I represented a client who sold land to a real estate trust years ago and has been paid in full with no pending matters. The same investor group owns a second, unrelated trust. Can I buy an interest in either trust under Rule 1.8?

Plain-English summary

In 1986 and 1987 the attorney represented a client, "Client X," offering a parcel of land and buildings for sale ("Parcel 1"). Parcel 1 was purchased by a real estate trust made up of numerous individual investors. That same group of investors also comprises a second, separate real estate trust that owns another parcel of real estate ("Parcel 2"). Parcel 1 is entirely separate from Parcel 2, Client X has been paid in full for Parcel 1, and Client X has never had any dealings with the second trust; there are no pending matters between Client X and either trust. The attorney asked the panel whether it would be proper for him to purchase an interest in either or both real estate trusts.

The panel quoted Rule 1.8(A), which bars a lawyer from entering into a business transaction with a client or knowingly acquiring an ownership, possessory, security, or other pecuniary interest adverse to a client. Because the attorney would not be entering into a business relationship with a client, and would not be entering into a relationship adverse to a client, the panel held Rule 1.8 does not apply, and it took the position that it would be permissible for the attorney to purchase an interest in either or both real estate trusts under the circumstances recited.

Currency note

This opinion was issued in January 1996, after the Rhode Island Supreme Court adopted the Model Rules of Professional Conduct effective November 15, 1988, and it applies Rule 1.8 as originally adopted. The Rhode Island Supreme Court later revised the Rules of Professional Conduct in 2007 as part of the nationwide Ethics 2000 process. Subsequent rule amendments or later opinions may have changed the analysis. Treat this page as historical context, not current guidance. Verify against current rules before relying on any specific rule mentioned here.

Common questions

Q: Does Rule 1.8 bar me from investing in an entity that is connected to, but has no current dealings with, a former client?

A: Not under this opinion. The panel held that because the attorney would not be entering into a business relationship with a client or a relationship adverse to a client, Rule 1.8 does not apply.

Q: What does Rule 1.8's prohibited-transactions provision actually bar?

A: Per the opinion, Rule 1.8(A) bars a lawyer from entering into a business transaction with a client or knowingly acquiring an ownership, possessory, security, or other pecuniary interest adverse to a client.

Q: Does it matter that the two real estate trusts share the same group of investors?

A: The opinion recites this fact but the panel's analysis turns on the absence of any business or adverse relationship between the attorney's former client and either trust, not on the overlap between the trusts' investor groups.

Background and rules framework

The opinion applies Rule 1.8(A) of the Rhode Island Rules of Professional Conduct, as adopted effective November 15, 1988, barring a lawyer from entering into a business transaction with a client or acquiring an interest adverse to a client, to an inquiry about purchasing an interest in real estate trusts connected to, but not transacting with, a former client.

Citations and references

Rules of Professional Conduct:

• MR 1.8 (conflict of interest: prohibited transactions)
• RI RPC 1.8(a), as adopted November 15, 1988

Statutes:

• None cited.

Cases:

• None cited.

Other opinions cited:

• None cited.

See also

• ABA Formal Op. 00-418: Acquiring Ownership in a Client in Connection with Performing Legal Services
• RI EAP Op. 90-06: Rule 1.9 Former-Client Conflict

Source

• Landing page: https://www.courts.ri.gov/attorney-resources/Pages/Ethics-Advisory-Panel-default.aspx
• Original PDF: https://www.courts.ri.gov/Opinions/EAP%2090-09.pdf

Original opinion text

Best-effort transcription from a scanned PDF. Minor errors may remain; the linked PDF is authoritative.

DIGEST OF ETHICS ADVISORY PANEL

OPINION 90-9, REQUEST 81
Issued January 13, 1996

An attorney seeks Panel advice as to whether he may properly purchase an interest in one or both of two real estate trusts under the circumstances he describes.

The attorney advises the Panel that in 1986 and 1987 he was the attorney for a client ("Client X") offering a parcel of land and buildings for sale ("Parcel 1"). Parcel 1 was purchased by a real estate trust comprised of numerous individual investors. The same group of individual investors also comprise a second real estate trust which owns another parcel of real estate ("Parcel 2"). Parcel 1 is entirely separate from Parcel 2. Client X has been paid in full for Parcel 1 and has never had any dealings with the second real estate trust. There are no pending matters between the client and either real estate trust. The attorney asks whether it is proper for him to purchase an interest in either or both real estate trusts.

Rule 1.8, entitled "Conflict of Interest - Prohibited Transactions" provides, in pertinent part:

(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.

Since the attorney would not be entering into a business relationship with a client or entering into a business relationship adverse to a client, Rule 1.8 is not applicable. The Panel takes the position that it would be permissible for the attorney to purchase an interest in either or both real estate trusts under the circumstances recited above.

Ethics Advisory Panel advice is protective in nature. There is no requirement that an attorney abide by a Panel opinion, but if he or she does, he or she is fully protected from any charge of impropriety.