New Jersey’s attitude toward business transactions between attorneys and clients is clear—while not prohibited, avoid them. The current rule on the subject, RPC 1.8(a), provides that an attorney may not enter into “a business transaction with a client or knowingly acquire an ownership, possessory, security or other pecuniary interest to a client” unless a list of conditions are met.
As originally adopted in 1984, RPC 1.8(a) imposed far more restrictions on counsel than its predecessors DR5-101 (Refusing Employment when the Interest of the Lawyer May Impair His Independent Professional Judgment) and DR5-104 (Limiting Business Relations with a Client). Rule 1.8(a) was amended in 2003 with additional preconditions to afford clients even greater protections. The reason for this trend of increased protections is obvious: the dual role as attorney and investor presents an inherent conflict between client service and personal profit. Public policy dictates that the former must give way to the latter and otherwise “require[s] a strict adherence to an attorney’s duty of fidelity and good faith” even if such conduct would appear to put the attorney at a business disadvantage. See Petit-Clair v. Nelson, 344 N.J. Super. 538 (App. Div. 2001) (invalidating mortgages given on clients’ personal residence to secure the payment of fees for attorney’s representation).
Fairness, Reasonableness and Attorney Overreach
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