2023 ABA LPL Edward C. Mendrzycki Scholarly Writing Competition—Hypothetical
Sponsored by:
ABA Standing Committee on Lawyers' Professional Liability
and Long & Levit, LLP
You are a seasoned business lawyer in the renowned law firm of Landem & Fast (the “Firm”). Your Firm maintains a preeminent reputation in real estate law and land acquisitions and is located in Big City, State of Winterkill.
To achieve social distancing during the course of the Covid-19 pandemic, your Firm’s executive committee decided to close its business office in Big City and require the Firm’s lawyers to work remotely. During the Firm’s office closure, each lawyer was tasked with the responsibility to establish a secure location that allowed each lawyer to work effectively and efficiently while remaining vigilant of client obligations and cognizant of their ethical responsibilities. One of the Firm’s lawyers, Arnold Woods, is a very successful Firm partner having graduated at the top of his class from Winterkill School of Law. Mr. Woods is licensed to practice law only in Winterkill, but due to the spectacular weather, he chose to work remotely from his winter home located in Littletown, State of Sunshine.
To ensure his clients and prospective clients were informed of his new remote location in Littletown, Mr. Woods ordered new letterhead and business cards showing his winter home address as his new business office address. The Firm also updated its website to show Mr. Woods’ new address in Littletown. Upon arriving in Littletown, Mr. Woods obtained high-speed internet service from a local service provider that allowed him to access the Firm’s network and information systems. Unfortunately, due to distance, the Firm’s Director of Information Technology was unable to assist Mr. Woods in setting up his home office. As a result, Mr. Woods unknowingly ended up with unsecured internet service.
Shortly after arriving in Littletown, a Russian oligarch (the “Client”) emailed Mr. Woods seeking legal representation with a series of land acquisitions in the State of Sunshine. The Client informed Mr. Woods that because of the Client’s wealth and reputation, the Client wished to avoid notoriety while taking advantage of the favorable tax laws in Winterkill. The Client insisted that Mr. Woods could not disclose the Client’s name to any party involved in the land transactions. Therefore, the Client requested that Mr. Woods organize separate LLCs in Winterkill for each land acquisition. The Client would wire funds from his Russian bank account to a trust account periodically to cover the purchase price for each land transaction. The Firm maintained its client trust account at a local bank in Big City, Winterkill. Mr. Woods agreed to undertake representation and, to accommodate the Client’s wiring of funds, Mr. Woods established a separate client trust account at a local bank in Littletown, Sunshine.
Upon undertaking representation, Mr. Woods organized four separate LLCs domiciled in Winterkill. He then arranged a series of virtual Zoom meetings from his Littletown home with each land seller during which he was able to negotiate the proposed purchase price and all other material terms and conditions for each land transaction. Throughout the course of the Zoom meetings, Mr. Woods’ housekeeper in Littletown overheard all of the discussions surrounding the transactions and realized that these transactions involved high density development of her favorite recreational area on the outskirts of Littletown.
Several days following the Zoom meetings, Mr. Woods was dying to get out of his house, so he grabbed his laptop and went to a local coffee shop in Littletown to work further on the transactions. Mr. Woods had no idea that the coffee shop maintained an unsecured and open wi-fi network.
While at the coffee shop, he drafted Buy-Sell Agreements for each transaction. He then emailed each respective Buy-Sell Agreement to each respective land seller requesting that they review and approve each Buy-Sell Agreement. Mr. Woods forgot to send the Buy-Sell Agreement to the local attorneys in Littletown whom Mr. Woods was informed was representing the land sellers. Mr. Woods was not concerned of his forgetfulness because he believed each of the local sellers would deliver the Buy-Sell Agreements to their own attorneys if they felt it was appropriate to do so. Mr. Woods also reasoned that his client may benefit in the negotiations if the land sellers did not seek further legal advice from their attorneys.
While at the coffee house, an unscrupulous real estate agent could see Mr. Woods’ computer screen and observed that Mr. Woods was working on real estate transaction documents. The real estate agent immediately jumped onto the coffee shop’s open wi-fi network and was successfully able to “hack” each of the emails and attached documents that Mr. Woods had sent to each land seller.
Armed with information about each transaction, the real estate agent contacted each land seller and offered each land seller more money for the land than Mr. Woods had negotiated for his client. Ultimately, a bidding war ensued between the Client and the real estate agent for each tract of land. Meanwhile, Mr. Woods’ housekeeper strongly opposed the proposed high-density development by a Russian oligarch and contacted the Littletown Gazette newspaper to inform them of this highly controversial information in hopes of raising community opposition to the development. A few days later the Littletown Gazette dropped the big story revealing the high-density development by a Russian oligarch. Despite the local news story and despite the intense bidding war with the real estate agent, the Client eventually prevailed at some cost. The Client paid substantially more for each tract of land as a direct result of the bidding war and the local news story destroyed his anonymity.
Mr. Woods received the Client funds via wire transfer into the client trust account he established at the local bank in Littletown. Mr. Woods successfully conducted each closing electronically and hired a “local” runner to record the Deed and other appropriate real estate transaction documents with the local clerk and recorder’s office in Littletown.
Pleased with his own performance, Mr. Woods immediately presented the Client with his billing statement for legal services rendered. The billing statement included charges for all out-of-pocket expenses Mr. Woods incurred through the transaction and in recording the documents. Upon learning of the Littletown Gazette newspaper story, the Client was furious and refused to pay any portion of the billing statement for legal services, and asserted he intended to file a grievance.
Months following the closing of the real estate transactions, your Firm is contacted by the Department of Justice to assist in the investigation of potential money laundering allegations against the Client. Your Firm’s executive committee is naturally concerned and has requested that you investigate and prepare a memo discussing all ethical and any malpractice issues raised by these facts and circumstances. Both the State of Winterkill and the State of Sunshine have adopted the ABA Model Rules of Professional Conduct.
Please prepare the memorandum.