Small Business Representation

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(c) Yan Ross www.AvalonStrategies.com

Small Business

Representation

Yan Ross

Avalon Strategies 602-703-3336 [email protected]

Ethical Issues for

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www.AvalonStrategies.com

Welcome & Introduction

Presenter - Yan Ross

– Avalon Strategies

– Institute of Consumer Financial Education

– Professional & Educational Background & Experience

2 DISCLAIMER: The following materials and accompanying Access MCLE, LLC audio program are for

instructional purposes only. Nothing herein constitutes, is intended to constitute, or should be relied on as, legal advice. The author expressly disclaims any responsibility for any direct or consequential damages related in any way to anything contained in the materials or program, which are provided on an “as-is” basis and should be independently verified by experienced counsel before being applied to actual matter. By proceeding further you expressly accept and agree to Author’s absolute and unqualified disclaimer of liability.

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Why This Pair of Courses

• Small Business

Substantive Course for General CLE

• Small Business & “ROI on Ethics” Course for Ethics CLE

• Recommended to take both courses, as they complement each other

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This Hour: The Ethics Prism

• Three Main Themes – Small Business

Practice

– Self-Governance &

Purposes of Rules

– “ROI” on Ethics

• WHY Good Ethics is Good Business

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Participants & Subject

Matter

• The General CLE course covers an

Approach to Growing Small Business Clients • BUT what about the

Ethical Issues for You and Your Clients?

• Can you help them

operate ethically – and decide how to do so?

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Brief Background on

Small Business Practice

• Overview hour –

Concepts & Practices • Ethics hour – Legal

Profession’s Ethics, Client Needs &

Broader Perspective • Some Similarities • Some Distinctions

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OVERVIEW

Small Business Client Objectives

• Growth

• Profitability

• Client Relationship

• Other “Mandarins”

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Some Examples of Small

Business Issues

• Business Plan

• Human Resources • Liabilities & Risk

Management • Real Estate • Finance

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Role of the Attorney

Representing a Small Business

• Start-Ups

• Internal Growth

• M&A

• Exit Strategies

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Crossroads of Ethics

• Application to Lawyers • Perspective of Firm &

Client & System • Potential Role as

Trusted Advisor & Facilitator

• Community/Society

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Legal Ethics?

• Could be an oxymoron • Could be a burden • Could be an opportunity

• “Doing well by doing good”

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• As has been

observed by

philosophers:

– Law operates from the outside in

– Ethics operates from the inside out

Ethics –

A Bi-Directional View

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Ethical Scope

• What are the relevant provisions &

requirements?

• Does this apply to myself, to my firm?

• What about the ethical vs. practical question: If not “required,” is it advisable to be ethical anyway?

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Significance for Attorneys

• Duty to Client

• Duty to Other

Parties

• Duty to

Court/System,

Society as a Whole

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• Ethics Grow out of Relationships

– Attorney - Client Relationship

– Process - Society Relationship

• “POV” – Model Rules Preamble - Scope

Basic Concepts

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Model Rules of

Professional Conduct

• Preface & Preamble • Rule 2.1 “Advisor” • Rule 1.1 • Rule 1.2 • Rules 1.7 – 1.9 • Rule 3.9 • Rule 4.4(a) • Rule 7.1 16

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Model Rules of

Professional Conduct

• Preamble: A Lawyer’s Responsibilities • Client-Lawyer Relationship • Counselor • Advocate • Transactions with

Persons Other than Clients

• Information about

Legal Services

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Scope of Professional Rules - I

• Preamble: “A LAWYER'S

RESPONSIBILITIES”

– Advisor – Advocate – Negotiator – Evaluator

• The Rules do not,

however, exhaust the moral and ethical

considerations that

should inform a lawyer

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Scope of Professional Rules - II

• Examples from Preamble: “A LAWYER'S RESPONSIBILITIES” – Special Responsibility – Competent, Prompt, Diligent

– Uphold Legal Process – Seek Improvement – Personal Conscience – Conflicting

Responsibilities

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Scope of Professional Rules - III

• Preamble: “A LAWYER'S RESPONSIBILITIES” – Self Governing – Government Regulation “Obviated” – Public Interest – Preservation of Society – Rules of Reason 20

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Ethical Issues Rise Above the

Minimum “Legal” Requirements

• Illustrative, not

Exhaustive

• Principle controls

over Provision

• Special Protected

Relationship

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Rules of Professional

Conduct

Rule 2.1 Advisor

• In representing a client, a lawyer shall exercise

independent professional judgment and render candid advice.

• In rendering advice, a lawyer may refer not

only to law but to other considerations such as moral, economic, social and political factors, that may be relevant to the client's situation.

• Double-Edged Sword

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Rules of Professional

Conduct

• Rule 1.1

• A lawyer shall provide competent

representation to a client.

• Competent representation requires the

legal knowledge, skill, thoroughness and

preparation reasonably necessary for the

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Rules of Professional

Conduct

• Rule 1.2

• Scope of Representation

• Allocation of Authority

• Limitation with Informed Consent

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Rules of Professional

Conduct

• Rule 1.7 – 1.9

• Conflicts – Enough Material for a Full Hour

• Current Clients

• Former Clients

• Imputation

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Rules of Professional

Conduct

• Rule 3.9

• Advocate in Nonadjudicative

Proceedings

• Disclosure of Representation

• Before governmental body

• Does NOT apply to bilateral

application or compliance matters

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Rules of Professional

Conduct

• Rule 4.4(a)

• Respect for Rights of Third Persons

• Principally regarding Receipt of

Materials or Documents

• Distinct from Rule 1.7 (Conflicts)

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Rules of Professional

Conduct

• Rule 7.1

• Communications to Client

• Prohibits False or Misleading

Statements

• Prohibits Raising Unjustified

Expectations

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Rules of Professional

Conduct

• Some Others That May Apply

• Confidentiality & Unauthorized

Disclosure (Rule 1.6)

• Evaluation for Use by Third Persons

(Rule 2.3)

• Fairness to Opposing Party (Rule 3.4)

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Advisory Opinions

• State By State – Examples

• Conflicts with Representation of Local Governments

• Conflict of Interest; City Outside Counsel

• Attorney Involvement with Land Title Company – Reliance is Voluntary

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Traps for the Unwary

- I

• Contingent Fee

Case Model

• Payment out of

Closing

• Equity

Participation

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Traps for the Unwary

- II

• Advancing OOPE

• Service on Board

• Legal Opinions for

Transactions

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Traps for the Unwary

- III

• Professional

Liability

• Slippery Slopes

• Use Your

Imagination

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Emphasizing ETHICS

• Precept:

– Do what’s right – Not just what’s

required • Politics:

– OK, I’ll do it, but despite law, not

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The Negative Side:

Risk Assessment

• Proportional Response to Threat of Loss

• Guidelines by Activity & Experience

• Periodic Review & Evaluation

• Not Just Small Business

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Risk Management & Ethics

• Dial not a Switch

• Example: Managing the Risk of Compromise of Client or Party

Information

• Manage the Risk of Resulting Damages • Client Can Become

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What if You Learned Your Client

Was Not “Playing Fair?”

• Would you Counsel Disclosure or Other Changes?

• Would you Proceed with a Deal Anyway? • What if you Choose

NOT to Proceed? • How would you

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Other Practical Issues

• Firm Relationships

– Corporate Opportunities – Whose time is being

used? – How am I compensated? • Current Cases/Matters – Preferential Priorities – Future Implications • Bar/Community Effects – Beyond the Case at

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R.O.I. on Ethics

• "ROI" is a financial

term meaning

“Return on

Investment"

• It is used here to

draw attention to

the "ROI on

Ethics."

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R.O.I. on Ethics

• Ethical practice is

often treated as a cost or burden, and compliance with

Professional Rules may be perceived as being burdensome or costly (and in some cases unnecessary).

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R.O.I. on Ethics

• Ethical requirements of the small

business counsel, viewed through a

prism of Ethics, actually reflect a

productive and positive exercise, with

benefits to the client (and the firm) that

outweigh the cost of implementation.

• There are, of course, many intangibles,

but ultimately, the ROI can be

demonstrated and used to advantage.

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Some Tangible Costs &

Benefits

• Costs – Attorney Time – Staff Time – Recordkeeping – Overhead • Benefits – Operating Efficiencies – Collections 42

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Some Intangible Costs &

Benefits

• Costs – Distraction from Other Activities – Perception & Resentment of “Wasted Effort” • Benefits – Strengthening Relationships – Reputation 43

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What Does it Cost You

to Get a New Client?

• Networking • Advertising • Speaking engagements • Publishing articles • Referral fees • Lead services

• Unaccounted for time &

even money must be calculated

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What Does It Cost When

You Lose a Client?

• For whatever reason? • On the other hand,

what is the value of a long-term trusted client relationship? • Receivables as well as long-term prospects 45

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What about the “ROI” part?

How does that work?

• In perspective, the

costs, both tangible and intangible, of acting in an ethical manner are minimal.

• Measuring our

treatment of our clients by whether a particular course of action is best for them – or whether indeed it might benefit us to their detriment –

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How Does It Translate?

• Beyond the Code of

Ethics, the value placed on ethical behavior by those

with whom you come into contact

professionally and personally indicates that the benefits of ethical behavior

outweigh the costs.

• Look into your own

experience

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What if there were no

Code of Ethics?

• What would you do? • How would you

behave?

• How would you be

perceived?

• How would it affect

you in establishing & maintaining

professional relationships?

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Current Trends

• Financial

Representations &

Warranties

• Concentration v.

Competition

• Contentiousness,

Courtesy & Civility

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A Personal Note

• “Clients are

like sheep”

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Questions to Ponder

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• How can I develop

my small business

legal skills?

• How can I best

serve my small

business clients?

• How can I make a

positive impact on

my community?

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Important Notice

• Mr Ross is an attorney, and this CLE course deals with a variety of legal issues; however, nothing in

these written materials or oral presentation should be considered as an expression of a legal opinion.