Nicole Strout

Document Type

Research Memorandum

Publication Date




Lawyers owe specific duties to their clients, mainly with respect to reasonable legal advice. If reasonable care is not exercised by an attorney when providing legal advice and services, there is a potential for a malpractice claim against that attorney. For attorneys that represent businesses, however, legal advice can sometimes be blurred with business advice. It is important to note that lawyers are not business consultants and do not specifically owe a duty to their clients to protect them from poor business decisions. The problem occurs when it is hard to distinguish between the legal and business advice. These issues come to light in various types of cases. One example is where a client entered into a business deal that later turned out to be a Ponzi scheme, causing the client to file for bankruptcy.

In Peterson v. Katten Muchin Rosenman LLP, the Seventh Circuit recognized the overlap that can occur between legal and business advice. Because of this overlap attorneys must provide advice regarding the different legal forms and risks associated with possible poor business decisions, especially if one of the risks could result in bankruptcy. Attorneys should now, as a precautionary measure, advise their clients of the risks that could result from their business decisions.


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