In re Spencer, 330 P.3d 538

Background

Michael L. Spencer (lawyer and licensed real estate broker) advised client Smith‑Canfield to buy a house to preserve a bankruptcy exemption, and agreed to act as her real estate broker while preparing her Chapter 13 petition.
Spencer prepared the offer, advised a low price, limited contingencies, and advised waiving a professional inspection; the seller accepted and Spencer received about $5,000 commission.
After closing, the City cited a code violation (steep slope/retaining wall); Spencer negotiated a one‑year extension but later withdrew; client suffered financial loss and later lost the house.
Oregon State Bar charged Spencer with violating RPC 1.8(a) (business transactions with clients) and RPC 1.7(a) (current conflicts of interest).
Disciplinary Board panel found violations of both rules and imposed 60‑day suspension; Supreme Court reviewed de novo, found only an RPC 1.8(a) violation, and imposed a 30‑day suspension (commencing 60 days after filing).

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether Spencer’s agreement to act as client’s real estate broker was a "business transaction" under RPC 1.8(a)	Spencer entered a business transaction with client (brokerage) and failed to advise and obtain written consent as RPC 1.8(a) requires.	Agreement to provide real‑estate brokerage is not a "business transaction" within RPC 1.8(a); agreement to provide legal services is not covered.	Held: Brokerage agreement is a business transaction under RPC 1.8(a); Spencer conceded he did not obtain required written advice/consent → violation.
Whether Spencer’s receipt of a real‑estate commission created a current conflict under RPC 1.7(a)(2)	The prospect of a commission posed a significant risk of materially limiting Spencer’s legal representation.	Ordinary prospect of a fee/commission does not by itself create a significant risk; unlike contingency fees, commission does not necessarily create conflict.	Held: Commission alone did not create a significant risk of material limitation; Bar failed to prove an RPC 1.7(a) violation.
Whether the Bar could rely on later city‑violation events as demonstrating an RPC 1.7(a) conflict	Post‑closing problems (city code violation, advice to waive inspection) show Spencer put commission ahead of client’s legal interests.	Those retrospective facts were not alleged as the complaint’s basis; record does not show inspection would have disclosed the code violation; inference is weak.	Held: Alternative retrospective theory not pled; evidence does not show commission prospect materially limited representation.
Appropriate sanction for RPC 1.8(a) violation	Bar sought suspension given client harm and prior discipline.	Spencer noted prior sanction and argued distinctions, but conceded lack of written consent.	Held: Considering duty violated, knowing mental state, actual client injury, prior discipline, and mitigating cooperation — 30‑day suspension appropriate.

Key Cases Cited

In re Samuels/Weiner, 296 Or 224 (1983) (former DR 5‑104(A) discussion on when business transactions require disclosure and consent)
In re Bartlett, 283 Or 487 (1978) (business transactions with clients not inherently unethical; disclosure required when interests differ)
In re Tonkon, 292 Or 660 (1982) (former rule required at least a substantial risk that personal interest would affect lawyer’s advice)
In re Montgomery, 292 Or 796 (1982) (Montgomery I) (public reprimand for undisclosed transaction with client)
In re Whipple, 296 Or 105 (1983) (three‑month suspension for similar business‑transaction violation)
In re Baer, 298 Or 29 (1984) (60‑day suspension for lawyer’s business transaction with client)
In re Montgomery, 297 Or 738 (1984) (Montgomery II) (seven‑month suspension for more serious nondisclosure in client sale)
In re Brown, 277 Or 121 (1977) (30‑day suspension for business transaction and conflicts violations)
In re Schenck, 345 Or 350 (2008) (analysis of mental state: acting knowingly)
In re Hostetter, 348 Or 574 (2010) (treating ABA commentary as persuasive where rule mirrors model rule)
In re Renshaw, 353 Or 411 (2013) (sanctioning framework: duty, mental state, injury, aggravation/mitigation)
In re Spencer, 335 Or 71 (2002) (prior discipline of the accused)