ETHICS: LAWYERS DOING BUSINESS WITH THEIR CLIENTS

Moderator: DEENA B. KALAI, Austin Deena Kalai, PLLC

Panelists: RICKY ANDERSON Anderson & Smith One Arena Place 7322 Southwest Freeway, Suite 2010 , TX 77074 (713) 621-5522 (713) 995-1499 Fax [email protected]

W. AMON BURTON, JR., Austin Attorney at Law

State Bar of 22ND ANNUAL ENTERTAINMENT LAW INSTITUTE October 25-26, 2012 Austin

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Deena Kalai Deena Kalai, PLLC

Deena Kalai earned her law degree at the University of Texas at Austin. She is licensed in Texas and New York, and has offices in both Austin and Manhattan.

Deena represents artists and businesses engaged in entertainment, intellectual property and technology, including film, music, television, fashion, literary publishing, and mobile/interactive media. Deena has a particular interest in fair use and assists many documentary filmmakers each year in assessing the applicability of this important copyright doctrine to their projects.

Always active in her community, she is affiliated with or donates time to many organizations including, the Texas Motion Picture Alliance, the Austin Film Society, Volunteer Legal Services, The College of the State Bar of Texas, and other professional associations in Texas and New York. Deena frequently provides pro bono services for low-income Texans, in addition to her pro bono activities for entertainment industry clients. She has been recognized by The Pro Bono College of the State Bar of Texas, and has been awarded the Judge Suzanne Covington Award in connection with her pro bono services. She has lectured at several legal workshops, at the University of Texas, and at various film conferences.

Deena has a master’s degree in English from the University of Texas at Austin, with a concentration on hip hop and feminist film theory. She completed her undergraduate education at the University of , where she graduated magna cum laude and Phi Beta Kappa.

Select Publications and Speaking

“Film Production Agreements” Texas Bar CLE Entertainment Law Institute, October 20-21, 2011.

“Is it Fair Use? Assessing Transformativeness in Film, Visual Art, and Audiovisual Works,” Bar Association, August 28, 2011.

“A Practical Guide to Working With Documentarians and Fair Use,” Texas Bar CLE Entertainment Law Institute, October 1-2, 2010

“Entertainment Property Financing” Texas Bar CLE Entertainment Law Institute, October 1-2, 2009.

“Does a Little Go a Long Way? Texas Entertainment Industry Economic Incentives,” Texas Bar Journal, Vol. 71, 9, October, 2008.

“Welcome to Dallas, Louisiana: Economic Incentives and the Entertainment Industry,” Texas Bar Journal, Vol. 70, 1, January, 2007.

Lectures, panels, and workshops for institutions and organizations including the University of Texas, Reel Women, Network Austin, SXSW, and the Austin Film Festival.

2203 East Fifth Street 315 Madison Avenue Austin, Texas 78731 Suite 901 512-542-9054 New York, New York 10017 212-842-9792 [email protected]

RICKY ANDERSON ATTORNEY AND COUNSELOR AT LAW ONE ARENA PLACE 7322 SOUTHWEST FREEWAY SUITE 2010 HOUSTON, TEXAS 77074 (713) 621-5522 Office, (713) 995-1499 Facsimile www.AttorneyRickyAnderson.com Email: [email protected]

BIOGRAPHY Ricky Anderson, is a 1979 graduate of Benton Harbor High School, attended Prairie View A & M University, receiving a Bachelor of Business Administration in 1983, and his Juris Doctor Degree, from Texas Southern University’s Thurgood Marshall School of Law in 1992, and was admitted to the State Bar of Texas, in 1992.

Attorney Ricky Anderson, has been the Managing Partner of the Law Firm of Anderson & Smith P.C., since 1994, with their office in Houston, Texas, as well as, an Adjunct Professor at Thurgood Marshall School of Law since 1998, where he Lectures Entertainment Law, Music Industry Contracts, and Trial Preparation. The National Bar Association’s Entertainment Attorney of the Year, 2006-2007, recipient of the National Bar Association’s Presidential Award, 2008, the National Bar Association Chair, Entertainment Sports and Arts Law Section 2010 to Present, National Bar Association’s Alternate Chair, Entertainment, Sports and Arts Law Section, 2008 - 2010, Advisor to the Grammy Board of Governors Texas Chapter 2010 – 2011, Grammy U Advocate of Year 2010 - 2011, Grammy Governor for The Recording Academy, Texas Board of Governors 2007 - 2010, 2011 - Present.

The Law Firm of Anderson & Smith P.C. represents Celebrities, Comedian-Actor , Host of , NBC's Steve Harvey Talk Show, Theater Box Office success "Think Like A Man", , Steve Harvey’s Big Time, New York Times, Number One Best Seller, Wall Street Journal, Number One Best Seller "Act Like A Lady, Think Like A Man", "Straight Talk, No Chaser", and the Nationally Syndicated Steve Harvey Morning Show, Show Time at the Apollo, Kings of Comedy, The Fighting Temptations, Love Don’t Cost A Thing, You Got Served, Racing Strips; Actor Isaiah Washington, of ABC’s Grey’s Anatomy, NBC’s Bionic Woman, Spike Lee’s Crooklyn, Clockers, Girl 6, Exit Wounds, Romeo Must Die, True Crime, Bulworth, Out of Sight, Love Jones, Dead Presidents, Stonewall, Dancing in September, Get on the Bus, and Forest Whitaker’s Hurricane Season, Actress Cassi Davis, of Tyler Perry’s House of Payne, Four (4) Time Grammy Award Recipient, Gospel Great Yolanda Adams, Nationally Syndicated Yolanda Adams Morning Show, Rushion McDonald of "Sister/Sister", The "Jamie Foxx Show", "The Parkers", MTV’s "Barber Shop", The Hoodie Awards, Academy Award Winner and Golden Globe Winner, Comedian-Actor Mo’Nique of BET’s The Mo’Nique Show, "The Parkers", "Fat Chance" "Charm School", and the Nationally Syndicated Radio Show Host of The Mo’Nique Show, Queens of Comedy and ""; Three (3) Time Grammy Award Winning Gospel Duo Tina Campbell, and Erica Campbell p/k/a "Mary Mary", also Celebrity Judges on BET’s "Sunday’s Best", Actor Richard T. Jones of "Judging Amy", Terminator, The Sarah Conor Chronicles, Kathy Sapp, Executive Producer of Fox's Judge Alex, Oprah Winfrey Network Suze Orman Show, Comedian –Actor , of the Rickey Smiley Morning Show, Host of the BET’s Comic View, and ABC’s Nationally Syndicated Doug Banks Morning Show, David A. Arnold, Actor and Writer for Tyler Perry’s "Meet The Browns", Michael Colyar of BET’s "Live in LA"; Comedian-Actor , former Host of Showtime at the Apollo, and starring in such films as Necessary Roughness, Houseguest, First Kid, , and Goodburger; R & B Artist "Rome", Total Entertainment; J. Anthony Brown, of the "Tom Joyner Morning Show" and WB’s "Like Family" Comedian Adele Givens "Queens of Comedy", "Why Did I Get Married", "Girlfriends", "Barbershop", "The Hugleys", 's "Are We There Yet", "The Parkers", "Tracey Takes On", "The Players Club", "", "Martin", "Def Comedy Jam"; WNBA’s three time MVP and four time WNBA World Champion, Houston Comet’s Cynthia Cooper; former Houston Oiler, and Tennessee Titan’s Eddie Robinson, the Late Christopher Rios, professionally known as "Big Pun", to name a Few. Weekly broadcast Television Shows (Talent/Production) are, The Mo’Nique Show, Family Feud, NBC's Steve Harvey Talk Show, The Steve Harvey Project, Judge Greg Mathis, Judge Alex, Tyler Perry’s House of Payne, Tyler Perry’s Meet The Browns, The Judge Mathis Project (solving murders in the African American Community), Ice Cube's "Are We There Yet", Sunday’s Best, The Steve Harvey Show, ‘Like Family", Warner Brothers, "The Parkers", UPN, Showtime @ Apollo, Sister Sister, UPN, "Steve Harvey’s Big Time", Warner Brother, Coming to the Stage, BET, and Comic View, BET.

In addition to the network television, movies, feature films, pay per view and HBO deals that Attorney Ricky Anderson develops, he is the Former Chairman and CEO of the Black Broadcasting Network Inc., is the former CEO and President of CBS Records, Inc., A Texas Corporation and the majority shareholder in Big City Enterprises, and Qudel Promotions, Inc., producing national concerts such as the "Kings of Comedy", "Jazzfest", "the Boys are Back", and "the Hip Hop Comedy Reunion Tour". He is also the Executive Producer of The Nationally Syndicated Music Video Television Show, "Big City", and such Independent Feature Films as "Renegade", "Beach Party Weekend", "A Freakin Documentary with Shamar Moore", and "Beach Party".

W. Amon Burton, Jr. Adjunct Professor

Education LLB University of Texas at Austin MA Wichita State University BA Texas Tech

Amon Burton has been an adjunct professor at the University of Texas School of Law since 1988. He teaches professional responsibility, legal ethics and lawyer liability. He is a member of the American Law Institute and served on the ALI's Members Consultative Group on the Restatement of the Law Governing Lawyers (Third). He currently serves by appointment of the National Conference of Bar Examiners as a member of the drafting committee for the Multistate Professional Responsibility Examination. He served for many years as a member of the Texas Supreme Court’s Professional Ethics Committee that writes ethics opinions interpreting the Texas Disciplinary Rules of Professional Conduct, and served as the Reporter for the Task Force on Judicial Ethics that drafted the revised Texas Code of Judicial Conduct in 1992. His most recent publications include Ethical Dilemmas in the Practice of Law: Case Studies and Problems, co-authored with John S. Dzienkowski (Thompson/West 2006) and "Reexamining the Role of In-House Lawyers After the Conviction of Arthur Andersen," co-authored with John S. Dzienkowski, which appeared in the book, Enron: Corporate Fiascos and Legal Implications (Foundation Press, 2004). He has practiced law for over thirty years in the fields of corporate, securities, and business law.

Ethics: Lawyers Doing Business with Their Clients Chapter 1

TABLE OF CONTENTS

ATTORNEY DOING BUSINESS WITH THEIR CLIENT ...... 1

TYPES OF DEALS WITH CLIENTS ...... 3

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Ethics: Lawyers Doing Business with Their Clients Chapter 1

Entertainment Law

Quick Notes

Attorney Doing Business with their Client

An Attorney's Fiduciary Duty to the Client is so essential to their relationship that an Attorney doing business with a Client is held to a much higher standard of conduct than anyone else.

Rule 1.8(a) of the American Bar Association Model Rules of Professional Conduct, for instance, imposes strict disclosure requirements on an Attorney who engages in a business transaction with a Client.

First, the terms of the transaction must be fair and reasonable for the Client; and the Attorney must explain them, in writing, in a way that is reasonably comprehensible to the Client.

Second, the Attorney must inform the Client, in writing, that it is advisable to consult with another Attorney about the transaction, and give the Client a reasonable opportunity to do so.

Third, the Client must sign an informed consent to the transaction disclosing that the Attorney is representing the Client in the deal.

Failure to comply completely with all of these requirements may result in the Attorney's suspension or disbarment, even if the deal is to the Client's benefit.

Doing business with a Client includes such things as loaning money (a particularly bad idea), obtaining an ownership interest in a Corporate Client, joining in a Business Venture for a Client and receiving a Security Interest in a Client's property to protect your fees.

Ethics rules regulate but do not forbid lawyers from doing business with clients. Since October 1, 1998 the Michigan Rules of Professional Conduct (MRPC) are the ethics rules that govern the relationship between attorneys and clients. In particular, Rule 1.8(a) protects client interests by requiring that business transactions between client and lawyer be objectively fair and reasonable to the client.

The purpose of MRPC I .8(a) is to safeguard the client's interests against the lawyer's superior knowledge of the intricacies of the deal and the lawyer's frequent familiarity with the client's business and personal affairs, both of which are said to give the lawyer an unfair advantage over the client. Moreover, in business dealings between a client and a lawyer, the attorney has the burden of proving the fairness of the transaction or it will be set aside by the courts. Kukla v Perry, 361 Mich 311, 105 NW2d 176 (1960).

MRPC 1.8(a) also obligates the lawyer to give the client a written explanation of the details of the proposed business transaction in language the client may reasonably understand. This advice should identify the risks and disadvantages to the client in the proposed transaction.

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Moreover, the lawyer must give the client an opportunity to seek the advice of independent counsel on whether to go forward with the deal.

There is no requirement that the client actually consult a lawyer. The client may decide to consult another trusted advisor such as an accountant, tax specialist, or business person. An opportunity to obtain competent independent advice is what is required since an independent advisor may lend objectivity to the proposed business arrangement. The lawyer may proceed only after the client has been given a reasonable opportunity to consult with disinterested counsel and the client consents to the proposed transaction in writing.

Prudence suggests asking a client to confirm receipt of this admonition in writing. In most routine matters involving products or services the client regularly sells, this suggestion should not be necessary. The commentary to this rule points out that the standard does not apply to everyday commercial transactions between the client and the client's lawyer for services or products the client routinely markets to others such as medical or banking services since under those circumstances the lawyer is said to have no special advantages.

Since a showing that the client suffered no economic disadvantage in the transaction is unnecessary to find that MRPC 1.8(a) has been violated, business dealings by lawyers with their clients are very dangerous. If the deal sours, lawyers inevitably become the targets of a malpractice suit, attorney grievance proceeding, or both. Regardless of the wording used in applicable ethics rules, courts and disciplinary agencies closely scrutinize business transactions between clients and their lawyers. Thus the admonition against and wisdom of proceeding with such transactions must be very carefully considered.

A common example of a business transaction with a client requiring application of MRPC 1.8(a) is the lawyer's taking of a mortgage on client-owned real estate or a security interest in client personalty. MRPC 1.8(j) allows for a lien "granted by law" to secure the lawyer's fee and advances for costs. See Proctor: Clarifying Liens, 73 MBJ 690 (July 1994) and George v Gelman, 201 Mich App 474, 506 NW2d 583 (1993) for a discussion of this topic.

Former Clients: Confidences When a lawyer contemplates entering into a business investment with a former client, arguably MRPC 1.8(a) does not apply because the lawyer is not expected to exercise independent professional judgment on behalf of a person with whom the lawyer has no current attorney-client relationship. However, the use of confidential client information to the detriment of that former client or to promote the lawyer's own personal interests is prohibited by ethics rules unless the former client gives advance consent to the lawyer's use of the former client's confidences and secrets. MRPC 1.6(C)(1) and MRPC 1.8(b).

Some lawyers mistakenly believe that client confidentiality ceases at the conclusion of the lawyer-client relationship. Confidentiality continues indefinitely—even after the client's death or the lawyer's discharge—unless client consent is given or one of the other permissible exceptions itemized in MRPC 1.6(c) exist or disclosure is triggered by MRPC 3.3. See Michigan Informal Ethics Opinion RI-72 (1991) and JI-31 (1990). Thus, while MRPC 1.8(a) may not apply to lawyer business

2 Ethics: Lawyers Doing Business with Their Clients Chapter 1 transactions with former clients, this activity is subject to challenge if the lawyer takes advantage of knowing the former client's confidential information.

Types of Deals with Clients

Buying/getting stock or taking options in Clients If taken as a fee, SCR 20:1.5 also applies Loaning money to Clients or getting loans from Clients Co-investing with Clients in assets or stock Asset purchase/sale from Clients Providing compensated non-legal services to Clients Especially when a Lawyer owns a business and refers Clients to it or invests Client money in it.

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