I have written before on the hazards of lawyers investing in their clients in the IPO context (Counselor, Gatekeeper, Shareholder, Thief:  Why Attorneys Who Invest in Their Clients in a Post-Enron World Are "Selling Out," Not "Buying In").  Even though my titles have gotten shorter since 2003, I haven't changed my mind.  I focused on how holding an equity interest in an IPO situation changes conflicts with a corporate attorney's duties to advise clients to either walk away or disclose damaging information.  This conflict could make it easier for investors to allege securities violations against the attorney.  Prof. Dzienkowski at Legal Ethics Forum uses a recent case to discuss the risk of being sued for malpractice in a private stock sale.

In that case, East Coast Venture Capital (and a shareholder) are suing its attorney at Brown Rudnick for giving them faulty advice regarding a private stock sale while the company was planning an IPO and in fact had filed its registration statement with the SEC.  The company is claiming that the attorney gave them faulty advice and a bad opinion letter because the partner wanted to see the IPO go through and increase the value of his shares, which he had been given in lieu of attorney fees in 1998 and held in the name of his wife.

The New York Law Journal article points at that because so many attorneys accepted shares in companies in the 1990s that we will see more of these types of lawsuits.

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