Fair v. Bakhtiari: Attorney’s Breach of Fiduciary Duty in Connection with Business Transaction with Client Results in Forfeiture of Fees

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An attorney entered into business transactions with his clients, jointly creating and managing financial companies. In setting up the companies, the attorney did not disclose in writing the terms of the transactions, did not advise his clients in writing of their right to seek independent legal advice, and did not obtain his clients’ written consent to terms of the transactions. The trial court ruled that the attorney violated Rule 3-300 of the California Rules of Professional Conduct and exercised undue influence by neglecting to take the above steps when doing business with the clients. After declaring the business agreements between the attorney and clients void and unenforceable, the trial court refused to allow the attorney to seek recovery of the fees owed to him for his work completed in the business transactions.

On appeal, the attorney contended that the clients suffered no damage because his work had resulted in great success for the companies he jointly created and managed with them. The attorney also argued that he was entitled to fees for the services he provided after setting up the companies.

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