Opinion ID: 1349326
Heading Depth: 1
Heading Rank: 13

Heading: is this conduct subject to discipline?

Text: Flores argues that even if his conduct was based in part upon the exercise of the power of attorney, such conduct cannot subject him to discipline under the code because the conduct did not occur within the scope of an attorney-client relationship and was neither criminal nor illegal in nature. The referee specifically found that the conduct at issue did not occur during the course of an attorney-client relationship. The referee did determine, however, that the conduct related, at least in part, to Flores' role as Erling's attorney in fact based upon the power of attorney. The issue presented is whether Flores' actions in these circumstances subject him to discipline. A power of attorney authorizes another to act as one's agent. Cheloha v. Cheloha, 255 Neb. 32, 582 N.W.2d 291 (1998). Generally, an agent is required to act solely for the benefit of his or her principal in all matters connected with the agency and adhere faithfully to the instructions of the principal. Id. An agent and principal are in a fiduciary relationship such that the agent has an obligation to refrain from doing any harmful act to the principal. Id. An agent is prohibited from profiting from the agency relationship to the detriment of the principal. Id. In the instant case, Flores has established that he paid certain of Erling's medical bills from his own funds and intended to be reimbursed for his expenditures. He contends that he therefore was entitled to repay himself by utilizing the monthly pension benefits, which were paid into an account on which he was a joint owner. However, Flores' status as an unsecured creditor cannot and does not diminish his role as Erling's agent pursuant to the power of attorney. Once he utilized the power of attorney in seeking medicaid benefits for Erling, he was acting as her fiduciary with regard to those benefits and the conditions upon which they were awarded. Flores' decision to apply Erling's pension benefits to her debt to him rather than to her account at Arbor Manor enabled him to benefit from the agency relationship, in direct violation of his fiduciary duty. See Cheloha v. Cheloha, supra . In addition, his decision to discontinue paying the pension moneys to Arbor Manor, with full knowledge that the medicaid award was premised upon the payment of those sums to Arbor Manor for Erling's care, was an act that subjected Erling to potential harm, either in the form of eviction from the nursing home or discontinuation of medicaid benefits. The record therefore establishes that Flores' conduct violated his fiduciary duty to Erling. Our prior case law has not limited conduct subject to discipline to that which occurs within the scope of an attorney-client relationship. See, State ex rel. NSBA v. Douglas, 227 Neb. 1, 416 N.W.2d 515 (1987); State ex rel. Nebraska State Bar Assn. v. McConnell, 210 Neb. 98, 313 N.W.2d 241 (1981). See, also, Neb. Ct. R. of Discipline 3(B) (rev. 1996), stating that acts or omissions which violate the Code of Professional Responsibility shall be grounds for discipline whether the act or omission occurred in the course of an attorney-client relationship or otherwise. While Flores was not convicted of a crime and there is no showing that his conduct was illegal, we find that his violation of a fiduciary duty nevertheless subjects him to discipline under the code. The evidence reflects that between 1993 and 1996, the sum of the deposits Flores made into the joint account and the bills he paid for Erling from his own funds exceeded his withdrawals from the account by $3,696.40. Thus, this is not a case of theft or misappropriation of client funds, and we conclude that there is no clear and convincing evidence that Flores engaged in conduct involving moral turpitude, dishonesty, fraud, deceit, or misrepresentation. We therefore find no violation of DR 1-102(A)(3) or (4). However, we conclude that Flores' breach of his fiduciary duties as attorney in fact for Erling, as discussed above, constituted conduct that adversely reflected on his fitness to practice law and therefore violated DR 1-102(A)(6), which also constitutes a violation of DR 1-102(A)(1). The relationship between an attorney and client is one of the highest trust and confidence such as to require the attorney to observe the utmost good faith and not to allow the attorney's private interests to conflict with those of the client. Bauermeister v. McReynolds, 254 Neb. 118, 575 N.W.2d 354 (1998). Canon 5 of the Code of Professional Responsibility adopted by this court requires a lawyer to exercise independent professional judgment on behalf of a client. EC 5-1 states: The professional judgment of a lawyer should be exercised within the bounds of the law, solely for the benefit of the lawyer's client and free of compromising influences and loyalties. Neither the lawyer's personal interests, the interests of other clients, nor the desires of third persons should be permitted to dilute the lawyer's loyalty to his or her client. EC 5-3 provides in part: The self-interest of a lawyer resulting from the lawyer's ownership of property in which his or her client also has an interest or which may affect property of the client may interfere with the exercise of free judgment on behalf of the client. If such interference would occur with respect to a prospective client, a lawyer should decline employment proffered by him or her. After accepting employment, a lawyer should not acquire property rights that would adversely affect the lawyer's professional judgment in the representation of his or her client. Even if the property interests of a lawyer do not presently interfere with the exercise of the lawyer's independent judgment, but the likelihood of interference can reasonably be foreseen by him or her, a lawyer should explain the situation to his or her client and should decline employment or withdraw unless the client consents to the continuance of the relationship after full disclosure. As noted, Flores' decision to use Erling's pension benefits to reimburse himself instead of making her required payments to Arbor Manor subjected Erling to potential if not actual harm. Although this conduct did not occur in the context of an attorney-client relationship, it nevertheless reflects adversely upon Flores' fitness to practice law because it calls into question his ability to subordinate his personal interests in order to exercise independent judgment on behalf of a client. Accordingly, there is a violation of DR 1-102(A)(6) which warrants discipline.