Justia Legal Ethics Opinion Summaries

Debra Sands appealed the grant of summary judgment in favor of Menard, Inc. Sands and John Menard, Jr., were involved in a romantic relationship from late 1997 to April 2006. Sands alleged that from 1998 until 2006 she cohabitated with Menard and they engaged in a "joint enterprise" to work together and grow Menard's businesses for their mutual benefit. Menard and his affiliated entities argued that by failing to comply with Supreme Court Rule 20:1.8(a), which regulated business transactions between lawyers and their clients, Sands was precluded from seeking an ownership interest in any of Menard's various business ventures. As to the claim she characterized as a “Watts” unjust enrichment claim, the Wisconsin Supreme Court concluded Sands failed to allege facts which, if true, would support her legal conclusion that she and Menard had a joint enterprise that included accumulation of assets in which both she and Menard expected to share equally. Furthermore, the Court held SCR 20:1.8(a) could guide courts in determining required standards of care generally; however, it could not be used as an absolute defense to a civil claim involving an attorney. Finally, the Court concluded the court of appeals properly granted summary judgment to Sands on Menard, Inc.'s counterclaim for breach of fiduciary duty, and to the Trustees on their motion for summary judgment dismissing Sands' claim. View "Sands v. Menard, Jr." on Justia Law

In this appeal, the New Jersey Supreme Court considered whether an attorney’s pledge of anticipated attorney’s fees could be considered an account receivable and secured under Article 9 of the Uniform Commercial Code (UCC), and whether the lender here complied with the requirements of the UCC to perfect its security interest. Plaintiff John Giovanni Granata retained Diane Acciavatti to bring a legal malpractice complaint against defendants Edward Broderick Jr., and Broderick, Newmark, & Grather. Acciavatti accepted a $10,000 retainer and agreed to a contingent fee arrangement. After a jury trial, Granata was awarded a judgment of $1,597,193, and the trial judge granted Acciavatti’s motions for fees, costs, and pre-judgment interest. Defendants appealed, and Granata cross-appealed. Acciavatti had an oral agreement with Granata to represent him at $350 per hour and told him she would seek counsel fees from defendants after the appeal. While the appeal was pending, Acciavatti withdrew from the practice of law. Dominic Caruso was appointed attorney-trustee for Acciavatti’s practice, and the firm of Roper & Twardowsky, LLC (the Roper firm), filed a substitution of counsel form for Acciavatti. The Appellate Division reversed and remanded for a new trial. Following a two-day mediation, the case settled for $840,000. Three of Acciavatti’s creditors then claimed liens upon any legal fees owed to her from the case. The appellate panel considered whether Acciavatti possessed an interest in her anticipated legal fees and whether one of her creditor's UCC filing granted it a perfected interest in those fees. The panel reasoned that, “[i]f both questions [we]re answered in the affirmative, [the creditor], as a perfected secured creditor, would enjoy priority over [the other creditors], who are subsequent lien creditors seeking to levy on the same collateral.” The panel expressed agreement with cited decisions and held “that, under certain circumstances, an attorney’s pledge of anticipated counsel fees can be considered an account receivable and secured under Article 9.” The panel observed that “[the appealing creditor] met the requirements of N.J.S.A. 12A:9-203 for its security interest to attach to Acciavatti’s counsel fees." Finding no reversible error in that judgment, the Supreme Court affirmed. View "Granata v.Broderick" on Justia Law

The Supreme Court granted a peremptory writ of prohibition to halt an action for an assignment for the benefit of a disbarred attorney’s creditors (the ABC action) pending before a Hamilton County probate judge. In 2004, nineteen judgment creditors filed a lawsuit alleging that the attorney at issue had stolen millions of dollars in settlement funds while representing them. A Kentucky trial court ruled that the attorney was jointly and severally liable for $42 million. The court of appeals affirmed. In 2013, the Kentucky Supreme Court permanently disbarred the attorney for his conduct in the underlying representation. In 2015, a Boone County circuit court judge ordered the attorney to transfer his beneficial interest in a company, which were held in trust for the purpose of winding up operations, to the creditors. The attorney did not transfer the shares to the creditors, and the shares were later transferred. The Supreme Court granted the creditors’ motion for a peremptory writ of prohibition barring further proceedings in the ABC action, holding that the necessary elements for a writ of prohibition to issue were all present in this case. View "State ex rel. McGirr v. Winkler" on Justia Law

Defendants Steve George and Real Estate Portfolio Management, LLC (REPM) appealed a trial court’s order granting the motion of plaintiffs Angelica Lynn and Angel Lynn Realty, Inc. (ALR) to disqualify counsel. George and REPM were represented by attorney Kevin Spainhour and his law firm, Spainhour Law Group (SLG), who were the subjects of the motion to disqualify. Spainhour represented George for over 15 years and REPM for several years. Lynn and ALR alleged in their complaint that they had formed a partnership with George and REPM for buying and selling real property. Lynn and ALR moved to disqualify Spainhour and SLG on the ground they had represented the alleged partnership and had provided Lynn legal advice relating to a proposed sale transaction. Alternatively, Lynn and ALR asserted they had a confidential non-client relationship with Spainhour and SLG. The trial court expressly found that neither Spainhour nor SLG had represented Lynn or ALR in their individual capacities, nevertheless, the court found there had been a confidential non-client relationship between Lynn and ALR, on the one hand, and Spainhour and SLG, on the other, and a “potential attorney-client relationship with the alleged partnership.” Based on those findings, the court granted the motion to disqualify. The Court of Appeal reversed, finding the evidence did not support the trial court’s finding of a confidential non-client relationship. View "Lynn v. George" on Justia Law

Defendants Beachcomber Management Crystal Cove, LLC (Management) and Douglas Cavanaugh (collectively, Defendants) challenged a trial court’s order disqualifying the law firm of Kohut & Kohut LLP (Kohut) from continuing to represent Defendants in the underlying matter. In March 2016, Plaintiffs filed this lawsuit on behalf of Beachcomber at Crystal Cove, LLC as a shareholder derivative action against Defendants. The complaint named the Company as a nominal defendant and alleged claims for fraud, breach of fiduciary duty, abuse of control, gross negligence and mismanagement, breach of duty of honest services, unjust enrichment, declaratory relief, and accounting. Plaintiffs alleged Defendants abused their position as the Company’s managers by diverting Company funds to other Cavanaugh entities, paying themselves unauthorized management fees, misallocating expenses the Company shares with other entities, and refusing to provide Plaintiffs complete access to the Company’s books and records. Defendants hired Kohut to represent them in this lawsuit, and the Company hired independent counsel, the law firm of Corbin, Steelman & Specter, to represent it in this lawsuit. In May 2016, Plaintiffs filed a motion to disqualify Kohut “from any further participation in this case” based on conflicts of interests arising from its past and present representation of the Company and Defendants. Specifically, Plaintiffs argued disqualification was required based on the conflicts of interest arising from: (1) Kohut’s concurrent representation of the Company and Defendants; (2) Kohut’s successive representation of the Company and Defendants concerning the disputes over the Company’s operations; and (3) the need for Kohut to testify in this lawsuit about the services it provided to the Company and Defendants. Here, the trial court concluded disqualification was mandatory because: (1) Defendants and the Company had conflicting interests because the Company is the true plaintiff in this derivative suit that Plaintiffs brought against Defendants on the Company’s behalf; and (2) Kohut previously represented the Company concerning some of the issues raised in this suit, and a substantial relationship therefore existed between that representation and Kohut’s representation of Defendants in this lawsuit. The Court of Appeal concluded the trial court erred because it failed to apply a more specific line of cases that governed an attorney’s successive representation of clients in a derivative lawsuit brought on a small or closely held company’s behalf against the insiders who run the company. View "Beachcomber Management Crystal Cove v. Super. Ct." on Justia Law

General Motors (GM), represented by the Mayer Brown law firm, entered into secured transactions in which JP Morgan acted as agent for two different groups of lenders. The first loan (structured as a secured lease) was made in 2001 and the second in 2006. In 2008, the 2001 secured lease was paid off, which required the lenders to release their security interests in the collateral securing the transaction. The closing papers for that payoff accidentally also terminated the lenders’ security interests in the collateral securing the 2006 loan. No one noticed—not Mayer Brown and not JP Morgan’s counsel. When GM filed for bankruptcy protection in 2009, GM and JP Morgan noticed the error. Plaintiffs, members of the consortium of lenders on the 2006 loan, were not informed until years later. Plaintiffs sued GM’s law firm, Mayer Brown. The Seventh Circuit affirmed dismissal, holding that Mayer Brown did not owe plaintiffs a duty. The court rejected arguments that JP Morgan was a client of Mayer Brown in unrelated matters and thus not a third‐party non‐client; even if JP Morgan was a third‐party non‐client, Mayer Brown assumed a duty to JP Morgan by drafting the closing documents; and the primary purpose of the GM‐Mayer Brown relationship was to influence JP Morgan. View "Oakland Police & Fire Retirement System v. Mayer Brown, LLP" on Justia Law

The court-appointed receiver of the Stanford entities filed suit alleging that six transfers from SCB to Dillon Gage were fraudulent transfers under the Texas Uniform Fraudulent Transfer Act (TUFTA), Tex Bus. & Com. Code 24.005(a)(1), and should be returned to receivership. The jury found that the transfers were not fraudulent. The district court subsequently denied Dillon Gage attorney's fees. Both parties appealed. The Fifth Circuit concluded that the jury reasonably could have found that SCB could have raised sufficient capital to pay Dillon Gage to complete the Gallery Deal without using new customers' money; the jury was not required to find that SCB was insolvent at the time of the transfers; and, viewing both the direct and circumstantial evidence of fraud as a whole, a rational jury could have found that SCB did not act with fraudulent intent. The Fifth Circuit rejected the receiver's four challenges to the jury instructions and concluded that they were without merit, and held that the district court did not apply the wrong standard in assessing Dillon Gage's fee request. Accordingly, the Fifth Circuit affirmed the jury verdict and order denying attorney's fees. View "Janvey v. Dillon Gage Inc. of Dallas" on Justia Law

Plaintiff, as an individual and as an assignee, brought this action pro se to recover for wrongs allegedly committed against the assignor, a limited liability corporation (LLC). The district court dismissed the action, concluding (1) Plaintiff was attempting to litigate “the claim of another which has merely been assigned to him” and that Plaintiff was therefore engaging in the unauthorized practice of law because an attorney is required when the action is derived from a wrong to an LLC; and (2) therefore, the pleadings were a nullity. The Supreme Court affirmed, holding (1) an assignment of a distinct business entity’s cause of action to an assignee who then brings such suit requires that the assignee must be represented by counsel and cannot bring such action pro se; (2) by bringing the assigned claim, Plaintiff engaged in the unauthorized practice of law; and (3) therefore, Plaintiff’s filings were a nullity as a matter of law. View "Zapata v. McHugh" on Justia Law

The three underlying legal actions, involving breach of contract, breach of fiduciary duty, stock valuation, bankruptcy, and appeals, took place in Illinois. Plaintiffs, including attorneys involved in the underlying actions, sought to indemnification in post-trial proceedings. Defendant is a Delaware corporation with offices in Illinois. The Delaware Court of Chancery awarded plaintiffs $79,540.14 for pursuing the post-trial action and $241,492.50 for the Illinois proceedings, plus 20% of the expenses they incurred enforcing their indemnification right through this proceeding. The court cited the corporations’ bylaws, under which the plaintiffs are entitled to mandatory if indemnification would be permitted under the Delaware General Corporation Law and Section 145(a) of that law. View "Dore v. Sweports Ltd." on Justia Law

Dr. Hoang, a dentist, died in 2010. Dr. Khan agreed to buy Hoang’s practice. The contract allows the prevailing party to be awarded fees if “any litigation . . . is commenced . . . concerning its terms, interpretation or enforcement or the rights and duties of any party.” Two years later, Khan filed suit for breach of contract, fraud, concealment, negligent misrepresentation, and rescission. Khan alleged failure to comply with warranties, including that none of the practice records contained any untrue statement or material omission; that the practice was in compliance with laws and regulations; that patients and insurance companies had been properly billed; that the practice had not billed for services for which the practice was not entitled to compensation; that the practice had not, as a usual practice, waived co-payments or deductibles; and the practice had not increased any employee’s salary after April 2010. The estate counter claimed that Khan had failed to remit accounts receivable and to provide proper accounting. Before trial, Khan voluntarily dismissed her entire complaint without prejudice. The court found for Khan on all causes of action in the counter-complaint. The estate obtained an award of attorney fees as the prevailing party under Code of Civil Procedure section 1032(a)(4). The court of appeal remanded. Section 1717(b)(2), generally bars the award of fees after a pretrial voluntary dismissal for defense of contract claims, but the agreement's fee provision was broad enough to cover fees for defense against tort actions. View "Khan v. Shim" on Justia Law