Friday, November 12, 2010

Business Venture With Client Leads To Disbarment

The South Carolina Supreme Court has disbarred an attorney for misconduct that primarilty involved a business transaction with a client:

In terms of Respondent's business dealings with Client, we find Rule 1.8(a), RPC, of Rule 407, SCACR is primarily implicated.  Although Rule 1.8 does not prohibit attorney-client business relationships, it clearly delineates three mandatory requirements an attorney must satisfy in order to comply with the standards of ethical conduct.  As a result, we have cautioned attorneys about engaging in business transactions with clients.  See In the Matter of Harper, 326 S.C. 186, 193, 485 S.E.2d 376, 380 (1997) ("In view of the trust placed in attorneys by their clients and attorneys' often superior expertise in complicated financial matters, attorneys must take every possible precaution to ensure that clients are fully aware of the risks inherent in a proposed transaction and of the need for independent and objective advice.");  In the Matter of Conway, 305 S.C. 388, 393, 409 S.E.2d 357, 360 (1991) (noting that Rule 1.8(a) does not forbid attorney-client business relationships but recognizing that "they require attorneys to maintain the highest professional and ethical standards in their dealings with clients.  No exceptions to that duty exist merely because an attorney chooses to become involved in business transactions with his clients.").

Here, based on the admitted allegations of misconduct, we find Respondent not only misrepresented the extent of his financial investment in the real estate venture, but also the potential return on Client's investment.  Furthermore, Respondent violated each of the three mandatory provisions of Rule 1.8(a), RPC, of Rule 407, SCACR.  Specifically, in entering into the business venture with Client, Respondent failed to:  (1) fully disclose the terms of the commercial business transaction to Client in writing and in a manner that could be easily understood by Client; (2) advise Client in writing of the desirability of seeking independent legal counsel regarding the transaction and to give Client a reasonable opportunity to seek such counsel; and (3) seek informed consent, in the form of writing signed by the Client, and to outline the essential terms of the transaction and Respondent's role in the transaction, including whether Respondent would be representing Client in the transaction.   

He also had not fully cooperated in the disciplinary process. (Mike Frisch)

Bar Discipline & Process | Permalink

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