Nebraska Attorney Disbarred for Deal With Clients

A Nebraska attorney who bought a half section of farmland from clients and then leased it to them was disbarred by the state’s highest court, which found she acted contrary to the clients’ interests and dishonestly.

“This case provides a textbook example of the ethical mine-field that is laid when an attorney enters into a business transaction with clients whose interests are adverse, without providing the full disclosure required by the ethical rules,” the Nov. 22 opinion from the Supreme Court of Nebraska said.

Janet L. Krotter Chvala provided legal services to Wayne and Kurt Kaup for their farming-related businesses. In 2003, Chvala and her husband purchased half a section of farmland from the Kaup brothers, who were seeking financing for the land. As part of the financial transaction, Chvala would then lease the half section back to them with an option to purchase it at the end of the lease term for $497,637.

When Chvala refused to allow the Kaups the exercise their purchase option for the land, which had quadrupled in value almost 10 years later, they filed a grievance against her with the state disciplinary counsel. The assigned referee concluded Chvala should be disbarred.

On review, the state supreme court called it “some-what astonishing” that Chvala denied she had an attorney-client relationship with the brothers for the deal.

There was an implied relationship even if Chvala told the brothers she wouldn’t represent them, the court said.

She prepared all of the legal documents for the transactions and even provided legal advice and assistance “without a specific request,” it said.

And because Chvala and her husband were the lessors and the brothers the lessees and she represented both parties, Chvala’s interests directly conflicted with the brothers’ interests, the court said.

This required full disclosure from Chvala, advising the brothers that there was a conflict of interest and how it could affect them, which she didn’t do, it said.

But “most egregious of all,” Chvala used the information acquired during her representation to disadvantage the Kaups, the court said.

She knew that ownership of the remaining half section of land she owned was integral to the success of their business model, it said.

She also knew the brothers would likely rather pay a premium for it than risk losing their investment, so “she used this information to secure a personal financial benefit for herself,” it said.

The court disbarred Chvala despite mitigating factors. Those included respect for her skills as an attorney and community leader because she used them to take advantage of her clients’ trust for her personal gain, it said. She also showed no remorse, the court noted.

The case is State ex rel. Counsel for Discipline of the Neb. Supreme Court v. Chvala, 2019 BL 451010, Neb., No. S-17-773, 11/22/19.