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ARDC Hearing Board Recommends Six Month Suspension For Lawyer Who Borrowed $50,000 from Elderly Client

The case is captioned In re Michael Naphtali Miller, 2012 PR 00072

In 2004, Miller represented Jeanne O. Meyer in the sale of her home. Ms. Meyer was 77 years old at the time. In 2009, Miller prepared statutory powers of attorney for healthcare and property for Ms. Meyer, both of which named Miller as the agent. Miller submitted an invoice for $2500 for the work on the powers of attorney and for a review of other estate planning documents. The invoice was paid in full.

In 2010, Miller requested and received from Ms. Meyer a “retainer for 2010 Legal Services” in the amount of $25,000. In February 2010, Miller met with Ms. Meyer at the nursing home where she resided and asked her to loan him $50,000. In November 2010, Miller gave Ms. Meyer a promissory note in which he agreed to repay the loan. Miller admitted that he was in financial difficulties at the time he obtained the retainer and the loan.

In 2011, Ms. Meyer’s family members contacted another elder law practitioner. That lawyer, Paul Smolinski, prepared new powers of attorney, revoking those previously prepared by Miller. In April 2012, after the ARDC began an inquiry, Miller repaid the $50,000 loan. In July 2012, Miller paid an additional $5000, perhaps for interest on the loan.  In June 2013, Miller returned the $25,000 retainer to Ms. Meyer.

The $25,000 Retainer Fee

The Hearing Board agreed with the ARDC that the $25,000 retainer was unreasonable under Rule 1.5(a). The retainer was excessive because the services that Miller would be expected to render to Ms. Meyer would not have required him to expend much time on her matter. Further, the retainer was ten times larger that the fee of $2500 he had already collected for reviewing the estate planning documents and drafting powers of attorney.

The Hearing Board also concluded that Miller violated Rule 1.7(a)(2) because he represented a client when the representation was materially limited by his own interests. The Hearing Board concluded that “respondent’s ability to protect Jeanne’s interests was compromised by his own financial problems.”

The Hearing Board also found a violation of Rule 8.4(c), in that Miller “acted dishonestly by knowingly overcharging Jeanne.”

The $50,000 Loan

The Hearing Board found that the $50,000 loan violated Rule 1.8(a), which prohibits a lawyer from entering into a business transaction with a client unless the terms of the transaction are fair and reasonable, the client was informed in writing to seek the advice of an independent lawyer, and the client gives informed consent, in writing, to the terms of the transaction and the lawyer’s role in the transaction.  The Hearing Board also found violations of Rule 1.7(a)(2) and 8.4(c).  The Hearing Board recommended a suspension of six months. The fact that another lawyer was hired to obtain the return of the $75,000 was an aggravating factor.

Conclusions: This is a growing area of concern in the attorney regulation world. Lawyers often have access to elderly people and can, in some circumstances, use undue influence or other improper means to cause financial harm to the elderly. A lawyer should almost never seek a loan from a client, unless the client is a member of the lawyer’s immediate family.

Finally, if you have any doubts about the legality of a transaction with a client, it is best to call the ARDC hotline or to consult with an experienced ethics lawyers.

Edward X. Clinton, Jr.