Court Opinion: Colorado Presiding Disciplinary Judge Opinion for May 15

Editor’s Note: Law Week Colorado edits court opinion summaries for style and, when necessary, length.

People v. Steven Bush

According to the Colorado Presiding Disciplinary Judge opinion, in 2017 Steven Bush was hired by Individual 1, who wanted to incorporate a company and purchase the assets of his current employer. After the company was incorporated, Bush began jointly representing Individual 1 and the company.

Individual 1 planned to fund the asset purchase with a loan backed by the Small Business Administration, seller financing and $250,000 in cash from Individual 2, who Bush introduced to Individual 1. Individuals 1 and 2 negotiated general terms of their agreement without Bush being involved.

In January 2018, after reviewing Ethics Opinion No. 68, Bush agreed to represent jointly both individuals, along with the company, with respect to a stockholders agreement. In a letter Bush noted Individual 2 would lend the company about $250,000, evidenced by a promissory note with terms to be negotiated. 

One day before the asset purchase transaction was set to close, Individual 1 sent Bush an email chain where Individual 1 noted the split would be  “51 [Individual 1] 49 [Individual 2],” and asked Bush to review and stated: “I think we should be equal let’s set up a time to talk.”

Bush doesn’t remember seeing the email and the transaction closed with funds which included Individual 2’s contribution of $250,100.

Later, Bush realized the two individuals hadn’t agreed to ownership terms, but Bush concluded he could continue representing the company exclusively with respect to a shareholders’ agreement, and encouraged the individuals to work with independent counsel to represent only their interests. 

At Bush’s request, Individual 1 accepted those terms, but Individual 2 didn’t. Bush continued acting as the company’s counsel in negotiating stockholders’ agreement, during which he proposed terms and rejected, on the company’s behalf, Individual 2’s proposed terms.

During negotiations, the company hadn’t yet issued stock or empaneled a board of directors. As corporate organizer, Individual 1 still exclusively spoke for the company until October 2018, when he empaneled a board of directors. The board found no ownership agreement existed, concluded Individual 2’s contribution of $250,000 was a loan and issued all the company’s outstanding shares to Individual 1.

The company and the two individuals ended up in litigation. Individual 2 sued Bush, who lost on a breach of fiduciary duty claim and was ordered to pay damages of $682,100, but the judgment is stayed pending review of Bush’s post-trial motions.

The Presiding Disciplinary Judge approved the parties’ stipulation to discipline and publicly censure Bush, effective May 15. 

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