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Beery v. State Bar

43 Cal. 3d 802 (1987)

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Beery v. State Bar

California Supreme Court

43 Cal. 3d 802 (1987)

Facts

Attorney Michael Beery concealed material facts, inducing client Richard Coss to invest in a risky business venture. Originally Beery incorporated a painting company for Coss. After a car accident left Coss paralyzed, Coss retained Beery and two associates to sue and obtained about $150,000 in settlement. Coss lacked financial sophistication, had a wife and children to support, trusted Beery, and asked him for investment advice and about a will. Beery mentioned he was involved in a venture called Satellite. Beery met with Coss, said Coss could buy into Satellite for $35,000 and that it was a good investment, and offered a personal guarantee. Beery also discussed wills, but Coss did not specifically ask Beery to prepare one, and Beery never billed him for the meeting. Beery never mentioned he was a principal in Satellite or that it desperately needed $35,000. The principals had invested just $5,000 and obtained only one contract to install equipment in a hotel. To buy equipment, Satellite borrowed $250,000 from a commercial lender. When the equipment did not work properly, the company needed between $30,000 and $35,000 to make it work. Knowing no professional lender would advance the funds, Beery met again with Coss and presented a note for $35,000 signed by another Satellite principal. After Coss reminded Beery about the personal guarantee, Beery wrote one on the note, and Coss wrote a check for $35,000. Beery never advised Coss to discuss the investment with another attorney or investment advisor. The equipment never worked properly, and Coss lost his investment. The California State Bar disciplinary hearing panel found Beery violated the ethics rules and recommended five years’ probation, with actual suspension for three or until Beery repaid Coss. The review department agreed, and Beery appealed, arguing Coss was not a client, Beery had not willfully violated any ethics rules, and the recommended discipline was excessive.

Rule of Law

Issue

Holding and Reasoning (Per curiam)

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