Legal Memorandum: Lawyer's Non-legal Services in NY

Issue: If a law firm, or one of its partners, signs a finder’s agreement with a seller and the law firm is subsequently engaged by another client who may be a prospective buyer either in respect of the seller’s transaction, or in a wholly separate transaction, what disclosures are needed on part of the law firm to either party?

Area of Law: Ethics & Professional Responsibility
Keywords: Non-legal services; Representation of the client; Conflict of interest
Jurisdiction: New York
Cited Cases: 213 A.D.2d 11; 630 N.Y.S.2d 372
Cited Statutes: Disciplinary Rules of New York's Code of Professional Conduct DR 1-106, DR 5-101(A); N.Y. State Bar Ass'n Op. 752, Opinion 784
Date: 07/01/2008

Disciplinary Rules of New York’s Code of Professional Conduct address such questions.  The N.Y. State Bar Association’s Committee on Professional Ethics (the Committee) made clear in Opinion 752 that a lawyer is barred from “acting as a broker and a lawyer in the same transaction.”  N.Y. State Bar Ass’n Op. 752 (2002).  Although the Committee noted that this issue in earlier opinions focused on real estate transactions, it did not limit its opinion to real estate.  Discussing the extent to which a lawyer may provide both legal and non-legal services in the same transaction after the 2001 promulgation of DR 1-106, the Committee concluded that DR 5-101(A) continues to prohibit a lawyer from offering non-legal services when “the nonlegal business activity would create a conflict with the representation of the client.”  Id.  “In the case of . . . brokerage businesses . . . , the existence of the personal interest created by prospect of earning fees from the nonlegal business was held [by the Committee in earlier opinions] to affect the exercise of independent legal  judgment.”  Id. (emphasis in original).  The Committee “concluded [in Opinion 752] that the lawyer’s financial interest in certain non-legal businesses – such as brokerages – could make it impossible under the rule governing personal conflicts of interest, DR 5-101(A), for the lawyer to render unconflicted professional services in matters where the non-legal business is involved.”  N.Y. State Bar Ass’n Op. 755 (2002).  To the same effect was the Appellate Division’s conclusion in In re Leff, 213 A.D.2d 11,