Court Opinion

ID: 9716678
Source: CourtListenerOpinion
Date Created: 2023-08-26 06:47:53.602931+00
Date Added: 2024-06-11T18:23:47.837860
License: Public Domain

JUSTICE MILLER, dissenting: I disagree with the majority’s disposition of the present case. In my view, the respondent’s misconduct warrants a suspension of at least one year. In addition, I believe that the respondent should be ordered to pay restitution to the injured client. The respondent does not contest the findings of misconduct made below. The Hearing Board found that the respondent breached his fiduciary duty to Nancy Week, his client; that he represented her when the representation was materially limited by his responsibilities to another client or to a third person, or by his own interests, without making full disclosure of that to Week; that he represented multiple clients in a single matter without explaining to them the implications of his actions and the risks involved; that he entered into a business transaction with Week without making full disclosure; that he made a statement of material fact or law that he should have known was false; and that he engaged in conduct that tends to defeat the administration of justice or brings the courts or legal profession into disrepute. The majority opinion contains a detailed recitation of the circumstances surrounding the respondent’s misconduct, and there is no need for me to repeat that evidence here. It is sufficient to note that the respondent served as counsel for Fox River Minerals, Inc. (FRM), receiving a weekly retainer of $500 for his work. The respondent was the sole signatory on FRM’s “special account,” into which all receipts were deposited. The respondent would transfer funds from the special account into a separate payroll account as the money was needed. According to the testimony of one FRM employee, there was a scramble each week to raise enough money to cover FRM’s payroll, and the respondent’s role was “to deal with the continual money crisis” experienced by the company. It is clear that the respondent was intimately familiar with FRM’s precarious financial condition. On this record, I must disagree with the majority’s conclusion that a six-month suspension is the appropriate sanction in this case. The evidence showed that the respondent encouraged the client to make her initial loan of $15,000 to FRM. The respondent broached the subject with Week and told her that she would receive interest of $2,500 on the $15,000 loan within 60 days. The loan was to be secured by an assignment of 10% of the shares of FRM stock held by the company’s principal shareholder, David Remy. Only two weeks earlier, however, the respondent had attended a meeting at which another person, Joseph Thoesen, received a promissory note from FRM for $120,000 and a written pledge of all Remy’s FRM stock as collateral. The respondent assured Week that the FRM company had great potential and that his wife planned to invest in the company. The respondent did not provide Week with any specific information about FRM’s finances, however, apart from the vague statement that the company required money to meet its payroll and expenses. The respondent did not advise Week of his conflicting interests in the matter or recommend that she obtain independent advice before making the loan. The circumstances surrounding the making of the second and third loans or investments are in dispute. Week testified that the respondent approached her about the additional loans, while the respondent testified that they were Week’s idea. In any event, it is clear that the respondent still failed to inform Week about his conflicting interests or recommend that she obtain independent advice. Apparently guided by the credo “In for a dime, in for a dollar,” the respondent allowed Week to extend further loans to FRM, even as its condition deteriorated and the likelihood that she would ever recover the value of her initial loan grew dimmer. On September 28, 1992, Week gave the respondent a check for $5,000, which he immediately transferred to FRM’s payroll account, then overdrawn. The respondent received a total of $1,000 from this sum in the form of weekly retainer payments. The respondent also urged her to convert her status from that of creditor to that of shareholder. This only increased the risk she was bearing, however, for in the event of an eventual bankruptcy, she would be further removed from recovering any portion of her funds. No shares were ever issued to represent her supposed equity interest in FRM. On the occasion of the third loan, on October 23, 1992, Week did not tap her own reserves for the amount of the loan but borrowed the sum — $20,000—from a bank. The respondent immediately deposited $7,500 of Week’s money into FRM’s payroll account, which was again overdrawn. The respondent deposited the balance of the loan into another account, but that was exhausted within days, and was used primarily for payroll purposes. The respondent personally received $2,500 from Week’s third loan of $20,000. Week’s funds helped keep the enterprise afloat for a time; in that way, at least temporarily, she supported the value of the respondent’s wife’s $16,000 investment in FRM. Moreover, the respondent further personally benefitted from the client’s loans on those occasions when his weekly retainer was drawn on those fresh funds. In this case, the respondent did more than simply give his client a bad stock tip. He urged her to extend an initial loan to the company, and he later allowed her to make further loans or investments, without ever revealing to her his own interest in the matter and the conflict under which he was laboring. Even at the time of the hearing below, the respondent still refused to recognize the conflict of interests that arose in these circumstances. On this record, I believe that a suspension of at least one year is appropriate. In addition, I believe that restitution in the amount of Week’s loss is in order.