Ezel / Ethics Opinions / OSB
OSB August 2005

Can an Oregon lawyer borrow money from, lease property from, or go into business with a client?

Short answer: Yes, qualified. The opinion concludes a lawyer may enter a business transaction with a client only if the lawyer meets all of RPC 1.8(a): fair and fully disclosed written terms, written advice to seek independent counsel, and the client's signed informed consent.

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This page answers the general question as of 2005. Ezel answers yours: whether it's allowed on your facts, under the current Oregon Rules of Professional Conduct, with citations.

Currency note: this opinion is from 2005
Subsequent statutory amendments, court decisions, or later opinions or rule amendments may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.
Disclaimer: Advisory only. Not binding precedent.
About this page: The plain-English summary, reader guidance, and Q&A below were written by Ezel based on the official ethics opinion. The original opinion (linked on this page as a PDF) is the authoritative source for any reliance.
View original ethics opinion (PDF)

Plain-English summary

The opinion addresses three lawyers: Lawyer A proposes to borrow money from a client, Lawyer B to lease property from a client, and Lawyer C to enter a business partnership with a client and others and then handle the partnership's legal affairs. The question is whether the proposed conduct is ethical.

The opinion concludes yes, qualified. It applies Oregon RPC 1.8(a), which bars a lawyer from entering a business transaction with a client, or acquiring an interest adverse to a client, unless the terms are fair, reasonable, and fully disclosed in writing the client can understand; the client is advised in writing to seek independent counsel and given a reasonable opportunity to do so; and the client gives informed consent in a signed writing to the essential terms and the lawyer's role. The lawyers may proceed if they comply with all of these requirements.

The opinion adds that if the lawyers will also represent their clients in the transactions, RPC 1.8(a)(3) together with RPC 1.7(a)(2) require the lawyers to inform their clients of the risks of wearing the dual hats of legal advisor and transaction participant, such as the risk that the lawyer will structure the deal or advise in a way that favors the lawyer's interest. The opinion notes this is true whether or not the lawyer and client are also friends.

In practice

Under the Oregon rules as they stood at the time of the opinion, RPC 1.8(a) permitted lawyer-client business transactions only on its three written conditions, and applied to all such transactions regardless of whether the lawyer and client had differing interests. Per the opinion, when the lawyer also represents the client in the transaction, RPC 1.7(a)(2) adds a duty to disclose the dual-role risks.

Common questions

Q: Can a lawyer borrow money from a client?

A: Yes, qualified. The opinion concludes a lawyer may do so only by satisfying all of RPC 1.8(a): fair written terms, written advice to seek independent counsel, and the client's signed informed consent.

Q: Can a lawyer go into business with a client and then represent the partnership?

A: Yes, qualified. The opinion concludes the lawyer must meet RPC 1.8(a) and, under RPC 1.7(a)(2), disclose the risks of acting as both legal advisor and business participant.

Q: Does it matter that the lawyer and client are friends?

A: No. The opinion concludes the RPC 1.8(a) requirements apply whether or not the lawyer and client also happen to be friends.

Background and rules framework

The opinion interprets Oregon RPC 1.8(a) (business transactions with a client; the fair-terms, independent-counsel, and signed-consent conditions) and RPC 1.7(a)(2) (material-limitation conflicts from the lawyer's personal interest). These track Model Rules 1.8 and 1.7.

Citations and references

Rules of Professional Conduct:

  • Oregon RPC 1.8(a) / Model Rule 1.8 (business transactions with a client)
  • Oregon RPC 1.7(a)(2) / Model Rule 1.7 (material-limitation conflicts)

Cases:

  • In re Luebke, 301 Or 321, 722 P2d 1221 (1986)
  • In re Moore, 299 Or 496, 703 P2d 961 (1985)
  • In re Germundson, 301 Or 656, 724 P2d 793 (1986)

See also

Source

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