In re Spencer
2014 WL 3326448, 330 P.3d 538, 355 Or. 679 (2014)
Premium Feature
Subscribe to Lexplug to listen to the Case Podcast.
Rule of Law:
A lawyer's agreement to provide non-legal professional services to a client, such as acting as a real estate broker, constitutes a "business transaction" under RPC 1.8(a), which requires the lawyer to advise the client in writing to seek independent legal counsel and to obtain the client's informed, written consent.
Facts:
- Michael L. Spencer was a licensed attorney and also a licensed real estate broker.
- In March 2008, a client, Smith-Canfield, hired Spencer for legal advice regarding a potential bankruptcy.
- Spencer advised Smith-Canfield that she could use proceeds from an out-of-state property sale to purchase a home in Oregon to take advantage of a bankruptcy exemption.
- Spencer offered to serve as Smith-Canfield's real estate broker to find a suitable property, and she agreed.
- Spencer found a home and advised Smith-Canfield on the offer terms; she was aware he would receive a commission from the sale.
- Upon Spencer's advice, Smith-Canfield waived a professional home inspection to expedite the purchase at a low price.
- The sale closed, and Spencer received a real estate commission of approximately $5,000.
- Shortly after the purchase, the City of Klamath Falls informed Smith-Canfield that the property was in violation of the city code due to an unstable slope, requiring a costly engineered retaining wall.
Procedural Posture:
- The Oregon State Bar filed a complaint against attorney Michael L. Spencer, alleging he violated Rules of Professional Conduct 1.7(a) and 1.8(a).
- A trial panel of the Disciplinary Board, acting as the court of first instance, found that Spencer had violated both rules.
- The trial panel recommended that Spencer be suspended from the practice of law for 60 days.
- Spencer, as the petitioner, sought review of the trial panel's decision in the Supreme Court of the State of Oregon, the state's highest court.
Premium Content
Subscribe to Lexplug to view the complete brief
You're viewing a preview with Rule of Law, Facts, and Procedural Posture
Issue:
Does a lawyer who simultaneously represents a client in a bankruptcy matter and acts as the client's real estate broker for a related property purchase enter into a 'business transaction' with the client, requiring compliance with the disclosure and consent requirements of RPC 1.8(a)?
Opinions:
Majority - Per Curiam
Yes. An agreement to serve as a client's real estate broker is a business transaction subject to the disclosure and consent requirements of RPC 1.8(a). The court reasoned that RPC 1.8(a) is a prophylactic rule designed to protect clients from potential overreaching when a lawyer participates in a business transaction with them. Relying on the commentary to the ABA Model Rules, the court found that the rule applies to the sale of services related to the practice of law, such as selling title insurance, and that acting as a real estate broker is analogous. This is distinct from an ordinary fee agreement for legal services (governed by RPC 1.5). Because Spencer conceded he did not advise Smith-Canfield in writing to seek independent counsel or obtain her signed written consent, he violated RPC 1.8(a). However, the court found no violation of RPC 1.7(a), holding that the mere prospect of receiving a commission, standing alone, does not create a 'significant risk' of materially limiting the lawyer's representation.
Analysis:
This decision clarifies that when a lawyer provides dual professional services to a client, the non-legal services are considered a 'business transaction' under attorney ethics rules, triggering heightened duties of disclosure and consent. It establishes that RPC 1.8(a) applies even when the business transaction is intertwined with and intended to support the legal representation. The ruling serves as a strong warning to attorneys with multiple licenses (e.g., law and real estate, law and financial planning) that they must formally separate their roles and adhere to the strict prophylactic requirements of RPC 1.8(a) to avoid ethical violations, regardless of whether an actual conflict of interest under RPC 1.7(a) exists.
