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LOCATION: 555 Capitol Mall, Suite 1230, Sacramento, CA 95814
PHONE: (916) 996-0400 | FAX: (916) 668-5760

Following is the third in a series of posts from Parker Taylor Law Group about recent changes to California Bar Association’s Rules of Professional Conduct (RPC), under the category of “Lawyer-Client Relationship,” focusing on “business transactions with a client and pecuniary interests adverse to the client.” The Rule of Professional Conduct, as revised, is as follows:

Rule 1.8.1 Business Transactions with a Client and Pecuniary Interests Adverse to a Client

A lawyer shall not enter into a business transaction with a client, or knowingly acquire an ownership, possessory, security or other pecuniary interest adverse to a client, unless each of the following requirements has been satisfied:

(a) the transaction or acquisition and its terms are fair and reasonable to the client and the terms and the lawyer’s role in the transaction or acquisition are fully disclosed and transmitted in writing to the client in a manner that should reasonably have been understood by the client;

(b) the client either is represented in the transaction or acquisition by an independent lawyer of the client’s choice or the client is advised in writing to seek the advice of an independent lawyer of the client’s choice and is given a reasonable opportunity to seek that advice; and

(c) the client thereafter provides informed written consent to the terms of the transaction or acquisition, and to the lawyer’s role in it.

The differences between CBA’s former rule (Rule 3-300) and the current one (Rule 1.8.1) – as set forth above – are slight, but Section (b) does add something to the previous wording. Now, instead of only requiring that clients be “advised in writing” that they can seek advice from an independent lawyer of their choosing … and given a reasonable opportunity to seek that advice, the rule now mentions an alternative to clients being notified in writing. That alternative is for the client to be represented during the transaction or acquisition by an independent lawyer they have chosen. Section (c) of the new rule adds an important phrase. Now, not only must a client consent to the terms of a transaction or acquisition in writing, he or she must also consent (in writing) to the role the independent attorney played in the matter.

The American Bar Association (ABA) addresses this topic in RPC Rule 1.8(a)((3). The ABA includes a phrase found in neither of CBA’s versions of the rule. The ABA says the written consent must include “whether the lawyer is representing the client in the transaction.”

Potential Benefit: Generally speaking, this rule provides a client with even more assurance their interests are being adequately protected during a transaction involving their attorney, through the advice of an “independent” attorney.

The information provided herein is informational only and should not be construed as legal advice or as an agreement for representation. This is not an advertisement. If you have an issue or dispute with your attorney, or are seeking advice with respect to your obligations, you should consult with an experienced attorney. Parker Taylor Law Group is a full-service litigation and transactional law firm. Mr. Parker has represented clients in professional malfeasance disputes for over 22 years. If you would like to schedule an initial consultation with Mr. Parker or his team, you can reach them at 916/996-0400 or at contact@parlawgroup.com. (An email to the law firm requesting a consultation does not create an attorney-client relationship or any agreement for representation by the firm.)

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