## Facts

- John C. Wagner, an Iowa attorney admitted in 1979, represented Carl Oehl, the seller of a restaurant property, in efforts to sell the business.
- Oehl agreed to pay Wagner a contingent fee equal to 10% of the sale price if Wagner found a buyer and represented Oehl in the sale, giving Wagner a personal financial stake in closing the deal and in the price.
- Prospective buyer David Childers asked Wagner to represent him in purchasing the restaurant.
- Wagner told Childers he represented Oehl, warned that conflicts might exist, suggested Childers consider independent counsel, and stated Wagner could not participate in price negotiations; Wagner nonetheless undertook representation of Childers in the transaction.
- Wagner did not disclose to Childers the 10% contingent fee arrangement or otherwise explain the concrete nature and implications of the conflicts beyond general warnings.
- Childers completed the purchase but later defaulted and sustained losses exceeding $200,000; he later retained different counsel.
- Wagner continued to assist Oehl with subsequent efforts to resell the restaurant; after another buyer defaulted, Wagner ultimately purchased the restaurant himself.
- Childers sued Wagner and settled; the Iowa Supreme Court Board of Professional Ethics and Conduct then filed disciplinary charges based on the dual representation and nondisclosure of Wagner’s personal financial interest.
- A Grievance Commission found the violations proved and recommended an indefinite suspension with no possibility of reinstatement for three months.

## Issues

1. Whether representing both buyer and seller in the same commercial transaction, while holding an undisclosed contingent financial interest in the sale, violated Iowa conflict-of-interest and client-transaction disciplinary rules (including DR 5-101(A), DR 5-104(A), and DR 5-105(C)/(D)).
2. Whether Wagner’s warnings about potential conflicts and suggestion of separate counsel constituted the “full disclosure” necessary for informed consent in dual representation and lawyer self-interest situations.
3. What sanction was appropriate to protect the public and the profession given the proved violations.

## Decision

- The Iowa Supreme Court reviewed the record de novo and agreed the Board proved misconduct by a convincing preponderance of the evidence.
- The Court held Wagner violated multiple disciplinary rules by representing clients with differing interests without adequate disclosure and by failing to disclose and obtain informed consent regarding his personal financial interest in the transaction.
- The Court adopted the Grievance Commission’s recommended sanction and suspended Wagner’s license indefinitely with no possibility of reinstatement for three months from the date of the opinion.

## Legal Principles

- In lawyer disciplinary proceedings, the Board must prove misconduct by a convincing preponderance of the evidence, a standard higher than ordinary civil proof but lower than criminal proof.
- When a lawyer represents clients with differing interests, or the lawyer’s own interests conflict with a client’s, the burden shifts to the lawyer to prove the transaction and representation were fair and equitable.
- In conflict and self-interest matters, the lawyer must use active diligence to ensure the client is fully informed of the nature and effect of the transaction, the client’s rights and interests, and the concrete risks posed by divided loyalties.
- General statements that conflicts “might” exist are insufficient where material facts exist; the lawyer must disclose material financial interests (such as a contingent fee tied to the deal) so the client can make an informed decision about consent and independent counsel.
- Attorney discipline serves to protect the public, maintain confidence in the legal profession, and deter similar misconduct, not to punish the attorney.

## Conclusion

The court imposed a three-month suspension because Wagner’s dual representation of buyer and seller, combined with his undisclosed contingent interest in the sale price, prevented informed consent and breached the heightened disclosure and fairness duties required when a lawyer’s loyalties are divided.


Iowa Supreme Court Bd. of Prof’l Ethics & Conduct v. Wagner, 599 N.W.2d 721 (Iowa 1999)