Opinion 2154

ISSUE: May an attorney continue to refer matters to a real estate broker to whom he has previously referred for a number of years and/or to the attorney’s spouse who is now employed as an agent for that broker?

ANSWER: So long as there is full disclosure by the attorney that his spouse is employed by the broker and the client gives informed consent, confirmed in writing, the referral to the broker and/or to the attorney’s spouse would not be prohibited by the Rules of Professional Conduct.

STATEMENT OF THE FACTS: As a part of his practice, the inquiring attorney practices probate law. This area of practice also involves the sale of real estate as a part of the probate. The attorney has, for the last ten years, referred such transactions to a broker who now employs the spouse of the attorney. The attorney has asked whether he can ethically continue to refer such matters to the broker and/or the attorney’s spouse and, if so, what disclosures he is required to make.

ANALYSIS: Under RPC 1.7(a) “a lawyer shall not represent a client if the representation involves a concurrent conflict of interest.” As stated in the Comments to RPC 1.7, “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.” The lawyer must also be mindful of RPC 2.1, which requires him to “exercise independent professional judgment and render candid advice,” when evaluating whether or not “the lawyer’s own interests” would prevent him from making the referral or undertaking the representation.

The only applicable definition of “concurrent conflict of interest” in this case is “a personal interest of the lawyer,” created by the income potential for his spouse from such referrals. RPC 1.7(a)(2). A concurrent conflict of interest will not disqualify the attorney 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).” In this situation, it does not appear that either requirements (2) or (3) need be addressed. As to requirement (1), this is a subjective determination which the attorney must make from the objective facts of each particular case/referral.

As to requirement (4), the only “client” is the probate representative/estate; and, consequently, the lawyer needs to fully disclose the relationship in writing and receive the written informed consent of the client. As stated in the Comments to RPC 1.7, “The lawyer`s own interests should not be permitted to have an adverse effect on representation of a client. . . . 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.”

“Informed consent” is now defined by RPC 1.0(e) as “denotes the agreement by a person to a proposed course of conduct after the lawyer has communicated adequate information and explanation about the material risks of and reasonably available alternatives to the proposed course of conduct.” Similarly, “confirmed in writing” is now also defined by RPC 1.0(b) "when used in reference to the informed consent of a person, denotes informed consent that is given in writing by the person or a writing that a lawyer promptly transmits to the person confirming an oral informed consent.”

It could be argued that the lawyer is entering into “a business transaction with a client,” requiring the greater disclosures and opportunity for independent advice before accepting the “informed consent” of the client, as required by RPC 1.8. However, in this situation the lawyer is not himself doing so. The mere fact of referral to the broker and/or the lawyer’s spouse would not rise to this level, so long as the attorney would not be involved in the activities and labors associated with the sale transactions performed by the broker and/or the lawyer’s spouse. See also Informal Opinion 1383 and 2140.