Can criminal-defense lawyers own a bail-bond business and refer their own clients to it?

Plain-English summary

Three criminal-law attorneys, not partners or in one firm, proposed forming a corporation to run a bail-bond business in which they would hold the majority of the stock (non-lawyers holding the rest), without being active in the business or serving as officers; their contribution would be assets supporting bonding authority. The committee treated the underlying issue as whether the attorneys could refer their criminal-defendant clients to the bail-bond business.

The committee restated its established position that a lawyer who is a stockholder, officer, director, or limited partner of a business such as a title company, realty corporation, or court-reporting firm may refer clients to it, provided the lawyer discloses the ownership interest so the client can make an informed decision and consent to continued representation. It pointed to DR 5-104(A), which bars a lawyer from entering a business transaction with a client where they have differing interests and the client expects the lawyer to exercise professional judgment for the client's protection, unless the client consents after full and adequate disclosure and the transaction is not unconscionable, unfair, or inequitable. Any doubt about the sufficiency of disclosure, it added, is resolved in the client's favor, since the lawyer seeks to profit from the advice given (citing DR 5-101(A)).

The committee held the attorneys may represent the bail-bond business's legal affairs only so long as their professional judgment for the business is not affected by their financial interest, but may not continue representing a criminal defendant for whom the business underwrites a bond while simultaneously representing the business, because it is not obvious the lawyer can adequately represent each interest (citing DR 5-105(B), (C)). Finally, it directed attention to DR 2-103(D), which bars a lawyer from compensating or giving anything of value to a person or organization to recommend or secure employment, except for permitted public communication.

Currency note

This opinion was issued in 1989, under Virginia's former Code of Professional Responsibility (the disciplinary rules it cites), before the Virginia State Bar's adoption of the Rules of Professional Conduct effective January 1, 2000. As the committee note observes, current Rule 1.8(a) requires that a lawyer not enter a business transaction with a client unless the client is given a chance to seek independent advice and there is full disclosure and written consent, and LE Op. 1343 indicates the lawyer may not represent the criminal defendant in the matter on which the bonding company supplied the bond. Subsequent rule amendments or later opinions may have changed the analysis. Treat this page as historical context, not current guidance. Verify against current rules before relying on any specific rule, deadline, or requirement mentioned here.

Common questions

Q: Can the lawyers refer their criminal-defense clients to a bail-bond business they own?

A: Under this 1989 opinion, yes, but only with full disclosure of their ownership interest and the client's informed consent, under DR 5-104(A). Any doubt about the adequacy of disclosure is resolved against the lawyer.

Q: Can the lawyers represent both the defendant and the bail-bond business in the same matter?

A: No. The committee concluded the lawyer may not continue representing a criminal defendant for whom the business underwrites a bond while simultaneously representing the business, because it is not obvious the lawyer can adequately represent each interest under DR 5-105(B), (C).

Q: Can the lawyers pay for referrals to the bail-bond business?

A: No. The committee pointed to DR 2-103(D), which bars compensating or giving anything of value to recommend or secure employment, except for permitted public communication.

Background and rules framework

The opinion interpreted former Virginia DR 5-104(A) and DR 5-101(A) (business transactions and personal-interest conflicts requiring disclosure and consent), DR 5-105(B) and (C) (multiple representation where independent judgment is likely affected), and DR 2-103(D) (not paying for recommendations of employment). Business transactions with clients are now within Rule 1.8(a), concurrent conflicts within Rule 1.7, and limits on paying for recommendations within Rule 7.2.

Citations and references

Rules of Professional Conduct:

• Former Virginia DR 5-104(A); DR 5-101(A) (business transactions and personal-interest conflicts)
• Former Virginia DR 5-105(B), (C) (multiple representation affecting independent judgment)
• Former Virginia DR 2-103(D) (compensating for recommendations of employment)
• ABA Model Rule 1.8 (business transactions with clients); Model Rule 1.7 (concurrent conflicts); Model Rule 7.2 (paying for recommendations)

Other opinions cited:

• Virginia LE Op. 187; LE Op. 1131; LE Op. 1198: disclosure and consent for referrals to a lawyer-owned business.
• Virginia LE Op. 1027; LE Op. 1198: representing a business in which the lawyer holds a financial interest.
• Virginia LE Op. 1343 (committee note): no representation of the defendant in the matter the bonding company bonded.

See also

• VA LEO 1489: Client Loaning Money to the Attorney
• VA LEO 1593: Accepting Corporate Stock as a Legal Fee
• VA LEO 1754: Lawyer as Insurance Agent Earning Commission
• VA LEO 1488: Division of Fees and Referral Responsibility

Source

• Landing page: https://vsb.org/Site/about/rules-regulations/leo-opinions.aspx
• Original PDF: https://www.vsb.org/common/Uploaded%20files/LEOs/1254.pdf

Original opinion text

Reproduced from the official source for research purposes. The linked source is authoritative.

Committee Opinion
July 25, 1989
LEGAL ETHICS OPINION 1254

PERSONAL INTERESTS CONFLICT:
CRIMINAL LAW ATTORNEYS
OWNING INTEREST IN BAIL BOND
BUSINESS AND REFERRING CLIENTS
TO BUSINESS.

You have asked the Committee to consider the propriety of three attorneys, all of whom practice criminal law but who are not partners or associated in a law firm, forming a corporation to engage in the bail bond business. The three attorneys would own the majority of the stock with the remainder of the stock being owned by non-lawyers. The three attorneys would not be actively engaged in the business nor would they be officers of the corporation. The major factor the three attorneys would be contributing to the corporation would be assets to permit substantial bonding authority.

In addition, concurrently with the bail bond business the nonlawyers/active partners would have a retail business and/or pawn shop. For the purposes of this opinion, the Committee will assume that the underlying issue forming the basis of this inquiry is the permissibility of the attorneys referring their criminal defendant clients to the bail bond business.

The Committee has previously opined, and it is well established, that it is not improper for an attorney who is a limited partner, stockholder, officer or director of a corporation such as a title company or realty corporation or court reporting firm to refer his clients to that firm for their services provided the attorney discloses his personal or ownership interest in the firm so that his client is able to make an informed decision and may consent to the continued representation. An attorney cannot ethically or legally undertake representation of a client when the attorney has personal interests which are not compatible with those of the client, unless the attorney fully discloses those interests to his client and the client consents thereto. Disciplinary Rule 5-104(A) [DR:5-104] provides that a lawyer shall not enter into a business transaction with a client if they have differing interests therein and if the client expects the lawyer to exercise his professional judgment therein for the protection of the client, unless the client has consented after full and adequate disclosure under the circumstances, and provided that the transaction is not unconscionable, unfair or inequitable when made. The Committee further opined that any doubts regarding the sufficiency of the disclosure must be resolved in favor of the client and against the attorney since it is the attorney who seeks to profit from the advice given his client. (See LE Op. 187, LE Op. 1131 and LE Op. 1198 and DR:5-101(A))

In addition, if the attorney wishes to represent the legal affairs of the bail bond business, he may do so as long as the attorney's professional judgment on behalf of the client/business is not affected by his financial interests in the entity. (See LE Op. 1027 and LE Op. 1198) Furthermore, if an attorney/client relationship is established on behalf of the bail bond business, the attorney may not continue the representation of the client/criminal defendant for whom the bail bond business will underwrite a bond while simultaneously representing the business since the Committee believes it is not obvious that the lawyer can adequately represent the interest of each because the exercise of his independent professional judgment on behalf of the client will be or is likely to be affected by his representation of the bail bond business. (See DR:5-105(B), (C))

Finally, the Committee directs your attention to DR:2-103(D) which provides that a lawyer "shall not compensate or give anything of value to a person or organization to recommend or secure his employment by a client, or as a reward for having made a recommendation resulting in his employment by a client, except that he may pay for public communication permitted by DR:2-101."

Committee Opinion
July 25, 1989

Legal Ethics Committee Notes. – L E Op. No. 1343 indicates that the lawyer may not represent the criminal in the matter on which the bonding company has supplied the bond. Under Rule 1.8(a), a lawyer may not enter into a "business transaction" with a client unless the client is given an opportunity to seek independent advice, and there has been full disclosure and consent in writing.