Hello and welcome to this JACPA Ethics Alert blog which will discuss a recent Pennsylvania Supreme Court disciplinary opinion disbarring a lawyer for violating numerous Pennsylvania Bar rules related to business transactions with clients when he solicited and obtained a $25,000.00 loan from a client to finance a business and failed to disclose that the business had a “staggering” amount of debt and that it would be reopened as a strip club.
According to the opinion, the lawyer had a failing restaurant business and decided to try to salvage it by turning it into a strip club. The lawyer then solicited a loan from a client who he represented in a divorce and child support matter. The client made the loan to the lawyer; however, he failed to advise the client that the business had accumulated a “staggering” amount of debt and was nearing foreclosure and he also failed to tell the client that the business was to be reopened as a strip club and had licensing issues.
The opinion also found that the lawyer failed to advise the client to seek independent counsel concerning the business transaction and the client testified that he thought that the lawyer was acting as his lawyer with regard to the loan. The lawyer was also found to have engaged in misconduct by failing to diligently pursue another client’s personal injury matter, resulting in the dismissal of the claim, which is apparently now barred by the statute of limitations.
The opinion concluded that the lawyer violated Pennsylvania Bar rules related to the conflicts of interest and dishonesty related to the loan from the client, and a lack of diligence in the other matter and disbarred him.
Bottom line: This case illustrates the very strict requirements of most, if not all, State Bar rules, including Florida, and confirms that lawyers are held to a much higher fiduciary standard when engaging in business dealing with clients.
If a lawyer in Florida is considering engaging in business dealings with a client or acquiring an adverse pecuniary interest, Florida Bar Rule 4-1.8(a) requires the following: (1) the terms of a business transaction with a client or adverse interest must be fair and reasonable to the client and fully disclosed and transmitted in writing to the client in a manner that can be reasonably understood by the client; (2) the client is advised in writing of the desirability of seeking and is given a reasonable opportunity to seek the advice of independent legal counsel on the transaction; and (3) the client gives informed consent, in a writing signed by the client, to the essential terms of the transaction and the lawyer’s role in the transaction, including whether the lawyer is representing the client in the transaction.
Be careful out there!
As always, if you have any questions about this Ethics Alert or need assistance, analysis, and guidance regarding these or any other ethics, risk management, or other issues, please do not hesitate to contact me.
THE LAW OFFICE OF JOSEPH A. CORSMEIER, P.A.
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Joseph A. Corsmeier, Esquire
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