720
370reOr
In
2023 DuBoff February 16, 2023
Argued and submitted September 22, 2022, respondent is publicly reprimanded
February 16, 2023
In re Complaint as to the Conduct of
LEONARD D. DuBOFF,
OSB #774378
Respondent.
(OSB 19-123) (SC S069006)
525 P3d 62
The Oregon State Bar brought a disciplinary action against respondent,
alleging a violation of Oregon Rule of Professional Conduct (RPC) 1.8(a), which
prohibits the lawyer from entering into a “business transaction” with the client
unless certain requirements are met. Held: On de novo review, the Court held
that (1) respondent’s agreement with the clients that the clients would pay some
or all of the amounts that they owed respondent’s law firm with construction
services was a “business transaction” within the meaning of RPC 1.8(a); and
(2) respondent violated RPC 1.8(a) when he entered into that business transaction with the clients without fully disclosing the essential terms of the transaction in writing.
Respondent is publicly reprimanded.
On review of the decision of a trial panel of the Disciplinary
Board.
David J. Elkanich, Buchalter, P.C., Portland, argued the
cause and filed the briefs for respondent. Also on the briefs
was Amber Bevacqua-Lynott.
Eric Collins, Assistant Disciplinary Counsel, Tigard,
argued the cause and filed the brief for the Oregon State
Bar.
Before Flynn, Chief Justice, Duncan, Nelson, Garrett,
and DeHoog, Justices, and Balmer and Walters, Senior
Judges, Justices pro tempore.*
PER CURIAM
Respondent is publicly reprimanded.
______________
* Bushong and James, JJ., did not participate in the consideration or decision of this case.
Cite as 370 Or 720 (2023) 721
PER CURIAM
In this lawyer disciplinary proceeding, respondent
Leonard D. DuBoff challenges the conclusion of a trial panel
of the Disciplinary Board that respondent had violated
Oregon Rule of Professional Conduct (RPC) 1.8(a), which
restricts a lawyer from entering into “a business transaction with a client” unless the lawyer satisfies multiple conditions meant to protect the client from the possibility of
overreaching. The trial panel determined that respondent
had violated that rule by failing to disclose in writing essential terms of a transaction under which respondent’s clients
agreed to pay some or all of what they owed for legal services by providing “construction services” to respondent and
his law firm. We agree with the trial panel that respondent
violated RPC 1.8(a) in that way and that a public reprimand
is the appropriate sanction for that violation.
I. BACKGROUND
Respondent has been a member of the Oregon State
Bar since 1977. He describes his practice as focused on business law, art law, international law, copyright and trademark law, high-tech law, and publishing and entertainment
law. Around 1999, respondent’s law firm began representing
Mr. Leascu and Mrs. Leascu and their construction company, Dependable Home Remodeling, Inc. For many years,
the relationship was that of lawyer and clients, with respondent representing the clients on a variety of legal matters and the clients paying respondent’s charges for those
legal services. That changed around November 2014, when
respondent started hiring the clients to perform construction projects on properties that he owned. Around the same
time, the clients’ need for legal services began to substantially increase, and they accumulated a large outstanding
balance for those legal services.
At some point, the clients proposed that they could
work off their accruing legal fees by performing additional
construction projects for respondent, and respondent agreed
to the proposal. As respondent described at the disciplinary
hearing, he and Mr. Leascu agreed that respondent “would
pay for out-of-pocket expenses” on the construction projects
but that Mr. Leascu’s “labor, his employees’ labor, [and]
722 In re DuBoff
independent contractors’ labor” on the projects “would be
used to offset the legal fees” that the clients owed to respondent’s firm.
The agreement was in effect at least by July 2015,
when respondent emailed a letter to the clients with the subject line “In[-]Kind Payments for Legal Services.” The letter
“confirm[ed]”:
“We have now agreed that you will pay some or all of the
amounts you owe, or will owe in the future, to The Duboff
Law Group with construction services including but not
limited to carpentry, electrical, plumbing, painting, and
the like, instead of by paying with money.”
The letter then explained:
“Oregon ethical rules consider such an in[-]kind payment
arrangement to be a business transaction between the law
firm and [the] client. The DuBoff Law Group will not be
representing you in this business transaction.
“The Duboff Law Group will continue to calculate its billings based on its then-standard hourly rate and will credit
you for the in[-]kind payments based on your rates for the
work you perform. You will provide this firm with a 1099
form for the value of these in[-]kind payments.”
The letter went on to describe potential risks to the arrangement, including that respondent’s “interests in this transaction could at some point be different than or adverse to” those
of the clients. “Specifically,” the letter advised, there was a
possibility that respondent’s firm and the clients “may disagree as to the value of the in[-]kind payments, or a dispute
may arise over how a refund will [be] made if necessary.”
The clients signed and dated the letter under a
statement that read, “I hereby consent to the legal representation, the terms of the business transaction, and the lawyer’s role in [the] transaction as set forth in this letter.”
For the next two years, the clients worked on multiple projects for various residential and commercial properties that respondent or his family members owned, including: numerous projects at an address in Portland where
respondent’s son and his family lived; a complete remodel
of the Portland home where respondent’s daughter lived; six
Cite as 370 Or 720 (2023) 723
projects at respondent’s Portland home; several projects at
two cabins that respondent owned in Nehalem; and a renovation of a property that respondent intended to sell. In
addition, for nearly a year, Mr. Leascu took on the job of
performing landscaping work twice a month at respondent’s
personal residence, and he handled tasks like snow-removal
and emergency repairs at two office parks in which respondent had an interest.
Although Oregon law requires a written contract
for residential construction projects exceeding $2,000, ORS
701.305, and although many of the projects for respondent
significantly exceeded $2,000, the clients performed the
work that respondent requested without written contracts
or contract proposals.1 Instead, the record suggests that the
projects were identified by respondent and conveyed to the
clients in emails with instructions such as the following: “I
have another project that I will need to have you assist with”;
“[b]elow is the complete list of things which need to be done
at [respondent’s son’s] house”; or “[b]elow is a list of items
that need to be taken care of at Mr. and Mrs. DuBoff[s’]
cabin and residence.”
Throughout the years of this arrangement, the clients sent invoices totaling more than $300,000 for the clients’ costs on the various projects, and respondent paid the
invoices. Mr. Leascu testified, however, that the invoices
included only his costs for labor and materials for the job.
They did not include charges for his time and his wife’s time
on the project, because Mr. Leascu understood that those
charges would be offset against legal fees. Mr. Leascu also
did not charge respondent for things like bringing equipment and trailers to the job—things that he considered to
be “overhead.” And Mr. Leascu did not include charges for
profit on the jobs.
For reasons that are not apparent from the record,
however, the clients never submitted an accounting of the
services that they understood could be credited against
1
ORS 701.305(1) provides, in pertinent part: “A contractor may not perform
work to construct, improve or repair a residential structure or zero-lot-line dwelling for a property owner without a written contract if the aggregate contract
price exceeds $2,000.”
724 In re DuBoff
their legal fees. And respondent never asked for documentation of those services until 2017, when he became dissatisfied with the clients’ construction services. In a June 2017
email to the clients, respondent demanded that the clients
provide documentation for all of their work on the projects
and emphasized his frustration with their failure to provide
the documentation:
“The agreement we had was that, when doing any contractor work for us, you would charge us for the actual ‘out of
pocket’ cost of materials and we would pay for those materials. You also agreed that you would keep track of the
time you, your employees and any independent contractors
worked on our jobs and provide a description of the work
performed as well as letting me know how much time was
spent on each job and what the total labor costs for that job
[were] as well.”
Respondent’s email insisted that the clients “were supposed to provide those descriptions, times and prices on a
regular basis” but “never did.” The email concluded that
respondent was “very disappointed” in the way that the
clients had conducted themselves and that his firm would
be withdrawing from all representation of the clients, their
family, and all the family businesses. Respondent had given
the clients no credit against accrued fees for the work that
they had performed on his properties, and he demanded
that the clients pay their outstanding bill—which exceeded
$175,000—“immediately.”
Respondent eventually filed a lawsuit against the
clients on behalf of himself, several family members, and
two business entities that respondent owns. The complaint
alleged negligence, negligence per se, fraud, conversion, nuisance, breach of contract, and unlawful trade practices, and
it sought almost $1,000,000 in damages.2 At the suggestion
of the clients’ new counsel, the Leascus sent a letter to the
Bar’s Client Assistance Office describing their experience
with respondent.
After an investigation, the Bar charged respondent
with one violation of RPC 1.8(a). That rule provides:
2
Respondent’s civil action against the clients was pending in Multnomah
County Circuit Court, but abated, at the time that the trial panel heard this
disciplinary case.
Cite as 370 Or 720 (2023) 725
“(a) A lawyer shall not enter into a business transaction with a client or knowingly acquire an ownership, possessory, security or other pecuniary interest adverse to a
client unless:
“(1) the transaction and terms on which the lawyer
acquires the interest are fair and reasonable to the client
and are fully disclosed and transmitted in writing in a
manner that can be reasonably understood by the client;
“(2) the client is advised in writing of the desirability
of seeking and is given a reasonable opportunity to seek
the advice of independent legal counsel on the transaction;
and
“(3) the client gives informed consent, in a writing
signed by the client, to the essential terms of the transaction and the lawyer’s role in the transaction, including whether the lawyer is representing the client in the
transaction.”
At the trial panel proceeding, respondent argued
that RPC 1.8(a) did not apply to his agreement with the clients regarding construction services, because that agreement was not a “business transaction” under the rule.
Alternatively, respondent argued that, if the agreement
came within the scope of the rule, then the letter that he
had sent in July 2015, which the clients signed, satisfied the
requirements of RPC 1.8(a).
The trial panel disagreed. It determined that
respondent had entered into a “business transaction” with
his clients and that respondent had failed to satisfy several
of the requirements that RPC 1.8(a) imposes on a lawyer’s
business transaction with a client. It concluded, therefore,
that respondent had violated RPC 1.8(a) and that a public
reprimand was the appropriate sanction for that violation.3
3
The attorney member of the trial panel dissented. The dissenting panel
member noted that, in respondent’s testimony before the trial panel, respondent
himself seemed to concede that his arrangement with the clients was a business
transaction for purposes of RPC 1.8(a) and, therefore, that the clients’ informed
written consent was required. For that reason, in the dissent’s view, the only
issue before the trial panel was whether the July 2015 letter was sufficient to
satisfy the requirements of the rule. And, the dissenting panel member stated,
he would have concluded that the July letter did satisfy the requirements of the
rule.
726 In re DuBoff
II. DISCUSSION
In this court, respondent reprises his argument that
his arrangement with the clients was not a “business transaction” for purposes of RPC 1.8(a). Alternatively, respondent
argues that, if the arrangement was subject to RPC 1.8(a),
then the court should find that the July 2015 letter that
respondent sent the clients complied with the requirements
of that rule. We review the trial panel’s decision de novo and
determine whether the Bar established by clear and convincing evidence that respondent violated RPC 1.8(a). See
BR 10.6 (providing for de novo review); BR 5.2 (requiring
proof by clear and convincing evidence).
RPC 1.8 sets out numerous specific rules governing
circumstances that create a conflict of interest between a
lawyer and current clients. As explained above, paragraph
(a) is the requirement at issue in this case. For convenience,
we again set out the text of the rule:
“(a) A lawyer shall not enter into a business transaction with a client or knowingly acquire an ownership, possessory, security or other pecuniary interest adverse to a
client unless:
“(1) the transaction and terms on which the lawyer
acquires the interest are fair and reasonable to the client
and are fully disclosed and transmitted in writing in a
manner that can be reasonably understood by the client;
“(2) the client is advised in writing of the desirability
of seeking and is given a reasonable opportunity to seek the
advice of independent legal counsel on the transaction; and
“(3) the client gives informed consent, in a writing
signed by the client, to the essential terms of the transaction and the lawyer’s role in the transaction, including whether the lawyer is representing the client in the
transaction.”
This court has previously explained that RPC 1.8(a)
was modeled on the American Bar Association’s Model
Rule of Professional Responsibility 1.8(a), and we therefore
looked to the commentary to the Model Rule as “persuasive
in interpreting the meaning of” RPC 1.8(a). In re Spencer,
355 Or 679, 685-86,
330 P3d 538 (2014). Relying on that
commentary, we concluded in Spencer that—like the Model
Cite as
370 Or 720 (2023) 727
Rule—RPC 1.8(a) “protects clients from ‘the possibility of
overreaching when the lawyer participates in a business,
property or financial transaction with the client.’ ”
Id. at 688
(quoting and citing ABA Model Rules, Rule 1.8 comment [1]
(2007)). Also like the Model Rule, we concluded, RPC 1.8(a)
is violated whenever the lawyer enters into a business
transaction with a current client “without first providing
the advice that that rule requires and obtaining the necessary consent.” Id. at 686.
A. “Business Transaction”
The first question that we must resolve is whether
the arrangement between respondent and the clients was a
“business transaction” for purposes of RPC 1.8(a). The term
“business transaction” is not defined in the rules, and this
court has not previously considered whether an arrangement
like the one in this case is a “business transaction” subject
to RPC 1.8(a). But the text of the rule and the interpretive
guidance that our decision in Spencer supplies explain why
the rule reaches the arrangement at issue in this case.
In fact, considering only the common meaning of
the term “business transaction,” there is little doubt that
the term describes the arrangement between respondent
and the clients. The clients, who were in the business of
performing construction projects, entered into an ongoing
arrangement with respondent in which the clients performed
numerous construction projects that respondent asked them
to perform, and respondent agreed to compensate them for
performing those projects. That arrangement fits the ordinary usage of the term “business transaction.” See Webster’s
Third New Int’l Dictionary 302 (unabridged ed 2002) (defining “business” as “a usu[ally] commercial or mercantile
activity customarily engaged in as a means of livelihood
and typically involving some independence of judgment and
power of decision”); id. at 2425-26 (defining “transaction” as
“an act, process, or instance of transacting” or “something
that is transacted”); id. at 2425 (defining “transact” as “to
prosecute negotiations : carry on business”).4
4
We need not decide whether a “business transaction” under RPC 1.8(a)
must always involve an activity that the client—or lawyer—customarily engages
in as a means of livelihood.
728 In re DuBoff
Moreover, our decision in Spencer, and the commentary to Model Rule 1.8(a) that Spencer highlights, identify
important general principles that point to the same conclusion. In the transaction at issue in Spencer, the lawyer
had advised a prospective bankruptcy client that it would
be advantageous to her bankruptcy case if she promptly
applied money from the sale of property to the purchase of a
home. 355 Or at 680. When the prospective client expressed
concern about finding a home that she could afford, the lawyer explained that he also was a real estate broker and could
help her with the real estate purchase.
Id. The client agreed
to have the lawyer represent her both in the bankruptcy and
the real estate purchase, and the arrangement eventually
led to a Bar complaint against the lawyer for violating RPC
1.8(a), among other rules.
Id. at 680, 683.
This court concluded that the real estate arrangement in Spencer was a “business transaction.” Id. at 688.
In reaching that conclusion—as set out above—this court
looked to the commentary to Model Rule 1.8(a) as “persuasive in interpreting the meaning of” RPC 1.8(a).
Id. at 686.
The court explained that the commentary describes the
Model Rule as applying “to transactions that are both unrelated and related to the subject of the legal representation”
and as reaching transactions in which there is “the possibility of overreaching”—not just transactions in which the lawyer and client actually “have differing or adverse interests.”
Id. at 685-86. And we interpreted RPC 1.8(a) as applying
in the same way.
Id. at 686. Although it was the lawyer in
Spencer who was in the business of providing real-estate services and the clients in this case who were in the business
of providing construction services, the arrangement in both
cases was a business transaction between lawyer and client that presented “the possibility of overreaching,” because
the lawyer had “an ‘advantage in dealing with the client.’ ”
See
id. at 685 (quoting ABA Model Rules, Rule 1.8, comment [1]). Thus, as in Spencer, the arrangement here should
be considered a “business transaction” subject to the requirements that RPC 1.8(a) imposes for the protection of the
client.5
5
Arguably, respondent and the clients engaged in a series of transactions—a
new transaction each time respondent asked the clients to perform construction
Cite as 370 Or 720 (2023) 729
But respondent understands Spencer to have identified two exceptions to the otherwise broad category of
“business transactions,” and respondent relies on both
exceptions to contend that his transaction with the clients was not a “business transaction” within the meaning
of RPC 1.8(a). First, respondent asserts that he and the
clients had entered into a “standard commercial transaction” for construction services and, as such, that transaction was not governed by RPC 1.8(a). Second, respondent
insists that the agreement to provide construction services
in exchange for a credit against legal fees is not governed
by RPC 1.8(a), because that agreement was simply a “modification” of his fee agreement with the clients. Both arguments depend on a misplaced reliance on our decision in
Spencer.
Respondent’s first argument depends on a distinction that we noted in Spencer between a “business transaction” and a “standard commercial transaction.” 355 Or at 687
n 8. We observed that the commentary to Model Rule 1.8(a)
indicates that “ ‘standard commercial transactions between
the lawyer and the client for products or services that the
client generally markets to others’ ” are not considered to be
“business transactions” for purposes of the rule.
Id. (quoting
ABA Model Rules, Rule 1.8, comment [1] (emphasis omitted)). We explained that excluding such transactions aligns
with the protective purpose of the Model Rule because, “[i]n
such transactions, the lawyer has no advantage in dealing with the client, rendering the prohibition ‘unnecessary
and impractical.’ ”
Id. (quoting ABA Model Rules, Rule 1.8,
comment [1]). Although Spencer did not expressly consider
whether RPC 1.8(a) includes the same exception, the court
explained that RPC 1.8(a) serves the same protective purpose as the Model Rule.
Id. at 686. Thus, we accept respondent’s premise that the kind of “standard commercial transaction” described in the comment to Model Rule 1.8 is an
exception to RPC 1.8(a) as well. But we reject respondent’s
contention that his transaction with the clients was a “standard commercial transaction.”
services that they then performed. But the parties have treated the entire relationship as a single transaction that either was or was not subject to RPC 1.8(a),
and we accept that framing.
730 In re DuBoff
Although the Commentary to Model Rule 1.8 does
not specifically define a “standard commercial transaction,”
it provides guidance by describing the relevant “standard
commercial transactions” as those “for products or services
that the client generally markets to others.” ABA Model
Rules, Rule 1.8, comment [1]. And we find further relevant
guidance in the parallel section of the Restatement (Third) of
the Law Governing Lawyers, which also excludes “standard
commercial transactions” from the reach of the rule governing “business transactions” with a client. Restatement
(Third) of the Law Governing Lawyers § 126 comment c
(2000). The Restatement describes “standard commercial
transactions” as “those regularly entered into between the
client and the general public, typically in which the terms
and conditions are the same for all customers.” Id.
According to respondent, when he first began hiring the clients to perform construction projects for him—
what respondent calls “Phase 1”—the arrangement was a
“standard commercial transaction,” because the clients performed construction services that they “generally marketed
to others” and for which respondent paid “just as any other
customer would.”
We need not decide whether respondent entered
into a “standard commercial transaction” when he first
hired the clients to complete a construction project, because
the arrangement that respondent describes as “Phase 2”—
the period when he agreed to provide a credit against the
client’s legal fees for portions of the construction projects
that the clients agreed to perform—was not a “standard
commercial transaction.” Although the clients were in the
business of performing construction projects, the terms and
conditions on which they offered their construction services
to respondent differed significantly from the terms and conditions on which they regularly offered construction services to the general public. Mr. Leascu testified that they
typically used a contract proposal that described the total
cost of a construction project. He described the parts of a
project as including not only the out-of-pocket cost for labor
and materials but also charges for Mr. Leascu’s work on the
job as well as “overhead” charges for bringing equipment
and trailers. For the projects that respondent asked them to
Cite as 370 Or 720 (2023) 731
perform, however, the clients offered construction services
on a different and customized basis: they carved out the
portion of each project that represented out-of-pocket costs,
which respondent paid directly; they omitted from invoices
the value of their own work on the project, because respondent had agreed to pay for that work with a credit against
legal fees; and they omitted from the invoices charges for
overhead and profit, for which there is no indication that
respondent intended to pay. There is no evidence that the
clients ever offered construction services to the general public without charging for overhead and profit, and there is no
evidence that the clients ever offered their labor as a standalone service on any terms. As respondent apparently recognized when he sent his July 2015 letter—the “Phase 2”
arrangement was a “business transaction” governed by RPC
1.8(a).
Respondent also argues, alternatively, that the
arrangement after July 2015 was simply a “modification”
of his original fee agreement with the clients, and thus—
according to respondent—not subject to RPC 1.8(a). That
argument relies on another distinction that we identified in
Spencer. We explained that the Oregon Rules of Professional
Conduct regulate an agreement to provide legal services
“differently from other business transactions,” emphasizing
RPC 1.1, which “requires that a lawyer provide competent
legal representation to his or her client”; RPC 1.2, which
“governs when a lawyer can limit the scope of legal representation”; RPC 1.4, which “requires that a lawyer keep clients reasonably informed about certain matters regarding
the legal representation”; and RPC 1.5, which “regulates the
fees that a lawyer can charge a client for engaging in legal
representation.” 355 Or at 687. And, therefore, we concluded
that “RPC 1.8(a) does not apply to agreements to provide
legal services but it does apply to other business transactions.”
Id.
But Spencer addressed only “agreements to provide legal services,” and the July 2015 letter was not an
agreement to provide legal services. The letter does not
describe any legal work that respondent was agreeing to
perform for the clients or describe any fees that respondent
intended to charge for legal work—apart from indicating
732 In re DuBoff
that respondent’s firm “will continue to calculate its billings
based on its then-standard hourly rate.”
Moreover, Spencer’s conclusion that fee agreements
are regulated “differently from other business transactions,” flowed from the premise that such agreements are
separately regulated under the rules governing the lawyer’s legal representation and the fees that the lawyer can
charge. 355 Or at 687. That reasoning and conclusion would
extend to a “modified fee agreement” only if the modified
agreement also is governed by the rules that regulate the
lawyer’s legal representation or the fees that the lawyer can
charge. But respondent has offered no persuasive reason to
conclude that the construction services agreement in this
case, which did not modify respondent’s legal representation or the fees that he would charge for that representation, should be understood as a modified fee agreement that
would be regulated by RPC 1.1, 1.2, 1.4, or 1.5—rather than
as a “business transaction” under RPC 1.8(a).
Instead, the record reflects that respondent and the
clients had multiple fee agreements covering different categories of legal work that respondent had agreed to perform
for the clients. And the July 2015 letter does not modify the
legal work that respondent had agreed to perform under any
of those prior fee agreements. Nor does it modify the rate
that respondent would charge for those services. In fact, it
does not identify any other term of any of the prior fee agreements that is being modified. Rather, the letter describes a
parallel agreement under which the clients would have the
opportunity to “pay some or all of the amounts” that they
owed to respondent’s firm—or would owe in the future—by
performing construction services. Although that parallel
agreement no doubt related to respondent’s agreements to
provide legal services, we held in Spencer that RPC 1.8(a)
reaches “business transactions” that are related to a fee
agreement. 355 Or at 688.
Respondent acknowledges that some agreements
related to the payment of a legal fee can be subject to RPC
1.8(a). But he asserts that the rule applies only when the
lawyer acquires an ownership, possessory, security, or other
pecuniary interest in the client’s business as a result of the
Cite as 370 Or 720 (2023) 733
modification—which respondent contends is not what happened here. Nothing in the text of the rule, our discussion in
Spencer, or the ABA commentary on which that case relied
supports that limitation, however. Rather, the rule prohibits a lawyer from either entering into “a business transaction with a client or” knowingly acquiring a “pecuniary
interest adverse to a client” without “first providing the
advice that that rule requires and obtaining the necessary
consent.” RPC 1.8(a) (emphasis added); Spencer,
355 Or at
686.
We emphasize that RPC 1.8(a) does not preclude
business transactions between lawyers and clients. Rather,
it permits them so long as the rule’s prophylactic requirements are met. See Spencer, 355 Or at 686 (explaining that
RPC 1.8(a) “serves as a general prophylactic against lawyers
entering into business transactions with clients”). Through
those requirements, the rule protects the lawyer’s client
against “ ‘the possibility of overreaching when the lawyer
participates in a business, property or financial transaction with the client.’ ”6
Id. at 688 (quoting and citing ABA
Model Rules, Rule 1.8, comment [1]). As we emphasized in
Spencer, the commentary to the Model Rule explains that
the rule “disfavors an arrangement in which the lawyer has
an ‘advantage in dealing with the client.’ ”
Id. at 685 (quoting ABA Model Rule, Rule 1.8, comment [1]). And “[t]he commentary does not suggest that, for the ‘business transaction’
prohibition to apply, the lawyer and client must have differing or adverse interests.” Id.; see also Restatement § 126
comment b (explaining that “a lawyer who engages in a
business transaction with a client is in a position to arrange
the form of the transaction or give legal advice to protect
the lawyer’s interests rather than advancing the client’s
interests”). We rely on that commentary as “persuasive in
6
During oral argument, respondent urged us to refrain from construing
RPC 1.8(a) in a way that would extend the rule’s reach to transactions in which
a client that regularly offers goods or services to the public at a standard retail
price offers those same goods or services to a lawyer in exchange for a credit
toward legal fees in the amount of the standard retail price. But that hypothetical exchange does not describe the transaction in this case, and we leave for
another day the question of whether such an in-kind exchange tied to the standard retail price for a client’s goods or services would present the possibility of
overreaching that the “business transaction” limit of RPC 1.8(a) is intended to
address.
734 In re DuBoff
interpreting the meaning of” RPC 1.8(a), because Oregon’s
rule was modeled on the ABA rule. See Spencer, 355 Or at
686.
Thus, both the text and purpose of RPC 1.8(a) persuade us that it covers respondent’s transaction with the
clients. Here, the parties agreed that the clients would perform construction projects for respondent and customized
how respondent would compensate the clients for those projects: they agreed that respondent would pay directly only
for the client’s out-of-pocket costs, they agreed that the clients could seek a credit from respondent’s firm for the portion of the cost of the projects attributable to the clients’
personal labor, and they reached no agreement on a mechanism for the clients to receive overhead or profit for the
projects. There is no evidence that the clients offered their
construction business services to the general public on those
terms. And that customized arrangement made it the kind
of transaction that allowed the possibility of overreaching
given the lawyer’s position of advantage. We therefore hold
that the arrangement between respondent and the clients
was a “business transaction” for purposes of RPC 1.8(a).
B. The Requirements for Entering into a “Business Transaction”
Having concluded that respondent’s arrangement
with the clients was a “business transaction” within the
meaning of RPC 1.8(a), we now consider whether respondent
satisfied the requirements for entering into that business
transaction. As pertinent to our resolution of this case, the
requirements in RPC 1.8(a) for entering into a “business
transaction” include that
“the transaction and terms on which the lawyer acquires
the interest are fair and reasonable to the client and are
fully disclosed and transmitted in writing in a manner
that can be reasonably understood by the client;”
and that
“the client gives informed consent, in a writing signed by
the client, to the essential terms of the transaction ….”
The Bar argues that respondent failed to meet
the requirements of RPC 1.8(a) in multiple ways, but we
Cite as 370 Or 720 (2023) 735
address only one: Respondent’s letter did not fully disclose
the “essential terms” of the business transaction. We agree
with the Bar that the July 2015 letter failed to set out terms
that were essential to the transaction, and, for that reason,
we conclude that the transaction violated RPC 1.8(a).
When evaluating conflicts of interest, this court
has required strict adherence to the terms of the conflictof-interest rules. See In re Lawrence, 332 Or 502, 512,
31
P3d 1078 (2001) (explaining that the lawyer violated former DR 5-101(A)(1), which required “full disclosure,” in
writing, of a conflict of interest, and rejecting the lawyer’s
argument that he had complied with the “spirit” of the rule
by taking various actions to protect the client’s interests);
In re Leuenberger,
337 Or 183, 212-13,
93 P3d 786 (2004)
(concluding that the lawyer violated former DR 5-101(A)(1)
when he failed to advise the client to seek independent legal
advice, notwithstanding that the lawyer had notified the client orally and in writing of potential conflict of interest). In
In re Brandt/Griffin,
331 Or 113, 124-25,
10 P3d 906 (2000),
for example, two lawyers sent a disclosure letter to a client
in an effort to comply with former DR 5-101(A), regarding
a waiver of a potential personal conflict of interest. This
court determined that the content of the letter was insufficient to show the nature and extent of the potential divergence of the lawyers’ and the client’s interests.
Id. at 136.
And this court concluded that the lawyers had violated the
rule, even though the client had obtained independent legal
advice about the conflict.
Id. at 136-37. In so concluding, this
court’s focus was on the sufficiency of the writing and not on
the client’s subjective understanding of the conflict of interest.
Id. at 137.
As set out above, RPC 1.8(a) requires that the lawyer
“fully disclose[ ]” the terms of the transaction in writing “in
a manner that can be reasonably understood by the client”
and obtain the client’s “informed consent … to the essential terms of the transaction.” RPC 1.8(a)(1), (3). Although
the multiple subparagraphs of the rule use different phrasing to describe the required disclosure, we understand the
related subparagraphs, in combination, to mean that the
terms are “fully disclosed” in writing when the writing sets
736 In re DuBoff
out the “essential terms of the transaction,” to which the
clients must give “informed consent.” We thus look solely to
the writing that respondent has proffered—his July 2015
letter to the clients—to determine whether it contained the
essential terms of the transaction.7
In pertinent part, the July 2015 letter provided:
“This letter confirms that we have now agreed that you
will pay some or all of the amounts you owe, or will owe
in the future, to The Duboff Law Group with construction
services including but not limited to carpentry, electrical,
plumbing, painting, and the like, instead of by paying with
money.
“Oregon ethical rules consider such an in[-]kind payment arrangement to be a business transaction between
the law firm and [the] client. The DuBoff Law Group will
not be representing you in this business transaction.
“The Duboff Law Group will continue to calculate its
billings based on its then-standard hourly rate and will
credit you for the in[-]kind payments based on your rates
for the work you perform. You will provide this firm with a
1099 form for the value of these in[-]kind payments.”
Respondent argues that there was no ambiguity in
any of the terms in the writing and that the clients were
not confused about the description of the services they were
to provide in exchange for a credit against their legal fees.
Respondent points out that Mr. Leascu had been in the construction industry for decades and argues that he would
have fully understood what was meant by the part of the
letter stating that the clients would pay their legal bill with
“construction services” rather than with money. Respondent
also points to testimony from Mrs. Leascu that she understood that she and her husband “would do repair, remodeling work and [that Mr. Leascu’s] work would be credited
7
As set out in the facts, there is evidence in the record suggesting that the
parties began operating under the arrangement well before respondent sent the
written disclosure of terms in July. If that timing is accurate, then that fact
alone would establish a violation of RPC 1.8(a). However, respondent disputes
that evidence, and we need not resolve the factual issue of when the clients first
performed construction services for which they billed respondent only for out-of-pocket costs, given our conclusion that the July 15 letter does not satisfy the
requirements of RPC 1.8(a).
Cite as 370 Or 720 (2023) 737
toward the bills.” Finally, respondent emphasizes that he
advised the clients to “consider the situation carefully,”
recommended that they consult with another lawyer, and
obtained their written consent to the agreement.
But the letter nonetheless omits other terms that
we conclude were essential to this business transaction. For
example, the letter does not specify how the parties would
determine what construction projects the clients would perform, for whom, when they would be performed, or—most
significantly—how respondent would calculate the amount
of credit that he would provide to the clients for their services. Instead, the letter sets out only that the credit will be
“based on your rates for the work you perform,” which does
not describe how the clients would calculate those “rates” and
whether the credit would include other standard costs on a
construction project, such as overhead, equipment usage or
profits. The failure to specify how the client’s credit would be
determined is a particularly significant omission given that
respondent recognized at the time of his letter that there
was a risk that the clients and the firm might in the future
“disagree as to the value of the in[-]kind payments.”
In addition, the July 2015 letter fails to disclose
other terms that respondent himself considered to be essential to the arrangement, such as which out-of-pocket costs
he would pay and what documentation he would require
from the clients. For instance, when respondent eventually
wrote to the clients to explain that he was terminating his
representation of them, he emphasized:
“The agreement we had was that, when doing any contractor work for us, you would charge us for the actual ‘out of
pocket’ cost of materials and we would pay for those materials. You also agreed that you would keep track of the
time you, your employees and any independent contractors
worked on our jobs ….”
And later, in testimony before the trial panel, respondent
emphasized that he intended the clients to exclude costs for
labor performed by the client’s employees and independent
contractors from the “out of pocket” costs for which respondent would pay:
738 In re DuBoff
“Well, the essential terms are I would—my wife and I would
pay for out-of-pocket expenses for equipment and materials. [Mr. Leascu] would list his labor, his employees’ labor,
independent contractors’ labor; and that would be used to
offset the legal fees he owed my firm.”
The July 2015 letter does not describe that limitation on the
out-of-pocket costs for which respondent intended to pay.
Respondent’s termination letter to the clients also
includes references to terms that were not included in the
July 2015 letter. For example, the termination letter states
that the clients had agreed to “provide a description of the
work performed as well as letting [respondent] know how
much time was spent on each job and what the total labor
costs for that job” were. It also states that the clients “were
supposed to provide those descriptions, times and prices on a
regular basis.” Yet the July 2015 letter contains no mention
of those reporting requirements that respondent believed
were essential conditions of the clients obtaining a credit.
Given those omissions, we are persuaded that the
July 2015 letter failed to “fully disclose[ ]” the “essential
terms” of the transaction by which the clients agreed to provide construction services in exchange for a credit against
their legal fees. And respondent has identified no other writing that disclosed those terms. Thus, respondent’s business
transaction with the clients violated RPC 1.8(a).
C. Summary
We reiterate that RPC 1.8(a) serves as a “general
prophylactic,” Spencer, 355 Or at 686; it does not prevent
lawyers from agreeing to accept services from their clients
in payment for legal fees, but it protects against the possibility of overreaching that arises with such transactions by
requiring that the terms must be fair to the client and fully
disclosed. As we have explained above, respondent’s arrangement with his clients was a business transaction subject to
the prophylactic requirements of RPC 1.8(a), and the July
2015 letter that respondent sent to the clients—purporting
to comply with the requirements of that rule—failed to disclose essential terms of the transaction. We therefore agree
with the trial panel that the Bar has proven by clear and
convincing evidence that respondent violated RPC 1.8(a).
Cite as
370 Or 720 (2023) 739
D. Sanction
Both parties have agreed that, if this court concludes that respondent violated RPC 1.8(a) as alleged, then
a public reprimand would be the appropriate sanction. We
agree that a public reprimand is the appropriate sanction
under the circumstances of this case, but a detailed explanation of that conclusion would not benefit the bench or the
Bar. We therefore impose a public reprimand.
Respondent is publicly reprimanded.
