CBA Record

Y O U N G L A W Y E R S J O U R N A L

HOW AN ILLINOIS ATTORNEY CAN INVEST IN A CLIENT’S BUSINESS The Ins and Outs of Influence By Brett Geschke

S uppose a client comes to your office full of excitement. He has an idea for a big business and the product is ready to be produced, distributed, and sold. All he needs is some investment capital. After reviewing his sound business model and agreeing that the product is a great idea, you are ready to invest. But as his attorney, how should you do it? Illinois Rule of Professional Conduct to Rule 1.8(a), entitled “Conflict of Inter- est: Current Clients: Specific Rules.” Rule 1.8(a) does not prevent a lawyer from investing with a client, or in a client’s business, but it must be followed to pro-

tect both the attorney and the client. Rule 1.8(a) mandates that full disclosure be made by the attorney and that the invest- ment agreement be fair and reasonable to the client. It is presumed that an investment agreement between a lawyer and a client proceeded from undue influence. Illinois State Bar Association Advisory Opinion on Professional Conduct, Opinion No. 9-06, November 1999. The attorney, as the dominant party, has the burden of proof to establish that the transaction was fair, equitable, and just, and that the benefit did not proceed from the attorney’s undue

influence over the client. Bremer v. Bremer , 411 Ill. 454, 457 (1952). To determine whether a lawyer has met his burden of proof to overcome that presumption, the following factors are considered: (1) the attorney made a full and complete disclosure of all relevant information to the client; (2) adequate consideration was given, consistent with contract law; and (3) the client had independent legal counsel before entering into the investment trans- action. Klaskin v. Klepak , 126 Ill.2d 376, 387 (1989) (quoting McFail v. Braden , 19 Ill.2d 108, 118 (1960)).

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