Sex with Client Constituent Created Conflict of Interest

The Kansas Supreme Court has indefinitely suspended an attorney for misconduct in representing an entity client  ( a railway company “KCT”) while having an intimate relationship with an employee of KCT.

The only remaining issue before us is the appropriate discipline for respondent’s violations. At the hearing before the panel, the respondent requested that she be placed on probation; the office of the Disciplinary Administrator did not object. The hearing panel recommended suspension for an indefinite period of time.

We agree with the hearing panel that probation is not an appropriate disposition. As the panel concluded, the respondent’s misconduct is serious, involving significant conflicts of interest as well as dishonest behavior. Further, the panel found respondent failed to take full responsibility for her actions, and the record supports that finding. We, therefore, conclude it would not be in the best interests of the citizens of the state of Kansas for the respondent to be placed on probation. We agree with the panel’s recommendation that the respondent’s license to practice law in the state of Kansas be suspended for an indefinite period of time.

Abovethelaw reported on the Missouri bar case that led to the Kansas sanction.

The Kansas court

From 2002 until January 2012, Respondent and Mader were in a personal, close relationship. At times the relationship was romantic and sexual. At all times from 2002 to January 2012, the relationship between Mader and Respondent was a very close, deep, meaningful, sustained, loving, caring, intimate and special friendship with frequent social and personal interactions with each other.

The sexual relations between Respondent and Mader did not exist prior to the 1999 beginning of the attorney-client relationship between Respondent and her client, KCT.

Respondent admits that she did not at any time inform the KCT board of directors of her ongoing personal relationship with Mader. She admits she did not inform the board of directors at any time prior to or during: her preparation of Mader’s employment contract with KCT; Mader’s initial employment providing engineering services for KCT; Mader becoming and serving as general manager and vice-president of KCT; or Mader’s appointment to as [sic] serving as president and chairman of the board of directors of KCT.

Brad Peek, current general manager and former president of KCT testified that Respondent did not but should have disclosed her personal, close, sexual relationship with Mader to KCT and its board of directors: when Mader was hired in 2007; when he became and served as general manager; and when he was appointed to and served as president and chairman of the board of KCT.

The client found out about the situation through an independent investigation

In early 2012, a member of the KCT board of directors had an independent investigation conducted into the activities of the officers, Somervell, Mader and Respondent.

After the initial investigation and upon learning of the personal relationship between Respondent and Mader, the ownership interest and billing of the legal fees for the Tallgrass Railcar, the conflict of interest of Respondent, as a result of that, the loss of trust and reliability because the board had not been informed of the relationship and the billing of legal fees for Tallgrass Railcar, which were not related to KCT, the board took action to:

a. Remove Mader from the board of directors, and;

b. Terminate Mader as president of KCT, and;

c. Terminate Respondent as secretary of the corporation, and;

d. Terminate Respondent as general counsel, and;

e. End the relationship with [Respondent’s firm] Lathrop, as attorneys for KCT.

The court here concluded that the relationship resulted in a concurrent conflict of interest and a violation of the sex with client rule

The respondent’s client-lawyer relationship commenced in 1999. In 2002, the respondent developed a close, personal, and sexual relationship with Mr. Mader. Because Mr. Mader was a constituent of the respondent’s client who supervised, directed, or regularly consulted with the respondent and because the respondent’s sexual relationship began after the client-lawyer relationship commenced, the hearing panel concludes that the respondent violated KRPC 1.8(k).

And Rule 1.13

Under subsection (b), the respondent failed to address or report substantial injury to KCT caused by Mr. Somervell and Mr. Mader—the diversion and appropriation of the railcar purchase which had been negotiated for KCT, the attempt to lease the railcar owned by Tallgrass Railcars to KCT, and the appropriation of KCT assets for the renovation and improvement of the railcar owned by Tallgrass Railcars. Under subsection (d), the respondent failed to explain to the board of directors that KCT’s interests were adverse to its constituents, Mr. Somervell and Mr. Mader. As such, the hearing panel concludes that the respondent violated KRPC 1.13(b) and KRPC 1.13(d).

Video of oral argument is linked here. (Mike Frisch)