Using Client Confidences and Secrets Nets Attorney One-Year Suspension
A Cincinnati attorney used secrets gleaned from a long-time client of his law firm to assist the client’s relative in an estate dispute and also improperly mingled funds of another client with his personal investment account.
The Ohio Supreme Court unanimously ruled that Richard G. Ward be suspended from practicing law for one year. The court agreed with most of the findings of the Supreme Court’s Board of Commissioners on Grievances and Discipline, which considered the matter in December 2013, and recommended the one-year suspension. (The board was renamed the Board of Professional Conduct in January 2015.)
The board found Ward had violated attorney standards by accepting employment in which his professional judgment was affected by his own business interests, dishonestly engaging in his dealing with his client, using a client’s confidences and secrets to that client’s disadvantage, and failing to hold client property separate from his own.
Representation of Koons
The infractions stem from Ward’s participation in the legal matters of the deceased John F. “Bud” Koons, principal owner of Central Investment Corporation (CIC), which Koons grew into the nation’s seventh largest bottler for Pepsi-Cola. Richard (Dick) H. Ward, Richard G. Ward’s father, had a close personal relationship with Koons since childhood, and Dick Ward served on the board of directors of CIC and represented Koons in many legal matters.
Dick Ward and other lawyers formed the Drew & Ward law firm. The firm handled several matters for Koons. Dick Ward served as a trustee for at least 11 of 12 trusts Koons established and funded the trusts with CIC stock. When one of the Drew & Ward partners left the firm in 2004, Ward joined his father’s firm. There he assisted in some of Koons’ personal and businesses matters, including litigation that threatened the Pepsi bottling business.
Within a year of Ward joining the firm, CIC sold its business for approximately $400 million to a Pepsi affiliate and formed a limited liability company (LLC) to hold the proceeds of the sale. Koons asked Dick Ward to disentangle himself from the CIC business, and Dick Ward became a consultant to the LLC and had a separate agreement to provide legal services. Shortly after the arrangement Koons died.
As part of the business separation Dick Ward resigned as a co-trustee to a major trust created by Koons’ parents. Allegations central to the misconduct charges brought against the younger Ward were generated by dealings with this trust.
Issues Related to the Trust
The trust, created in 1976, was divided into two separate shares, one for Koons’ family and the other for the family of his sister, Betty Lou Cundall. The parents made Koons the trustee for the entire trust, and it was primarily funded with CIC stock. In 1984, Koons sold the CIC stock that funded the Cundall family share, and invested the proceeds in various stocks, bonds, and cash. He did not sell the CIC shares of the trust benefitting his family.
In 1992, the trust was divided into two separate trusts, and the assets designated for the Koons family, CIC stocks, went into a trust for the Koonses. The assets for the Cundall family went into a separate trust for them. Koons remained trustee for the Cundall family trust, until his death, but resigned as the trustee for his family trust. He was replaced by three successor trustees, including Dick Ward.
After Koons died, Dick Ward asked his son to review the Cundall family trust to determine how it was distributed. Ward worked with files in possession of the Drew & Ward law firm, and with the accountant for Koons who also assisted with the CIC operations. Ward questioned the disparities in values of the trust and Koons’ responsibilities as the trustee.
He also expressed concern about his father’s liability exposure for serving as a co-trustee in the event of litigation arising from the disparities. Dick Ward relayed these concerns to the other trustees informing them that his son had participated in the review and Dick Ward resigned as a trustee.
Ward was a personal friend and attorney to Michael Cundall, Betty Lou Cundall’s son, and a trust beneficiary. Ward approached Cundall and his sister about the trust and suggested the possibility of a lawsuit arising out of Koons’ handling of it. He sent Michael Cundall a proposed fee agreement to represent him that varied from a contingent fee of 10 percent to 25 percent depending on the extent of the litigation. Cundall agreed and the fee changed over the course of the representation increasing to a 50 percent contingency.
Ward contacted a local bar association ethics hotline to discuss whether his business interests and his father’s prior involvement created an issue, and based on the call Ward concluded that he did not need to disqualify himself. Ward discussed the potential conflict with Drew & Ward shareholders and directors. At their direction, Ward prepared a memo discussing any potential conflicts.
The memo centered on an analysis of his situation in the context of the Ohio Supreme Court’s 1998 Kala v. Aluminum Smelting & Refining Co, Inc. decision. He concluded neither he nor the firm needed to disqualify themselves in a lawsuit against Koons’ estate for its handling of the Cundall estate. The firm authorized Ward to file the lawsuit.
In the Courts
Koons’ defense moved to disqualify the Drew & Ward law firm, but the trial court did not act on the motion. Instead it dismissed the case against Koons. Appeals brought the case to the Supreme Court, which ultimately determined all the Cundall’s claims were barred by the statute of limitations.
Representatives of Koons’ estate sued Drew & Ward, as well as Dick and Richard Ward for malpractice. The Wards agreed to indemnify the law firm against any malpractice claims, and they left the firm in 2009, establishing their own firm. The malpractice suit was settled for $5 million.
Supreme Court’s Ruling
In its per curiam decision, the Supreme Court cited the Kala ruling expressing that “a fundamental principle in the attorney-client relationship is that the attorney shall maintain the confidentiality of any information learned during the attorney-client relationship.” Further, an attorney who leaves a firm to represent the opposing party is presumed to take any confidences gained with the former relationship and share the confidences with the new firm.
The court wrote that the Kala decision set up a test for matters when an attorney leaves a client and joins another law firm that wants to represent the opposing parties in matters involving the former client. In this case, Ward did not leave Drew & Ward, but instead was seeking to have him and the firm represent Cundall because Koons had terminated its relationship with Drew & Ward and then died.
Because Drew & Ward represented Koons personally and his trust and business interests, Ward was presumed to have shared in the confidences and secrets gained by the firm. The court found Drew & Ward had no institutional screening method that would prevent the confidential information Koons provided to the firm from flowing to Ward. And while Ward argued that he did not represent Koons, the court decided the professional conduct board correctly determined that Ward was in possession of Koons’ confidential information even as he sought to represent Cundall against Koons.
“Here the evidence shows that Ward knowingly used confidential information that Drew & Ward obtained during its representation of Koons’ various interests to solicit and secure Cundall as a client and to formulate his legal strategy in resulting litigation without Koons’ consent,” the court wrote.
The court noted that Ward received more than $237,000 in fees for representing Cundall, and stood to receive millions more had the lawsuit seeking $300 million in damages succeeded. For this the court deemed Ward violated three disciplinary rule: the prohibition of a lawyer from knowingly revealing a confidence or secret of his client; the prohibition of a lawyer from knowingly using the confidence or secret of a client to the clients disadvantage, and; the prohibition of a lawyer from knowingly using a confidence or secret of a client for the lawyer’s own advantage unless the client consents.
In addition, the board charged Ward with violating disciplinary rules that require the consent of the client if a lawyer’s professional judgment might be affected by his own financial or personal interests, and barring a lawyer from engaging in conduct that aversely reflects on the lawyer’s fitness to practice law.
The board investigation found that Ward was motivated to “settle the score” with Koons for removing his father from Koons’ business affairs and that led him to disregard the evident conflict of interest in using the confidences gained by his father and the law firm. The court agreed that he violated the two disciplinary rules.
The court also found Ward acted improperly in a real estate transaction involving Michael Cundall’s wife, Ann, as she was selling a house. Ward attended a real estate closing and testified he was directed to put the $113,000 in net sales proceeds into his client account until Ann found another parcel of real estate to purchase. Ward put $10,000 into an account held by Michael, purportedly at Ann’s request, and transferred the rest to his own securities account as a loan.
Ann disputed the transaction and denied giving Ward any instructions to invest the proceeds of the sale. He paid the money back plus interest to the Cundalls. The board found Ward’s account not to be credible and was contradicted by the Cundalls account of the transaction. The board found and the court agreed that Ward violated the rules requiring a lawyer to hold property of clients separate from the lawyer’s own property.
“Having considered Ward’s misconduct, the aggravating and mitigating factors present in this case, and sanctions we have imposed for comparable misconduct, we believe that the board’s recommended sanction will adequately protect the public from future misconduct,” the court concluded.
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