Legal Ethics Opinion #1518

Attorney Misconduct - Zealous Representation - Obligation to
Report Misconduct: attorney Advising Client to Circumvent
Creditor's Claim

You have presented a hypothetical situation in which Law Firm A
represents a creditor ("Creditor") with a claim against a person
under a disability ("PUD") in the amount of approximately
$23,000.00.  The niece of PUD was appointed by PUD as PUD's
attorney-in-fact and Law Firm B represents the niece of PUD who
is also an employee of Law Firm B.

Law Firm B files a partition suit on behalf on the niece of PUD
to have real property owned by PUD and other family members sold. 
The petition indicates that the niece has been advised by
Creditor that the real property in question must be sold to pay
the medical bills outstanding to Creditor.

You indicate that shortly after the partition suit is filed in
January 1989, Law Firm A files suit against PUD on behalf of
Creditor.  At the same time, a courtesy copy of the motion for
judgment is mailed by Law Firm A to Law Firm B.

On February 27, 1989, the niece, as attorney-in-fact for PUD,
executes an assignment conveying to Creditor PUD's share of the
proceeds of the partition suit and sale of the real property,
less the sum of $2,500.00.  On March 3, 1989, Law Firm A forwards
the assignment to Law Firm B so as to advise them of the
assignment.  You indicate that the assignment is not recorded in
the clerk's office for the circuit court where the real property
is located.

Subsequently, Law Firm A obtains judgment against PUD and dockets
the judgment on April 7, 1989.  On April 3, 1989, however, the
niece, as attorney-in-fact for PUD, creates a trust for PUD and
appoints niece's daughter as trustee.  The sole asset transferred
into the trust is the real property in question, which is subject
to the assignment.  Law Firm B prepares all the documentation
necessary for its transfer.

Attorney for Law Firm B is ultimately appointed a special
commissioner in a partition suit to sell the property.  He sells
the property and does not honor the assignment previously
executed by niece as attorney-in-fact for PUD.

You indicate that, in 1992, Law Firm A inquires as to the status
of the assignment and partition suit and learns that the real
estate has been sold and money distributed to parties other than
Creditor.  Upon inquiry by Law Firm A, Law Firm B writes a letter
stating as follows:

     I enclose a check from my trust account for full
     settlement of [PUD's] account with [Creditor], per the
     assignment.  The reason that this money was not paid
     sooner was that, on my advice, the property interest of
     [PUD] was transferred to a trust prior to the closing
     so that actually [PUD] herself did not have an interest
     in the property at the time of sale to generate money
     per the agreement.  However, also on my advice, the
     trustee of that trust kept the money in the trust
     distributed while we waited to see if we could get away
     with that (not to put too fine a point on it).

     When we received your inquiry, I advised the trustee to just
     go ahead and fork over the money, as I didn't really feel a
     court would be sympathetic with the violation of the spirit,
     if not the letter, of the assignment.  the enclosed check is
     for the entire amount, with interest, minus the $2,500.00
     which the assignment called to be retained.  The last sum
     remains in my trust account pending your agreement that it
     may be distributed to [PUD's] heirs.  No disbursements were
     made from the trust fund previously.

The letter concludes by showing the calculations indicating that
the amounts as indicated above have been paid correctly.
  
You have asked the committee to opine whether, under the facts of
the inquiry, (1) such conduct by Law Firm B violates the
Disciplinary Rules, specifically Disciplinary Rules 1-102(A)(3)
and (4); and (2) whether Law Firm A has an obligation to report
such misconduct pursuant to Disciplinary Rule 1-103.

The appropriate and controlling Disciplinary Rules related to
your inquiry are DR 1-102(A)(4) which states that a lawyer shall
not engage in conduct involving dishonesty, fraud, deceit, or
misrepresentation which reflects adversely on the lawyer's
fitness to practice law; DR 1-103(A) which provides that a lawyer
having information indicating that another lawyer has committee a
violation of the Disciplinary Rules that raises a substantial
question as to that lawyer's fitness to practice law in other
respects, shall report such information to the appropriate
professional authority, except as the confidentiality provisions
require otherwise; and DR 7-102(A)(7) which states that in his
representation of a client, a lawyer shall not counsel or assist
his client in conduct that the lawyer knows to be illegal or
fraudulent.
  
As stated in your facts, a letter allegedly was written by Law
Firm B which letter apparently indicates that the firm knew that
the transfer of PUD's  property interest to the trust was in
violation "of the spirit, if not the letter, of the assignment". 
Based upon the facts you have provided, then, the committee is of
the opinion that Law Firm B has counseled or assisted his client 
in conduct that the firm knows to be illegal or fraudulent, in
violation of DR 7-102(A)(7).  Assuming that the assignment was in
place and that the lawyer set up machinery to avoid honoring the
assignment, the committee is of the opinion that such activity
did constitute fraud as prohibited under DR 7-l02(A)(7).  The
committee is of the further opinion that such conduct would
similarly be per se violative of DR 1-102(A)(4).

As to whether Law Firm A has an obligation to report misconduct
by Law Firm B, the committee has adopted a two-pronged test to be
satisfied under DR 1-103(A) before the obligation to report
misconduct arises: (1) the lawyer must have information
indicating that another lawyer's conduct has violated one of the
Disciplinary Rules; and (2) that violation must raise a
substantial question as to that lawyer's fitness to practice law
in other respects.  See LEO #1004. 

Since the committee has opined that Law Firm B's conduct violates
DR 7-102(A)(7), the first prong of the test has been satisfied. 
Relevant factors to be considered under the second prong include,
but are not limited to, the recency of the conduct, the
seriousness of the offense, the likelihood that the conduct will
be repeated, the likelihood that it will affect the attorney's
competence and any mitigating or aggravating circumstances.  LEO
#l004.  The committee advises that the determination of whether a
violation must be reported is to be made by the reporting
attorney.

Committee Opinion
May 11, 1993