The United States Court of Appeals for the District of Columbia Circuit recently upheld an injunction freezing most of an attorney’s assets in order to protect the plaintiff in a legal malpractice action against the attorney.
This is a highly unusual move, but a closer reading of the allegations makes it clear why this happened. According to the court’s memorandum opinion, the attorney entered into a business relationship with a client. The client funded the business with approximately $3.5 million dollars. The attorney then transferred $3.405 million into his personal accounts through interest free loans, not due until 2030 and 2040. When the court finally ordered an accounting, only $522,000 was left. The claims against the attorney included legal malpractice, breach of fiduciary duty and fraud.
Obviously, if the claims against the attorney are true, then there was good reason for the court to believe the injunction was necessary to avoid further harm to the attorney’s client. From a professional liability avoidance perspective, any attorney entering into a business relationship with a client should be very circumspect.
(HT to the National Law Journal at law.com) The court’s memorandum can be found at legaltimes.typepad.com/files/circuit_judgment.pdf