This episode of Remotely Ethical is the second installment of a three-part series on doing business with clients.
In Part 2, below, we discuss how certain alternative fee arrangements, such as taking equity in exchange for legal services, may constitute business transactions with clients.
In this episode we address:
- How certain alternate fee arrangements, such as taking stock in a client’s business or accepting crypto-currency for fees may – in some instances – constitute a business transaction with a client;
- New York City Bar Ethics Opinions 2000-3, which discusses the ethical considerations that apply when a lawyer exchanges legal services for stock in a client’s business;
- New York City Bar Ethics Opinion 2019-5, which discusses accepting cryptocurrency and other non-monetary property in exchange for legal services;
- Complying with Rule 1.8(a) when entering into a business transaction with a client, including ensuring that:
- the transaction is "fair and reasonable" to the client;
- the terms of the transaction are fully disclosed and transmitted in writing in a manner that can be reasonably understood by the client;
- the client is advised in writing of the desirability of seeking, and be given a reasonable opportunity to seek, the advice of independent legal counsel on the transaction; and
- the client gives written "informed consent" to the essential terms of the transaction and the lawyer’s role in the transaction, including whether the lawyer is representing the client in the transaction.
- Litigators should be aware that there is a special rule for them, if they are considering taking equity or another ownership interest in exchange for fees. Rule 1.8(i) prohibits attorneys from taking an ownership interest in a cause of action or the subject matter of the litigation.
Watch more episodes of Remotely Ethical on our YouTube channel.
For more information about attorney ethics and professional responsibility, please subscribe to our blog.
I think in any situation where a client is offering you equity in exchange for legal fees, they probably are expecting you to still exercise some judgment [on the client's behalf], even in just that transaction that you're having with them to take that equity.