On January 16, 2015, the U.S. Bankruptcy Court for the Northern District of California ruled that a California attorney forfeit all fees—both earned and already paid—for blatantly violating his duty of loyalty to a former client. Forfeits
After being terminated by the client, the attorney reversed his stance on arguments previously made on her behalf during her bankruptcy proceeding.
The client filed for bankruptcy protection after incurring $400,000 in attorney fees in a prior will contest, during which she was represented by another law firm. The attorney initially argued that although the original law firm’s fee obligations were secured by a deed of trust on the client’s home, the deed was invalid under California’s version of Model Rule 1.8(a) and that the value of her home should instead be used to pay her homestead exemption. Upon termination of his engagement, however, he revised his legal position.
In an attempt to secure payment of his own fees, the attorney now argued that the same lien was valid and that any value of the estate above the original law firm’s claim should inure to the benefit of unsecured creditors (including himself). Unfortunately, irrespective of the legitimacy or correctness of the attorney’s revised view, the court held that his now adversarial stance against his former client was a breach of ethical duty “so flagrant that he should be denied the fees he now seeks, and be required to refund all fees he [had] previously received.”
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