ARDC Hearing Board Proposes 60-day Suspension For Lawyer Who Obtained Mortgages on Client’s Homes

A recent decision of the ARDC Hearing Board is worth taking the time to read. A lawyer who assisted clients with Medicaid applications ran into trouble with his method of collecting his fee.The lawyer did the Medicaid work on a flat fee basis. If the client did not have sufficient funds to pay the flat fee, the lawyer would have the client execute a promissory note and a mortgage in the amount of his fee.

Rule 1.8(a) of the Illinois Rules of Professional Conduct provides that:

 (a) A lawyer shall not enter into a business transaction with a client or knowingly acquire an ownership, possessory, security or other pecuniary interest adverse to a client unless:

(1) the transaction and terms on which the lawyer acquires the interest are fair and reasonable to the client and are fully disclosed and transmitted in writing in a manner that can be reasonably understood by the client;

(2) the client is informed in writing that the client may seek the advice of independent legal counsel on the transaction, and is given a reasonable opportunity to do so; 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.

Unfortunately, for the lawyer who obtained a mortgage on his client’s home, the ARDC found that he did not comply with Rule 1.8(a).

The ARDC Hearing Board explained that the transaction did violate Rule 1.8(a) because it created a conflict between the lawyer and the client.

There was nothing inherently improper in Respondent having a client sign a promissory note, committing to pay Respondent’s fee, or in having the client provide security for the promissory note. ABA Comm. on Ethics and Prof’l Responsibility, Formal Opinion 02-427 (2002). A lawyer may acquire a lien authorized by law to secure the lawyer’s fee or expenses. Ill. Rs. Prof’l Conduct R. 1.8(a). However, when a lawyer enters into a transaction whereby the

client agrees to provide non-monetary collateral to secure payment of the lawyer’s fee, the client must be afforded the protections of Rule 1.8(a). ABA, Formal Opinion 02-427.

The Hearing Board found a violation of Rule 1.8(a) and recommended a 60-day suspension for the attorney.

The case, In re Durward Jamison Long, Jr., 2017 PR 0083, can be viewed at http://www.iardc.org.

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