Merri Baldwin Writes Article Outlining Ethics Guidelines for Lawyers Investing in Clients for California Lawyers Association Publication

Shareholder Merri A. Baldwin, who co-chairs RJO’s Attorney Liability and Conduct practice group, wrote an article for the first ethics-focused issue of Business Law News, published by the California Lawyers Association. Titled “Put Your Money Where Your Mouth is: Ethical Guidelines for Lawyers Investing in Clients,” the piece serves as a helpful roadmap for California law firms and lawyers when making investments in clients. 

In the article, Baldwin notes that it is not uncommon for lawyers to invest in their clients, particularly those representing emerging companies. While not strictly unethical, Baldwin says firms and lawyers should take steps to minimize ethical risks as much as possible for them and their clients. This is even more important since most professional liability insurance policies have exclusions for many risks associated with investing in clients. 

“The most significant ethical concern when a lawyer invests in a client is that of conflict of interest: a lawyer who invests in a client may be at risk of a claim of self-dealing,” writes Baldwin. “Related issues include ensuring fairness to the client (in accordance with the business transactions with clients rule), adequate disclosure, and whether a client may give informed consent.”

To minimize those risks, Baldwin says lawyers and firms should make careful decisions about the form and timing of client investments, ensure that the transactions are objectively fair and reasonable, and document the details. They should also pay particular attention to conflicts, disclose all conflicts and ensure the client seeks the advice of independent counsel before entering into the investment transaction. 

There is much more in Baldwin’s article.

Certified in legal malpractice law by the California Board of Legal Specialization, Baldwin regularly counsels law firms and lawyers on legal ethics and law practice management issues. She handles attorney liability and conduct matters, particularly claims of legal malpractice, breach of fiduciary duty, attorney sanctions and motions to disqualify. Baldwin represents attorneys in disciplinary and admission matters before the State Bar of California disputes and in both jury and bench trials. She frequently testifies as an expert witness on legal ethics and attorney standards of care.