Keeping that gift horse from biting you

Given the challenges and stress that often accompany the practice of law, a client's expression of thanks for a job well done can be one of the most gratifying parts of the work. It lets the lawyer know that the work and stress has paid off with a positive impact, probably by, among other things, alleviating a lot of stress for the client.

Sometimes, in addition to a verbal or written expression of gratitude, a client may want to provide a token of appreciation. As much as attorneys may be flattered by gifts - and as much as they may want to avoid offending a client they hope will refer them work or return to them - there are limits to accepting gifts from clients.

Rules of Professional Conduct, Rule 4-400 sets the current standard. It provides that an attorney "shall not induce a client to make a substantial gift, including a testamentary gift, to the member or to the member's parent, child, sibling, or spouse, except where the client is related to the member." As set forth in the rule's discussion, this is a rule of common sense. "Subject to general standards of fairness and absence of undue influence," a lawyer may accept a gift from a client. Even lawyers who "participate" in the preparation of an instrument memorializing a gift which is otherwise permissible are not subject to discipline. But, where the lawyer exerts impermissible influence, discipline is appropriate. Rule 4-400, Discussion (citing Magee v. State Bar, 58 Cal. 2d 423 (1962).

Although the substance of Rule 4-400 is largely expected to remain the same, proposed Rule 1.8.3 clarifies the limitations on lawyers' acceptance of gifts. First, it makes clear that solicitation of substantial gifts from clients is generally unacceptable. Of note, no other jurisdiction uses the word "induce." So, the substitution of the word "solicit" will make California's rule more consistent with others.

Second, it carves out exceptions to the rule for those related by blood or marriage. Specifically, proposed Rule 1.8.3 would ethically permit an attorney either to solicit a family member to provide a gift or to prepare for a relative an instrument that provides a gift to the attorney. And it ties the definition of "a person related to the lawyer" to the broader scope of people "related by blood or affinity" enunciated in Probate Code Section 21374(a), rather than just "the member's parent, child, sibling, or spouse."

Finally, the proposed rule allows the attorney to prepare such an instrument for a non-relative so long as the client receives advice from an independent lawyer, and the independent lawyer provides a certificate of independent review that complies with Probate Code Section 21384. By contrast, current Rule 4-400 provides for only one situation where the attorney may even induce a client to make a substantial gift, "where the client is related to the member," but allows the attorney to prepare instruments memorializing "permissible" gifts so long as there is not undue influence. So, although the proposed rule offers a broader scope of instruments that the lawyer may prepare, it puts in place additional procedural safeguards against undue influence.

The goal of the current and proposed rules is the same. Lawyers should not exert undue influence to obtain something from their clients in addition to their fees. So, from a practical perspective, how do attorneys avoid offending a grateful client without violating their ethical duties?

First, lawyers should not ask their clients for gifts. Of course, overt, express requests for something fall within the prohibition of solicitation. But soliciting can take many forms. And attorneys, who are advocates after all, develop skills at asking for things in many different ways. Suggesting or otherwise intimating that the lawyer would like something from the client would arguably be considered a solicitation. The State Bar of California Standing Committee on Professional Responsibility and Conduct addressed this in a 2011 ethics opinion. There, it concluded an attorney improperly induced a client to provide one week in an expensive seasonal rental property by stating that she "feels that she has really earned a break" and "she would really be able to recharge her batteries and dive back into the case after relaxing for a week" at the property. This does not mean, for example, that a lawyer representing an upscale golf course owner from the East Coast cannot mention that she happens to be an avid golfer. But the attorney should be careful not to suggest that the client offer to fly her across the country for a free round of golf.

Second, keep in mind that there is not a bright-line prohibition on accepting any gift, only "substantial" ones. And the current rule's prohibition relates to those gifts which are "induced" by the attorney. What is substantial is, unsurprisingly, a fact-specific inquiry. Some factors may include the economic positions of the lawyer and client, the type of representation, whether there is a social relationship, on how long the attorney and client have known one another. Such optics may determine why the same gift may be "substantial" from one client, but not from another. The Comment to Section 127(2) of Restatement Third of the Law Governing Lawyers provides an example. "To a poor client, a gift of $100 might be substantial, suggesting that such an extraordinary act was the result of the lawyer's overreaching. To a wealthy client, a gift of $1,000 might seem insubstantial in relation to the client's assets." Of course, if it is still "substantial" compared to the lawyer's assets, that may be an indication that the lawyer has improperly "induced" or "solicited" such a gift.

Finally, lawyers should remember that they also may have an obligation to share what they receive with their partners. To the extent that a gift has more significant value and can be tied to a professional relationship, there could be a question about whether the item was, in reality, a means of compensating the attorney. To the extent that a court could potentially look at the gift as crossing the line into being a portion of the fee, lawyers must not only consider whether the combined value of the gift and the amounts billed is conscionable, but whether the partnership agreement requires the gift be treated as one to the firm, rather than to an individual.

When the circumstances surrounding a gift run afoul of ethical obligations, lawyers must decline to accept. Again, this may be difficult because of the symbolism involved. Most people like to feel appreciated and a gift is often a symbol of precisely that. Plus, it may feel awkward telling a client, "Thanks, but no thanks." In the long run however, the client relationship may grow from the experience. Refusing a gift lets the client know that the attorney has strong character, respects the client, and has motivations beyond maximizing personal gain. That impression can be a lasting one, and potentially worth far more than a one-time exorbitant gift.