If a New Hampshire lawyer agrees to be paid in a client's goods or services instead of cash, what does Rule 1.8 require?

Plain-English summary

The opinion addresses bartering: a lawyer agreeing at the outset of representation to take the client's goods or services, rather than cash, as the fee. It concludes that a barter agreement is a business transaction with the client governed by Rule 1.8, not an ordinary fee agreement under Rule 1.5.

The opinion walks through the ABA comment's three categories of transactions: Rule 1.8 does not apply to ordinary fee agreements; it does apply when the lawyer accepts a client's nonmonetary property as payment of a fee; and it does not apply to "standard commercial transactions" for products or services the client generally markets to others, where the lawyer has no special advantage. A barter for legal fees falls into the second category. The opinion notes the Restatement's narrower view that the standard-commercial-transaction exception applies only when the lawyer is not also rendering legal services, so a barter tied to the representation does not qualify for the exception.

As a result, the lawyer must satisfy Rule 1.8(a): the terms must be fair and reasonable and fully disclosed in writing, the client must be advised in writing of the desirability of seeking independent counsel and given a reasonable opportunity to do so, and the client must give informed consent in a signed writing. The opinion adds a caution that, even with strict Rule 1.8(a) compliance, transactions between lawyers and clients likely remain voidable under New Hampshire law, with the client able to rescind or recover damages, and courts tending to order the remedy most economically beneficial to the client.

In practice

The opinion holds that, under the New Hampshire Rules as they stood when it issued, a lawyer who takes a client's goods or services as payment must meet all of Rule 1.8(a)'s requirements, including the written advice to seek independent counsel and the client's signed informed consent. It treats the standard-commercial-transaction exception as unavailable where the barter is tied to the lawyer's rendering of legal services, and warns that compliance with Rule 1.8(a) does not necessarily make the transaction immune from being voided by the client under New Hampshire law.

Common questions

Q: Is a barter for legal fees treated like an ordinary fee agreement?

A: No. The opinion concludes that taking a client's goods or services as payment is a business transaction governed by Rule 1.8, not an ordinary fee agreement under Rule 1.5.

Q: What must the lawyer do before bartering with a client?

A: The opinion requires compliance with Rule 1.8(a): fair, fully written terms; written advice to seek independent counsel with a reasonable opportunity to do so; and the client's informed consent in a signed writing.

Q: Does the "standard commercial transaction" exception apply to barter?

A: Generally no. The opinion explains that under the Restatement the exception applies only when the lawyer is not also rendering legal services, so a barter connected to the representation does not qualify.

Q: If the lawyer follows Rule 1.8(a), is the deal safe from challenge?

A: Not necessarily. The opinion cautions that transactions between lawyers and clients likely remain voidable under New Hampshire law, and the client may rescind or recover damages even after Rule 1.8(a) compliance.

Background and rules framework

The opinion interprets New Hampshire Rule 1.8(a) (business transactions with a client) and distinguishes it from Rule 1.5 (ordinary fee agreements). It relies on the ABA comment to Model Rule 1.8(a) dividing transactions into ordinary fees, transactions taking nonmonetary property as a fee, and standard commercial transactions, and on the Restatement's narrower reading of the standard-commercial-transaction exception, together with New Hampshire law on the voidability of lawyer-client transactions.

Citations and references

Rules of Professional Conduct:

• MR 1.8 / NH Rule 1.8(a) (business transactions with a client)
• MR 1.5 / NH Rule 1.5 (fees)

Other references:

• ABA Comment 1 to Model Rule 1.8(a) (three categories of transactions)
• Restatement (Third) of the Law Governing Lawyers (standard-commercial-transaction exception)

See also

• Alabama Bar Op. 2001-01: Bartering Legal Services for Other Professionals' Services
• ABA Formal Op. 02-427: Security Interest Obtained to Secure a Fee
• Arizona Bar Op. 99-09: Business Transactions With a Client

Source

• Landing page: https://www.nhbar.org/ethics/opinion-2017-18-01
• Original PDF: https://nhba.s3.amazonaws.com/wp-content/uploads/2019/12/14142320/2017-18-1-REFORMATTED-Providing-Legal-Services-in-Exchange-for-a-Client%E2%80%99s-Goods-and-Services.pdf

Original opinion text

Reproduced from the official source for research purposes. The linked source is authoritative.
NEW HAMPSHIRE BAR ASSOCIATION
Providing Legal Services in Exchange for a Client’s Goods and Services
Ethics Committee Advisory Opinion #2017-18/01

ABSTRACT:
In any agreement to exchange goods or services for legal fees entered into at the outset of legal
representation or during the course of such representation, a lawyer will need to comply with all
the provisions of NHRPC Rule 1.8(a), including the requirement to advise the client in writing of
the desirability of seeking the advice of independent legal counsel. Even if the lawyer strictly
complies with Rule 1.8(a), however, the courts may view the transaction as voidable if the client
later feels aggrieved by the transaction.
ANNOTATIONS:
Barter agreements are business transactions between a lawyer providing legal services and a
client providing goods or services.
NHPR Rule 1.8 regulates all business transactions with clients.
While NHPR Rule 1.8 does not apply to ordinary fee agreements, it does apply when the lawyer
accepts nonmonetary property as payment of all or part of a fee.
Under the ABA comments, NHPR Rule 1.8 does not apply to “standard commercial
transactions” between the lawyer and the client for products or services that the client generally
markets to others.
Under the Restatement, the exception for “standard commercial transactions” only applies when
“the lawyer does not render legal services.”
Transactions between lawyers and clients likely remain voidable by the client under New
Hampshire law.
When the transaction is voided, the client may have the option to either rescind the transaction or
recover damages.
Courts usually order the remedy that is “most economically beneficial to the client.”
ISSUES PRESENTED:
Whether a lawyer who agrees at the outset of representation to receive compensation for legal
services in kind, rather than in cash, must advise the client of the desirability of seeking the
advice of independent legal counsel, and whether compliance with Rule 1.8 prevents the
transaction from being voidable.
BACKGROUND:

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This opinion will include those situations where the compensation for legal services involves the
exchange of services, but will be limited to situations where the discussion of barter takes place
at the outset of the attorney client relationship. While financial transactions that arise during the
course of the relationship will likely give rise to the same considerations, transactions that occur
before the onset or after the conclusion may not.
DISCUSSION:
Rule 1.8. Barter agreements are business transactions between a lawyer providing legal services
and a client providing goods or services. Rule 1.8 of the New Hampshire Rules of Professional
Conduct (“NHRPC”) regulates all business transactions with current clients.
a. 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:
1. the transaction and terms on which the lawyer acquires the interest are fair and
reasonable to the client and are fully disclosed and transmitted in writing in a
manner that can be reasonably understood by the client;
2. the client is advised in writing of the desirability of seeking and is given a
reasonable opportunity to seek the advice of independent legal counsel on the
transaction; and
3. the client gives informed consent, in a writing signed by the client, 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.
Id., emphasis added.
The American Bar Association (“ABA”) comment to Model Rule 1.8(a) provides some guidance
about such business transactions by dividing them into three groups.
1. [Rule 1.8] does not apply to ordinary fee arrangements between client and lawyer, which
are governed by Rule 1.5,
2. although its requirements must be met when the lawyer accepts an interest in the client’s
business or other nonmonetary property as payment of all or part of a fee.
3. In addition, the Rule does not apply to standard commercial transactions between the
lawyer and the client for products or services that the client generally markets to others,
for example, banking or brokerage services, medical services, products manufactured or
distributed by the client, and utilities’ services.
Rule 1.8(a), Com. 1, emphasis added.
So, ordinary fee agreements are exempted, but barter agreements clearly fall into the second
category, as the lawyer is accepting nonmonetary property as payment for legal fees. That leaves
open the question whether the barter agreement is a “standard commercial transaction.”
Comment 1 goes on to explain the rationale for excepting standard commercial transaction.

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In such [standard commercial] transactions, the lawyer has no advantage in dealing with
the client, and the restrictions in paragraph (a) are unnecessary and impracticable.
Id.
The idea that the client will ordinarily need to be protected from the lawyer also appears in
the Restatement.
Standard commercial transactions are those regularly entered into between the client and
the general public, typically in which the terms and conditions are the same for all
customers. In such circumstances, the client’s interests in the transaction with the lawyer
need no special protection.
Restatement (Third) of the Law Governing Lawyers § 126, com. c (2000).
This might suggest that there still may be some “standard” goods or services offered by
“commercial” clients that would qualify as standard commercial transaction that you could
exchange for legal fees. Perhaps a case of wine from a wine merchant or a pedicure from a nail
salon would provide an exchange that does not present any chance of overreaching.
The Restatement offers the following, which sheds light on the barter situation.
A lawyer may not participate in a business or financial transaction with a client, except a
standard commercial transaction in which the lawyer does not render legal services.
Id. at § 126(a) (emphasis added). In other words, since the barter transaction does involve the
rendering of legal services, it cannot fall within the safe harbor of the standard commercial
transaction.
Presumptions and Voidability. Lawyers need to remember that they have a fiduciary
responsibility to their clients.
A lawyer’s legal skill and training, together with the relationship of trust and confidence between
lawyer and client, create the possibility of overreaching when the lawyer participates in a
business, property or financial transaction with a client.
Com. 1 to Model Rule 1.8. The Restatement suggests that the burdens will always rest on the
attorney in any dispute with a client in these matters.
In any civil proceeding between a lawyer and a client or their successors, the lawyer has
the burden of persuading the tribunal that requirements stated in this Section have been
satisfied. … In a discipline case, once proof has been introduced that the lawyer entered
into a business transaction with a client, the burden of persuasion is on the lawyer to
show that the transaction was fair and reasonable and that the client was adequately
informed.
Restatement, supra, § 126, com. a.
In approving the bartering of stock for legal services, the Ethics Committee had a few similarly
sobering thoughts.

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The ABA [opinion] noted in passing that if the client challenges the transaction it
“remains voidable in a civil suit.” In fact, New Hampshire appears to follow the almost
universal rule that establishes a presumption that transactions with clients are voidable.
Whipple v. Barton, 63 N.H. 613 (1885) (gift). Summarizing the law when a client
challenges the transaction, one respected treatise concludes:
The obvious conclusion to be derived from almost two centuries of American
decisions is that an attorney rarely can prove there was compliance with the
fiduciary obligations in business transactions with the client. The lesson to be
learned is that, when the attorney and client become parties to a transaction, the
requisite independent advice is best furnished by another unrelated lawyer.
Ronald E. Mallen and Jeffrey M. Smith, Legal Malpractice § 14.22 (4th ed. 1996). When
the transaction is voided, the client may rescind the transaction or recover damages.
Courts usually order the remedy that is “most economically beneficial to the client.” Id. at
§ 14.23.
“Taking Stock in Your Client As Legal Fees Or An Investment,” NHBA Ethics Committee,
Practical Ethics Article (November 8, 2000); “Acquiring Ownership in a Client in Connection
with Performing Legal Services,” ABA Formal Opinion 00-418 (2000).
Courts in other jurisdictions have been similarly disposed. In re Disciplinary Action Against
Bullis, 723 N.W.2d 667, 673 (N.D., 2006) (attorney “engages in business transactions with a
client at the attorney’s peril”); Chism v. Tri-State Const., Inc., 374 P.3d 193, 210 (Wash.App.
2016) (“an attorney-client transaction is prima facie fraudulent”); Liggett v. Young, 877 N.E.2d
178, 184 (Ind. 2007) (attorney-client transactions “are presumed to be fraudulent”); Rosas v.
Commission for Lawyer Discipline, 335 S.W.3d 311 (Tex.App. 2010) (the attorney has “the
burden to prove his and [the client]’s transaction is exempted from Disciplinary Rule 1.08(a)”).
Even in New Hampshire, the situation can get messy if problems arise. In Becksted v. Nadeau,
155 N.H. 615 (2007), a dispute arose between a lawyer and carpenters who had worked on the
lawyer’s office. The lawyer offered to write off the cost of legal services provided in exchange
the carpenters writing off their bill. The dispute went first to the Attorney Dispute Resolution
Committee, and ended up in superior court when the carpenters filed a mechanics lien. The
dispute also made its way to the Professional Conduct Committee where the lawyer received a
Public Censure and agreed to resign from the New Hampshire Bar. Nadeau advs. Becksted, #04-
048 (2009).
CONCLUSION:
The lawyer will need to comply with all the provisions of NHRPC Rule 1.8(a), including the
requirement to advise the client in writing of the desirability of seeking the advice of
independent legal counsel, in any agreement to exchange goods or services for legal fees entered
into at the outset of legal representation or during the course of such representation. Even if the
lawyer strictly complies with Rule 1.8(a), however, the courts may view the transaction as
voidable if the client later feels aggrieved by the transaction.

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NH RULES OF PROFESSIONAL CONDUCT:
Rule 1.8
Rule 1.8(a)

NH ETHICS COMMITTEE OPINIONS AND ARTICLES:
“Taking Stock in Your Client As Legal Fees Or An Investment,” Practical Ethics Article
(November 8, 2000);

SUBJECTS:
Barter
Business transaction with a client
Conflict of Interest
Fees
Standard commercial transaction
Voidable transaction
• By the NHBA Ethics Committee
This opinion was submitted for publication to the NHBA Board of Governors at its
November 16, 2017 meeting.

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