Bankrupt Lawyer Loses Appeal to Pot Dispensary

SAN FRANCISCO (CN) - Though a medical marijuana dispensary may have been selling pot illegally, it can still seek relief from the lawyer who stole money from it, the Ninth Circuit ruled Friday.

Northbay Wellness Group had sued Michael Beyries in 2008, nearly two years after the attorney resigned, "effective immediately," and absconded with the $25,000 with which the dispensary had entrusted to him as a legal defense trust fund.

After Northbay secured a six-figure jury verdict, plus punitive damages, against Beyries, the attorney filed for bankruptcy and listed Nortbay as a creditor to his $349,430.96 debt.

Northbay and Beyries then faced off in another trial, this time in federal bankruptcy court, where a judge found that the doctrine of unclean hands precluded any judgment for Northbay because it created the $25,000 trust fund that Beyries stole using the proceeds of illegal marijuana sales.

A three-judge panel with the Ninth Circuit reversed Friday.

"Because Beyries's wrongdoing outweighs Northbay's, and because application of the unclean hands doctrine to absolve an attorney of responsibility for stealing from his client would be contrary to the public interest, we reverse," the 11-page opinion states.

Supreme Court precedent emphasizes that the doctrine of unclean hands "does not mean that courts must always permit a defendant wrongdoer to retain the profits of his wrongdoing merely because the plaintiff himself is possibly guilty of transgressing the law," Judge Michelle Friedland wrote for the court.

"The bankruptcy court failed to conduct the required balancing, instead concluding solely from the fact that Northbay had engaged in wrongful activity that the doctrine of unclean hands applied," Friedland added.

"Had the bankruptcy court weighed the parties' respective wrongdoing, it necessarily would have concluded that Beyries's wrongdoing outweighed Northbay's, both as to harm caused to each other and as to harm caused to the public."

Since Beyries was on Northbay's board of directors and partnered in its business, he was just as responsible for the dispensary's illegal sales, the court found.

"Allowing Beyries to avoid through bankruptcy his responsibility for misappropriating his client's money would undermine the public interest in holding attorneys to high ethical standards," Friedland wrote.

Recognizing the "critical importance of enforcing lawyers' obligations to their clients," Friedland held that "the doctrine of unclean hands cannot prevent recovery of funds stolen from a client by his or her lawyer."

Neither side could be reached for comment on Friday.

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