A formal complaint was filed against Phelps on November 8, 1977, by the Kansas State Board of Law Examiners for his conduct during a lawsuit against a court reporter named Carolene Brady. Brady had failed to have a court transcript ready for Phelps on the day he asked for it; though it did not affect the outcome of the case for which Phelps had requested the transcript, Phelps still requested $22,000 in damages from her. In the ensuing trial, Phelps called Brady to the stand, declared her a hostile witness, and then cross-examined her for nearly a week, during which he accused her of being a "slut", tried to introduce testimony from former boyfriends whom Phelps wanted to subpoena, and accused her of a variety of perverse sexual acts, ultimately reducing her to tears on the stand. Phelps lost the case; according to the Kansas Supreme Court:
The trial became an exhibition of a personal vendetta by Phelps against Carolene Brady. His examination was replete with repetition, badgering, innuendo, belligerence, irrelevant and immaterial matter, evidencing only a desire to hurt and destroy the defendant. The jury verdict didn't stop the onslaught of Phelps. He was not satisfied with the hurt, pain, and damage he had visited on Carolene Brady.
In an appeal, Phelps prepared affidavits swearing to the court that he had eight witnesses whose testimony would convince the court to rule in his favor. Brady, in turn, obtained sworn, signed affidavits from the eight people in question, all of whom said that Phelps had never contacted them and that they had no reason to testify against Brady. Phelps was found to have made "false statements in violation of DR 7–102(A)(5)".
On July 20, 1979, Phelps was permanently disbarred from practicing law in the state of Kansas, though he continued to practice in Federal courts.
In 1985, nine Federal judges filed a disciplinary complaint against Phelps and five of his children, alleging false accusations against the judges. In 1989, the complaint was settled; Phelps agreed to stop practicing law in Federal court permanently, and two of his children were suspended for periods of six months, and one year, respectively.