Steven Donziger has been given a second chance to save his law license. John R. Horan, the referee who will be conducting the next hearing in the New York bar’s disciplinary case against Steven Donziger has decided that Donziger should be allowed to challenge the factual basis on which Judge Kaplan found that he had committed fraud. The is the best news Donziger has had in a while, and it creates the possibility that a US court will eventually disagree with Judge Kaplan’s findings of fact.

The decision seems erroneous to me. As I understand it, the court has already determined that Donziger violated the rules of professional conduct, and the purpose of the upcoming hearing is to determine the sanction. It seems very odd to say that the findings to which the court gave preclusive effect as to liability should not have preclusive effect as to the sanction, and surely it is not open to the referee to make findings of fact that differ from the findings the court has already reached in the same proceeding. This point is independent of the point about whether Judge Kaplan’s findings of fact should be entitled to preclusive effect, but even if that were the question, I think there is a pretty strong case for applying the doctrine of collateral estoppel. But all that said, even if the referee’s decision is erroneous as a matter of law, I don’t see that it really prejudices anyone (Donziger is temporarily suspended from the practice of law, so no clients or potential clients will be prejudiced), and all else being equal, the more opportunity an accused lawyer is given to make his case, the better.

The Attorney Grievance Committee, which is in effect the prosecutor in the proceeding, has filed a strong objection to the referee’s decision. It appears the court will hear the objection on November 26, and Donziger has not yet responded to the objection. So it is not clear yet what will happen at the hearing Horan is scheduled to hold on December 4.

If the Horan decision stands, I think anything could happen. It’s not at all clear what evidence Donziger would seek to offer. We do know that Donziger says the hearing could be completed in two days, which suggests that he doesn’t have in mind relitigating the fraud claims in detail.

It’s probably too early to speculate about such things, but if Horan were to find, as a matter of fact, that Donziger had not committed a fraud, and if his findings were not reversed on the facts or the law, that would be huge news, and it could have unpredictable but important effects on the overall case, particularly in Canada. So stay tuned.