen sulfide and insisted employee enter the tank of a truck to do welding repairs).

Before we consider Blythe’s arguments on other theories, we emphasize that Blythe has failed to meet the requirements set forth in Great Western and also in Noonan v. Spring Creek Forest Products, Inc. (1985), 216 Mont. 221, 700 P.2d 623. Under Great Western, Blythe was required to show the presence of intentional harm which his employer maliciously and specifically directed at him, and that he was injured as a proximate result of that specific intentional harm. Blythe has not demonstrated any intentional harm maliciously and specifically directed at him or any of his co-employees. We therefore conclude that Blythe has failed to meet the standard of intentional harm required by Great Western.

Noonan contains factual precedent which is helpful in the present case. In Noonan, the employer required the worker to run a broken planer. The employer had removed the safety guard on the planer, which violated OSHAregulations. The on/off switch on the planer was broken and employees were required to run the machine continuously, even while retrieving wood pieces which became caught in the planer. Other employees had asked the employer to repair the planer. The worker, a nineteen-year-old recent high school graduate who was starting his first full-time job, was required to feed rough-cut lumber through the planer.

In Noonan, the employer knew these facts and knew that other employees had been injured, yet it concealed the information from the worker. The worker’s hand was drawn into the planer and severely injured when he reached in to remove a piece of wood which had become stuck in the planer. Under these facts, this Court concluded that Noonan’s employer was not guilty of the type of intentional harm which removes an employer from the protection of the Act’s exclusivity clause. We stated:

We have reviewed each of the plaintiff’s alleged facts set forth above and fail to discern how any of the specific facts could be interpreted to mean harm was specifically directed at Noonan. The facts do establish that the owners of Spring Creek operated a hazardous and dangerous workplace. The number of injuries that occurred among a relatively small number of workers provides ample support for this observation. However, to translate this situation into an inference of tortious intent on behalf of the employer would require a standard of law that this Court has thus far refused to adopt.
Where an employee’s allegations go no further than to charge an employer with knowledge of a hazardous machine, the complaint does not state a cause outside the purview of our exclusive remedy statute. (Emphasis supplied.)

Noonan, 700 P.2d at 625-26.

Blythe has failed to address this Court’s holding in Noonan. In Noonan, this Court concluded that the complaint failed to state a cause of action outside the purview of the exclusivity statute where the allegations only demonstrated an employer who had knowledge of a hazardous machine. We conclude that this rationale applies to the present case. Here, the most that Blythe has demonstrated is that his employer knew of the defective and hazardous character of the medical devices which Blythe and other employees were required to use. We conclude that under Noonan, Blythe has failed to state a cause of action which removed his employer from the protection of the exclusivity clause of the Act.

In Noonan, we discussed a line of cases from a minority of jurisdictions which have recognized an intentional tort action for situations where the employee cannot show a specific intent to injure, but rather where the employer knows or believes that harm is a “substántially certain” consequence of the unsafe workplace. Noonan, 700 P.2d at 625-26. West Virginia, Ohio and some Louisiana courts have used this “substantially certain” test. In his treatise on workers’ compensation, Professor Larson states:

... [T]he various efforts ... to stretch the concept of intentional injury are not undertaken in the name of discovering a truer and higher meaning of “intentional”; they are undertaken because these courts still cannot quite accept the non-fault nature of workers’ compensation, and have taken it on themselves to change the statutory scheme to conform more closely to their values....
... The most cogent argument against this type of holding is an intensely practical one: the difficulty of drawing an effective distinction, once this door has been opened, to prevent the virtual destruction of the exclusiveness principle, as evidenced by the experience of Ohio and Louisiana.

2AA. Larson, Workers’Compensation Law § 68.15, at 13-58 to 13-59.

Blythe recognizes that this Court reviewed the leading cases espousing the minority rule and that we declined to change our course by adopting the “substantially certain” test in Noonan and he professes that he is not arguing that this Court should adopt it now. However, he presents several arguments which essentially reargue the “substantially certain” theory.

Blythe first contends that this case is different from other cases involving willful violations of safety standards because it is not the type of risk ordinarily undertaken in the workplace and because the employer specifically intended to violate the law. This argument attempts to equate an employer’s willful violation of the law to specific intent by employing the reasoning of the “substantially certain” test which we have declined to adopt. Intent to violate the law does not equate to intentional harm that is maliciously and specifically directed at an employee or group of employees.

Blythe next contends that the leading treatise on workers’ compensation law supports his position that specific intent is not required. This too is essentially an argument for the “substantially certain” test. We do not interpret the treatise’s discussion of intent in this manner. Professor Larson states:

[I]t seems prudent to hold the line, as the vast majority have done, in saying that “intentional injury” means “intended injury.” ...This is by no means the only area of compensation law in which, to be administrable and kept within bounds, a rule must be so arbitrary that it produces some “injustice” on its fringes.

2AA. Larson, Workers’Compensation Law § 68.15, at 13-68.

Blythe frames a third argument for the “substantially certain” test by claiming that he was subj ected to what he calls an “active injurious force” and which Larson would classify as an exception to exclusivity under the majority rule. Blythe coined the phrase “active injurious force” from the following:

[T]he element of uncertainty is not whether the worker is apt to be exposed to the active force (whether cave-in or toxic fumes), but whether the active force to which the worker is knowingly exposed, proves to be injurious.

2A A. Larson, Workers’ Compensation Law § 68.15, at 13-68. Larson discusses this active force in the context of distinguishing the majority and minority rules.

Larson illustrates an intentional infliction of harm caused by what Blythe calls an “active injurious force” and which is actionable in tort by reference to the facts of People v. Film Recovery Sys. (Ill. App. 1990), 550 N.E.2d 1090. See Beauchamp v. Dow Chemical Co. (Mich. 1986), 398 N.W.2d 882, 892. Larson points out that in Film Recovery, the employer knew that the employees consistently inhaled fames, knew that inhaling fumes caused harmful consequences, and purposely withheld this information from the employees. The employer also knew that the employees would not continue to do the work if they were aware that they were being injured by inhaling the chemical fumes.

Larson contrasts cases like Film Recovery, where the employer knows the employee is being injured, to the situation where the employer exposes the employee to harm but does not know with certainty that the employee is being harmed or will be harmed. 2A A. Larson, Workers’ Compensation Law § 68.15. Larson uses the case of an employee working in a ditch who is subsequently injured by a cave-in of the ditch walls as an example of the latter. See, e.g., Adsem, 728 P.2d 1352 (forcing employee to work in trench which subsequently collapsed and killed employee was not intentional conduct with known consequences specifically directed at the employee).

In the case before us, CMC provided only defective ABG kits for its employees to use. Although CMC may have been aware that there was risk of injury as illustrated by the fact that it warned employees and trained some of them on how to use them to avoid injury, CMC did not force its employees to use the defective ABG kits with knowledge that they would be certain to sustain injury. Further, CMC did not withhold information from employees that the ABG kits were defective. We therefore conclude that Blythe’s injury is not analogous to the active force in Film Recovery where the employer knew the employee was being harmed and continued to expose the employee to known harm after failing to disclose warnings on chemicals.

We reject all Blythe’s arguments as detailed above which attempt to reargue the minority rule by couching it in other terms.

Malice

Blythe presents another argument concerning the meaning of “malice” which this Court has not previously considered. He contends that his injuries now come within the exception to the Act’s exclusivity clause because the definition of “actual malice” in § 27-1-221(2), MCA, changes the Great Western standard.

As set forth above, the type of intentional harm which exposes an employer to tort liability under Great Western is that which is maliciously and specifically directed at the employee or class of employee. The word “maliciously” as used by the Court in Great Western has a well-known meaning in Montana. Section 1-1-204(3), MCA, defines “malice” as follows:

“Malice” and “maliciously” denote a wish to vex, annoy, or injure another person...

Miller’s Mutual Ins. Co. v. Strainer (1983), 204 Mont. 162, 168, 663 P.2d 338, 341, referred to this statute in a workers’ compensation case, concluding that intent to injure an employee does not require specific intent to cause the precise resulting injury. We emphasize again that the plaintiff has failed to demonstrate intentional harm maliciously and specifically directed at him or any class of employee, according to the Great Western standard.

However, Blythe contends that the Great Western standard has been changed because the definition of malice in § 1-1-204(3), MCA, no longer applies to determine whether an injury is “intentional” within the meaning of § 39-71-413, MCA. He contends that this definition has been superseded by the legislature’s definition of “actual malice” in § 27-1-221(2), MCA, which applies to the Act through § 1-2-107, MCA. Section 1-2-107, MCA, provides that where the meaning of a word is defined in part of the code, the definition is applicable wherever it occurs throughout the code, except where a contrary intention is clearly apparent. This Court has not reviewed a case on exclusivity since that statute was enacted in 1987.

Section 27-1-221, MCA, defines “actual malice” as follows:

Punitive damages — liability — proof — award....
(2) A defendant is guilty of actual malice if he has knowledge of facts or intentionally disregards facts that create a high probability of injury to the plaintiff and:
(a) deliberately proceeds to act in conscious or intentional disregard of the high probability of injury to the plaintiff; or
(b) deliberately proceeds to act with indifference to the high probability of injury to the plaintiff.

Blythe compares the above section to the definition of “knowingly” in § 45-2-101(33), MCA, where proof that a person is aware of a high probability of the existence of a particular fact will establish an element of a criminal offense. Blythe further argues that the legislature’s adoption of the definition of “actual malice” in § 27-1-221(2), MCA, from the criminal code’s definition of “knowingly” rather than “purposely” rejects the notion that the wrongdoer must have a specific intent to injure; rather, he contends that the level of certainty required now for exception to exclusivity under the Act is the same as in the criminal code:

45-2-101. General definitions.... (33) “Knowingly” — a person acts knowingly with respect to the result of conduct described by a statute defining an offense when the person is aware that it is highly probable that the result will be caused by the person’s conduct. When knowledge of the existence of a particular fact is an element of an offense, knowledge is established if a person is aware of a high probability of its existence.

Blythe contends that the legislature has rejected the notion that the wrongdoer must have a specific intent to injure while retaining the distinction made by this Court when it held in Miller’s Mutual that malice can be found where the acts are intended though the consequences are not. Blythe further contends that CMC demonstrated its intent to do a wrongful act under the new definition of “actual malice,” by accepting and requiring employees to use the unlawfully-possessed ABG kits with knowledge of their defect and the possibility of injury.

As emphasized above, the conduct here does not qualify as malicious if we use the definition of “malice” used in prior exclusivity cases. The rationale of Noonan applies directly to the present case where the most that can be charged is that the employer knew of the defective and hazardous medical device which the plaintiff was required to use.

The stated intent in House Bill 442 enacted by the 1987 legislature in revising §§ 27-1-220 and 221, MCA (1985), was to revise the law relating to punitive damages — limiting the right to recover punitive damages, restricting the award of punitive damages in contract actions and permitting insurance coverage of punitive damages. 1987 Mont. Laws 1722. The legislature did not repeal the definition of malice in § 1-1-204(3), MCA, or otherwise indicate that the changes in the punitive damages section applied to any other part of the code, including the chapter governing workers’ compensation awards.

It is our duty to restrict the meaning of general words whenever necessary so as to carry out the legislative intent. In re Takahashi’s Estate (1942), 113 Mont. 490, 494, 129 P.2d 217, 220. The context in which the word is used must be considered, and the word, together with the context, then gives the meaning sought to be conveyed. Takahashi’s Estate, 129 P.2d at 221. In addition to viewing the word within its context, we presume that the legislature enacts a law with full knowledge of all existing laws on the same subject, including workers’ compensation laws and does not intend to abrogate or interfere with another law on the same matter unless the repugnancy between the two is irreconcilable. Fletcher v. Paige (1950), 124 Mont. 114, 119, 220 P.2d 484, 487.

When an employee is injured on the job, the Act generally provides the exclusive remedy. If the injury is compensated under the Act, the employee is not allowed other remedies provided for by other statutes, including punitive damages. Section 27-1-221, MCA, provides for punitive damages for injuries outside the limits of the Act. We conclude that the legislature did not intend the definition of “actual malice” in § 27-1-221(2), MCA, to apply to determine whether conduct qualifies as an exception to the exclusive remedy under the Act. We further conclude that the definition of “actual malice” set forth in § 27-1-221(2), MCA, was intended for purposes of punitive damages awards and is specifically not applicable to the Act.

We hold the Workers’ Compensation Act provides Blythe with the exclusive remedy for his injury resulting from his employer’s decision to require its employees to use defective ABG kits.

ISSUE II.

Does the exclusivity clause of the Workers’ Compensation Act apply to plaintiff’s claim for breach of contract?

Blythe contends that if his tort claim is barred by the exclusivity provision in the Act, he should be allowed to bring an action for breach of his employment contract. He contends that his employment contract with CMC carried a duty of good faith in its performance and CMC is liable in damages upon breach.

Blythe maintains that his employer had the discretion to choose the equipment to be used and he was required to do as he was told by his employer. He contends that CMC’s decision to provide dangerously defective equipment which cannot be commercially sold was a breach which deprived Blythe of the benefit of his contract by eliminating his right to practice his profession and earn his living. Blythe contends that contract damages here, unlike most contract actions, would include emotional distress damages because the action involves actual physical injury.

If this attempt to create a cause of action for breach of contract under these facts were to prevail, every employer/employee relationship might involve contractual issues, resulting in exposure of each employer beyond the Act. Such a result would undermine the workers’ compensation system.

Larson’s treatise on workers’ compensation states:

The all-inclusive character of the exclusiveness principle results in barring actions for covered injuries even though the plaintiff casts his action in the form of a breach of some kind of contract. 2AA. Larson, Workers’Compensation Law § 65.38, at 12-37.

We conclude that Blythe is further barred by the exclusivity provision in § 39-71-411, MCA, from bringing an action for breach of the employment contract. We are supported in this decision by courts of numerous other jurisdictions which have addressed the issue.

We hold plaintiff’s claim for breach of contract, pled alternatively to the tort claim, fails to state a claim for which relief can be granted. Affirmed.

CHIEF JUSTICE TURNAGE, JUSTICE GRAY and TED O. LYMPUS, District Judge, sitting for JUSTICE McDONOUGH, concur.

JUSTICE TRIEWEILER

dissenting.

I dissent from the majority’s conclusion that the Workers’ Compensation Act provides Michael Blythe with his exclusive remedy for the injury he sustained during the course of his employment with the Community Medical Center.

Blythe’s complaint in this case was dismissed for failure to state a claim pursuant to Rule 12(b)(6), M.R.Civ.P. We have previously held that:

A complaint should not be dismissed for failure to state a claim unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief. A motion to dismiss under Rule 12(b)(6), M.R.Civ.R, has the effect of admitting all well-pleaded allegations in the complaint. In considering the motion, the complaint is construed in the light most favorable to the plaintiff, and all allegations of fact contained therein are taken as true. [Citations omitted.]

Willson v. Taylor (1981), 194 Mont. 123, 126, 634 P.2d 1180, 1182.

With that standard in mind, we assume the following facts to be true:

Michael Blythe was employed as a respiratory therapist for the Community Medical Center in Missoula during January 1989. Prior to that time, the Medical Center had been having financial difficulties, and therefore, the head of the respiratory care department accepted free arterial blood gas kits, knowing that they were defective. Patients, however, were charged the regular price for this equipment.

Although the head of the respiratory care department knew the kits were defective, he did not advise all of the therapists who would use those kits during the course of their employment. Instead, the kits were placed with other equipment inventory for use.

The danger to which employees were exposed from the defective kits was the danger that the needle would come loose and cause a needle-stick injury to the employee. As a result, the disease for which patients were being treated could be transmitted to the health care provider using the kit. Hospital administrators knew that a needle-stick injury resulting from use of the defective kits could transmit diseases, such as AIDS and hepatitis B to its employees.

At about 6 a.m. on Sunday morning, January 29,1989, Blythe was using a defective arterial blood gas kit on a patient who suffered staph and strep infection, pneumonia, herpes, the AIDS virus, and hepatitis B. Because of the defect in the kit, he was stuck by the needle and exposed to contamination from the patient’s blood-born diseases. He was subsequently advised by an emergency room physician that “well, you’ve got five or six years before you come down with AIDS.” As a result of his injury and the mental strain from concern for his future health, Blythe has suffered severe and totally disabling mental problems.

Blythe alleged, and therefore, we assume it to be true, that when his superiors provided him with defective blood gas kits they acted intentionally and with actual malice. In other words, he alleged that the hospital intentionally provided its employees with defective blood gas kits, knowing that they were exposed to severe and terminal harm in the exact manner that Blythe alleges he was harmed, but disregarding that potential harm because of the economic benefit it hoped to realize from doing so.

The majority discusses its prior decisions, language from a treatise, and a selected statutory definition of “malice” to support its conclusion. However, the rule which excepts intentional conduct on the part of an employer from the exclusivity of the Workers’ Compensation Act is statutory and is neither as restrictive nor demanding as this Court’s prior decisions. It simply states that:

If an employee receives an injury while performing the duties of his employment and the injury or injuries so received by the employee are caused by the intentional and malicious act or omission of a servant or employee of his employer, then the employee ... shall, in addition to the right to receive compensation under the Workers’ Compensation Act, have a right to prosecute any cause of action he may have for damages against the servants or employees of his employer causing the injury.

Section 39-71-413, MCA.

There is no question, based on the allegations in the complaint, that Blythe’s supervisor acted intentionally when he purchased defective arterial blood gas kits from the hospital’s supplier. The question is whether, based on the allegations in the complaint, his act was also malicious.

Stripping an employer from the protection provided by the Workers’ Compensation Act based on intentional conduct is a punitive remedy intended to deter employers from intentionally harming their employees. Therefore, it is most logical to apply the statutory definition of malice found at § 27-1-221(2), MCA, Montana’s punitive damage statute. There, the Legislature has stated that:

A defendant is guilty of actual malice if he has knowledge of facts or intentionally disregards facts that create a high probability of injury to the plaintiff and:
(a) deliberately proceeds to act in conscious or intentional disregard of the high probability of injury to the plaintiff;
(b) deliberately proceeds to act with indifference to the high probability of injury to the plaintiff.

By that definition of malice, Blythe’s complaint satisfies all of the elements necessary to overcome defendants’ motion to dismiss pursuant to Rule 12(b)(6), M.R.Civ.P.

The majority relies on the definition of malice found at § 1-1-204(3), MCA, but fails to distinguish its previous decision in Millers Mutual Insurance Company v. Strainer (1983), 204 Mont. 162, 663 P.2d 338, where this Court applied the term “malice” in a workers’ compensation context much more expansively than it does here. In that case, we held that:

Respondent argues that for one to act maliciously one must necessarily intend the consequences of the act. Respondent relies on Boyer v. KLoepfer (1976), 170 Mont. 472, 554 P.2d 1116, wherein this Court equated malice with an intent to injure. However, the general definition of malice is more expansive. In Cashin v. Northern Pac. R. Co. (1934), 96 Mont. 92,28 P.2d 862, this Court defined malice as “a wish to vex, annoy, or injure another person, or an intent to do a wrongful act. (Emphasis supplied). The Montana Supreme Court has also implied malice where the intentional acts of a defendant were committed without justifiable excuse, privilege or defense. Poeppel v. Fisher (1977), 175 Mont. 136, 572 P.2d 912. We hold that malice can be found where acts are intentional though the consequences are not.
In summaiy, we hold that section 39-71-413, of the Workers’ Compensation Act, permits the filing of a third-party action where acts of an employee are intentional irrespective of whether the results of that act were intended.

Strainer, 663 P.2d at 341-42.

Our holding in Strainer suggests that for purposes of construing the term “malice,” as it is used in § 39-71-413, MCA, the statutory definition provided for in § 27-1-221(2), MCA, is much more appropriate than the restrictive language found at § 1-1-204(3), MCA, which was specifically rejected in the Strainer decision.

The majority also relies on its prior decisions in Great Western Sugar Company v. District Court (1980), 188 Mont. 1, 610 P.2d 717, and Noonan v. Spring Creek Forest Products, Inc. (1985), 216 Mont. 221, 700 P.2d 623, for the principle that an intentional act which removes an employer from the protection of the exclusivity clause of the Workers’ Compensation Act requires “intentional harm” and an act directed at the specific employee, or a class of employees to which he or she belongs. However, those requirements clearly go beyond the plain terms of § 39-71-413, MCA, and are inconsistent with this Court’s prior decision in Strainer. While it is true that since 1987 the Court is not required to construe the Workers’ Compensation Act liberally in favor of the employee, there certainly is no requirement that it be construed liberally in favor of the employer. That should be especially true where the issue is compensation for an employee injured by an allegedly intentional and malicious act of his employer. Yet, that is the effect of our decisions in Great Western Sugar, Noonan, and the majority opinion in this case.

Therefore, I conclude that the decisions relied on by the majority have misconstrued the plain terms of the Workers’ Compensation Act and have judicially legislated requirements which are not in the Act. For these reasons, I would not follow those prior decisions.

I conclude that the acts alleged in Blythe’s complaint were both “intentional” and “malicious” as defined by statute in Montana and our prior case law. Therefore, I would reverse the judgment of the District Court and remand this case to the District Court for further proceedings to determine whether Blythe’s allegations are true.

JUSTICES HARRISON and HUNT join in the foregoing dissent.


source: Caselaw Access Project

license: Public Domain

text:
    IN RE THE PETITION OF ROBERT G. STEELE
    No. 92-465.
    Submitted on Briefs August 5, 1993.
    Decided December 22, 1993.
    50 St.Rep. 1649.
    262 Mont. 481.
    865 P.2d 285.

      For Appellant: Larry M. Elison, Missoula.
    For Respondent: K. Paul Stahl, Helena.
   JUSTICE WEBER

delivered the Opinion of the Court.

Petitioner Robert G. Steele appeals from the final decision of the State Bar of Montana Committee on Character and Fitness (Committee) refusing to certify petitioner to this Court for admission to the State Bar of Montana. We affirm the decision of the Committee.

The sole issue presented is whether the Committee properly concluded that Mr. Steele is unfit to practice law in the State of Montana.

Robert G. Steele (Steele) submitted his application for admission to the State Bar of Montana on November 15,1990, intending to take the February 1991 bar examination. On December 26, 1990, after a review of his Character and Fitness application, the Committee sent a letter to Steele advising him that it had “serious concerns” about his convictions for driving under the influence (DUI) and tax liens and requested that Steele provide the Committee with DUI records and dispositions, copies of Internal Revenue Service (IRS) deficiency notices and copies of his responses to the IRS.

The Committee also noted that Steele had applied to take the February 1991 exam but would not be graduating from the University of Montana School of Law until the spring of 1991. Steele was asked to submit a written explanation of why he had applied to take the February examination when he would not have fulfilled the graduation requirement until June. Steele responded by telephone that he had applied for a faculty waiver for a required one-credit course which he had attempted to replace with an “independent study” project. He stated that he would not know until February 4, 1991, whether the faculty would grant his request for a waiver. After the faculty denied his request for waiver, Steele requested that the State Bar allow him to take the examination without meeting the graduation requirement and he was advised that this was not possible without permission from this Court.

On February 13, 1991, the Committee met to review Steele’s application and decided not to certify Steele for the bar examination and admission due to the concerns previously noted. The Committee advised Steele that he could appear in person for an informal hearing regarding the decision. Steele accepted. The Committee’s position did not change following the informal hearing.

The Committee was particularly concerned with Steele’s interaction with the IRS. Steele is a Certified Public Accountant licensed to practice in Montana and is thus conversant with IRS regulations and procedures. Steele did not file timely personal income tax returns for tax years 1982 through 1986. With penalties and interest added, Steele’s personal tax liability to the IRS was greater than $208,000 at the time of the informal hearing.

Steele provided an authorization for disclosure and waiver for the Committee’s use in obtaining relevant information from the IRS. He also submitted numerous documents to the Committee demonstrating his tax protest activities in the early 1980s. Most of these documents consisted of correspondence to and from members of the Montana Congressional delegation.

During the time between the request for the informal hearing and May 1, 1991, the date of the hearing, Steele made offers in compromise for his tax liability, offering slightly more than 1% in compromise of his federal and state taxes owed. At the hearing, Steele presented copies to the Committee of his written offers to these agencies and discussed his difficulties with the IRS in more detail:

I have an offer and compromise that I mailed off to the federal government for all the back taxes. I don’t know if they will accept this offer and compromise, but it’s the first time that I have been able to offer anything. I am only offering what I can afford to pay here. I am in hopes that if they don’t accept this offer, another one can be worked out. And here is the same thing with the state of Montana.
I have sat down and I have talked to these people. I have met with the Internal Revenue agents. They understand. They have no gripe with me. As a matter of fact, they offered to — They wanted me to go to work for them, and I have agreed to do work for them. They told me they will pay me for both my time and my expenses, and I have agreed to do that. I have to assume from that that they have a certain amount of trust in me as well.

Steele responded to additional questions from Committee members pertaining to his tax liability and his tax protest activities, including questions concerning his involvement with the Golden Means Society, a group which advocated not filing tax returns on the basis of constitutional rights and which no longer exists. He testified as follows:

MS. BRANDBORG: In working with those people in the Golden Means Society, when people would come to you as an accountant and ask your advice, what type of advice were you giving, and did it essentially follow the same pattern that you followed in refusing to pay taxes?
MR. STEELE: ... We didn’t refuse to pay taxes. We refused to file a return with the information that was on there. The answer to your question is, no, I didn’t get into a professional advisory capacity, unless it was in the realm of my expertise in the tax law. And there was a lot of that, an awful lot of that.
In fact, I primarily was preparing tax returns for people who hadn’t filed for a while. I was preparing these returns through their records and getting them up to date, currently.
I, myself, wanted to find out what basis there was to a lot of the constitutional challenges; and I wrote those letters and took those stances. “Example only,” I wrote on the first return that I filed, requesting assistance; and I got quite a few answers from different senators that were encouraging our position at that time.

Steele testified that in 1987, after certain tax reform legislation was enacted, he finally filed returns for the years 1982-1986. He stated that after numerous tax court appearances, he was convinced that his tax protest methods were not going to work. He also testified that he felt his efforts had been helpful in changing the tax laws.

At the request of the Committee, Steele provided an authorization to disclose information about his income tax and “other matters” for tax years 1982 through 1990 and his permission to discuss an “Agreement to Assist IRS” with Larry Huggins, an IRS investigations officer from the Missoula IRS office. The District Counsel for the IRS in Montana responded in writing to the Committee’s request for information, stating that the IRS opposed Steele’s admission to the State Bar of Montana. The letter also stated that a memorandum had been circulated to IRS employees in Montana asking for their input regarding the request and that several memoranda were received in response from IRS employees who had dealt with Steele and copies of such were attached to the letter. The Committee also was informed that Steele had never been employed by the IRS, but that he had agreed to work with the IRS in a special capacity and that he had provided such services to the IRS.

The letter noted the following about Steele’s dealings with the IRS: (1) that he had been a member of the Golden Means Society which advocated violation of the tax laws; (2) that he failed to timely file income tax returns for tax years 1982 through 1986 and only filed them after entering law school; (3) that his tax liability was in excess of $200,000 and that he had made no effort to pay any of the taxes when he was earning a substantial salary as a CPA; (4) that he encourages his clients to ignore the IRS Examination Division during its audit procedures and to request conferences with the Appeal’s Division without a meaningful audit and delays resolution of cases pending before the Tax Court until the eve of trial, a tactic which he apparently believes will obtain more favorable results for his clients; and (5) that his actions indicate that he does not believe he is required to follow the Internal Revenue laws of the United States.

One of the attachments to the letter stated that Steele had been the subject of two IRS criminal investigations in the 1980s, although each case resulted in a decision by the IRS not to prosecute. This was the first knowledge the Committee obtained about the criminal investigations. One of the criminal investigations, in which Steele was designated a co-conspirator because of his affiliation with the Golden Means Society, concerned an alleged conspiracy to impede and impair the IRS in assessment and collection of taxes. Steele testified that he did not timely file the tax returns because a taxpayer under criminal investigation is not required to file returns until the investigation is resolved. Steele refused to voluntarily file tax returns other than “5th amendment constitutional” tax returns until his criminal case was resolved. The IRS does not consider these to be actual returns as they do not list income and deductions.

The second criminal investigation centered around Steele’s failure to pay taxes due and owing for 1982 through 1986 after he filed the actual returns in 1987. Although the IRS suspected that Steele had transferred property and filed false financial statements with the IRS to preclude paying taxes, the IRS later determined that Steele had not falsified any documents or secreted away funds in order to avoid paying the IRS and that Steele had spent all his funds for personal reasons rather than making estimated tax payments. The revenue officer handling Steele’s returns noted that she had “minimal cooperation” from Steele.

In a letter dated August 9,1991, Steele responded to the information disclosed by the IRS. On August 23, 1991, the Committee provided formal notice to Steele by certified mail of its denial of certification for admission to the State Bar of Montana. The Committee stated the following as reasons for denial:

Unlawful conduct, as evidenced by your DUIs and your failure to pay taxes;
Making of false statements including omissions as shown by your failure to disclose the IRS’s criminal investigations of your activities; Abuse of legal process as reported in IRS District Counsel’s letter of July 26,1991;
Neglect offinancial responsibilities as shown by your tax liens; and Neglect of professional responsibilities as evidenced by your failure to adhere to the tax laws even though you are fully aware of them in your capacity as a CPA.

Pursuant to the Rules of Procedure of the Committee on Character and Fitness, Steele formally responded to each of the five reasons given by the Committee for denial of certification and filed a Request for Reconsideration and Hearing.

A reconsideration hearing was held on March 5, 1992, to allow Steele to present evidence to support his application for admission. Prior to the hearing, Steele provided additional information to the Committee, including letters and affidavits in support of his application for admission and notice that his offer of compromise had not been accepted by the IRS. Steele also had a chemical dependency evaluation performed on September 19,1991 and had the evaluation results forwarded to the Committee.

After the hearing, Steele was allowed to depose two additional IRS employees, submit additional interrogatories to one of the witnesses at the hearing and to submit other additional materials. On July 22, 1992, the Committee met to review Steele’s application and again denied his application. Formal findings and conclusions were issued on August 24, 1992. Steele challenges several of the Committee’s findings and conclusions.

Further facts will be provided as necessary throughout this opinion.

Did the Committee properly conclude that Mr. Steele is -unfit to practice law in the State of Montana?

The rules for admission to the State Bar of Montana provide that the burden of proof is on the applicant to demonstrate good moral character and general fitness to practice law in an appeal from a decision of the Committee on Character and Fitness of the State Bar of Montana:

Every Applicant for the Montana Bar examination shall be of good moral character. The applicant shall have the burden of proving by clear and convincing evidence that he or she is possessed of good moral character. The Committee shall certify the Applicant to the Clerk of the Supreme Court unless prior or present conduct of the Applicant of which the Committee becomes aware would in the opinion and discretion of the Committee cause a reasonable person to believe that such Applicant would, if admitted to practice law in Montana, be unable or unwilling to act in accordance with the standards set forth in the Montana Rules of Professional Conduct, fairly, discreetly, honestly, reasonably, and with unquestionable integrity in all matters in which he or she acts as an attorney at law.

Rules of Procedure of the Committee on Character and Fitness (1991), Section 3(a) (as amended June 9, 1992); now Section 4(a) (amended March 25, 1993). The standard of review used by this Court in reviewing Committee decisions to deny admission and certification to take the Montana bar examination is as follows:

Upon reviewing a final decision of the Character and Fitness Committee we will conduct an independent review of the entire record to determine if the Committee erred. When the facts are admitted and uncontested, as they are in this case, we will give due consideration to the inferences drawn by the Committee, including inferences concerning rehabilitation and mitigation. Consideration will be given to the recommendation of the Committee as to whether the applicant is of the requisite good moral character and fitness to be admitted to the Montana Bar. The Committee will have heard testimonial evidence and will have had the opportunity to observe the demeanor and judge the credibility of the applicant or other witnesses. However, inasmuch as we are designated by the Montana Constitution to ultimately make this decision, we will affirm the Committee’s recommendation if we determine it was correct, and we will reverse if we determine the Committee erred. Our review will be in accordance with the existing standards for admission, taking into consideration the whole record.

In re the Matter of Matt (1992), 252 Mont. 345, 348-49, 829 P.2d 625, 626 (emphasis in original) (quoting In re the Matter of Pedersen (1991), 250 Mont. 325, 328-29, 820 P.2d 1288, 1290).

Although the Montana Constitution gives this Court exclusive authority to regulate bar admissions in Montana, such authority is subject to the limits imposed by the United States Constitution. The United States Supreme Court has held that, in making determinations of an applicant’s character and fitness to practice law, the applicant must be afforded adequate due process of law. Willner v. Committee on Character and Fitness (1963), 373 U.S. 96, 83 S.Ct. 1175, 10 L.Ed.2d 224. The Court stated in Willner, 373 U.S. at 107, 83 S.Ct. at 1182, 10 L.Ed.2d at 232:

[I]n all cases in which admission to the bar is to be denied on the basis of character, the applicant, at some stage of the proceedings prior to such denial, must be adequately informed of the nature of the evidence against him and be accorded an adequate opportunity to rebut this evidence.

Steele contends that he was not afforded due process because he either did not receive notice of the Committee’s bases for its decision, or he received notice after the hearings. He also contends that due process was not afforded him because supporting documentation was either absent or based on constitutionally protected activities which Steele had engaged in prior to attending law school.

In support of his claim that he did not receive due process, Steele contends that the Committee did not identify the evidence against him; specifically, the Committee did not identify or allow him to address omissions in his application and did not identify any false statements, even in the final decision. He also claims that the Committee did not follow consistent rules of evidence.

We first note that the Committee is not bound by formal rules of evidence and

may, in its discretion, take evidence in other than testimonial form, having the right to rely upon records and other materials furnished to the Committee in response to its request for assistance in its inquiries. The Committee may, in its further discretion, determine whether evidence to be taken in testimonial form shall be taken in person at the hearing or upon deposition, but all testimonial evidence shall in either event be taken under oath. A complete stenographic record of the hearing shall be kept, and a transcript may be ordered by the Applicant at the Applicant’s own expense.

Rules of Procedure of the Committee on Character and Fitness, Rule 5(i) (March 25,1993).

Steele’s objection here seems to center around the evidence supplied by IRS employees as previously set forth in this opinion; he states that their “inability to specify either because of confidentiality or lack of memory leaves... Steele in an informational and evidentiary wasteland.” Therefore, Steele claims that the Committee’s findings should identify the portions of the record which the Committee relied on to support each finding to prove that it did not rely on improper evidence. Because of the independent character of our review, such detailed fact-finding is unnecessary. From our review of the entire record, we find evidence to support the Committee’s findings as set forth in the following discussion.

One of the reasons for denying Steele’s certification is that Steele made false statements in his application. False statements include omissions. Thus, Steele’s argument that the Committee failed to identify any actual false statements is not relevant. We focus on the omissions in Steele’s application.

The application form asks the applicant to list any civil proceedings in which the applicant has been a party. In answering this question, Steele disclosed that he had sued a client in 1978 for nonpayment of a fee for professional services, yet he did not disclose a more recent civil suit against the IRS which had proceeded to the Ninth Circuit Court of Appeals. More importantly, Steele did not inform the Committee about two criminal investigations that the IRS had initiated against him in the 1980s. Moreover, despite providing the Committee with a two-inch sheaf of paper after the Committee inquired into his dealings with the IRS, Steele continued to withhold information about the criminal investigations. The Committee found out about the criminal investigations from the information disclosed by the IRS after the informal hearing.

Steele contends that because the application for admission did not specifically request him to fist any known criminal investigation, it cannot be an omission to fail to include that which is not specifically requested. However, the application does require an applicant to disclose any other information not already given having a bearing on character and fitness. Furthermore, this request is conspicuously located above the applicant’s signature line. It would be impossible for the application to ask every conceivable question which would cover the conduct of every applicant. That is one of the reasons for the general query into any other information having a bearing on character and fitness.

Steele also claims that since he identified the IRS investigator, Larry Huggins, as a person with whom he had been in contact, the Committee could then easily find out about the criminal investigations. Steele’s reference to Huggins was included in the following written response to a question on the application asking if there are any unsatisfied judgments outstanding against the applicant:

I am delinquent on income tax payments. I am current on return filings but owe on past amounts due. This is because I filed late for the years 1982-1986 in 1987. My original returns for those years were protest returns. This was because, in my practice as a CPA, I became aware of severe problems with the income tax system. Some of these problems, as to fairness, have been corrected by Congress in the 1986 Reform Act. I believe that my efforts contributed to the reasons for the mandate President Reagan gave Congress to reform the Income Tax System.
Nevertheless, I realize that the taxes are due, owing, and should be paid. I am in contact with Mr. Larry Huggins, IRS Missoula, (406) 329-3681. It is my intention to begin to pay these taxes as I return to the full-time work force after law school. I have provided IRS with financial statements and Mr. Huggins seems to be satisfied that this plan will work.
A contributing factor to not being able to pay these taxes is that I lost all my Capital in the Stock Market about 1983. While this has diminished by ability to pay, it has not helped the tax problems because Capital losses are only allowed to offset ordinary income to the extent of $3,000.00 per year. They are also not deductible for self-employment tax purposes. I have learned however, that IRS has a compromise procedure for situations like this and I intend to utilize that procedure as soon as I have something to offer. The total amount due, both to State and Federal, currently approximates $150,000.00, including penalty and interest. A large portion of this would be currently dischargeable in bankruptcy. I do NOT intend to resort to bankruptcy since the debt is a legitimate result of a mistake I made.
The mistake, however, was instrumental in my decision to enter Law School. I believe that I am now equipped with an understanding of law and taxes to allow me to assist clients in this area where few attorney’s [sic] wish to specialize. The IRS is no longer an enemy but rather an agency in need of guidance from a Congress enlightened by attorney’s [sic] with knowledge and experience in this realm. A system of taxation that meets the needs of our government and yet inflicts the least intrusion into the lives of those who pay it should be the goal of congress. A populace with the expertise available to help them function within this system is the foundation to make it work. My goal is to help stabilize this foundation. In this respect, I pledge to be a better example in the future.

This statement is not a candid disclosure of the extent of Steele’s tax difficulties. Although it provides Huggins’ number, it omits any mention that Huggins investigated Steele for criminal conduct. Further, it states that Steele lost his capital in “about 1983,” but it does not explain why Steele did not attempt to preserve funds after that time for future payment to the IRS.

Steele further argues that the following finding of fact was not material:

11. The Applicant applied to take the February, 1991, exam, even though he was not eligible; to become eligible he had to receive a waiver from the faculty. Applicant made no mention of his conditional application until the issue was raised by the Administrative Assistant to the Committee.

The record contains a memorandum written by Jan Weber, the Administrative Assistant to the Committee, on December 26, 1990, after questioning Steele about his eligibility to take the exam. It also contains other memoranda indicating that, after Steele learned that he would not graduate until spring semester, he inquired whether he could still take the exam and was advised that this would require permission from this Court. While this omission by itself may not be a serious omission under the particular circumstances of this case, it is cumulative and, therefore, it becomes material.

We conclude that Steele was adequately informed of the nature of the evidence against him and was afforded an adequate opportunity to rebut the evidence. He knew from the time of the Committee’s first letter, dated December 26, 1990, that the Committee had concerns about his tax liens and DUIs. After further communication with Ms. Weber and the Committee, Steele knew the Committee was concerned about his ineligibility to take the February examination, he knew the Committee was concerned about his problems with the IRS and he knew the Committee was concerned about the civil case which he had not disclosed. After the Committee inquired into the tax lien matter, other information from the IRS was disclosed and Steele was questioned about this information. He responded to all these concerns either informally or formally. He had access to and reviewed the Committee’s complete file. Steele was given adequate opportunity to explain and rebut the evidence.

We conclude that the materiality of the omissions was significant. Furthermore, Steele did not facilitate information gathering about his dealings with the IRS either in his testimony before the Committee or in other numerous communications with the Committee. The Committee determined that Steele “was neither candid in his application nor before the Committee.” The record fully supports this finding. The record also establishes that the Committee gave Steele every opportunity to present evidence and that it treated Steele fairly throughout the post-denial process.

Throughout this proceeding, however, Steele’s conduct demonstrates an attempt to make light of or to downplay the significance of the facts relating to his tax protest activity, his failure to pay taxes and his interaction with the IRS. In our view, this is a significant basis for the Committee’s finding that Steele was neither candid in his application nor before the Committee. The Committee also had the advantage of personal observation of Steele and other witnesses to determine the candor and credibility of each.

In addition to finding that Steele had made “false statements including omissions,” the Committee made a number of additional conclusions with regard to the filing of tax returns and payment of taxes for the years 1982 through 1986. These findings showed that Steele owed the IRS more than $209,000 and had made an offer of compromise of $3,544; similarly, he owed the State of Montana $20,824 and had made an offer of compromise of $381. The Committee found that Steele had never denied the tax was due and owing, that the money which he had for payment of the tax was spent otherwise and that he acknowledged this was a violation of the law. The key conclusion in paragraph seven was that the behavior showed lack of reasonableness, neglect of financial responsibilities and neglect of professional obligations as an accountant. Following are the conclusions of the Committee on this aspect:

5. The Applicant failed to pay taxes for years 1982,1983, 1984, 1985, and 1986. Apphcant presently owes the [IRS] more than $209,000; he made an offer of compromise to the IRS of $3,544, slightly more than one percent of the amount owed. Applicant presently owes the State of Montana Revenue Department more than $20,824; he made an offer of compromise of $381, which is slightly more than one percent of the amount owed. These offers in compromise were made April 30, 1991, after the Committee made inquiry. The Applicant never denied that the tax was due and owing; money available to pay a portion of the tax was spent otherwise. Applicant further acknowledged this was a violation of the law ...
6. Applicant admitted that failure to pay the tax and failure to file income tax returns were violations of IRS regulations.
7. Money available for payment of taxes was spent by the Applicant. Such behavior shows lack of reasonableness, neglect of financial responsibilities and neglect of professional obligations as an accountant. Applicant was more than 35 years of age and had been employed for more than 15 years as an accountant.
13. Applicant’s actions in application, hearings, and gathering evidence, show him to be a person of questionable integrity. He shows neglect of financial responsibilities, neglect of professional responsibilities, and has made false statements including omissions. Based on Applicant’s omissions in the application process and on the evidence adduced in the hearings process, the Committee finds that the Applicant lacks sufficient moral character and if admitted to the practice of law would be unable or unwilling to act in accordance with the standards set forth in the Montana Rules of Professional Conduct, fairly, discretely, honestly, reasonably, and with unquestionable integrity.

Steele contends that the Committee based these findings in part on constitutionally protected activities which he had engaged in prior to attending law school. He argues that the Committee could not base any part of its decision on his exercise of free speech for speaking out against the IRS and the income tax laws, that it could not base any part of its decision on his association with the Golden Means Society because of his right of freedom of association, and that it could not base any part of the decision on his right of freedom of assembly for his presence in a group of persons assembled to protest the foreclosure of a family store. We find no evidence that the Committee considered any of these activities in making its decision except to the extent that Steele omitted information on his application or to the extent that he was not candid in discussing them.

From our review of the record, we affirm the conclusions with regard to the nonpayment of taxes, the offers in compromise, and the other essential elements as above-quoted. From the record it is somewhat difficult to determine if Steele acknowledged that his conduct was a violation of the law. Unfortunately Steele did not give straightforward answers to questions asked by the Committee. Following is a portion of his testimony:

MR. SULLIVAN: Let me ask you: Did you actually sit down and keep figures for your income, for deductions, and compute what a tax would have been in 1982?
MR. STEELE: No, I did not do that.
MR. SULLIVAN: Why is that?
MR. STEELE: I believed that would never be necessary. I believed it was all going to change. I believed that the IRS was going to see the error of their ways and we were going to have a new tax system.
MR. SULLIVAN: And you believed that the government was not going to seek to collect what they felt was your legitimate tax due and owing for 1982 on through those years?
MR. STEELE: I believed that at some time there would be a settlement. You know, at the time, I was prepared to lose; and at that time, I had some money and I was investing at that time. At that time, I always had an open mind. If they could show me where we were wrong and convince me that we were wrong, I was willing to file the return; and I had the money at that time to pay it.
MR. SULLIVAN: Maybe my question isn’t very clear. I get the impression that back then you felt that it was an invasion of privacy to provide all of this information about your earnings and your deductions, but I am a little unclear. Are you saying it was a violation of the constitution to tax you?
MR. STEELE: Of course not.
MR. SULLIVAN: So did you set aside any money to pay tax, or is it your position that you owed no tax?
MR. STEELE: No, no, no. We were wanting a better form of taxation; not no taxes. I mean, that’s ridiculous. A flat tax, like it’s been proposed, a national sales tax, something like that, that wouldn’t be an intrusion into privacy. [Emphasis supplied.]
I had the money. I didn’t put it in a trust fund and keep it aside for the IRS, and I eventually ended up losing most of that money in my investments. At that time, it was not a problem with me that I was going to have to pay these taxes, pay some taxes of some kind.

While the record is not as clear as it might be as to Steele’s acknowledgement that this conduct was a violation of the law, we conclude there is sufficient evidence to support that conclusion and the further conclusion that Steele admitted that the failure to file tax returns was a violation of IRS regulations.

The emphasis in the above quote illustrates the difficulty of obtaining a direct answer from Steele. In addition, from the above testimony it appears that Steele did not intend to pay the tax owed but intended to settle or “compromise” with the IRS at some future point.

When the first criminal investigation was resolved, Steele filed tax returns for the years 1982 through 1986. Because Steele did not keep records of income and deductions for tax purposes, his tax liability is based only on estimated income for those years.

The second criminal investigation related to the IRS’s suspicion that Steele had transferred or hidden assets in an attempt to avoid paying the tax due after he finally filed the returns. The IRS did not prosecute this either because it could not determine that Steele had acted improperly.

The record demonstrates that Steele neglected both his financial and professional responsibilities. The record also demonstrates that at the time he was refusing to pay taxes, Steele did intend to effect some sort of a compromise for the years in question. The record does not disclose any willingness on the part of Steele to pay the full amount of taxes owed for the years 1982 through 1986. As a CPA, Steele was and is aware of the tax laws and the procedures required in connection with the filing of returns and payment of taxes. We affirm the findings and conclusions of the Committee as above set forth indicating a neglect on the part of Steele of both financial and professional responsibilities.

We have reviewed the entire record according to the standards set forth in Pedersen and in Matt. We conclude that the record supports the decision of the Committee. We further conclude that Steele was afforded due process. We hold that Steele is unfit to practice law in Montana.

Affirmed.

CHIEF JUSTICE TURNAGE, JUSTICES HARRISON, NELSON and HUNT concur.

JUSTICE TRIEWEILER

dissenting.

I dissent from the majority opinion. After a review of the entire record provided by the Committee for Character and Fitness, I conclude that the Committee erred when it denied Robert Steele’s application to take the State Bar Examination.

Specifically, I conclude that those findings of fact relied on by the Committee to support its denial of Mr. Steele’s application either lacked sufficient specificity so that they can be reviewed, or are unsupported by substantial evidence.

The Committee’s Finding No. 5 to the effect that Steele acknowledged violating the law is incorrect. While it is true that one member of the panel examined him at length for the purpose of establishing that he knowingly violated the law, it is clear from that examination that the panel member did not understand Steele’s responses. In sum, Steele testified that he did not file tax returns during the early 1980s because he was under criminal investigation. He had money with which to pay his taxes during those times, but based on his interpretation of the law, concluded that he would not owe any taxes. When the investigation was concluded, he filed a tax return. However, by then, the money with which to pay the taxes owed had been lost due to poor investments. Steele never stated that his failure to pay the taxes was a violation of the law. The whole point of his testimony was that he did not believe the amount was due, and that the law did not require that he file tax returns because he was under criminal investigation by the Internal Revenue Service.

Steele admitted that failure to pay taxes if a taxpayer acknowledged that they were due, and failure to file income tax returns if a taxpayer had no legal excuse for not doing so, would be violations of the law. But he vigorously denied that either circumstance pertained to him during the times that he failed to pay taxes or file returns. Therefore, the Committee’s Finding No. 6 is taken out of context, distorts the essence of his testimony, and is also clearly erroneous.

In Finding No. 7, the Committee stated that because Steele no longer has the money available with which to pay his taxes, he was financially and professionally irresponsible. Unsuccessful investments are not the equivalent of financial irresponsibility, and it is peculiar that members of this profession would find him professionally negligent as an accountant when he has never had a similar complaint filed against him, nor has he ever been disciplined as an accountant.

The Committee’s Finding No. 8 states that Steele was neither candid in his application nor before the Committee. I find no indication in the record that Steele lacked candor during his testimony before the Committee. Furthermore, since the Committee’s finding lacks any specificity and provides no example of Steele’s lack of candor, I conclude that it is insufficient as a basis for denying his application to take the bar exam or be admitted to a profession for which he has studied for over three years.

The Committee’s Finding No. 9 states that Steele failed to disclose his suit against the United States on his application for certification. While that may be true, it is hardly a material basis for denying his application. Steele filed the suit and prevailed in the suit, and it had absolutely no adverse bearing on his moral character or general fitness to practice law. Furthermore, all materials relating to the suit were fully provided to the Committee at their request prior to the time any decision was rendered. This finding does not support the Committee’s conclusion that Steele was unfit to practice law.

In its Finding No. 10, the Committee stated that in spite of its requirement that Steele disclose information bearing on his character and fitness, he failed to identify two criminal investigations conducted by the IRS. However, neither criminal investigation resulted in any charge that Steele violated any law or federal regulation. Neither did any investigation lead to any complaint that Steele violated any professional rules established for certified public accountants. How then did either criminal investigation have any bearing on Steele’s fitness or character? Have we established a new presumption in our law that because someone is investigated, that investigation provides evidence of unfitness or poor character? If so, then this opinion reflects a major change in the traditional principles of justice to which our courts have previously subscribed.

In its Finding No. 11, the Committee stated that Steele applied to take the February 1991 exam, even though he was not eligible. However, the record indicates that when Steele made application to take the February bar exam he thought he would be eligible. When he filed the application, he indicated that he was still attending law school. All applicants for the bar exam anticipate their graduation date. Developments subsequent to Steele’s application required that he take one additional course, which he did. This unforeseen series of events has no bearing on his fitness to practice law.

Other than these findings, there is no factual basis in the Committee’s decision for denying Steele’s application to practice law. Since I conclude that these findings are either unsupported by the evidence, or are inadequate bases for denying his application, I dissent from the majority opinion and would reverse the Committee’s denial of Steele’s application to take the bar exam and, if successful, subsequently practice law in the State of Montana.

Steele has been a certified public accountant for 20 years. During that time, he represented many clients to their satisfaction. Because of his political and legal beliefs, he has been investigated by the IRS on two separate occasions, and has been involved in civil litigation with the IRS on one occasion. In spite of those investigations, he has never been charged with a crime, nor even accused of a crime. He has never been found to have committed any ethical violation nor charged with any ethical violation. In the only civil litigation in which he was involved, he prevailed, and it was determined that the government owed him money.

It is true that because of his poor investment history and misjudgment about his legal obligations, he now owes a substantial debt to the federal and state governments. However, that debt continues to be his obligation and "will presumably be enforced by the government to its satisfaction. It does not disqualify him morally or render him unfit to take the bar examination. Steele is being denied the opportunity to practice the profession for which he has prepared for over three years because of unconventional political ideas and incorrect legal conclusions drawn prior to his admission to law school. To forever deny him the opportunity to practice a profession for which he is otherwise qualified based on these past mistakes is a substantial injustice.

JUSTICE GRAY joins in the foregoing dissent.


author: JUSTICE WEBER

text:
    STATE OF MONTANA, Plaintiff and Respondent, v. JEFF WAYNE BROWN, Defendant and Appellant.
    No. 92-493.
    Submitted on Briefs November 18, 1993.
    Decided December 22, 1993.
    50 St.Rep. 1658.
    262 Mont. 499.
    865 P.2d 282.
    For Defendant and Appellant: Wendy Holton, Helena.

      For Plaintiff and Respondent: Joseph P. Mazurek, Attorney General, Michael Wellenstein, Assistant Attorney General, Helena; Richard J. Llewellyn, Jefferson County Attorney, Boulder.
   JUSTICE WEBER

delivered the Opinion of the Court.

Defendant Jeff Wayne Brown appeals the judgment by the District Court of the Fifth Judicial District, Jefferson County, which sentenced him to forty years of imprisonment. We affirm in part, vacate in part and remand.

The issues for review are restated as follows:

1. Did the District Court err in imposing two ten-year sentences under the weapon enhancement statute when the underlying charges of felony assault arose from the same incident?

2. Did the District Court err in imposing a forty-year sentence under the circumstances of this case?

On July 25,1991, after a day spent fishing and drinking together, Jeff Wayne Brown (Brown), his brother Darren Brown and Gerald Mullaney stopped at the Two Bit Saloon in Whitehall, Montana, while a tire on Darren Brown’s truck was being repaired. When the trio started to bother other bar patrons, the bartender asked them to leave the bar.

Brown left momentarily and then reentered the bar brandishing a pistol. He pointed it in the direction of the bartender, cocked it and made threatening statements. The bartender’s back was turned so he was unaware of this, but one of the bar patrons told Brown to put the pistol away. Brown did so and then left the bar.

After Brown left the bar, the three men got into Darren Brown’s truck. Darren Brown drove slowly past the bar while the defendant hung out the window of the truck and fired shots at the bar entrance. Although the shots frightened bar patrons and employees, no one was injured. Darren Brown then accelerated his truck and as he sped out of town, lost control of his truck and struck two pedestrians who were standing on the shoulder of the road. The impact killed one of the pedestrians and seriously injured the other.

The State charged Jeff Wayne Brown with felony assault, attempted aggravated assault and deliberate homicide by accountability. Brown later entered into a plea agreement, pursuant to which the State agreed to amend the information to charge Brown with two counts of felony assault and Brown agreed to plead guilty to the two counts of felony assault. The parties further agreed that the State would recommend a sentence of thirty years of imprisonment. The thirty years recommended by the State included the maximum sentence of ten years imprisonment for each of the two felony assault charges and a sentence enhancement of an additional five years imprisonment for each offense for using a firearm in the commission of the offenses.

Judge Frank Davis was the original presiding judge in this case. "When Judge Davis accepted Brown’s change of plea after the parties had entered the plea agreement, he advised Brown, among other things, that the maximum sentence he could receive was thirty years. After a remarkable community response generated by a newspaper advertisement which encouraged people to write letters to the District Court, Judge Davis recused himself from the case and Judge Robert J. Boyd assumed jurisdiction. Judge Boyd sentenced Brown to forty years with sixteen years suspended.

I.

Did the District Court err in imposing two ten-year sentences under § 46-18-221, MCA, when the underlying charges of felony assault arose from the same incident?

Section 46-18-221, MCA, provides for additional sentences for offenses committed with a dangerous weapon. In his first brief in this appeal, Brown argued that § 46-18-221, MCA, did not permit an additional ten-year sentence for each of his felony assault offenses. After Brown submitted his initial brief, this Court ruled on that issue in State v. Byers (1993), [261 Mont. 17], 861 P.2d 860, 879, 50 St.Rep. 1163, 1175, holding that the sentence enhancement for use of a dangerous weapon applies to each offense. Brown’s reply brief concedes that Byers controls; thus, we will not further address this issue.

II.

Did the District Court err in sentencing Brown to forty years when Brown had been advised by the original judge in the proceeding that the maximum term of imprisonment was thirty years?

On appeal, Brown has asked this Court to vacate ten years of his forty-year sentence. He contends that Montana law specifically requires the sentencing court to ensure that a defendant is informed of the maximum possible punishment that may be imposed. Brown further contends that because Judge Davis advised him that the maximum sentence of imprisonment was thirty years, Judge Boyd could not impose a term of imprisonment in excess of thirty years.

The State argues that Brown in fact knew that he could be sentenced to a maximum of forty years imprisonment and that the State did not misinform him as to the maximum sentence. The State further asserts that Brown was also aware that the prosecutor’s recommendation for two five-year sentences under § 46-18-221, MCA, did not bind the sentencing court, that the sentence was within the discretion of the District Court and that Brown knew that the court was not required to permit him to withdraw his guilty pleas. It further asserts that Brown cannot credibly maintain that he did not know the maximum sentence the court could impose because he acknowledged that he had discussed the sentencing laws and was informed by his attorney of the maximum sentence he could receive for the offenses. Finally, the State contends that the District Court’s misstatement does not constitute reversible error because Brown was well aware of the maximum sentence that could be imposed for the offenses to which he pled guilty.

Prior to accepting the plea agreement, the District Court advised Brown as follows:

THE COURT: You understand that the State proposes to file an amended information charging you with two counts of felony assault and proposes to ask that if you’re convicted of those that your sentence by — for the use of a gun. The possible punishment for that under that amended information, if I permit it to be filed, would be thirty years in the state prison. ... (Emphasis supplied.)

This statement is clearly incorrect as Brown could receive an additional sentence of ten years for each of the two felony assault offenses according to this Court’s recent decision in Byers. Therefore, the correct maximum sentence included two additional sentence enhancements of ten years each — a total of forty years. See §§ 45-5-202 and 46-18-221, MCA.

A sentencing court must comply with § 46-12-210, MCA, which provides in pertinent part:

46-12-210. Advice to defendant. (1) Before accepting a plea of guilty, the court shall determine that the defendant understands the following:
(a) (iii) the maximum penalty provided by law, including the effect of any penalty enhancement provision .... (Emphasis supplied.)

The court also must comply with § 46-16-105(1), MCA, which provides:

46-16-105. Plea of guilty. (1) Before or during trial, a plea of guilty may be accepted when:
(a) the defendant enters a plea of guilty in open court; and
(b) the court has informed the defendant of the consequences of his plea and of the maximum penalty provided by law which may be imposed upon acceptance of such plea. (Emphasis supplied.)

In addition to the above-quoted sections, the clear language of § 46-16-105, MCA, mandates that courts advise defendants of maximum punishment for offenses before the court may accept a plea of guilty. Further, § 46-12-204(2), MCA, requires the court to determine that a guilty plea is “voluntary” before accepting it. See also Benjamin v. McCormick (1990), 243 Mont. 252, 256, 792 P.2d 7, 10 (defendant must have an adequate understanding of the consequences of his guilty plea).

Brown relies on Benjamin and In re the Matter of Orman (1986), 224 Mont. 332, 336, 731 P.2d 893, 895, to support his argument that where a defendant is incorrectly advised of the maximum penalty allowed, the sentence must be modified to reflect his understanding. In Benjamin, the defendant was advised by the court and the prosecution that he would serve approximately one year in prison. However, a further provision of his sentence required him to complete the prison’s program for sexual offenders which would have resulted in at least two years imprisonment. The defendant’s guilty plea was based on a specific error; i.e., that he had been misinformed as to the consequences of his plea. Benjamin, 792 P.2d at 10.

Similarly, in Orman, the correct period of time of suspending a driver’s license for a second refusal to take a breathalizer test was imprisonment for one year. The arresting officers incorrectly advised the defendant several times that his license would be suspended for ninety days. We concluded, under the circumstances of that case, that even a person who was not under the influence of alcohol would reasonably have concluded that his license would be suspended for only ninety days. Orman, 731 P.2d at 895.

The State argues extensively that Brown’s subjective knowledge that he could be sentenced to a maximum of forty years is crucial. We disagree. We conclude that the plain language of the code sections quoted above provides that a defendant must be advised of the maximum punishment. We further conclude that Benjamin and Orman support Brown’s argument that the sentence must be modified to provide for a sentence no longer than the maximum sentence which Judge Davis advised Brown he could receive for the charged offenses.

We hold the District Court erred in imposing a forty-year sentence under the circumstances of this case. The District Court is instructed to modify the sentencing order by changing the term of imprisonment to thirty years, thereby eliminating five years from the enhancement to the sentence for each felony assault offense. The District Court is further instructed to redetermine the number of years, if any, which are to be suspended.

Affirmed in part, vacated in part and remanded.

JUSTICES HARRISON, TRIEWEILER, NELSON and GRAY concur.