Court Opinion

ID: 853738
Source: CourtListenerOpinion
Date Created: 2013-03-02 01:27:30.64078+00
Date Added: 2024-06-11T09:04:40.680484
License: Public Domain

FOR THE RESPONDENT                FOR THE INDIANA SUPREME COURT
                                       DISCIPLINARY COMMISSION

Jon D. Krahulik                   Donald R. Lundberg, Executive Secretary
3500 West DePauw Blvd.            115 West Washington Street, Suite 1060
First Floor, Pyramids Building II       Indianapolis, IN 46204
Indianapolis, IN 46268

      IN THE

      SUPREME COURT OF INDIANA

IN THE MATTER OF               )
                                    )  Case No. 49S00-9702-DI-116
RICHARD N. BELL                )
__________________________________________________________________

      DISCIPLINARY ACTION
__________________________________________________________________

                              November 9, 1999
Per Curiam
      The respondent, Richard N. Bell, improperly  served  both  as  counsel
for, and partner in, a business for which accounting services were  provided
by a firm in which the respondent had an  interest.   He  exacerbated  these
impermissible conflicts of interest by later suing the business and  one  of
his business  partners.   Today  we  approve  a  Conditional  Agreement  for
Discipline, pursuant to Ind.Admission and Discipline Rule  23,  Section  11,
between  the  respondent  and  the  Indiana   Supreme   Court   Disciplinary
Commission, which will  result  in  the  respondent’s  suspension  from  the
practice of law for thirty (30)  days  for  engaging  in  this  professional
misconduct.
      As a preliminary matter,  we  note  the  respondent  was  admitted  to
practice law in this state  in  1975.   Therefore,  he  is  subject  to  the
disciplinary authority of this Court.
      The undisputed facts show that the  respondent  in  late  1983  was  a
certified public accountant in an accounting firm.  At that  time,  he  also
was an attorney.  He sold his interest in the accounting firm at the end  of
1983 to devote his professional career to law.  As a condition of the  sale,
he was to receive 108 monthly  installment  payments  and  was  required  to
protect the goodwill of the accounting firm.  The accounting firm  continued
to insure him for accounting malpractice.
      Shortly after the sale of the accounting firm, the respondent  drafted
papers creating  a  partnership  to  develop  condominiums.   He  agreed  to
represent, as an attorney, both the general  partner  and  the  partnership.
The respondent later invested in the partnership, and his former  accounting
firm provided accounting services to the partnership.
      A fire destroyed the condominiums before completion.  A dispute  arose
as to the  fees  to  which  the  general  partner  was  entitled  under  the
partnership agreement drafted by the  respondent.   The  respondent  advised
the  partnership’s  accounting  firm  (to  which  he  still  was  indirectly
related) that the general partner, whom he represented, was not entitled  to
such fees.  Relying on that legal opinion, the accounting firm  reported  to
the general partner that he was not entitled to  the  fees.   That  approach
was financially advantageous to the investors, who included the  respondent,
some of  the  respondent’s  clients,  and  some  of  the  accounting  firm’s
clients.
      A dispute over payment for the  respondent’s  legal  services  to  the
general partner and partnership arose.  The respondent  filed  suit  against
the general partner’s company and the partnership  and  obtained  a  default
judgment.  The judgment later was set aside because the  trial  court  found
the respondent had violated his duty to the partnership and to  the  general
partner by failing to advise them of his intent to proceed with that suit.
      Instead of appealing the order setting aside the default judgment, the
respondent filed an “Amended Complaint for Damages” which named the  general
partner and the  partnership  as  defendants.   The  respondent  signed  the
amended complaint under penalties of perjury and stated that the  defendants
owed him $14,675.43 for legal services performed since  January  1984.   The
respondent later withdrew his complaint and admitted that some of  the  fees
which he sought in the Amended Complaint had been paid.
      On July 3, 1984, the respondent sent to the general  partner  and  the
limited partners  a  letter  in  which  he  resigned  as  attorney  for  the
partnership.  The letter stated the respondent  was  resigning  because  the
general  partner  had  failed  to  pay  legal  fees  and  maintain  accurate
accounting records.  The letter alleged that  the  general  partner  was  in
violation of  the  partnership  agreement  because  he  allegedly  owed  the
partnership money.
      Based in part on the respondent’s representations, one of the  limited
partners sued the general partner on October  16,  1985.   The  suit  sought
dissolution of the partnership, appointment of a receiver and  an  award  of
punitive damages.  In that same month, the  respondent,  with  proxies  from
other limited shareholders, voted to oust the general partner.  In the  face
of that vote, the general partner resigned.
      The general partner filed a  counterclaim  seeking  damages  from  the
respondent.  The trial court  entered  judgment  in  favor  of  the  general
partner and against the respondent in the amount of $32,500 in  compensatory
damages and $50,000 in punitive damages.
      These facts establish an  improper  intermixing  of  the  respondent’s
personal and professional  interests.   We  discussed  the  rules  governing
lawyers engaging in business transactions with their clients  in  Matter  of
Strutz, 652 N.E.2d 41 (Ind.  1995),  and  that  discussion  bears  repeating
here:
      Under the Professional Responsibility Code, a lawyer may
      engage in a business transaction with a client only if the
      transaction satisfies standards designed to protect the
      client against an overreaching attorney.  (footnote omitted)
      However, a lawyer is prohibited from entering into a business
      transaction with a client if they have "differing interests therein,"
      and the client "expects the lawyer to exercise his professional
      judgment therein for the protection of the client, unless the client
      consents after full disclosure."  In re Watson (1985), Ind., 482
      N.E.2d 262, 264;  In re Aspinall (1983), Ind., 455 N.E.2d 942, 943;
      D.R. 5-104(A).  Moreover, under D.R. 5-101(A), a lawyer is
      prohibited from accepting employment if the exercise of his
      professional judgment on behalf of his client will be or
      reasonably may be affected by his own financial or business
      interests unless the client consents after full disclosure.  In re
      Young (1985), Ind., 482 N.E.2d 723, 723.   As we observed in
      In     re     Welke     (1984),     Ind.,     459     N.E.2d      725:

           The Code of Professional Responsibility for Attorneys
           at Law does not preclude an attorney from being
           an entrepreneur or engaging in any other lawful
           profession.  However, it does provide that if there is
           a conflict between these personal interests and
           professional obligations, the latter must prevail.  Only
           through adherence to these principles and enforcement
           of such standards can the integrity of the profession
           be maintained.

      Id.  at  730.    Ethical  Consideration  5-1   of   the   Professional
Responsibility
      Code provided that a lawyer should exercise professional judgment
      "solely for the  benefit  of  his  client  and  free  of  compromising
influences
      and loyalties."   Ethical Consideration 5-3 added that even if a
      lawyer's property interests  "do  not  presently  interfere  with  the
exercise
      of his independent judgment, but the likelihood  of  interference  can
      reasonably be foreseen ..., a lawyer should explain the  situation  to
      his client and should decline employment or withdraw unless the client
      consents...after full disclosure."   See Bruce A.  Mann  &  Marcus  P.
      Wilkinson, The Role of Counsel in  Venture  Capital  Transactions,  46
      Bus.Law. 770 (1991);  Note,  Developments  in  the  Law--Conflicts  of
      Interest,      94      Harv.L.Rev.      1244,       1286       (1981).

Strutz, 652 N.E.2d at 47-48.
      The respondent and the Commission have stipulated that the  respondent
was an investor in the partnership, the attorney for  the  general  partner,
the attorney for the partnership, and the attorney for some of  the  limited
partners, and that he had a business arrangement with  the  accountants  for
the  partnership.   Stipulation  of  Facts  &  Conditional   Agreement   for
Disciplinary Action (“Stipulation”) Ex. A ¶  95.   The  respondent  and  the
Commission also have stipulated that respondent did not make any written  or
oral communications to the general partner about  the  actual  or  potential
conflicts of the respondent being  a  limited  partner  while  he  was  also
attorney  for  the  general  partner  and  attorney  for  the   partnership.
Stipulation Ex. A ¶ 45.  The respondent and the Commission  agree  that  the
respondent accepted  employment  where  the  exercise  of  his  professional
judgment on behalf of his client would be or reasonably  might  be  affected
by his own  financial,  business,  property,  or  personal  interests.   The
respondent and the  Commission  also  agree  that  the  respondent  accepted
employment where the exercise of his independent  professional  judgment  on
behalf of a client would be or likely would be  adversely  affected  by  the
acceptance of the employment.  Under  these  circumstances,  the  respondent
violated DR 5-101(A)[1] and 5-105(A).[2]
      The respondent and the Commission stipulate that  the  respondent  and
the  general  partner  had  a  lengthy  dispute  over  legal  fees  due  the
respondent and that the respondent eventually sued to  collect  those  fees.
Stipulation Ex.  A  ¶¶  73-78.   The  respondent  and  the  Commission  also
stipulate that  after  the  fire,  “[t]he  amount  of  money  available  for
distribution to the limited partners, including [respondent], depended  upon
the collection of insurance proceeds, the denial of fees and other money  to
[the general partner], and the obtaining of  any  money  from  [the  general
partner] to the  partnership.   [Respondent]  was  aware  of  those  facts.”
Stipulation Ex. A ¶ 85.  The respondent and the Commission  agree  that  the
respondent continued multiple employment (i.e., employment on behalf of  the
general partner, the partnership, and some of the  limited  partners)  where
the exercise of his independent professional judgment on behalf of a  client
would be or likely would be adversely  affected  by  his  representation  of
another client.  Under these circumstances, the respondent  violated  DR  5-
105(B).
      The respondent also breached his professional  responsibility  to  his
client, the general partner, in several specific ways.  The  respondent  and
the Commission stipulate that the respondent alleged  in  the  letter  dated
July 3, 1984, that the general partner had not  paid  legal  fees,  had  not
kept accurate accounting records and had improperly withdrawn  $47,800  from
the partnership.  Stipulation Ex. A ¶ 103.  They further stipulate that  the
letter  was  distributed  to  all  limited  partners  without  the   general
partner’s permission and that it “defamed (the general partner)  with  false
statements,  inferences  and  innuendos  that  (the  general  partner)   was
dishonest, untrustworthy, and incompetent  in  his  profession,  office  and
occupation.”  Stipulation Ex. A ¶¶ 104 - 106.[3]
      The parties also stipulate that  the  respondent  obtained  a  default
judgment on June 14, 1984, without notice to  the  general  partner  or  the
limited partnership.  Stipulation Ex. A ¶ 101.  They further stipulate  that
a limited partner, relying on the respondent’s  representations,   sued  the
general partner for dissolution of the partnership, for the  appointment  of
a receivership and for an award of punitive damages.  Stipulation Ex.  A  ¶¶
126-127.   The  respondent,  armed   with   proxies   from   other   limited
shareholders, voted to  oust  the  general  partner  from  his  position  in
October 1985, leading to the  general  partner’s  resignation.   Stipulation
Exhibit  A  ¶  129.  The  respondent  and  the  Commission  agree  that  the
respondent revealed or otherwise misused the confidences or secrets  of  his
client and, thereby, under these  circumstances,  violated  DR  4-101(B).[4]
The respondent and the Commission further agree that the  respondent  caused
prejudice or damage to his client during the course of  representation  and,
thereby, under these circumstances, violated DR 7-101(A)(3).[5]
      Since we have found professional misconduct, we must now determine  an
appropriate sanction.  We recognize a mitigating circumstance in this  case:
that  the  respondent  fully  satisfied  the  judgment   for   $32,5000   in
compensatory damages and $50,000 in punitive damages  entered  against  him.
With that in mind, the  Commission  and  the  respondent  suggest  a  30-day
suspension with automatic reinstatement.   Such  a  sanction  is  consistent
with our resolution of similar cases.  See, e.g., Matter of  Christoff,  690
N.E.2d 1135 (Ind. 1997) (30-day suspension for prosecutor who threatened  to
revive  dormant  criminal  investigation  of  attorney  if  attorney  became
candidate for prosecutor); Matter of  Maternowski,  674  N.E.2d  1287  (Ind.
1996) (30-day  suspension  for  attorney  who  represented  client  who  was
uncertain whether to cooperate with government  authorities  where  attorney
had  personal  policy  of  not  representing  clients  who  cooperate   with
government);  Matter  of  McCarthy,  668  N.E.2d  256  (Ind.  1996)  (30-day
suspension for attorney who represented client  and  himself  in  an  action
against accountant who had agreed to perform services for them).
      We are satisfied that a 30-day suspension  is  commensurate  with  the
misconduct here.  Accordingly, we order that  the  respondent  be  suspended
from the practice of law  for  a  period  of  thirty  (30)  days,  beginning
December 10, 1999, at the conclusion  of  which  he  automatically  will  be
reinstated to the practice of law in Indiana.
      The Clerk of this Court is directed to provide notice  of  this  order
in accordance with Admis.Disc.R. 23(3)(d) and to provide the  Clerk  of  the
United States Court of Appeals for the Seventh Circuit, the  Clerk  of  each
of the United States District Courts in this state, and the  Clerk  of  each
of the United States Bankruptcy Courts in this state  with  the  last  known
address of the respondent as reflected in the records of the Clerk.
      Costs of this proceeding are assessed against the respondent.
-----------------------
      [1]The respondent’s conduct at issue arose before adoption of the
Rules of Professional Conduct for Attorneys at Law; thus, he was charged
under the Code of Professional Responsibility.  DR 5-101(A) of those rules
provided:

           Except with the consent of his client after full disclosure, a
lawyer
           shall not accept employment if the exercise of his professional
           judgment on behalf of his client will be or reasonably may be
           affected by his own financial, business, property, or personal
           interests.

      [2]DR 5-105 provided:

           (A) A lawyer shall decline proffered employment if the exercise
           of his independent professional judgment in behalf of a client
           will be or is likely to be adversely affected by the acceptance
           of the proffered employment, except to the extent permitted
           under DR 5-105(C).

           (B) A lawyer shall not continue multiple employment if the
           exercise of his independent professional judgment in behalf
           of a client will be or is likely to be adversely affected by his

           representation of another client, except to the extent permitted
           under DR 5-105(C).

           (C) In the situations covered by DR 5-105(A) and (B), a lawyer
           may represent multiple clients if it is obvious that he can
           adequately represent the interest of each and if each consents
           to the representation after full disclosure of the possible
effect
           of such representation on the exercise of his independent
           professional judgment on behalf of each.

      [3]The Commission originally charged the respondent with violation of
DR 1-102(A)(4) in connection with the misstatements made in the
respondent’s letter dated July 3, 1984.  The Commission later determined
the inaccuracies were not intentionally dishonest.  The parties agree, and
we find, that the evidence does not establish a violation of DR 1-
102(A)(4).

      [4]DR 4-101 provided:

           (B) Except when permitted under DR 4-101(C), a lawyer shall not
           knowingly:

                 (1) Reveal a confidence or secret of his client.

                 (2) Use a confidence or secret of his client to the
disadvantage
                 of the client.

                 (3) Use a confidence or secret of his client for the
advantage of
                 himself or of a third person, unless the client consents
after full
                 disclosure.

           (C) A lawyer may reveal:

                 (1) Confidences or secrets with the consent of the client
or clients
                 affected, but only after a full disclosure to them.

                 (2) Confidences or secrets when permitted under
Disciplinary Rules
                 or required by law or court order.

      [5]DR 7-101(A) provided in relevant part:

           A lawyer shall not intentionally: . . .

                 (3) Prejudice or damage his client during the course of
                 the professional relationship, . . . .