Justia Legal Ethics Opinion Summaries

Plaintiff Bruce Kaye, the controlling principal of three entities that sold and managed timeshare interests in resort properties in Atlantic County, hired defendant Alan Rosefielde, an attorney admitted to practice law in New York but not in New Jersey, initially as outside counsel, and then as an employee. After defendant had worked closely with plaintiff for approximately four months, the parties entered an agreement providing that, as compensation for his services, defendant would earn an annual salary of $500,000. For approximately two years, defendant served as Chief Operating Officer for several of the timeshare entities, and effectively functioned as their general counsel. In that capacity, defendant committed serious misconduct by acting on his own behalf instead of for his employers benefit, and exposing his employers to potential liability. Based on this misconduct, and dissatisfaction with defendant’s performance, plaintiff terminated defendant’s employment. Kaye, in his individual capacity and as trustee of two trusts, Kaye’s son Jason Kaye, and the business entities that Kaye owned, sued Rosefielde and several other entities. Plaintiffs asserted claims based on Rosefielde’s breach of fiduciary duty, fraud, legal malpractice, unlicensed practice of law, and breach of the duty of loyalty. Following a lengthy bench trial, the trial court found that Rosefielde engaged in egregious conduct constituting a breach of his duty of loyalty, breach of his fiduciary duty, legal malpractice, and civil fraud. The trial court rescinded Rosefielde’s interest in several entities, awarded compensatory damages, punitive damages, and legal fees, and dismissed Rosefielde’s counterclaims. It declined, however, to order the equitable disgorgement of Rosefielde’s salary as a remedy for his breach of the duty of loyalty, on the ground that his breach did not result in damage or loss to the entities that employed him. The Appellate Division affirmed that determination, and the New Jersey Supreme Court granted certification on the issue of equitable disgorgement. “In imposing the remedy of disgorgement, depending on the circumstances, a trial court should apportion the employee’s compensation, rather than ordering a wholesale disgorgement that may be disproportionate to the misconduct at issue. . . . If an agent is paid a salary apportioned to periods of time, or compensation apportioned to the completion of specified items of work, he is entitled to receive the stipulated compensation for periods or items properly completed before his renunciation or discharge. This is true even if, because of unfaithfulness or insubordination, the agent forfeits his compensation for subsequent periods or items.” The judgment of the Appellate Division was reversed with respect to the remedy of equitable disgorgement, and the matter was remanded to the trial court to decide whether plaintiffs were entitled to disgorgement. If so, the trial court should apportion Rosefielde’s compensation, ordering disgorgement only for monthly pay periods in which he committed acts of disloyalty. View "Kaye v. Rosefielde" on Justia Law

Plaintiffs Robert Coldren and his wife Brook sued defendants Hart, King & Coldren, Inc. (HKC) and William Hart asserting several causes of action arising out of Coldren’s departure from his law practice at HKC. Defendants appealed an order disqualifying HKC’s counsel, Grant, Genovese & Barratta LLP (Grant Genovese), who had been representing both Hart and HKC. The court held there was an unwaivable actual conflict between the two. The court concluded a conflict existed because Coldren was a 50 percent shareholder of HKC, and HKC would have duties to Coldren that were in conflict with Hart’s interests in defeating the litigation. Accordingly, the court ordered Hart to confer with Coldren on the appointment of “neutral” counsel for HKC. The Court of Appeal reversed: Coldren sued both Hart and HKC directly, "not derivatively," on essentially the same claims. The Court surmised Hart’s interest was perfectly aligned with HKC’s interest in seeing Coldren’s claims defeated. Coldren’s contended he could sue his company and then, because he is a 50 percent shareholder, have a say in its defense. "That is not the law." Moreover, the COurt concluded Grant Genovese’s duty of loyalty, as counsel for HKC, ran to HKC, not its shareholders. HKC was free to defend itself and assert relevant counter claims to the detriment of Coldren. View "Coldren v. Hart, King & Coldren" on Justia Law

Plaintiffs Robert Coldren and his wife Brook sued defendants Hart, King & Coldren, Inc. (HKC) and William Hart asserting several causes of action arising out of Coldren’s departure from his law practice at HKC. Defendants appealed an order disqualifying HKC’s counsel, Grant, Genovese & Barratta LLP (Grant Genovese), who had been representing both Hart and HKC. The court held there was an unwaivable actual conflict between the two. The court concluded a conflict existed because Coldren was a 50 percent shareholder of HKC, and HKC would have duties to Coldren that were in conflict with Hart’s interests in defeating the litigation. Accordingly, the court ordered Hart to confer with Coldren on the appointment of “neutral” counsel for HKC. The Court of Appeal reversed: Coldren sued both Hart and HKC directly, "not derivatively," on essentially the same claims. The Court surmised Hart’s interest was perfectly aligned with HKC’s interest in seeing Coldren’s claims defeated. Coldren’s contended he could sue his company and then, because he is a 50 percent shareholder, have a say in its defense. "That is not the law." Moreover, the COurt concluded Grant Genovese’s duty of loyalty, as counsel for HKC, ran to HKC, not its shareholders. HKC was free to defend itself and assert relevant counter claims to the detriment of Coldren. View "Coldren v. Hart, King & Coldren" on Justia Law

Plaintiffs filed suit alleging claims for breach of fiduciary duty, conspiracy, and legal malpractice, and defendants moved to strike the entire complaint as to the individual plaintiffs Klotz and Spitz because defendants had no independent legal duty to plaintiffs nor did they act for their personal financial gain. Plaintiffs alleged that a former business associate of theirs, Stephen Bruce, who was a client of defendants, conspired with defendants to unlawfully withdraw from plaintiff SageMill and to usurp a nascent business opportunity of SageMill. The trial court denied the motion. The court reversed the trial court‘s order on plaintiffs‘ second cause of action for conspiracy as to the individual plaintiffs Klotz and Spitz, finding that any advice defendants gave Bruce arose from an attempt to contest or compromise a claim or dispute, and thus was within the ambit of section 1714.10. The court affirmed as to the remaining claims. View "Klotz v. Milbank,Tweed, Hadley & McCloy" on Justia Law

YTC Dream Homes, Inc. and other franchisees (collectively, YTC) filed in Lake Superior Court a contract-related action against franchisor DirectBuy, Inc. and related parties (collectively, DirectBuy). YTC filed a motion requesting pro hac vice admission of five out-of-state attorneys to represent YTC in the case. The trial court initially granted YTC’s motion but, upon the objection of DirectBuy, vacated its original order and issued an order denying YTC’s motion, holding that YTC did not overcome the presumption under Lake County Local Rule 5(C) that an attorney not licensed in Indiana is not permitted to practice before it. The Supreme Court reversed, holding that Local Rule 5(C) does not create a presumption against pro hac vice admissions. Remanded to the trial court with instructions to determine, within the discretion granted by the Indiana Admission and Discipline Rule 3(2), whether good cause exists for the admission of the attorneys. View "YTC Dream Homes, Inc. v. DirectBuy, Inc." on Justia Law

Paul R. Plante, Jr. brought a shareholder derivative suit against Appellants, directors of Arthrodynamic Technologies Animal Health Division, Inc. (ADT), alleging that Appellants had violated various provisions of ADT’s shareholder agreement with respect to sales of stock. The law firm Miller, Griffin & Marks, PSC (MGM) was retained to represent Appellants. Plante moved to disqualify MGM as the counsel for Appellants, alleging that MGM’s participation in the action created a conflict of interest or at least an appearance of impropriety due to MGM’s representation of two Appellants in another suit and its representation of the board of directors, which included Plante, in giving advice on other litigation. The trial court concluded that disqualification of MGM was required based on the appearance of impropriety. Appellants subsequently sought a writ of prohibition to bar enforcement of the trial court’s order. The Court of Appeals denied the writ because Appellants had not shown irreparable injury. The Supreme Court reversed, holding (1) the trial court applied a disqualification standard that is no longer appropriate under the Rules of Professional Conduct; and (2) the trial court’s factual findings were insufficient to allow disqualification under the proper standard of a showing of actual conflict. View "Marcum v. Hon. Ernesto Scorsone" on Justia Law

This case was a permissive appeal of an order denying the appellants' motions for summary judgment. The central issue was whether an attorney who, as counsel for a corporation, issued an opinion letter stating that a stock redemption agreement did not violate the law, could be held liable to the shareholder whose stock was redeemed if the opinion was incorrect and the redemption agreement was later declared void as violating state law. The Supreme Court held that the claim against appellant Richard Riley was barred by res judicata and that there could be a claim against the remaining appellants where the opinion letter was addressed to respondent and stated that he could rely upon it. View "Taylor v. Riley" on Justia Law

John Dilks filed a pro se petition to recover damages he suffered as a result of a flood. The “Plaintiffs” identified in the allegations of the petition were Dilks, individually, and Naylor Senior Citizens Housing, LP and Naylor Senior Citizens Housing II, LP (collectively, “Partnerships”), both of which were Missouri statutory limited partnerships. The trial court dismissed the Partnerships’ claims on the ground that, because Dilks was not a licensed attorney and he attempted to assert claims on behalf of the Partnerships, the petition was a nullity and had no legal effect for purposes of asserting claims on behalf of the Partnerships. The Supreme Court affirmed, holding that, as statutory entities, the Partnerships may not appear in Missouri court except through a licensed attorney, and because Dilks was not a licensed attorney, his attempt to assert claims on behalf of the Partnerships constituted the unauthorized practice of law and may not be given effect.View "Naylor Senior Citizens Housing, LP v. Sides Constr. Co." on Justia Law

In this case and its companion, LK Operating, LLC v. Collection Grp., LLC,(No. 88132-4), the central issues on appeal arose from a joint venture agreement regarding a debt collection business. The debt collection business operated according to the terms of the joint venture agreement, as originally proposed, from approximately winter 2005 through summer 2007. In this opinion, the issue presented to the Supreme Court was whether the trial court erred in applying the doctrine of equitable indemnification (known as the "ABC Rule") to hold that the legal malpractice plaintiffs here suffered no compensable damages as a matter of law and that summary judgment dismissal was appropriate. "Where the only damages claimed by a legal malpractice plaintiff are attorney fees incurred in a separate litigation and the only legal basis on which plaintiff asserts those fees are compensable is the ABC Rule, then the defendant is entitled to summary judgment dismissal if the ABC Rule does not apply to the undisputed facts as a matter of law." That was the situation presented in this case, and as such, affirmed the trial court. View "LK Operating, LLC v. Collection Grp., LLC" on Justia Law

In this case and its companion, LK Operating, LLC v. Collection Grp., LLC, (No. 88846-9) (Wash. July 31, 2014), the central issues on appeal arose from a joint venture agreement regarding a debt collection business. The debt collection business operated according to the terms of the joint venture agreement, as originally proposed, from approximately winter 2005 through summer 2007. This opinion addressed whether the trial court proceedings complied with due process requirements; whether, as a matter of law, the joint venture proposal was entered by an attorney in violation of one or both of former RPCs 1.7 (1995) and 1.8(a) (2000); and, if so, whether the remedy imposed by the trial court and affirmed on appeal is appropriate. The Supreme Court found: (1) the trial court proceedings satisfied the requirements of procedural due process; (2) though on different reasoning from that used by the Court of Appeals, that the undisputed facts established as a matter of law that the joint venture proposal contemplated a business transaction subject to, agreed to, and entered into in violation of former RPC 1.8(a). The Court affirmed that the former RPC 1.8(a) violation rendered the terms of the business transaction unenforceable under the circumstances presented and the remedy imposed was appropriate. Furthermore, the Court affirmed that the business transaction was entered in violation of former RPC 1. 7. The Court declined to determine whether the former RPC 1.7 violation would have also justified the remedy imposed. View "LK Operating, LLC v. Collection Grp., LLC" on Justia Law