Saturday, December 22, 2007

Prohibited Transaction

A lawyer who took a series of interest-free loans from a client claimed that Rule 1.8(a) did not apply because the loans were funded by a marital trust rather than by the client in an individual capacity. The Supreme Court of Washington rejected this attempt to put a form over substance spin on the rule and imposed a six-month suspension for the misconduct. The court concluded that the attorney had knowingly engaged in the misconduct:

"Holcomb's argument that he did not act knowingly is dependent on his claim 
that he lacked a fundamental understanding that the trust and marital community
were the alter egos of his client when he obtained the loans and that he had no duty
to inquire into the nature of the trust. 

       Because we reject that claim, this argument collapses.  The facts support the
conclusion that Holcomb knowingly requested a loan from Schiffner before he even
knew of the existence of the trust.  Further, our definition of 'knowledge' includes
the requirement that the lawyer should have known that a conflict existed."

A dissent would not find, as did the majority, a finding that
the attorney also violated Rule 1.7(b)
and favors a shorter suspension (Mike Frisch)

http://lawprofessors.typepad.com/legal_profession/2007/12/prohibited-tran.html

Bar Discipline & Process | Permalink

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