Last month, in Attorney Grievance Commission v. Kalarestaghi, the Maryland Supreme Court issued a 60-day stayed suspension with six months of probation for improperly handling a conflict of interest. Mr. Kalarestaghi represented a business (Catonsville Eye Associates, LLC) in lease negotiations with an entity (MAH Mountain, LLC) that he partially owned, after he provided legal advice to Catonsville Eye on terminating its prior lease.
By way of background, Kalarestaghi's father (one of MAH's principals) was contacted by Catonsville Eye when it was looking for new office space. As discussions continued, Kalarestaghi was introduced to Catonsville Eye as his father's lawyer. Catonsville Eye, however, could not afford two simultaneous rent payments, so it paid Kalarestaghi to review the lease and provide an opinion as to the termination date. Kalarestaghi then helped Catonsville Eye resolve its issues with its landlord.
Catonsville Eye decided to lease property from MAH. During negotiations, Kalarestaghi represented MAH. Since Kalarestaghi could not represent both Catonsville Eye and MAH in a transaction under Rule 19-301.7(a) and Comment 28 to the rule, he advised Catonsville Eye that he had a conflict. Although he disclosed a conflict under Rule 19-301.7, Kalarestaghi never advised of a Rule 19-301.8 conflict. He did not tell Catonsville Eye that he partially owned MAH.
Catonsville Eye and MAH later contested the buildout and timing of rental payments. Kalarestaghi sued Catonsville Eye for rent in the District Court of Maryland in Baltimore County. Catonsville Eye successfully moved to disqualify Kalarestaghi. Catonsville Eye won an $18,000 judgment.
In the disciplinary matter, the court found Kalarestaghi violated multiple Maryland Attorneys' Rules of Professional Conduct, including the rules that apply to communication, conflicts of interest, and declining/terminating representation. Two items that stood out most to me were Kalarestaghi's claim that he did not have an attorney-client relationship with Catonsville Eye and his failure to disclose the full nature of his relationship with MAH.
Kalarestagi contended throughout that Catonsville Eye was not his client but was, instead, “a prospective client.” However, Catonsville Eye paid him to review the lease, and its principals believed Kalarestagi was their lawyer.
The case turned on the finding of an attorney-client relationship between Catonsville Eye and Kalarestaghi. The duties he owed to Catonsville Eye and the rule violations found were based on the existence of the attorney-client relationship. The key takeaway is that business lawyers need to identify in writing the (1) client and (2) scope of representation.
Lawyers can easily avoid later misunderstandings about the lawyer's role in business matters with up-front client identification and disclosures in writing. This can be especially important in business matters because a single lawyer often represents an entity and its principals.
Also, there are many occasions when the principals may own multiple business entities. A lawyer in these circumstances should advise all principals who the lawyer represents. Then, the lawyer can (and perhaps should) advise parties who are not represented that they can obtain their own counsel.
Had Kalarestagi taken the time to clarify his role with Catonsville Eye and his relationship with MAH at the outset, he likely would have avoided his entire disciplinary matter. Indeed, Catonsville Eye would not have been confused about who its lawyer was. In turn, Kalarestagi probably would have figured out his multiple roles.
Identifying the client(s) and the various roles a lawyer might play can assist with the necessary conflicts analysis. The lawyer will know whether the analysis is conducted under Rule 19-301.7 (Conflicts of Interest- General Rule), Rule 19-301.8 (Conflict of Interest; Current Clients; Specific Rules) or -19-301.9 (Conflicts of Interest – Former Client). It also helps the lawyer analyze whether Rule 19-301.13 (Organization as Client) or other rules apply.
My final takeaway comes from the sanction entered. Before the introduction of probation, Kalarestagi may very well have received a suspension, which seems unduly harsh under the facts of this case. The commission established two aggravating factors, including a selfish motive, but Kalarestagi established four significant mitigating factors: full and free disclosure to the board, absence of prior discipline, good reputation, and imposition of other penalties.
With the new rules allowing for probation, the public was protected while Kalarestagi is deterred from future misconduct.
Craig Brodsky is a partner with Goodell, DeVries, Leech & Dann LLP in Baltimore. For over 25 years, he has represented attorneys in disciplinary cases and legal malpractice cases, and he has served as ethics counsel to numerous clients. His column in The Daily Record appears on the first Thursday of every month. He can be reached at firstname.lastname@example.org.
This article originally appeared in The Daily Record on April 5, 2023.f
Goodell DeVries defends various professionals in Maryland, the District of Columbia, and Virginia, including lawyers and law firms. Many of these cases are ethics matters involving Bar Counsel. If you have questions about the above or are a Maryland lawyer facing discipline, please contact us at EthicsHelp@gdldlaw.com.