A mid-size law firm was devoted almost entirely to personal injury cases. Many of the law firm’s clients, however, were low- and middle-income citizens and in difficult financial situations because of their physical injuries and inability to work. The law firm regularly referred these clients to a finance company located in the same building. The finance company offered loans to personal injury plaintiffs under an arrangement that would repay the loan through a settlement or judgment based on the personal injury claim. Nonetheless, the plaintiffs would still be liable for the loan if the claim was not settled or resolved by a judgment in the client’s favor. At no time did the law firm or the finance company disclose that the law firm owned the finance company. Is the law firm subject to discipline for its interest in the finance company?
Explanation
Answer: B - Yes, because the law firm has a personal business interest that may affect the independent professional judgment of the law firm’s lawyers. A lawyer has a concurrent conflict of interest if a significant risk exists “that the representation of one or more clients will be materially limited by . . . a personal interest of the lawyer.” Model Rule 1.8(a)(2). “[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.” Model Rule 1.7, comment 10. Answer B is the best choice because it reflects the language of the Model Rules. Answer A is not the best choice because, in addition to disclosure, the client must give informed consent in writing. Model Rule 1.7(b) and 1.8(a)(3). Answer C is not the best choice because disclosure and informed consent are required if the client is referred to the business. Answer D is not the best choice because the Model Rules apply even if the clients do not use the finance company.
