the Reefs: Conflicts and Prohibited Transactions
By Joyce E. Peters
John Mortimer, an English barrister, novelist, and dramatist, has been an observer of the British legal profession, the English court system, and human nature for many years. In 1982 he described the law as “a sort of maze through which a client must be led to safety, a collection of reefs, rocks, and underwater hazards through which he or she must be piloted.”1
So who is John Mortimer? Better known, perhaps, as the creator of Horace Rumpole of Rumpole of the Bailey and a number of other fictional works, Mortimer created the fictional barrister whose slightly rumpled appearance and determination not to be improperly influenced by snobby bewigged colleagues, or even judges, has made him beloved by readers and public television viewers. The stories of the middle-aged Rumpole are tales of Mortimer’s own experiences or those of his father (also an English barrister) and are peppered with witticisms, legal phrases, humor, and drama.
John Mortimer’s comment about the law, however, provides a good visual and nautical comparison to the ethical rules involving conflicts of interest. As discussed in last month’s column, there are seven rules in the D.C. Rules of Professional Conduct dealing with conflicts and their resolution.2 These rules recognize the wide variety of situations in which conflicts can occur and the subtle nuances that may distinguish a conflict from permissible ethical action.
Attempting to resolve complex conflict issues can be quite difficult, particularly when the decision-making process is influenced by such factors as imputed conflicts, disparate fee-generating potential of two possibly conflicted clients, conflicts that arise midstream during a representation, the degree to which former clients have interests that are “materially adverse” to a new client in a “substantially related matter,” and revolving-door issues in successive employment. In addition, resolving conflicts when consent of a client or former client is needed can raise other ethical problems, such as the “underwater hazards” involving the scope of contingency fee agreements under Rule 1.5, the prohibition in Rule 1.6 against revealing client confidences and secrets, and the prohibition in Rule 5.4 against interference with professional judgment and independence. Resolving a conflict issue can raise a tangle of other ethical issues. The complex interrelationship of various ethical rules is one of the reasons why resolving conflict-of-interest issues can be so difficult and why seeking ethical advice is often advisable.
Against this “maze” of conflict issues lies Rule 1.8, titled “Conflict of Interest: Prohibited Transactions.” This rule, unlike the other rules that do not identify specific circumstances in which a conflict may arise, describes nine types of transactions in which a lawyer may not ethically engage. These are the partially exposed reefs and rocks of the conflicts area visible to the vigilant attorney. Even these situations can be quite hazardous to the ethical course of the lawyer, but the subsections of this rule are explicit in their prohibitions.
In general terms, these nine subsections describe a variety of transactional situations: (a) business transactions with a client; (b) accepting gifts related to drafting a legal instrument for a nonrelative; (c) receiving grants of a client’s literary or media rights during a representation; (d) advancing financial assistance to a client-litigant; (e) accepting fees or compensation from a third party for representing a client; (f) making aggregate settlement of civil claims or criminal pleas without individual consultation; (g) prospectively limiting legal malpractice liability or settling such a claim with either an unrepresented or a former client; (h) representation of adverse clients by two related lawyers; and (i) imposition of attorneys’ liens on client files to collect fees and expenses. Within these identified situations, exceptions and limitations carve out what is permitted and what is not. Numerous opinions by the Legal Ethics Committee have defined and refined the ethical issues in transactions falling within the prohibitions of the Rule 1.8.3
Although the types of transactions described in Rule 1.8 vary considerably, there is a common current running through these provisions. All involve situations in which a lawyer could potentially reap monetary rewards at the expense of the client. All raise issues of fairness or perceptions of fairness in client dealings. As Comment  to Rule 1.8 states, in describing transactions between a client and a lawyer, “As a general principle, all transactions between client and lawyer should be fair and reasonable to the client.” Who can better assure this fairness: the legally trained lawyer or the client? The rules require the lawyer to assure this fairness and place the ethical responsibility on the lawyer handling the representation.
As with the variety of situations described in the legal ethics opinions, the disciplinary system has also confronted a variety of situations involving violations of Rule 1.8. These cases have primarily involved lawyers who made themselves beneficiaries in clients’ wills that they drafted in violation of Rule 1.8(b)4 and lawyers who entered into improper business transactions or loans with clients in violation of Rule 1.8(a).5 Often, however, these cases have also involved multiple rule violations, including allegations of dishonesty in violation of Rule 8.4(c) and misappropriation in violation of Rule 1.15, either of which makes the matter considerably more serious.
In In re Alongi,6 for example, a reciprocal matter from New York, the court found that the attorney had violated five disciplinary rules in the representation of two clients. The New York court found that in addition to neglecting one client’s criminal matter, the attorney also had “made misrepresentations to [the other] client regarding the status of a lawsuit and prepared documents and advanced funds in furtherance of the misrepresentations; . . . engaged in a sexual relationship with the client [during the representation]; . . . [and] prepared a will for the client designating himself as executor and guardian of the property of the client’s infant son without making required disclosures regarding the potential conflict of interest. . . .”7 Our court imposed reciprocal discipline, suspending the lawyer for one year and conditioning his reinstatement on proof of fitness.
Similarly, in an original case here, In re Berryman,8 the Board on Professional Responsibility concluded that the attorney had commingled funds in violation of Rule 1.15(c), engaged in intentional misappropriation in violation of Rule 1.15(a), engaged in dishonest conduct in violation of Rule 8.4(c), engaged in conduct prejudicial to the administration of justice in violation of Rule 8.4(d), and improperly designated herself as a beneficiary of the client’s estate in a will she had prepared in violation of Rule 1.8(b). In reviewing the board’s recommendation, the court found that the scope of its review was limited and that it would accept the board’s findings unless they were unsupported by substantial evidence. The court then devoted most of its opinion to an analysis of the board’s findings of commingling and intentional misappropriation, which it viewed as the “more serious charges.”9 Upon concluding that the board’s findings of intentional misappropriation were correct, the court, without further discussion of the other rule violations found by the board, stated that disbarment was mandated under the rule in In re Addams.10
In other cases involving improper business transactions with clients, attorneys have also been charged with multiple rule violations along with violations of Rule 1.8(a). In In re Viehe11 an attorney represented a pair of figure skaters from the former Soviet Union in a real estate transaction. The court found that the attorney engaged in deliberately dishonest acts and misrepresentations, intentionally misappropriated client funds, and entered into a business transaction with clients in violation of Rule 1.8(a) by failing to make the necessary disclosures or obtain their written consent. The “business transaction” involved the attorney’s writing two checks to himself, which he characterized as a $77,500 loan, although his clients had no knowledge of the transaction or his financial circumstances. The court, however, found intentional misappropriation,12 and the attorney was disbarred. More than just a business transaction was involved in this case; the attorney’s actions were unfair and dishonest.
In another case, In re Grimes,13 the court in a per curiam opinion gave deference to the board’s report and recommendation and imposed a one-year suspension along with requirements that the attorney establish fitness prior to reinstatement and make restitution to three clients. Among the rule violations found by the board was a violation of Rule 1.8(a) for borrowing a rental car and a small sum of money. Noting that whether the attorney’s actions involved a business transaction for purposes of Rule 1.8(a) was a close question, the board found a violation, stating that the finding would not change its sanction recommendation:
Other jurisdictions have held that only a substantial loan of money qualifies as a “business transaction” for purposes of administering discipline. . . . [Citations omitted.] The District of Columbia Court of Appeals recently found a violation of Rule 1.8(a) in the context of a $21,000 loan and a sale and rental agreement. In re McLain, 671 A.2d 951 (D.C. 1996). Further the purpose of Rule 1.8(a) is to assure that clients receive full disclosure of the differing interests in a transaction so that the client may evaluate whether or not to proceed with the transaction. See In re James, 452 A.2d 163 (D.C. 1982), cert. denied, 460 U.S. 1038 (1983).14The board then upheld the hearing committee’s finding of a violation of Rule 1.8, which the court subsequently accepted in its decision.
In re McLain, which is cited by the board, involved a series of client loans made to help the lawyer satisfy his income tax liability. This case also involved another violation found by the board that the court chose not to address. Consequently, it was decided solely under DR 5-104(a), the predecessor to Rule 1.8. The court noted, “In most cases, violations of conflict of interest rules are accompanied by more serious disciplinary violations and thus warrant a more serious sanction. . . . [Citations omitted.] In cases involving only conflict of interest violations, we have imposed lesser sanctions.”15 Thus, cases involving conflicts of interest often involve more than just the conflict itself, and the conflict may be preceded or accompanied by other, more serious misconduct.
In a slightly different variation of a business transaction, the attorney in In re Jones-Terrell16 received a 60-day suspension from the court for improperly contacting a represented party, who was mentally incapacitated, and then negotiating an agreement with the party (ultimately her client) to live with her husband rent-free in her client’s home during the representation. Not only was the client unable to appreciate the implications of the attorney’s actions, but also the attorney’s representation of the client caused clear conflicts of interest with the attorney’s other clients. The court viewed the entire case as an extremely serious matter in light of the client’s incapacity, although the case did not involve evidence of dishonesty or misrepresentation.
Two other cases involving Rule 1.8 are currently pending before the court. In In re Austin17 the attorney obtained a series of loans from his elderly client and then filed a bankruptcy petition without listing her as a creditor or advising her of his action. The board has recommended an 18-month suspension with reinstatement conditioned on proof of fitness and restitution to the client. In In re Maxwell,18 a reciprocal matter from Maryland involving a stipulated disposition, the attorney engaged in conduct involving a series of conflicts of interest with his clients. Each of these cases, like the others discussed above, involves a situation in which the attorney’s ethical compass has failed. Instead of safely navigating the hazardous waters of conflicts of interest, the attorney has landed on the reefs and rocks of Rule 1.8.
So how do you keep your own compass properly oriented? John Mortimer would say, “No brilliance is needed in the law. Nothing but common sense, and relatively clean fingernails.”19 Common sense would tell you to consult the rules in any conflict situation; they provide the best guide to safety. Read the prohibitions and the exceptions in the conflict rules carefully, ponder the language, and chart your course to avoid unfairness to your client or other ethical issues. Obtain ethics advice before you act. Don’t let a conflict lead to a shipwreck in your practice.
- Clinging to the Wreckage: A Part of Life ch. 7 (Advanpress 1982).
- The ethical rules concerning conflicts of interest can be found in Rules 1.7 through 1.13 of the D.C. Rules of Professional Conduct.
- See, e.g., D.C. Ethics Ops. 211, 218 (inclusion of mandatory arbitration clause in fee agreement, Rule 1.8(a)); 225 (prepaid legal service programs, Rule 1.8(e)); 230, 250, 273 (retaining lien and surrender of client files, Rule 1.8(i)); 235 (prospectively limiting liability through law firm structure, Rule 1.8(g)); 260 (release of malpractice liability in fee dispute settlement, Rule 1.8(g)); 269, 290 (payment of fees of corporate constituent by corporate employer, Rule 1.8(e)); 279 (gift to lawyer not related to donor, Rule 1.8(b)); 300 (stock for fees, Rule 1.8(a)); 306 (lawyer as licensed insurance broker, Rule 1.8(a)).
- Rule 1.8(b) provides:
A lawyer shall not prepare an instrument giving the lawyer or a person related to the lawyer as parent, child, sibling, or spouse any substantial gift from a client, including a testamentary gift, except where the client is related to the donee.
- Rule 1.8(a) provides:
A lawyer shall not enter into a business transaction with a client or knowingly acquire an ownership, possessory, security, or other pecuniary interest adverse to a client unless: (1) The transaction and terms on which the lawyer acquires the interest are fair and reasonable to the client and are fully disclosed and transmitted in writing to the client in a manner which can be reasonably understood by the client; (2) The client is given a reasonable opportunity to seek the advice of independent counsel in the transaction; and (3) The client consents in writing thereto.
- 794 A.2d 605 (D.C. 2001).
- Id. at 606 (quoting from the decision of the New York court).
- 764 A.2d 760 (D.C. 2000).
- Id. at 768 et seq.
- 579 A.2d 190 (D.C. 1990) (en banc).
- 762 A.2d 542 (D.C. 2000).
- The court noted: “An unauthorized ‘loan’ constitutes misappropriation. In re Pierson, 690 A.2d 941, 947 (D.C. 1997).” Id. at 544.
- 687 A.2d 198 (D.C. 1996).
- Bar Docket No. 151-89, at 15 (Bd. on Prof’l Responsibility May 29, 1996) (emphasis added).
- 671 A.2d at 954.
- 712 A.2d 496 (D.C. 1998).
- Bar Docket No. 56-99 (Bd. on Prof’l Responsibility July 12, 2002).
- No. 00-BG-221 (D.C. May 23, 2002).
- A Voyage Round My Father: The Dock Brief: What Shall We Tell Caroline act 1 (Viking 1984).
Disciplinary Actions Taken by the Board on Professional Responsibility
IN RE PAUL DRAGER. PO Box 208, Peekskill, New York. August 29, 2002. In a reciprocal matter from New York, the board recommends that the court suspend Drager for 30 days, and that he demonstrate fitness to practice law before reinstatement. Drager was disbarred in New York for his failure to cooperate in three separate disciplinary investigations in New York.
IN RE RICHARD L. FIELDS. Fields & Fields, 5620 Saint Barnabas Road, Oxon Hill, Maryland. September 18, 2002. The board recommends that the court disbar Fields based on his consent to disbarment. Fields also was disbarred in Maryland by consent on January 11, 2001.
IN RE PATRICK H. MCCARTHY. 5851 Potomac Avenue NW, Washington, D.C. September 19, 2002. The board recommends that the court disbar McCarthy based on his consent to disbarment.
IN RE C. JAMES PATTI. 9638 Duffer Way, Montgomery Village, Maryland. August 9, 2002. The board recommends that the court disbar Patti based on his consent to disbarment.
IN RE CATHERINE THOMAS-PINKNEY. 7710 Lanham Lane, Fort Washington,
Maryland. August 29, 2002. The board recommends that the court disbar
Thomas-Pinkney for multiple violations arising out of her handling
of six different client matters involving claims against insurance
companies, including failure to provide written fee agreements in two
contingency matters, failure to provide settlement sheets, commingling,
failure to notify a third party of her receipt of funds in which the
third party had an interest, failure to pay promptly third parties
funds to which they were entitled, two reckless misappropriations,
and failure to keep proper records.
Disciplinary Actions Taken by the District of Columbia Court of Appeals
IN RE CHARLES BRIDGES. 2300 Lincoln Road, Hattiesburg, Mississippi. August 22, 2002. In a reciprocal matter from Maryland, the court publicly censured Bridges. The Maryland court publicly reprimanded Bridges for failure to cooperate with a disciplinary investigation commenced by the state’s attorney grievance commission.
IN RE JOSEPH E. GLASS. 209 Courtland Avenue, Baltimore, Maryland. August 22, 2002. In a reciprocal matter from Maryland, the court suspended Glass for 90 days, nunc pro tunc to October 26, 2001, the date he filed his affidavit required by D.C. Bar Rule XI, § 14(g). The Maryland suspension was based on a joint petition in which Glass conceded the existence of sufficient evidence to establish that he committed assorted ethical violations in four separate matters, including charging an excessive fee, failing to provide a client a written statement explaining the remittance to the client and how it was determined, contacting a prospective client at a memorial service when he should have known the person could not then exercise reasonable judgment, failing to communicate adequately with a client, and failing to act diligently on a client’s behalf resulting in a time-barred claim.
IN RE MARSHALL E. LIPPMAN. 1 Fidelian Way, Lincoln Park, New Jersey.
September 26, 2002. In a reciprocal matter from New York, the court
disbarred Lippman. The New York court disbarred Lippman after concluding
that he intentionally converted client funds to his own personal use
in two cases, lied under oath, and engaged in a pervasive and egregious
pattern of neglecting client matters.
IN RE GERALDINE H. OWENS. 3533 Warder Street NW, Washington, D.C. September 26, 2002. The court suspended Owens for 30 days based upon the fact that she made false statements, one of them under oath, to an administrative law judge. In an effort to cover up the fact that she had attempted to eavesdrop on testimony in violation of the judge’s sequestration order.
IN RE C. JAMES PATTI. 9638 Duffer Way, Montgomery Village, Maryland. September 26, 2002. The court disbarred Patti by consent nunc pro tunc to July 24, 2002.
IN RE ALFRED L. REHDER. Bell, Rehder & Rose, 101 West Jefferson Street, Rockville, Maryland. September 26, 2002. In a reciprocal matter from Maryland, the court disbarred Rehder. The Maryland court disbarred Rehder by consent after Rehder acknowledged that he could not successfully defend himself against charges of misappropriating client funds, for which he was under investigation.
IN RE E. NEWTON STEELY JR. 14300 Gallant Fox Lane, Bowie, Maryland. September 26, 2002. In a reciprocal matter from Maryland, the court disbarred Steely. The Maryland court disbarred Steely by consent after Steely acknowledged that he could not successfully defend himself against charges of misappropriation of client funds, failure to maintain an attorney escrow account, and commingling trust funds with operating funds, for which he was under investigation.
IN RE ALAN G. WARNER. 3252 SW Plass Avenue, Topeka, Kansas. September 26, 2002. In a reciprocal matter from Kansas, the court publicly censured Warner and ordered him to reimburse a witness in the amount of $728.41 for travel expenses. The Kansas court publicly censured Warner for failing to reduce a contingent fee agreement to writing, failing to reimburse a witness for travel expenses for which his client had provided funds, and refusing to pay a witness for travel expenses after promising to do so. In addition, the Kansas court ordered Warner to reimburse the witness for her travel expenses in the amount of $728.41.
Informal Admonitions Issued by the Office of Bar Counsel
IN RE JOHN T. BELL. Bell, Rehder & Rose, 101 West Jefferson Street, Rockville, Maryland. July 19, 2002. Bar Counsel issued Bell an informal admonition for failing to pay the undisputed portion of his client’s settlement funds to a third-party medical provider.
IN RE CLINTON W. CHAPMAN. 1220 East-West Highway, Silver Spring, Maryland. August 8, 2002. Bar Counsel issued Chapman an informal admonition for failing to provide zealous and diligent representation, to provide competent representation, to charge a reasonable fee, to withdraw from the representation because his physical or mental condition materially impaired his ability to represent his client, and to explain a matter to the extent reasonably necessary to permit his client to make informed decisions regarding the representation.
IN RE DONALD S. JOHNSON. 1101 Golf Course Drive, Mitchellville, Maryland. July 16, 2002. Bar Counsel issued Johnson an informal admonition for failing to provide his client a writing that sets forth the rate or basis of his fee.
IN RE JOHN B. LOW. 5425 Indian Head Highway, Oxon Hill, Maryland. July 31, 2002. Bar Counsel issued Low an informal admonition for engaging in conduct prejudicial to the administration of justice by failing to file a required accounting to close an estate matter.
IN RE REGINALD J. ROGERS. PO Box 77741, Washington, D.C. August 1, 2002. Bar Counsel issued Rogers an informal admonition for failing to communicate the basis or rate of his fee in writing.
IN RE MARK R. QUINN. 1013 Margaret Street, Key West, Florida. August 1, 2002. Bar Counsel issued Quinn an informal admonition for failing to take any formal action regarding his client’s matter and failing to communicate with his client.
IN RE MARK R. QUINN. 1013 Margaret Street, Key West, Florida. August 1, 2002. Bar Counsel issued Quinn an informal admonition for failing to communicate with his client, revealing a confidence or secret of his client when consulting with a colleague, and failing to release the client’s file at the close of representation.
The Office of Bar Counsel compiled the foregoing summaries of disciplinary
and recommendations issued by the Board on Professional Responsibility,
as well as informal
admonitions issued by the Office of Bar Counsel, are posted on the
D.C. Bar Web site at www.dcbar.org. Court opinions are printed in the
Atlantic Reporter and, for decisions issued since mid-1998,
are also available online. To obtain a copy of a recent slip opinion,
dccourts/appeals/opinions_mojs.jsp. Please note that in some cases Bar members may have the same name. To confirm the identity of individuals who have been subject to discipline, contact the D.C. Bar Member Service Center at 202-626-3475 or email@example.com.