In re Conduct of Baer

Brief Fact Summary.

Defendant had a conflict of interest because he represented his wife during the purchase of a house. Defendant was subjected to disciplinary proceedings by Plaintiff. Defendant was found guilty of failing to refuse employment when his interests could impair his independent professional judgment, having improper business relations with a client, and accepting and continuing employment when the interest of another client could impair his independent professional judgment. Defendant appealed.

Synopsis of Rule of Law.

When a lawyer represents a client with interests that conflict with his own, or represents two clients with conflicting interests, he must explain the conflict to his clients in sufficient detail that they can understand why it is desirable for them to have independent counsel.

Facts.

Peter E. Baer (Defendant) was an attorney admitted to practice law in Oregon. His wife became interested in buying a house, and Defendant offered to handle the necessary legal work. The owners of the house, the Petersons, believed that Defendant was representing both his wife and them as clients. In fact Defendant represented only his wife’s interests, but merely told the Petersons that they could hire another attorney to review his work. Defendant also acted as the escrow agent for the transaction. The parties came to an agreement that Mrs. Baer would make a down payment and assume the mortgage on the house, and then pay the remaining balance by April 2, 1981. The transaction went according to plan until Mrs. Baer was unable to pay the remaining balance. Defendant had told the Petersons that they would get their house back if the balance was not paid in a timely fashion, but when they tried to repossess the house, Defendant told the Petersons that Mrs. Baer owned a part interest in the house and that the Petersons would need to sell the house and reimburse Mrs. Baer. The Petersons hired an attorney, who informed Defendant that he had a severe conflict of interest and should settle the matter. Defendant responded by filing suit against the Petersons in both state and federal court. He was then subjected to disciplinary proceedings by the Oregon State Bar (Plaintiff). The Bar’s Trial Board found him guilty of failing to refuse employment when his interests could impair his independent professional judgment, having improper business relations with a client, and accepting and continuing employment when the interest of another client could impair his independent professional judgment. The Trial Board’s recommendation was a public reprimand and a requirement that Defendant pass a legal ethics examination. The Disciplinary Review Board affirmed the findings and agreed with the ethics examination requirement, but recommended a 30-day suspension from the bar. Defendant appealed to the state supreme court.

Issue.

Whether a lawyer must explain a conflict to his clients in sufficient detail that they can understand why it is desirable for them to have independent counsel when a lawyer represents a client with interests that conflict with his own, or represents two clients with conflicting interests.

Held.

Yes. Costs are awarded to the Oregon State Bar. When a lawyer represents a client with interests that conflict with his own, or represents two clients with conflicting interests, he must explain the conflict to his clients in sufficient detail that they can understand why it is desirable for them to have independent counsel.

Discussion.

When a lawyer represents a client with interests that conflict with his own, or represents two clients with conflicting interests, he must explain the conflict to his clients in sufficient detail that they can understand why it is desirable for them to have independent counsel.  Both disclosures are required by the state’s ethics rules. Here, Defendant had an interest in the transaction because his wife was a party to it. He had a duty to inform the Petersons of his conflicting interest, and it was not sufficient for him to tell them they could have another attorney review his work. That by itself was not a sufficient explanation for the Petersons to be able to appreciate why it was desirable for them to have separate counsel. Similarly, Defendant did not inform the Petersons that his wife’s interests were adverse to theirs. This falls short of the disclosure required when a lawyer represents two clients with conflicting interests. Defendant is suspended from the practice of law for 60 days, and may not practice law again until he has passed the legal ethics examination.