Attorney Sanctions: Fee Disgorgement for Conflict of Interest
As attorney Leonard Suchanek found out, biting off more than you can chew may come back to bite you in your wallet.
The D.C. Circuit Court of Appeals held that Suchanek must disgorge a portion of his fees paid by a client because of his violations of the ethical rule against current-client conflicts.
Suchanek was alleged to have been representing three parties with conflicting interests, including Chinese businessman Kevin So, in an international Ponzi scheme lawsuit. So filed a malpractice action against Suchanek after they ended their attorney-client relationship in Jan. 2008.
A district court found that Suchanek breached his fiduciary duty to his clients and ordered him to disgorge $400,000 of his fees, plus interest.
The D.C. Circuit upheld the district court’s judgment, finding that an objective lawyer would not have concluded that he could provide competent and diligent representation to each of the parties without adversely affecting representation.
In addition to So, Suchanek represented Nancy Yan Lu, So’s agent in investment matters which ended contentiously, and Land Base LLC, the alleged Ponzi company.
Further, the D.C. Circuit decided So was owed an even larger amount of disgorgement due to Suchanek’s “rampant misconduct.” It sent the case back to the district court and ordered the judge to consider: the full extent of Suchanek’s conflicts, the need to deter attorney misconduct, the fundamental equitable principle that fiduciaries should not profit from their disloyalty, and the decreased value of the services provided to So.
When deciding whether to take on a client’s case, make sure you take into serious consideration whether you can wholeheartedly and zealously represent additional parties. Otherwise, trying to take on too much could mean having to lose a lot of your fees.
- So v. Suchanek (D.C. Circuit Court of Appeals)
- Case of Contempt: Ted Stevens Prosecutors Held in Civil Contempt (FindLaw’s D.C. Circuit blog)
- Avoid Attorney Sanctions: Show Up for Your Hearing (FindLaw’s First Circuit blog)