ARDC Charges Lawyer with Violating the Rules on Business Transactions with Client

BEFORE THE HEARING BOARD:

The ARDC will charge a lawyer who enters into a business transaction with a client where the lawyer does not advise the client to obtain independent counsel.

The Complaint alleges:

. In or before 2010, Respondent created a limited partnership entitled Professional Digital Advancement (“PDA”) for the purpose of developing a website (SmartSharks.com) where legal consumers could compare fees and obtain an attorney for certain types of cases at a fixed fee. Respondent was the sole owner, president and general partner of PDA. In 2010 and thereafter, Respondent sought investors for PDA.
2. On July 8, 2009, Attorney P.K. Johnson V (hereinafter “Johnson”), filed a complaint on behalf of Dr. Cleveland and Mrs. Sherrill Rayford (hereinafter “Rayfords”) regarding a pending property dispute between the Rayfords and Kevin and Debbie Hazlett (hereinafter “Hazletts”), the Rayfords’ neighbor and subdivision developer. The complaint alleged that the Hazletts, and the subdivision homeowners association, violated the declaration of covenants for the subdivision by changing the grade of the Rayfords’ land parcel. The complaint sought injunctive and monetary relief. The case was docketed as Rayford et. al. v. Hazlett et. al., case number 09CH639, St. Clair County, Illinois.
3. On December 5, 2010, Respondent met with the Rayfords and Respondent, and the Rayfords and Respondent agreed that Respondent would file a motion to substitute as counsel and represent them in case number 09CH639.
4. During the meeting with the Rayfords on December 5, 2010, Respondent informed them about PDA and informed them of an investment opportunity in the PDA limited partnership.
5. On December 10, 2010, Respondent filed his appearance and motion to substitute as counsel for the Rayfords in case number 09CH639. Respondent continued to represent the Rayfords until at least December 2014.
6. On December 19, 2010, the Rayfords invested $2,250 in PDA by tendering a check to Respondent made payable to “PDA DEV 1.0 LP”.
7. On September 25, 2011, the Rayfords invested an additional $4,000 in PDA by tendering a check to Respondent made payable to “PDA DEV 1.0 LP”.
8. At no time did Respondent inform the Rayfords, in writing or otherwise, that they could seek the advice of independent legal counsel with regard to the investment transactions nor did Respondent give the Rayfords reasonable time to seek independent counsel.
9. At no time during the representation did Respondent obtain the Rayfords’ informed consent, in a writing signed by the Rayfords, to the essential terms of the investment transactions and Respondent’s role in the transactions, including whether Respondent was representing the Rayfords in the transactions.
10. At no time did Respondent provide to the Rayfords any limited partnership agreement or other document to show that they had an interest in PDA.
11. In 2014, Respondent created a new limited partnership entitled Free Market Professionals Inc. (“Free Market”) and changed the name of the website to “GoodLawyerGoodPrice.com”. Respondent registered Free Market as a limited partnership with the State of Missouri. Respondent then transferred the Rayfords’ interest in PDA into the Free Market limited partnership.
12. On May 5, 2016, the State of Missouri dissolved Free Market and neither the PDA or Free Market limited partnerships are currently operational.
13. At no time has Respondent returned any portion of the funds that the Rayfords invested in PDA/Free Market.
14. By reason of the conduct described above, Respondent has engaged in the following misconduct:
  1. entered into a business transaction with a client that was neither fair nor reasonable, without disclosing the terms of the transaction in writing, advising the client to obtain independent advice, or obtaining the client’s written consent after disclosure, by obtaining funds from the Rayfords for investment in PDA, in violation of Rule 1.8(a) of the Illinois Rules of Professional Conduct (2010).

Edward X. Clinton, Jr.

www.clintonlaw.net

‘via Blog this’

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