RI-197
March 23, 1994
SYLLABUS
A law firm may loan money to a sports agent for the purpose of assisting the agent with the start of a new sports agency business, provided that the loan is not made for the purpose of receiving referrals of legal business and provided that, if the sports agent is a client of the law firm, the terms of the loan are fair and reasonable and transmitted to the client in writing, and the client has an opportunity to consult with independent counsel regarding the loan transaction.
References: MRPC 1.7(b), 1.8(a), 7.2(c).
TEXT
A lawyer inquires whether the lawyer's firm may loan money to a sports agent to whom the lawyer occasionally provides legal advice at no charge. The money would be used by the agent in the start of a new sports agency business. The lawyer states that the agent may refer sports clients to the law firm for legal representation, but the loan would not be conditioned upon such referrals. The lawyer stated that the money would be loaned interest-free.
Although the lawyer's occasional representation of the agent has been without charge, the payment of a fee is not required to establish a lawyer/client relationship. Since the lawyer has been providing legal services to the agent, the provisions of MRPC 1.8(a) would apply to the loan transaction. Accordingly, the terms of the loan must be in writing and fair and reasonable to the agent, and the agent must be given an opportunity to consult with other counsel regarding the loan arrangement. After making the loan to the agent, the firm would have to ensure that its representation of the agent, or of any sports clients of the agent, is not materially affected by the firm's own interest in receiving repayment of the loan. MRPC 1.7(b).
MRPC 7.2(c) prohibits a lawyer from giving anything of value to a person in return for the referral of legal business. A loan is something of value and an interest-free loan may be of significant value. If there is any understanding between the agent and the lawyer that the agent would refer legal business to the law firm in return for the loan, then the arrangement would be prohibited by MRPC 7.2(c).