Asking A Client to Sign a Promissory Note Leads to Disciplinary Charges

BEFORE THE HEARING BOARD:

A lawyer, Donald Fredrick Franz, 2014 PR 00161 was handling a divorce case. In a familiar story, the client fell behind on his payments. The lawyer asked the client to sign a promissory note for $4,450, which the client signed. This decision by the lawyer, which appears to be routine, is alleged to have violated Rule 1.7(a)(2) and Rule 1.8(a).

“11. The trial in case number 10DV993 began on May 22, 2012, and concluded on May 24, 2012, after three afternoon sessions.

12. On or about May 23, 2012, at court, and prior to the commencement of the trial proceedings that day, Respondent presented Nzeribe with the Note and asked him to sign it. Respondent told Nzeribe that if he did not sign the Note, Respondent would not continue to represent him. Nzeribe believed that he had no alternative but to sign the Note if he wanted representation at the trial, so he signed the Note.

13. At no time before Nzeribe signed the Promissory Note did Respondent disclose to Nzeribe the risks associated with Respondent’s dual role as both legal advisor and participant in the transaction, or obtain Nzeribe’s informed consent to that transaction.

14. When asking Nzeribe to sign the Note, Respondent did not advise Nzeribe that he was entitled to seek independent counsel or give Nzeribe a reasonable opportunity to do so. Further, Respondent did not advise Nzeribe that, as his attorney, he was prohibited from entering into a business transaction with Nzeribe, since Respondent’s interests might be conflicting with Nzeribe’s, unless Nzeribe was made aware in writing of the transaction and its terms, and expressly consented in writing after disclosure, with the consent to recite the essential terms of the transaction and Respondent’s role.

15. By reason of the conduct described above, Respondent engaged in the following misconduct:

  1. representing a client when the representation of that client may be materially limited by his own interests, by having Nzeribe sign a Promissory Note wherein Nzeribe was the borrower and Respondent was the lender, while representing Nzeribe in a matter, in violation of Rule 1.7(a)(2) of the Illinois Rules of Professional Conduct (2010); and
  2. entering into a business transaction with a client (the Promissory Note), without explaining in writing to the client the possible conflicting interests and that the client was entitled to seek the advice of independent counsel, and without obtaining the written consent of the client, in violation of Rule 1.8(a) of the Illinois Rules of Professional Conduct (2010).

The rules are clear on this issue. A lawyer cannot get involved in business transactions with clients. Furthermore, when presenting the client with a promissory note the lawyer must advise the client to retain separate counsel. That being said, this is a tough case for the lawyer who was merely trying to get paid and who did the work he was asked to do.

Edward X. Clinton, Jr.



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