These summaries were prepared by McGuireWoods LLP lawyer Thomas E. Spahn. They are based on the letter opinions issued by the Virginia State Bar. Any editorial comments reflect Mr. Spahn's current personal views, and not the opinions of the Virginia State Bar, McGuireWoods or its clients. 
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8-Bills and Fees

16-Lawyer's Personal Interests

Lawyers may accept stock in lieu of or in addition to a client's cash payment for services, but the following rules apply to such arrangements: the arrangements must satisfy the ethics standards for "business transactions" with clients [in Virginia, the requirements include a written explanation of the transaction and written client consent]; determining if the fee is "reasonable" focuses "only [on] the circumstances reasonably ascertainable at the time of the transaction"; the lawyer must fully explain the possible conflicts that might arise (such as diminution in client control of the corporation and ways in which the lawyer's personal interests in the stock value might affect the lawyer's professional judgment); the lawyer should describe the services to be rendered, and whether the stock acquisition is in the nature of an investment, a direct payment for services or a true "retainer" paid for the lawyer's availability; even though it is not required by the Model Rules, the lawyer should recommend that the client seek independent advice; if a corporation's main asset consists of a claim in litigation, the stock might be a prohibited "proprietary interest" in litigation; a lawyer's ownership of a client's stock does not create an inherent conflict of interests because both share an interest in the corporation's success; in the case of conflicts (as when a lawyer's ethical duty requires disclosure of adverse facts that will affect the stock price), the lawyer must subordinate any economic self-interest in favor of the ethics duty, and obtain the client's consent to be involved in rendering advice if there might be a material conflict; in the case of a severe conflict (as when the stock is the lawyer's major asset), the lawyer might be incapable of rendering legal advice; a lawyer-shareholder cannot challenge the client's termination of the lawyer.Some law firms have adopted policies about stock ownership in firm clients, such as: assuring that the percentage of stock ownership in a client is a non-material amount; requiring that a firm lawyer other than the main client contact decide any issues involving conflicts; transferring billing and supervisory responsibility to a lawyer with no stock ownership in the client.

Copyright 2000, Thomas E. Spahn