Rule 4-400 Prohibits an Attorney from Inducing a Client into Making a Substantial Gift to the Attorney

Holiday gift exchanges commonly extend into the commercial and professional realm with professionals giving token presents to clients and professional acquaintances in the spirit of the season.  Quite often, our clients give us gifts of bottles of wine, fruit baskets and other thoughtful presents.  Those gifts from clients are proper within the scope of the Rules of Professional Conduct and specifically Rule 4-400.  Likewise, a client’s gift to an attorney as a show of appreciation for a job well done does not violate the Rule.

However, Rule 4-400 does prohibit an attorney from inducing a client into making a substantial gift to the attorney, unless the client is related to the attorney.  Rule 4-400 does not define the terms “induce” and “substantial gift”.  The following factual scenario presented in State Bar Formal Opinion no. 2011-180 (available on the State Bar’s web site) provides some guidance to attorneys in attempting compliance with Rule 4-400:

An attorney represented a client in litigation concerning the client’s rental property in Santa Barbara.  The client normally rented the house for $5,000.00 a week.  The attorney wanted to vacation for a week at the client’s Santa Barbara property, but she could not afford the $5,000.00, rent.

The attorney told the client that the attorney had “earned a break and needed to re-charge her batteries and dive back into the case after relaxing a week at the client’s property.”  While the client was financially strapped and could not afford the week’s free rental of her property, the client reluctantly allowed the attorney to spend a free week at her property because the client was deeply invested in the litigation.

The Ethics Opinion found that this attorney violated Rule 4-400.  By telling her client that she needed to re-charge her batteries to get back into the client’s litigation, the attorney had induced her client into providing her with a rent free vacation worth $5,000.00.

The Opinion discusses several factors to consider in determining if such a gift is substantial.  Two factors were applicable here.  The gift of the week’s free rental was substantial from the perspective of the client, because the financially strapped  client lost the $5,000.00 rental fee for the property.

The second applicable factor was that the gift of the $5000.00 free rental was substantial from the perspective of the attorney, because she could not otherwise afford to have a week’s vacation at the property.

A violation of Rule 4-400 requires the two elements of client inducement by the attorney and substantial value of the gift.

There may come a time in your career when your wealthy client gives you a gift of  substantial value as a show of appreciation, without any suggestion or inducement on your part. If that ever happens, I suggest two alternative approaches.  You should write the client a “Thank You” note, including the statement that the gift was unexpected and a total surprise to you.

Or,  you can politely refuse to accept the substantial gift, citing the Rules of Professional Conduct.  Because you never know when, and under what circumstances, the grateful gift-bearing client will turn on you and complain to the State Bar that you induced him to make the gift.