Monday, July 24, 2006

Young Outfoxes Liggett In Construction Dispute

The Indiana Court of Appeals releases an opinion today involving a construction dispute between two former legislators, Rep. Dean Young (R-Hartford City) and Rep. Ron Liggett (D-Red Key), with the court ruling in favor of Young. The case does, however, raise some serious issues pertaining to Young's ethical conduct as an attorney.

Liggett owns a construction company and used Young as personal attorney for his business. Young entered into a contract with Liggett to build a home for him for $230,000. Young drafted the contract after Liggett had already broken ground and had begun contruction on the home. He inartfully revised the form contract the parties' signed to make it appear that changes in the original contract could be made by oral agreement of the parties. He did not, however, explain to Liggett that another provision of the contract required that all change orders be in writing and signed by both parties. Liggett claims that Young made an additional $30,000 in material upgrades after he began construction, which increased labor charges by $35,000, both above the orginal contract price of $230,000.

Young paid Liggett the full original contract price amount, but he refused to pay him any more because Liggett had failed to execute signed, written change orders with him. Assuming Liggett's claims are true, he wound up building Young's home at a considerable loss to his construction company. Without the additonal funds, Liggett was unable to pay one of the material suppliers, resulting in a lawsuit against his construction company. Liggett filed a third-party complaint against Young seeking recovery, but the trial court granted Young summary judgment based upon the requirement that change orders be in writing and signed by both parties. Liggett had also claimed that the contract should be void as a matter of law because Young had violated Rule 1.8 of the Indiana Rules of Professional Conduct prohibiting certain transactions between lawyer and client. The court found that Young hadn't violated Rule 1.8 because the rule does not apply to "standard commercial transactions between the lawyer and the client."

The Court of Appeals affirmed the trial court's ruling on both its interpretation of the contract and Young's compliance with Rule 1.8. Judge Sullivan concurred with the court's affirmation of the lower court's ruling on the interpretation of the contract, but he dissented from the court' s ruling with respect to Rule 1.8. Judge Sullivan writes:


In my view, there is a large question as to whether Dean’s drafting of the construction contract and the manner in which is was phrased violated Professional Conduct Rule 1.8(a).

To be sure and without question, Dean, as Liggett’s attorney, entered into a "business transaction" with Liggett. The contract formalizing that transaction was not transmitted "in a manner that [could] be reasonably understood by [Liggett]." It is certainly reasonable that Liggett could construe the contract to authorize additional changes by consultation, and notwithstanding Paragraph 8 of the contract, such changes would be valid and enforceable without a specific writing for a specific change. Even if otherwise, Dean, as the attorney and the person in a superior position, was required to advise of the "in writing" provision of Paragraph 8 as controlling over the "consultation" language of Paragraph 12(b).

Procedural niceties aside, basic fairness, as well as Professional Conduct Rule 1.8(a), dictate that the Youngs not benefit, as a matter of law, from the contract as interpreted by the trial court and by the majority opinion here. Conversely, Liggett should not be denied, as a matter of law, fair and equitable compensation for the labor and materials which were provided to enhance the value of the residence constructed.

I have to agree with Judge Sullivan's dissent. The appearance of Young's over-reaching influence in his dealings with Liggett is quite disturbing. Young and Liggett had a very cordial relationship as former legislators in the Indiana General Assembly, and Liggett obviously placed a lot of trust in Young as his personal attorney, notwithstanding the fact that they were members of opposite parties. Young appears to have taken advantage of that relationship to the detriment of a friend, colleague and client. I think it unfortunate that the majority treated Rule 1.8 so lightly when applied to the facts of this case.

You can read the full text of the case by clicking here. Hat tip to the Indiana Law Blog for catching this one. As a side note, Mark GiaQuinta represented Liggett in his appeal. He is the son of retiring Rep. Ben GiaQuinta (D) and is a former Ft. Wayne city council member. His brother Phil is running this year to replace his father in the House. Liggett is also seeking to regain the seat he lost two years ago.

2 comments:

Anonymous said...

That was nice
Pleasure or pain
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Mark E. GiaQuinta said...

Happened upon this article. Nice job on the facts and the analysis. As you probably know, the Supreme Court accepts very few cases for review. This was one of them.

We argued before the Supreme Court on Thursday, May 3, 2007. You can watch the video. Justice Sullivan asked Mr. Young (now judge Young)to comment on Judge Sullivan's (no relation to Justice Sullivan) dissent. We should get a decision sometime within the next 6 months. Most of the focus was on Rule 1.8.

Only one point of constructive criticism. The Court of Appeals did not accept the trial court's "standard commercial transaction" exception. Instead, the Court of Appeals said that it was Ligget's burden to show whether Young was excused for dealing with a client by properly advising the client to get independent counsel. We think the burden should be on the attorny, not the client. Thanks for your analysis.