Can a lawyer keep referring probate-estate clients to a real estate broker that now employs the lawyer's spouse, and what must the lawyer disclose?

Plain-English summary

The inquiring lawyer practices probate law, which often involves selling real estate as part of an estate. For about ten years he had referred those transactions to a broker, and that broker now employs the lawyer's spouse as an agent. He asked whether he can keep referring matters to the broker, and to his spouse, and what he must disclose.

The opinion applies RPC 1.7(a), which bars representation involving a concurrent conflict of interest, and RPC 2.1, which requires the lawyer to exercise independent professional judgment and render candid advice. It identifies the only applicable kind of conflict here as "a personal interest of the lawyer" under RPC 1.7(a)(2), created by the income potential for the spouse from the referrals. It then steps through the RPC 1.7(b) waiver requirements: the lawyer must reasonably believe he can provide competent and diligent representation (a subjective determination from the facts of each referral), and the affected client (the probate representative or estate) must give informed consent confirmed in writing. The opinion notes that requirements about representation prohibited by law and about claims between co-clients do not need to be addressed here.

The opinion quotes RPC 1.0(e) and 1.0(b) for the definitions of "informed consent" and "confirmed in writing." It then considers whether the referral is a "business transaction with a client" triggering the heightened disclosure and independent-advice requirements of RPC 1.8, and concludes it is not: the lawyer is not himself entering the transaction, and a mere referral does not rise to that level so long as the lawyer is not involved in the activities and labors of the sale performed by the broker or the spouse. It cites Informal Opinions 1383 and 2140.

In practice

Under this opinion, and under the Washington rules as they stood at the time, a lawyer may continue to refer probate-estate matters to a broker that employs the lawyer's spouse, and to the spouse, treating the spouse's income potential as a personal-interest conflict under RPC 1.7(a)(2). The opinion conditions the referral on full written disclosure of the relationship and the client's informed consent confirmed in writing, and treats the lawyer's ability to provide competent, diligent representation as a determination the lawyer must make from the facts of each referral. It concludes a mere referral is not a business transaction with a client under RPC 1.8 as long as the lawyer stays out of the sale work itself.

Common questions

Q: Can a lawyer refer an estate client to a broker that employs the lawyer's spouse?

A: The opinion concludes the referral is not prohibited so long as the lawyer fully discloses in writing that the spouse is employed by the broker and the client gives informed consent confirmed in writing.

Q: What kind of conflict does this create?

A: The opinion identifies it as a personal interest of the lawyer under RPC 1.7(a)(2), arising from the income potential for the spouse from the referrals.

Q: Does referring the client count as a business transaction with a client under RPC 1.8?

A: The opinion concludes it does not. The lawyer is not himself entering the transaction, and a mere referral does not rise to that level as long as the lawyer is not involved in the sale activities performed by the broker or the spouse.

Q: Whose informed consent is required?

A: The opinion says the only client is the probate representative or estate, so the lawyer must fully disclose the relationship in writing and obtain that client's written informed consent, as defined in RPC 1.0(e) and 1.0(b).

Background and rules framework

The opinion interprets Washington RPC 1.7 (Model Rule 1.7; concurrent conflicts), specifically the personal-interest branch in RPC 1.7(a)(2), together with RPC 1.7(b)'s conditions for proceeding despite a conflict, and RPC 2.1 (Model Rule 2.1; independent professional judgment and candid advice). It draws the definitions of "informed consent" and "confirmed in writing" from RPC 1.0(e) and 1.0(b) (Model Rule 1.0 terminology). It addresses, and rejects, application of RPC 1.8 (Model Rule 1.8; business transactions with a client) to a mere referral, citing Informal Opinions 1383 and 2140.

Citations and references

Rules of Professional Conduct:

• Model Rule 1.7 / Washington RPC 1.7(a)(2), (b) (personal-interest conflict; conditions for client consent)
• Model Rule 2.1 / Washington RPC 2.1 (independent professional judgment and candid advice)
• Model Rule 1.0 / Washington RPC 1.0(e), (b) (definitions of "informed consent" and "confirmed in writing")
• Model Rule 1.8 / Washington RPC 1.8 (business transactions with a client; held not triggered by a mere referral)

Other opinions cited:

• WSBA Informal Opinion 1383: referral and the lawyer's own interests
• WSBA Informal Opinion 2140: referral and the lawyer's own interests

See also

• WA Ethics Op. 2141: Referring Clients to a Realtor Relative and a Fee Discount
• WA Ethics Op. 2025: Referring Clients to the Lawyer's Own Real Estate Business
• WA Ethics Op. 1944: Referral to a Lawyer With a Common Business Interest

Source

• Landing page: https://ao.wsba.org/print.aspx?ID=1594

Original opinion text

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

Advisory Opinion: 2154
Year Issued: 2007
RPC(s): RPCs 1.0, 1.7, 1.8, & 2.1; IOs 1383 & 2140
Subject: A lawyer referring estate-client to real estate firm employing the lawyer`s wife

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 lawyers relationship to a client. Concurrent conflicts of interest can arise from the lawyers 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.