Mixing business and clients
When a fortuitous business opportunity presents itself, it is only natural to want to seize it. Whether it be a business transaction, a barter agreement, or even a gift, an attorney must be mindful of the potential conflict of interest that may rise. The confidences revealed in the course of representation combined with the attorney’s legal training create the possibility for that attorney’s judgement to be clouded by the potential for financial profit.
An attorney must not enter into a business transaction with a client or knowingly acquire any financial interest adverse to a client unless the terms of such transaction are reasonable and fair and are fully disclosed and conveyed in writing in a way that can be reasonably understood by the client. Further, the client must be advised in writing and given the chance to seek the advice of independent counsel. Lastly, the client must give informed consent in writing that explains the essential terms of the transaction as well as the attorney’s role in the transaction.
What about a business opportunity that is the client’s case? Well, an attorney cannot acquire a proprietary interest in the client’s case except when the attorney has a contract with a client for a reasonable contingent fee in a civil case or when the attorney acquires a lien authorized by law to secure the attorney’s fees or expenses.
Sometimes, a client’s case can generate an opportunity for a lucrative business transaction. For example, when representing a famous person, an attorney has a front row seat to a real-life story that can become an interesting movie or TV show such as the O.J. Simpson trial. Of course, the rules dictate that the attorney can only reveal information about the client’s case with the client’s consent. However, when it comes to an agreement giving the attorney literary or media rights to the portrayal based in substantial part on information relating to the representation of the client, the rules are even stricter. No such agreement is allowed prior to the conclusion of the representation of the client. This restriction is imposed to protect the client’s confidences while the client is in an ongoing litigation. In high-profile cases, the attorney is likely paid well already and earns a lot of free publicity when appearing before the media. Ultimately, it remains critical that the attorney’s duties to the client not be compromised by the attorney’s desire to benefit financially from revealing the client’s secrets.
Occasionally, a client may wish to compensate an attorney beyond the agreed upon price. However, an attorney cannot solicit any substantial gift from a client or prepare on behalf of a client a document giving the attorney or someone related to the attorney any substantial gift unless the beneficiary of the gift is related to the client. This prohibition exists to prevent the attorney from manipulating the situation in order to obtain such gift. It is acceptable to express gratitude with a small token of appreciation.
Moreover, an attorney cannot provide a client with financial assistance in connection with pending or prospective litigation, except for the advancement of the court costs and expenses of litigation and for paying costs and expenses for an indigent client. The concern is that lending money to the client would compromise the attorney’s fiduciary role by giving the attorney too high of a financial interest in the outcome of the case and allow the attorney to assume the controlling position in the decision-making process.
In summation, it is probably best practice in an attorney-client relationship to avoid business opportunities outside the scope of the standard attorney-client engagement.
Natalia Vander Laan is a Minden attorney practicing estate planning, family law, and workers’ compensation.