Court: No compensation for attorney’s legal work during relationship with Menards founder

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An appeals court has found that a lawyer can’t seek compensation for legal services she provided during her relationship with the founder of the Menards chain of home improvement stores because she broke one of the rules of professional conduct for attorneys.

John Menard Jr., founder of the Eau Claire-based Menards, and Debra Sands, a lawyer who was licensed in Minnesota, started dating in 1997. Sands moved into Menard’s home in 1998, and the two were later engaged. The relationship ended in 2006.

Sands sought more than $1 million for the thousands of hours worth of legal work she provided to Menard and his companies during their relationship. In response, Menard and his chief financial officer offered her nearly $200,000 in compensation if she signed a waiver to any other claims.

She refused and filed a lawsuit in 2008 against Menard, his companies and their trustees. Among other things, she alleged that she had been promised part-ownership in the company for work she had performed for Menard and his companies during the relationship.

Menard and his companies sought summary judgment, contending that Sands had failed to follow state rules governing the professional conduct of lawyers and therefore could not claim any part of Menard’s assets or ownership in his companies.

Under Wisconsin Supreme Court rules, when an attorney enters a business transaction with a client, the terms must be fair and reasonable to the client and must be submitted to the client in writing. The client must also be given a chance to seek independent counsel on the matter and must consent to the transaction in writing.

Both Menard and Sands agreed that Sands had not complied with any part of the rule.

Eau Claire Circuit Court Judge Paul Lenz sided with Menard in 2012, noting that Sands’ claim would not have been barred if her romantic relationship had pre-dated their attorney-client relationship and if her legal services had only been incidental to the relationship.

On appeal, Sands argued that her claim should not be barred, noting that the rules of professional conduct only apply in attorney-discipline cases and do not create a basis for civil liability.

The District 3 Court of Appeals affirmed Lenz’s decision on Tuesday and rejected Sands’ argument. The three-judge panel noted that no case law bars courts from considering the rules of professional conduct in non-disciplinary cases. It pointed to the rules’ preamble, which states that a violation of a rule can serve as evidence of a breach of a particular standard of conduct. Follow @erikastrebel