Wednesday, November 2, 2022
The Alaska Supreme Court rejected as unduly lenient a sanction proposed by the Bar Association's Disciplinary Board
The same day an attorney’s long-existing law firm was ordered to return over $643,000 to a former client, the attorney closed that firm and began transferring its assets to a recently formed law firm and to himself. The attorney then told the former client that the old law firm did not have sufficient assets to return the funds. In subsequent civil litigation between the attorney and the former client, the superior court found the attorney and both law firms liable under a consumer protection statute for nearly $2 million in damages.
The Alaska Bar Association initiated disciplinary proceedings against the attorney. After a four-day hearing, an area hearing committee found that the attorney had intended to defraud his former client by transferring the old firm’s assets to the new firm and to himself and had misrepresented his old firm’s ability to pay in violation of professional conduct rules. The Bar Association’s Disciplinary Board adopted the hearing committee’s findings and conclusions and recommended that we suspend the attorney from the practice of law for one year and order him to pay $3,000 in fees and costs. The attorney appeals, arguing that there is insufficient evidence to support the area hearing committee’s (and therefore the Board’s) finding, by clear and convincing evidence, that he intended to defraud the former client.
We agree that the attorney’s conduct violated professional conduct rules, but we conclude that the Board’s recommended sanction is too lenient. We therefore suspend the attorney from the practice of law for four years and order him to pay $3,000 in fees and costs to the Bar.
The representation of the client - a Native American corporation - spread over 30 years and involved both Respondent and his father.
In civil litigation
The superior court also found that seven of eight badges of fraud were present which “weigh[ed] strongly in favor of finding that the capitalization of [Merdes Law Office] with the assets of [Merdes & Merdes] was done with the intent to defraud [client] Leisnoi and prevent payment of the debt owed to Leisnoi.”
The court here sustained the findings of misconduct.
The Board did not specify the reasons it concluded that the “selfish or dishonest motive” aggravator applied. But the record shows that Merdes fraudulently conveyed more than a million dollars from Merdes & Merdes to his new firm and over two million dollars to himself to keep the money his old firm owed to Leisnoi. His reasons for doing so were his belief that his father had earned the money and his anger over the insults Leisnoi had levied against his father. We conclude that the Board properly found “selfish and dishonest motive” as an aggravating factor...
Lawyers must act with integrity.114 We have previously emphasized that because “[s]ociety allows the legal profession the privilege of self-regulation . . . . it is of the utmost importance that the public have confidence in the profession’s ability to discipline itself.” Therefore “our paramount duty ‘lies in the assurance that the public will be protected in the performance of the high duties of . . . attorney[s].’ ” Yet Merdes’s conduct in this case “contributes to the perpetuation of the stereotype of lawyers as unscrupulous and unprincipled.