Ames v. State Bar of Cal. - 8 Cal. 3d 910, 106 Cal. Rptr. 489, 506 P.2d 625 (1973)

Rule:

Within the context of Cal. Rules Prof'l Conduct R. 4, an attorney must avoid circumstances where it is reasonably foreseeable that his acquisition may be detrimental or adverse to the interests of his client.

Facts:

While representing holders of a junior encumbrance on realty involved in litigation, petitioner attorneys, pursuant to agreements with the clients, purchased the senior encumbrance and note for the apparent purpose of affording the clients more time to raise funds to protect the clients' interest against a threatened foreclosure of the senior encumbrance. The agreements entitled the clients to purchase the note and senior encumbrance from the petitioners within a reasonable time. However, the clients were unable to raise the necessary funds, and, in a sale under the senior encumbrance, the petitioners purchased the realty. The local committee recommended that petitioners be subjected to a private reprimand. The state bar's disciplinary board (board) concluded that petitioners violated Rule 4 of the Rules of Professional Conduct and resolved that each petitioner be privately reproved. Petitioners appealed based on the following grounds: (i) that the findings of fact did not support the conclusion that they violated the rule; (ii) that rule 4 violated the due process and equal protection clauses of the United States Constitution; and (iii) that the discipline imposed by the Board was improper.

Issue:

Did the Board impose the proper discipline under the circumstances? 

Answer:

Yes.

Conclusion:

The Supreme Court held that private reproval was the proper discipline under the circumstances. The Court upheld Rules of Professional Conduct, rule 4, against attacks based on due process and equal protection grounds, and refused to accept the contention that actual injury to the client is an element of violation of the rule. Furthermore, the Court declared that it would be inconsistent with the purposes of the rules to hold that the client's consent or fairness of the attorney-client transaction would render rule 4 inoperative. Accordingly, the Court found that the attorneys had violated the rule, but agreed that private reproval was sufficient discipline in the light of the fact that they had acted purportedly with the clients' consent, and with no intent to deceive, defraud, or otherwise oppress the clients.