In Re the Disciplinary Proceeding Against McGlothlen
99 Wash. 2d 515, 663 P.2d 1330, 1983 Wash. LEXIS 1538 (1983)
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Rule of Law:
An attorney's duty of full disclosure in business transactions under CPR DR 5-104 extends beyond formal, present attorney-client relationships to any situation where the influence arising from a past or ambiguous relationship continues to exist.
Facts:
- In 1975, attorney Gary McGlothlen acquired the files of a deceased attorney, including the probate file for John Cole's estate.
- McGlothlen contacted Eileen Ward, the sole heir who lived in California, informed her he was taking over the matter, and offered legal assistance.
- Ward replied, 'I sincerely hope you will take care of this matter for me,' and relied on McGlothlen's advice regarding the probate of her mother's estate as well.
- At McGlothlen's suggestion, Ward agreed to substitute another individual, Delford Woodall, as executor of her mother's estate.
- Ward expressed a desire to sell a house, the sole asset of the estates, and McGlothlen offered to help find a buyer.
- In June 1977, McGlothlen offered to purchase the house himself for $8,500, emphasizing its poor condition and a recent fire but not disclosing a 1971 appraisal of $9,000.
- Ward agreed to the sale, and McGlothlen prepared the contract.
- One year later, McGlothlen resold the house to a tenant for $14,500.
Procedural Posture:
- A local real estate broker filed a complaint against attorney Gary McGlothlen with the Washington State Bar Association.
- A hearing officer for the bar association conducted a disciplinary hearing.
- The hearing officer concluded that an attorney-client relationship existed and CPR DR 5-104 applied, but found that McGlothlen's disclosure was sufficient.
- Bar counsel filed an objection to the hearing officer's conclusion on the sufficiency of disclosure with the Disciplinary Board.
- The Disciplinary Board reviewed the case and concluded that McGlothlen's disclosure was not sufficient, recommending that he receive a censure.
- McGlothlen refused to accept the censure, which brought the matter before the Supreme Court of Washington for a final decision.
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Issue:
Does an attorney's business transaction with an individual violate CPR DR 5-104 when a formal attorney-client relationship is ambiguous or has technically ended, but the attorney retains significant influence over that person due to their prior professional interactions?
Opinions:
Majority - Utter, J.
Yes, the transaction violates CPR DR 5-104 because an attorney's duty of full disclosure applies as long as the influence from an attorney-client relationship persists, even if the relationship itself has formally ended. The court held that to protect the public, the rule must be construed broadly. An attorney-client relationship can be implied from conduct, and the tenor of the correspondence indicated Ward was relying on McGlothlen's legal expertise. Even if the relationship ended when a new executor was substituted, McGlothlen's influence continued. His disclosure was insufficient because he failed to meet the high burden of showing he gave Ward the same advice a disinterested attorney would have (e.g., getting a new appraisal) and that she could not have obtained a better deal from a stranger. Despite finding a violation, the court declined to impose sanctions because it was announcing a new, broader interpretation of the rule.
Dissenting - Dore, J.
Yes, the transaction violates CPR DR 5-104, and the attorney's conduct warrants a significant sanction. The dissent argues that an attorney-client relationship clearly and continuously existed, citing McGlothlen's own letters admitting Ward had 'retained' him. The substitution of the executor was a procedural step that did not sever this relationship. McGlothlen breached his fiduciary duty by failing to secure an updated appraisal and not disclosing all relevant information, thereby profiting from his client's trust. The dissent strongly disagrees with the majority's characterization of McGlothlen's conduct as 'entirely proper' under ordinary standards, calling it a 'deception' that warrants a 90-day suspension, not merely a censure or no sanction at all.
Dissenting - Dimmick, J.
Yes, the transaction violates CPR DR 5-104. This dissent concurs with the analysis of Justice Dore that McGlothlen's conduct was a clear violation. However, it disagrees on the sanction, arguing that the court should not deviate from the Disciplinary Board's original recommendation of a censure.
Analysis:
This decision significantly broadens the scope of an attorney's fiduciary duties under CPR DR 5-104 by shifting the focus from the formal existence of an attorney-client relationship to the 'continuing influence' an attorney exerts over an individual. By extending the duty of full disclosure to transactions with former or quasi-clients, the court established a more protective, albeit more ambiguous, standard. This precedent puts attorneys on notice that their ethical obligations do not abruptly terminate with their formal employment; rather, the duty persists as long as the power imbalance created by the professional relationship lasts, requiring heightened scrutiny of any subsequent business dealings.
