Opinion ID: 1169136
Heading Depth: 1
Heading Rank: 4

Heading: Representation of Multiple Clients with Adverse Interests

Text: In October 1978, James Rafferty retained the respondent for assistance in handling the financial difficulties Rafferty and his pipe-trenching company were experiencing in making payments to creditors. The respondent suggested that Rafferty either file for bankruptcy or arrange for new financing for the company. Rafferty chose the second option. The respondent suggested obtaining financing from investors who could purchase Rafferty's trenching equipment and then lease it back to his company. In this regard, the respondent met with Grant Walter, one of Rafferty's creditors. Walter and the respondent proposed the formation of a corporation, to be called Walter Trenching, which would purchase Rafferty's machinery. Under the terms of the final agreement, Walter was to loan the corporation enough money to satisfy Rafferty's debts at La Junta State Bank and was to establish a line of credit at the bank for the operation of the corporation's business. In return, Walter was to receive the tax benefits generated by the enterprise. Rafferty was to operate the firm's machinery, bid the trenching jobs, and schedule the corporate business. Mr. and Mrs. Walter and the respondent, as Rafferty's agent, received all the shares of Walter Trenching. The respondent was appointed secretary and treasurer of the corporation and served as the corporation's counsel. Rafferty delivered his cash and his accounts receivable to the respondent who was to use them to satisfy Rafferty's remaining creditors. The respondent told Rafferty that at the end of seven years, Rafferty would be given the opportunity to repurchase the trenching machinery with a loan from the corporation. Although the La Junta State Bank indebtedness was satisfied, Rafferty's other creditors were not paid and no line of credit was established for the corporation. After Rafferty expressed his displeasure with the respondent's failure to satisfy the outstanding debts, the respondent transferred to Walter the shares he held for the benefit of Rafferty. Approximately eighteen months later, a creditor sued Rafferty. The respondent refused to assist Rafferty with this lawsuit, stating that a conflict of interest prevented him from continuing to represent Rafferty. The respondent suggested that Rafferty file for bankruptcy. The stipulation correctly concludes that the respondent's conduct in the Rafferty matter violated DR1-102(A)(1) (violating a disciplinary rule), DR1-102(A)(4) (engaging in conduct involving dishonesty, fraud, deceit, or misrepresentation), DR1-102(A)(6) (engaging in conduct that adversely reflects on fitness to practice law), DR5-101 (accepting employment when the interests of the lawyer may affect his independent professional judgment), DR5-104 (engaging in improper business relations with a client), DR5-105(B) (continuing employment by multiple clients who have differing interests), DR6-101(A)(3) (neglecting a legal matter entrusted to the lawyer), and DR7-101(A)(3) (intentionally prejudicing or damaging client), and therefore grounds for discipline exist under C.R.C.P. 241.6(1) (any act or omission that violates the provisions of the Code of Professional Responsibility) and C.R.C.P. 241.6(3) (any act or omission that violates the highest standards of honesty, justice or morality).