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Wednesday, July 11, 2007

Opinion about lawyer referrals could raise conflict questions

A recent opinion by the New Jersey's Advisory Committee on Professional Ethics says the state's lawyers can refer clients to investment companies in which they own stock and can also receive a share of commissions from the client's dealings. Also, if the investment company advises a client on estate planning, the lawyer can prepare the documents.

Those applauding the decision say it creates ways for lawyers and nonlawyers to team up in ways that are lucrative for both. But the New Jersey Bar Association feels that opening the door for the nonlawyers to have an interest in law practices this way could raise attorney-client privilege issues, in addition to encouraging lawyers to think foremost in terms of potential revenue streams.

The arrangement the advisory committee seems to be endorsing goes beyond simple quid pro quo referrals between friends and associates. One would hope that clients are savvy enough to realize that a lawyer's referral to another firm in which he's partial owner should be taken with a grain of salt at best. But in reality, most people don't have the time or resources to check into such things. That's where the danger could lie.

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