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When Wilson Sonsini Goodrich & Rosati’s Donald Bradley talks to a room full of lawyers about investing with clients, he sounds like a stern father who doesn’t want his kids to kill the goose that lays the golden eggs. It’s “foolish” to ever assume the California Bar’s rule requiring fairness and reasonableness in business deals with clients doesn’t apply, he says; it damages morale to allow lawyers within a law firm to invest as individuals; and one must consider how a deal — like selling directed shares on a start-up’s first day — is going to look to a jury. Pragmatism was the order of the day when Bradley, Wilson Sonsini’s general counsel, spoke at the California Bar’s Fourth Annual Statewide Ethics Symposium, held June 16 at Western State University College of Law in Fullerton, Calif. “I come to these panels because … I like them [lawyers who invest in clients] to do it right, because I want to be able to continue doing it,” said Bradley, whose firm took in more through its investment pool than through fee revenues. And besides, “It’s dumb to invest when your investment is subject to rescission, so why not follow the rules?” For any members of the audience who thought the discussion would be whether lawyers should invest with clients at all, panelist Joseph Troy outlined just how outdated such an idea is. Among 24 large firms surveyed, 22 have programs for buying stock in clients, said Troy, founder of Troy & Gould and co-author of “Advising and Defending Corporate Directors and Officers.” Further, he said, one-third of all law firms that do initial public offerings own stock in them. Both Troy and Bradley said the practice of taking stock in return for general legal services is not nearly as popular and is more likely to make them “uncomfortable” — particularly, Bradley added, when the clients are just founding the firm and may be “unsophisticated techies.” Troy referred to an emerging concept of “customs and practices” of those who have pioneered the dot-com deals. The use of that concept as a standard, however, provoked some debate with the audience — namely about the sophistication gap between Silicon Valley and the rest of California. “We aren’t writing the rules just for the Silicon Valley,” noted Robert Kehr of Los Angeles’ Kehr, Schiff & Crane, and the chairman of the State Bar Committee on Professional Responsibility and Conduct. “We wouldn’t be having this discussion if it weren’t for the Silicon Valley phenomenon,” replied Gail Windisch, of counsel to Los Angeles’ Manatt, Phelps & Phillips. And panelist Paul Vapnek noted that he finds nothing reassuring about “customs and practices.” Customary doesn’t mean within the rules, he said. “I see things that make the hair on my neck stand up,” said Vapnek, a partner in the trademark and copyright group at San Francisco’s Townsend and Townsend and Crew. “And I don’t feel any better when a lawyer tells me ‘everyone does it.’” One point of definite agreement was that these investments, like the traditional kinds, are safest when well-diversified. Bradley said his firm “never has more than 1 percent” of a single company, and Vapnek added that “judgment is affected by the size of the interest.” Among other panel offerings during the day-long gathering was one on “Lawyers’ Duties to Society vs. Lawyers’ Duties to Clients,” which evolved into a discussion of the difference between California and the rest of the nation on confidentiality; and two others on the proposed rules for multidisciplinary practice, and how MDP may affect lawyers’ screening themselves for conflicts of interest. By the afternoon’s sessions, one attendee, Stanley Lamport of Century City, Calif.’s Cox, Castle & Nicholson, thought he saw a pattern he didn’t like. “It looks as if a theme today is the economic reasons for changes,” said Lamport, the 1997 chairman of the Bar’s professional responsibility committee. “That’s just wrong.” But there was no getting away from the economic factor. The fourth annual symposium on ethics came six years after the first one, explained organizer Ellen Peck, because in 1998 and 1999, the Bar didn’t have the money to sponsor it.

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