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Sexton v. Arkansas Supreme Court Committee on Professional Conduct, 299 Ark. 439, 774 S.W.2d 114, 9 A.L.R.5th 1032

Facts

In January 1987, Danny Haffelder and his wife filed a complaint against the appellant, an attorney, with the Committee on Professional Conduct after a loan transaction in which the Haffelders believed the appellant was still their attorney. The appellant solicited a $20,000 loan from the Haffelders, promising to repay $40,000, but failed to make payments after a year. The Haffelders eventually filed a suit for collection and a complaint with the Committee, leading to the suspension of the appellant's license for one year.

In January 1987, Danny Haffelder and his wife filed a complaint against the appellant, an attorney, with the Committee on Professional Conduct after a loan transaction in which the Haffelders believed the appellant was still their attorney.

Issue

Did the attorney violate Disciplinary Rule 5–104(A) by failing to make full disclosure when soliciting a loan from his clients?

Did the attorney violate Disciplinary Rule 5–104(A) by failing to make full disclosure when soliciting a loan from his clients?

Rule

Disciplinary Rule 5–104(A) states that a lawyer shall not enter into a business transaction with a client if they have differing interests and if the client expects the lawyer to exercise his professional judgment for the protection of the client, unless the client has consented after full disclosure.

Disciplinary Rule 5–104(A) states that a lawyer shall not enter into a business transaction with a client if they have differing interests and if the client expects the lawyer to exercise his professional judgment for the protection of the client, unless the client has consented after full disclosure.

Analysis

The court determined that the attorney did not fulfill his obligation under DR 5–104(A) to make full disclosure to the Haffelders regarding the risks of the loan transaction. Despite the clients seeking advice from their banker, they still relied on the attorney's professional judgment, and the attorney failed to inform them of the speculative nature of the investment and the potential consequences.

The court determined that the attorney did not fulfill his obligation under DR 5–104(A) to make full disclosure to the Haffelders regarding the risks of the loan transaction.

Conclusion

The court affirmed the Committee's decision to suspend the attorney's license for one year, concluding that the attorney did not make the required full disclosure to his clients.

The court affirmed the Committee's decision to suspend the attorney's license for one year, concluding that the attorney did not make the required full disclosure to his clients.

Who won?

The Arkansas Supreme Court Committee on Professional Conduct prevailed, as the court upheld their decision to suspend the attorney's license for failing to make full disclosure.

The Arkansas Supreme Court Committee on Professional Conduct prevailed, as the court upheld their decision to suspend the attorney's license for failing to make full disclosure.

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