ABA Formal Op. 499: A consumer review

So, are you a lawyer in the market for an ethics opinion that largely gets to the right answer but has to do so in such a convoluted fashion that it makes you question just how badly your profession has lost the plot on what we should be doing when it comes to regulation and the like? Would you like it even better if the ethics opinion is both technically correct but pretty clunky on what turns out to be a relatively important issue in a way that might accidentally be a bit chilling for your future conduct?

If so, then ABA Formal Op. 499: Passive Investment in Alternative Business Structures is going to be just the sort of thing you are looking for. If not, then keep shopping.

Now, if you’re the type that wants to get more into the weeds in evaluating someone’s review, here goes.

So, first in the interest of total transparency: I only even started reading this thing because I misunderstood what it was about at first. I really thought it was going to clue me into the secret of how to passively get abs, but I should have known something like that would be too good to be true. Once I figured out my original error, me and my beer gut settled in to really get a better understanding of this thing.

This ethics opinion addresses a relatively straightforward question about whether someone who is a lawyer can make a “passive” investment in a business that is allowed to operate in some other state but not in the state where the lawyer is licensed to practice law. Now, they don’t really say that clearly but that clearly is the question. The authors seem to think the question is more complicated than that because the business is something called an “Alternative Business Structure” and can apparently compete with lawyers and law firms. But, not in the lawyer’s state.

[Which, by the way, reading through this thing tells me that only a couple of states are letting more competition take place for delivering legal services at all through these ABS things. Like just Arizona, Utah, and Washington, D.C. Huh? That seems a crazy low number of places to me.]

Now, the opinion gets to what sure sounds like the correct answer – of course they can. But, man, you won’t believe how complicated the opinion makes answering the question. Wait, maybe I can give you just a snippet to show how bonkers lawyers must be in terms of being all up in their own heads about straightforward stuff. Okay, this is literally the first paragraph of the “Analysis” part of the opinion:

In general, a lawyer may own a business or an investment interest that is separate from and
unrelated to the lawyer’s practice of law. For instance, a lawyer may have an ownership interest in a restaurant, be a partner in a consulting business, invest in a mutual fund, or buy stock in a publicly traded company (collectively “unrelated personal investments”).

Goodness me. I mean … no wonder this opinion goes round and round and round the bend some more.

While it got the big answer right, it then went into all of this stuff about how even though a lawyer could invest some money in an ABS in some other state, it would probably be a conflict for the lawyer if the ABS was then involved somehow in handling something that was adverse to one of the lawyer’s clients. I had to read that part a couple of times. Still sounds pretty crazy to me.

Like, as the world works now, if a lawyer gets hired to represent the company that makes like Snickers bars then the lawyer can’t own shares of stock in Nestle? Or would it be that they can’t own shares of stock in like a company that makes weight loss products? Or would that only matter if say Snickers was suing Nestle over something? Or like if a lawyer represents Microsoft on something, they can’t own any shares of stock in Apple because those two companies are suing each other some times?

And the opinion doesn’t even mention that somehow the size of the investment would make a difference. Surely there’s got to be a different way of looking at things if a lawyer puts $100,000 into an ABS as opposed to $100, right? I bet there are lots of lawyers out there that own small amounts of stock in companies and no one ever spends a minute caring about whether those companies are on the other side of some of their clients.

Anyway, super weird to think that getting an answer to such a straightforward question is so complicated. I guess that’s why lawyers cost so much these days. LOL.

On a final note, probably would have given the opinion three stars but the copy I had to read was a bit mutilated and had some coffee stains on it.

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