Opinion 2141

I. Facts and Questions

The inquiring attorney practices family law and discloses that there are instances in his practice when clients need to sell a home or commercial property. He has two sons; one is an attorney practicing in the same office as the inquirer, and the other, a realtor who recently passed his real estate examination. The realtor son is not part of the law office, nor does he have an office in the same building as the inquiring attorney.

The question asked is twofold: (1) whether it is proper under the Rules of Professional Conduct for the inquiring attorney and his attorney son (hereinafter referred to jointly as “inquiring attorney”) to recommend and/or steer clients to the realtor son for handling of clients’ real estate needs; and (2) whether the inquiring attorney may discount or reduce clients’ fees in cases where the client agrees to utilize the realtor son for their real estate matters.

II. Additional Information

In preparation for submission of this memorandum, the office of the inquiring attorney was contacted to verify that the realtor son was not located in the same office as the attorney, that there was no business relationship between him and his realtor son, and that none of the relevant individuals were or held themselves out as business acquaintances or partners.

III. Discussion

There is no RPC which per se prohibits the inquiring attorney from referring clients to a particular real estate agent, including his son, nor is there any prohibition against discounting fees or reducing fees if a client utilizes the services of the inquiring attorney’s realtor son. There are, however, a number of areas of concern which the inquiring attorney may wish to review.

First, there is a potential for breach of client confidence, especially between family members under RPC 1.6; next is the conflict of interest which might arise under both RPC 1.7 and RPC 1.8; and third, there is a concern that the attorney may compromise the obligation to maintain professional judgment and independence under RPC 2.1 and 5.4.

A. Client Confidences

As set forth in RPC 1.6 CONFIDENTIALITY OF INFORMATION:

(a) A lawyer shall not reveal information relating to the representation of a client unless the client gives informed consent, the disclosure is impliedly authorized in order to carry out the representation or the disclosure is permitted by paragraph (b).

This Rule addresses a basic tenet of jurisprudence; confidentiality of revelations to an attorney, even at times where an attorney-client relationship may not exist. This rule should be read in association with RPC 1.8(b) and 1.9(c) (1) as well as 1.18 for the lawyer`s duties with respect to information provided to the lawyer by a prospective client.
As recognized in comment 11 to rule 1.7, there is a great danger that as between family members, client confidences may be disclosed. Thus, the attorney inquirer should be clear with the client as to what confidences the client would permit the attorney inquirer to disclose to the realtor son. The attorney inquirer, without the consent of the client, should not reveal any information to the realtor son.

B. Conflict of Interest.

RPC 1.7 (Conflict of Interest: Current Clients) provides:

(a) Except as provided in paragraph (b), a lawyer shall not represent a client if the representation involves a concurrent conflict of interest. A concurrent conflict of interest exists if . . .
(2) there is a significant risk that the representation of one or more clients will be materially limited by the lawyer’s responsibilities to another client, a former client or a third person or by a personal interest of the lawyer. . . .

Even though a potential conflict of interest may exist or arise, this will not preclude the act to be undertaken if the attorney complies with Rule 1.7(b):

(b) Notwithstanding the existence of a concurrent conflict of interest under paragraph (a), a lawyer may represent a client if:
(1) the lawyer reasonably believes that the lawyer will be able to provide competent and diligent representation to each affected client;
(2) the representation is not prohibited by law;
(3) the representation does not involve the assertion of a claim by one client against another client represented by the lawyer in the same litigation or other proceeding before a tribunal; and
(4) each affected client gives informed consent, confirmed in writing (following authorization from the other client to make any required disclosures).

The comments to rule 1.7 provide guidance:

[1] Loyalty and independent judgment are essential elements in the lawyer`s relationship to a client. Concurrent conflicts of interest can arise from the lawyer`s responsibilities to another client, a former client or a third person or from the lawyer`s own interests. For specific Rules regarding certain concurrent conflicts of interest, see Rule 1.8. For former client conflicts of interest, see Rule 1.9. For conflicts of interest involving prospective clients, see Rule 1.18. For definitions of "informed consent" and "confirmed in writing," see Rule 1.0(e) and (b).

[10] The lawyer`s own interests should not be permitted to have an adverse effect on representation of a client. For example, if the probity of a lawyer`s own conduct in a transaction is in serious question, it may be difficult or impossible for the lawyer to give a client detached advice. . . . In addition, a lawyer may not allow related business interests to affect representation, for example, by referring clients to an enterprise in which the lawyer has an undisclosed financial interest. See Rule 1.8 for specific Rules pertaining to a number of personal interest conflicts, including business transactions with clients. See also Rule 1.10 (personal interest conflicts under Rule 1.7 ordinarily are not imputed to other lawyers in a law firm).

Although it has been confirmed that the inquiring lawyer and his son are separate entities without, mutual financial arrangements and do not hold themselves out as related in business, there is the potential for misunderstandings, if not the appearance of impropriety. It is with caution and full disclosure that the inquiring lawyer should make referrals to his realtor son, especially when an attorney fee discount is provided as a method and incentive of steering clients to the realtor son.

For example, there is great potential that the property at issue (to be bought or sold) with the assistance of the realtor son could also be involved in divorce proceedings, and that representation of the client by the attorney will be ongoing. Disputes may arise within the real estate relationship with respect to escrow instructions, duties of agents, personal property within the home, fees charged, etc., which could jeopardize the independence and loyalty of the attorney, both as perceived by the client and in actuality. Full disclosure should be given to the client as to issues that may arise that would require the attorney to withdraw from his representation of the client.

RPC 1.8 (Conflict of Interest: Current Clients: Specific Rules) states:

(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 . . . .
(b) A lawyer shall not use information relating to representation of a client to the disadvantage of the client unless the client gives informed consent, except as permitted or required by these Rules. . . .
(l) A lawyer who is related to another lawyer as parent, child, sibling, or spouse, or who has any other close familial or intimate relationship with another lawyer, shall not represent a client in a matter directly adverse to a person who the lawyer knows is represented by the related lawyer . . . .

For the same reasons as set forth under RPC 1.7 above, problems can arise upon referral to a family member, whether lawyer or non-lawyer, when the family member, may in the future, become a client. As stated in comment [23] of RPC 1.8:

[23] Model Rule 1.8 does not contain a provision equivalent to paragraph (l) of Washington`s Rule. Paragraph (l) prohibits representations based on a lawyer`s personal conflict arising from his or her relationship with another lawyer. Paragraph (l) is a revised version of former Washington RPC 1.8(i). See also Comment [11] to Rule 1.7.

Some of the same conflicts which might arise due to a lawyer’s relationship with another lawyer can just also arise due to a lawyer’s relationship with a non-lawyer i.e. the inquiring attorney’s realtor son. Although neither the rule nor the comment specifically address relationships other than attorney-client and attorney-attorney, the inquiring attorney should be cautious in making referrals to his son. There should be full disclosure to the client upon referral and instruction from the client as to what confidentiality can be revealed.

C. Professional Judgment and Independence

RPC 2.1 (Advisor) states:

In representing a client, a lawyer shall exercise independent professional judgment and render candid advice. . . .

Although RPC 2.1 primarily addresses a lawyer’s judgment in providing legal advice, the inquiring attorney should not make referrals to his son based solely upon his relationship but rather based upon candid and honest advice and recommendation to the client. The lawyer has a duty to the client to exercise independent professional judgment, even if it means that the inquiring attorney give an unfavorable recommendation about his realtor son. As stated in comment [1] of RPC 2.1, “[a] client is entitled to straightforward advice expressing the lawyer’s honest assessment.” This may mean that the attorney, in certain situations, should not refer a client to his son. Although comment [5] to the rules states that “. . . a lawyer is not expected to give advice until asked by the client,” once the lawyer gives advice or recommendation, the duty arises to provide competent, candid, professional and independent advice.

RPC 5.4 Professional Independence of a Lawyer reads in relevant part:

(b) A lawyer shall not form a partnership with a non-lawyer if any of the
activities of the partnership consist of the practice of law.
(c) A lawyer shall not permit a person who recommends, employs, or pays the lawyer to render legal services for another to direct or regulate the lawyer`s professional judgment in rendering such legal services.
(d) A lawyer shall not practice with or in the form of a professional
corporation or association authorized to practice law for a profit, if:
(1) a non-lawyer owns any interest therein, except that a fiduciary representative of the estate of a lawyer may hold the stock or interest of the lawyer for a reasonable time during administration;
(2) a non-lawyer is a corporate director or officer (other than as secretary or treasurer) thereof or occupies the position of similar
responsibility in any form of association other than a corporation; or
(3) a non-lawyer has the right to direct or control the professional judgment of a lawyer.

The inquiring attorney should be familiar with RPC 5.4, including those sections relating to the need for professional lawyer independence and the harm that might arise from a business relationship between the lawyer and his son. Special consideration should be given to 5.4(b) through (d), to avoid any improper business arrangement with his son that might allow the lawyers professional judgment to be compromised.

IV. Answer

The Rules of Professional Conduct do not per se prohibit an attorney from referring a client who needs the services of a realtor, to the attorney’s son who is a realtor; nor is there a rule prohibiting the reduction or discounting of legal fees to clients who agree to use a lawyer’s son to handle their professional real estate matters.

In making referrals and providing discounts to encourage clients to use the attorney’s son for real estate services, the attorney should fully disclose the relationship between the attorney and the realtor son and establish the boundaries for revealing the clients confidences. The attorney may wish to refer to RPC 1.6; 1.7; and 1.8, regarding potential conflicts of interest that may exist or could arise.

Finally, an attorney is obligated to exercise independent professional judgment, and provide candid advice to clients in accordance with RPC 2.1 and avoid entering into business arrangements which might compromise an attorneys’ duty to maintain independent professional judgment under RPC 5.4.