Law Practice Essentials

You may become involved in business opportunities with your  clients. Ethical concerns arising from doing business with clients are addressed in Rule 3.4-13. Doing business with clients is not prohibited, but because you are in fiduciary relationships with clients, you can only do so if:

• the client obtains independent legal representation; or
• the client does not obtain independent legal representation:
• the transaction must be fair and reasonable to the client; and
• the client must consent to the transaction.

Remember that consent always means fully-informed consent!

Conducting business with clients, or operating a business while practicing law, can pose difficult ethical issues. If you intend to enter into these arrangements, you should ensure that you have considered how these relationships may affect your duties to clients. Remember that the Practice Advisors are available to provide confidential information on these issues.

Independent legal representation for a client means that the client has a separate lawyer acting for him or her. “Independent legal representation” is not the same as “independent legal advice.”

If the client does not have separate legal representation, then you bear the onus of proving the fairness and reasonableness of the transaction, that the client was fully informed of all material facts relative to the transaction, and that you explained the nature of any actual or potential conflict of interest.

You must also advise the client of the advantages of independent legal representation and at the very least recommend that the client obtain independent legal advice. However, even where the client waives independent legal advice, you  still must assess whether they are able to proceed. All of these matters should be confirmed in writing. The old saying “Document, Document, Document” is as important for lawyers as it is for clients!

Transactions contemplated by Rule 3.4-13 and commentary include:

• lending or borrowing money;
• buying or selling property;
• accepting a gift, including a testamentary gift;
• giving or acquiring ownership, security or other pecuniary interest in a company or other entity;
• recommending an investment; and
• entering into a common business venture.

The commentary to this Rule clarifies that the Rule is not engaged if your client is entering a transaction with a publicly traded corporation or entity in which you have an interest[MO1] .

Conflicts may also arise if a related person does business with your client. Accordingly, you must assess conflicts with respect to your own interests as well as those of related persons. Related persons are defined in commentary to Rule 3.4-13, paragraph [6], to include individuals related to you by blood, marriage, common-law partnership or adoption, as well as corporations owned or controlled directly or indirectly by you or a person you are related to.

The fact that you will earn legal fees from representing a client on a transaction is not a conflict of interest. However, if the client wants to pay their legal bill by transferring an interest in a corporation, property, investment or other enterprise, you must recommend that the client seek independent legal advice.