Barter Arrangement Violated Business Transactions Rule

The Oregon Supreme Court has sustained a public reprimand for a violation of the “business transactions with a client” rule.

The attorney was admitted in 1977 and had represented the clients and their construction business for several years

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.

A barter arrangement was made

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 agreement letter referenced ethics rules and described potential risks.

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 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.

Eventually, and after years of dealings

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, nui -sance, breach of contract, and unlawful trade practices, and it sought almost $1,000,000 in damages. 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.

Leading to charges; Respondent contended that the arrangement was not a business transaction and that his disclosures complied with Rule 1.8(a).

The court

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.”

The “standard transactions” comment

We accept respondent’s premise that the kind of “standard commercial trans-action” 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.”

…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).

Disclosure and consent

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.

…Given those omissions [described in the opinion], we are persuaded that the July 2015 letter failed to “fully disclose[ ]” the “essential terms” of the transaction by which the clients agreed to pro-vide 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).

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.

(Mike Frisch)