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Nebraska ex rel. Counsel for Discipline of the Nebraska Supreme Court v. Orr

Nebraska Supreme Court
759 N.W.2d 702 (2009)


Facts

Steve Sickler and Cathy Mettenbrink owned a coffee shop called Barista’s Daily Grind (Barista’s) in Nebraska and wanted to begin franchising their business. They consulted Jeffrey Orr (defendant), a general practice attorney who had limited experience in franchising. Orr had previously reviewed franchise agreements for franchisees but had never represented a franchisor or drafted a franchise agreement. With minimal preparation or effort to acquire expertise in the area, Orr drafted a franchise agreement as well as a disclosure statement that he believed was sufficient to meet Federal Trade Commission (FTC) requirements. Between 2003 and 2006, Barista’s sold 21 franchises in multiple states. In 2004, Orr revised the franchise agreement and disclosure statement in response to problems Barista’s was having with a franchisee in Iowa. Later that year, Barista’s sued a Colorado franchisee to terminate the franchise, and that franchisee countersued Barista’s, alleging unfair trade practices and FTC rules violations. The Iowa franchisee also alleged that Barista’s had failed to comply with federal and state laws. Sickler informed Orr of these allegations. Orr prepared a third version of the disclosure statement and told Sickler that the statement was now compliant with every state. The Iowa franchisee filed suit and obtained personal judgments against Sickler and Mettenbrink. Barista’s sold more franchises using the third disclosure statement but came under FTC investigation. An attorney who specialized in franchise law reviewed this third disclosure statement and found that it contained major deficiencies and did not comply with FTC rules. By 2006, all of Barista’s franchise activities had been shut down. Charges of violations of professional conduct were filed against Orr in 2007. A court-appointed referee found that Orr had violated two sections of the Nebraska Rules of Professional Conduct, including the rule that required attorneys to provide competent representation to clients. The referee found that Orr had negligently determined that he was competent in the area of law and that he did not knowingly engage in the practice of law without competence. The referee recommended a public reprimand as punishment for Orr. The Counsel for Discipline for the Nebraska Supreme Court (plaintiff) brought the action for sanctions to be imposed.

Rule of Law

Issue

Holding and Reasoning (Per curiam)

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