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Y O U N G L A W Y E R S J O U R N A L
34
NOVEMBER 2016
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)).