FOR THE RESPONDENT FOR THE INDIANA SUPREME COURT
Jon D. Krahulik
Donald R. Lundberg, Executive Secretary
3500 West DePauw Blvd. 115 West Washington Street, Suite 1060
First Floor, Pyramids Building II Indianapolis, IN 46204
Indianapolis, IN 46268
SUPREME COURT OF INDIANA
IN THE MATTER OF )
) Case No. 49S00-9702-DI-116
RICHARD N. BELL )
November 9, 1999
The respondent, Richard N. Bell, improperly served both as counsel for, and partner
in, a business for which accounting services were provided by a firm in
which the respondent had an interest. He exacerbated these impermissible conflicts of
interest by later suing the business and one of his business partners.
Today we approve a Conditional Agreement for Discipline, pursuant to Ind.Admission and Discipline
Rule 23, Section 11, between the respondent and the Indiana Supreme Court Disciplinary
Commission, which will result in the respondents suspension from the practice of law
for thirty (30) days for engaging in this professional misconduct.
As a preliminary matter, we note the respondent was admitted to practice law
in this state in 1975. Therefore, he is subject to the disciplinary
authority of this Court.
The undisputed facts show that the respondent in late 1983 was a certified
public accountant in an accounting firm. At that time, he also was
an attorney. He sold his interest in the accounting firm at the
end of 1983 to devote his professional career to law. As a
condition of the sale, he was to receive 108 monthly installment payments and
was required to protect the goodwill of the accounting firm. The accounting
firm continued to insure him for accounting malpractice.
Shortly after the sale of the accounting firm, the respondent drafted papers creating
a partnership to develop condominiums. He agreed to represent, as an attorney,
both the general partner and the partnership. The respondent later invested in
the partnership, and his former accounting firm provided accounting services to the partnership.
A fire destroyed the condominiums before completion. A dispute arose as to
the fees to which the general partner was entitled under the partnership agreement
drafted by the respondent. The respondent advised the partnerships accounting firm (to
which he still was indirectly related) that the general partner, whom he represented,
was not entitled to such fees. Relying on that legal opinion, the
accounting firm reported to the general partner that he was not entitled to
the fees. That approach was financially advantageous to the investors, who included
the respondent, some of the respondents clients, and some of the accounting firms
A dispute over payment for the respondents legal services to the general partner
and partnership arose. The respondent filed suit against the general partners company
and the partnership and obtained a default judgment. The judgment later was
set aside because the trial court found the respondent had violated his duty
to the partnership and to the general partner by failing to advise them
of his intent to proceed with that suit.
Instead of appealing the order setting aside the default judgment, the respondent filed
an Amended Complaint for Damages which named the general partner and the partnership
as defendants. The respondent signed the amended complaint under penalties of perjury
and stated that the defendants owed him $14,675.43 for legal services performed since
January 1984. The respondent later withdrew his complaint and admitted that some
of the fees which he sought in the Amended Complaint had been paid.
On July 3, 1984, the respondent sent to the general partner and the
limited partners a letter in which he resigned as attorney for the partnership.
The letter stated the respondent was resigning because the general partner had
failed to pay legal fees and maintain accurate accounting records. The letter
alleged that the general partner was in violation of the partnership agreement because
he allegedly owed the partnership money.
Based in part on the respondents representations, one of the limited partners sued
the general partner on October 16, 1985. The suit sought dissolution of
the partnership, appointment of a receiver and an award of punitive damages.
In that same month, the respondent, with proxies from other limited shareholders, voted
to oust the general partner. In the face of that vote, the
general partner resigned.
The general partner filed a counterclaim seeking damages from the respondent. The
trial court entered judgment in favor of the general partner and against the
respondent in the amount of $32,500 in compensatory damages and $50,000 in punitive
These facts establish an improper intermixing of the respondents personal and professional interests.
We discussed the rules governing lawyers engaging in business transactions with their
Matter of Strutz, 652 N.E.2d 41 (Ind. 1995), and that discussion
bears repeating here:
Professional Responsibility Code, a lawyer may
engage in a business transaction with a client only if the
transaction satisfies standards designed to protect the
client against an overreaching attorney. (footnote omitted)
However, a lawyer is prohibited from entering into a business
transaction with a client if they have "differing interests therein,"
and the client "expects the lawyer to exercise his professional
judgment therein for the protection of the client, unless the client
consents after full disclosure."
In re Watson (1985), Ind., 482
N.E.2d 262, 264;
In re Aspinall (1983), Ind., 455 N.E.2d 942, 943;
D.R. 5104(A). Moreover, under D.R. 5101(A), a lawyer is
prohibited from accepting employment if the exercise of his
professional judgment on behalf of his client will be or
reasonably may be affected by his own financial or business
interests unless the client consents after full disclosure.
(1985), Ind., 482 N.E.2d 723, 723. As we observed in
In re Welke (1984), Ind., 459 N.E.2d 725:
Code of Professional Responsibility for Attorneys
at Law does not preclude an attorney from being
an entrepreneur or engaging in any other lawful
profession. However, it does provide that if there is
a conflict between these personal interests and
professional obligations, the latter must prevail. Only
through adherence to these principles and enforcement
of such standards can the integrity of the profession
Id. at 730. Ethical Consideration 51 of the Professional Responsibility
Code provided that a lawyer should exercise professional judgment
"solely for the benefit of his client and free of compromising influences
and loyalties." Ethical Consideration 53 added that even if a
lawyer's property interests "do not presently interfere with the exercise
of his independent judgment, but the likelihood of interference can reasonably be foreseen
..., a lawyer should explain the situation to his client and should decline
employment or withdraw unless the client consents...after full disclosure."
A. Mann & Marcus P. Wilkinson, The Role of Counsel in Venture Capital
Transactions, 46 Bus.Law. 770 (1991); Note, Developments in the LawConflicts of Interest,
94 Harv.L.Rev. 1244, 1286 (1981).
Strutz, 652 N.E.2d at 47-48.
The respondent and the Commission have stipulated that the respondent was an investor
in the partnership, the attorney for the general partner, the attorney for the
partnership, and the attorney for some of the limited partners, and that he
had a business arrangement with the accountants for the partnership. Stipulation of
Facts & Conditional Agreement for Disciplinary Action (Stipulation) Ex. A ¶ 95.
The respondent and the Commission also have stipulated that respondent did not make
any written or oral communications to the general partner about the actual or
potential conflicts of the respondent being a limited partner while he was also
attorney for the general partner and attorney for the partnership. Stipulation Ex.
A ¶ 45. The respondent and the Commission agree that the respondent
accepted employment where the exercise of his professional judgment on behalf of his
client would be or reasonably might be affected by his own financial, business,
property, or personal interests. The respondent and the Commission also agree that
the respondent accepted employment where the exercise of his independent professional judgment on
behalf of a client would be or likely would be adversely affected by
the acceptance of the employment. Under these circumstances, the respondent violated DR
The respondent and the Commission stipulate that the respondent and the general partner
had a lengthy dispute over legal fees due the respondent and that the
respondent eventually sued to collect those fees. Stipulation Ex. A ¶¶ 73-78.
The respondent and the Commission also stipulate that after the fire, [t]he
amount of money available for distribution to the limited partners, including [respondent], depended
upon the collection of insurance proceeds, the denial of fees and other money
to [the general partner], and the obtaining of any money from [the general
partner] to the partnership. [Respondent] was aware of those facts. Stipulation
Ex. A ¶ 85. The respondent and the Commission agree that the
respondent continued multiple employment (i.e., employment on behalf of the general partner, the
partnership, and some of the limited partners) where the exercise of his independent
professional judgment on behalf of a client would be or likely would be
adversely affected by his representation of another client. Under these circumstances, the
respondent violated DR 5-105(B).
The respondent also breached his professional responsibility to his client, the general partner,
in several specific ways. The respondent and the Commission stipulate that the
respondent alleged in the letter dated July 3, 1984, that the general partner
had not paid legal fees, had not kept accurate accounting records and had
improperly withdrawn $47,800 from the partnership. Stipulation Ex. A ¶ 103.
They further stipulate that the letter was distributed to all limited partners without
the general partners permission and that it defamed (the general partner) with false
statements, inferences and innuendos that (the general partner) was dishonest, untrustworthy, and incompetent
in his profession, office and occupation. Stipulation Ex. A ¶¶ 104 -
The parties also stipulate that the respondent obtained a default judgment on June
14, 1984, without notice to the general partner or the limited partnership.
Stipulation Ex. A ¶ 101. They further stipulate that a limited partner,
relying on the respondents representations, sued the general partner for dissolution of
the partnership, for the appointment of a receivership and for an award of
punitive damages. Stipulation Ex. A ¶¶ 126-127. The respondent, armed with
proxies from other limited shareholders, voted to oust the general partner from his
position in October 1985, leading to the general partners resignation. Stipulation Exhibit
A ¶ 129. The respondent and the Commission agree that the respondent revealed
or otherwise misused the confidences or secrets of his client and, thereby, under
these circumstances, violated DR 4-101(B).
The respondent and the Commission further
agree that the respondent caused prejudice or damage to his client during the
course of representation and, thereby, under these circumstances, violated DR 7-101(A)(3).
Since we have found professional misconduct, we must now determine an appropriate sanction.
We recognize a mitigating circumstance in this case: that the respondent fully
satisfied the judgment for $32,5000 in compensatory damages and $50,000 in punitive damages
entered against him. With that in mind, the Commission and the respondent
suggest a 30-day suspension with automatic reinstatement. Such a sanction is consistent
with our resolution of similar cases. See, e.g., Matter of Christoff, 690
N.E.2d 1135 (Ind. 1997) (30-day suspension for prosecutor who threatened to revive dormant
criminal investigation of attorney if attorney became candidate for prosecutor); Matter of Maternowski,
674 N.E.2d 1287 (Ind. 1996) (30-day suspension for attorney who represented client who
was uncertain whether to cooperate with government authorities where attorney had personal policy
of not representing clients who cooperate with government); Matter of McCarthy, 668 N.E.2d
256 (Ind. 1996) (30-day suspension for attorney who represented client and himself in
an action against accountant who had agreed to perform services for them).
We are satisfied that a 30-day suspension is commensurate with the misconduct here.
Accordingly, we order that the respondent be suspended from the practice of
law for a period of thirty (30) days, beginning December 10, 1999, at
the conclusion of which he automatically will be reinstated to the practice of
law in Indiana.
The Clerk of this Court is directed to provide notice of
this order in accordance with Admis.Disc.R. 23(3)(d) and to provide the Clerk of
the United States Court of Appeals for the Seventh Circuit, the Clerk of
each of the United States District Courts in this state, and the Clerk
of each of the United States Bankruptcy Courts in this state with the
last known address of the respondent as reflected in the records of the
Costs of this proceeding are assessed against the respondent.
The respondents conduct at issue arose before adoption of the Rules of Professional
Conduct for Attorneys at Law; thus, he was charged under the Code of
Professional Responsibility. DR 5-101(A) of those rules provided:
Except with the consent of his client after full disclosure, a lawyer
shall not accept employment if the exercise of his professional
judgment on behalf of his client will be or reasonably may be
affected by his own financial, business, property, or personal
DR 5-105 provided:
(A) A lawyer shall decline proffered employment if the exercise
of his independent professional judgment in behalf of a client
will be or is likely to be adversely affected by the acceptance
of the proffered employment, except to the extent permitted
under DR 5-105(C).
(B) A lawyer shall not continue multiple employment if the
exercise of his independent professional judgment in behalf
of a client will be or is likely to be adversely affected by
representation of another client, except to the extent permitted
under DR 5-105(C).
(C) In the situations covered by DR 5-105(A) and (B), a lawyer
may represent multiple clients if it is obvious that he can
adequately represent the interest of each and if each consents
to the representation after full disclosure of the possible effect
of such representation on the exercise of his independent
professional judgment on behalf of each.
The Commission originally charged the respondent with violation of DR 1-102(A)(4) in connection
with the misstatements made in the respondents letter dated July 3, 1984.
The Commission later determined the inaccuracies were not intentionally dishonest. The parties
agree, and we find, that the evidence does not establish a violation of
DR 4-101 provided:
(B) Except when permitted under DR 4-101(C), a lawyer shall not
(1) Reveal a confidence or secret of his client.
(2) Use a confidence or secret of his client to the disadvantage
of the client.
(3) Use a confidence or secret of his client for the advantage of
himself or of a third person, unless the client consents after full
(C) A lawyer may reveal:
(1) Confidences or secrets with the consent of the client or clients
affected, but only after a full disclosure to them.
(2) Confidences or secrets when permitted under Disciplinary Rules
or required by law or court order.
DR 7-101(A) provided in relevant part:
A lawyer shall not intentionally: . . .
(3) Prejudice or damage his client during the course of
the professional relationship, . . . .