Tuesday, May 29, 2012
The Idaho Supreme Court has affirmed the grant of a new trial to an attorney and his girlfriend who were found by special jury verdict to have breached fiduciary duties to a former client by purchasing half of his stock in a closely-held corporation for less than fair market value.
The stock was for a resort property on the shore of Lake Pend Orielle and was held in equal shares by two couples. The stock of one couple was purchased by a man with the wonderful name of Jerry Berry.
The attorney, who practiced bankruptcy law, visited the resort and made Mr. Berry's acquaintance. Berry consulted him about a possible bankruptcy but did not pursue that option. Later, Berry wished to purchase the other 50% of the stock, with money lent by the attorney in part and his girlfriend in part. The attorney thought he would be repaid on sale of the resort, but the sale did not happen.
Berry was diagnosed with pancreatic cancer, triggering events that led Berry to transfer the stock to the attorney and girlfriend to repay the obligation and the attorney to take control of the corporation. Berry died in November 2006.
The attorney then had the locks to the resort changed and did not give a key to Mrs. Berry. He approached her the day after the memorial service with a proposed special resolution and shortly thereafter was elected corporation president by 2-1 majority vote of himself and the girlfriend, who was elected treasurer by the same margin.
As they say, litigation followed, initiated by Berry's widow.
The court here found that the trial court's instructions on the attorney-client relationship were "clearly inadequate." The district court "did not err in holding that there was insufficient evidence to sustain the verdict that when [the attorney] purchased the stock he breached his fiduciary duty to Mr. Berry arising from an attorney-client relationship."
The court noted a dearth of evidence of an attorney-client relationship between Berry and the attorney after the 2000- 2001 consultation. The stock purchase took place in 2006.
The court and a concurring opinion were unimpressed by the attorney's "shabby" treatment of Mrs. Berry, which may have contributed to the jury's verdict.
Justice Jones, concurring, opines that while plaintiff's case raised "some smoke, it did not produce the actual fire necessary to support the verdict" against the attorney and the girlfriend. (Mike Frisch)