## Facts

- The Upper Deck Company, a start-up baseball-card business, needed a $100,000 deposit by August 1, 1988, to secure special paper and avoid jeopardizing a key licensing arrangement.
- Upper Deck’s corporate attorney, Anthony J. Passante, Jr., arranged for the funds to be loaned to a company controlled by an Upper Deck director; the money was wired on July 29, 1988.
- That evening, Upper Deck’s directors orally agreed among themselves, “in gratitude,” that Passante “should have three percent” of Upper Deck’s stock.
- No written stock-grant agreement or formal documentation was executed.
- Passante did not advise the board to seek independent legal counsel regarding the stock transfer, despite the conflict inherent in a lawyer obtaining a substantial equity interest from a client.
- Upper Deck later refused to provide the 3% equity interest, and Passante sued for breach of an oral contract, seeking the value of the stock.

## Issues

1. Whether the directors’ oral promise of 3% of the company’s stock to corporate counsel constituted an enforceable contract supported by consideration rather than a gratuitous, unenforceable gift.
2. Whether the promise was unenforceable as a matter of public policy because the lawyer failed to comply with ethical and fiduciary duties governing business transactions with a client, including disclosure, fairness, and advising the client to seek independent counsel.
3. Whether judgment notwithstanding the verdict was proper where the jury found for the lawyer but undisputed facts showed unenforceability as a matter of law.

## Decision

- The jury returned a verdict for Passante on an oral contract theory and awarded damages approximating the trial-time value of 3% of Upper Deck (about $33 million).
- The trial court granted judgment notwithstanding the verdict for the defendants, concluding Passante violated ethical duties owed to his client in connection with the stock arrangement.
- The California Court of Appeal affirmed the judgment notwithstanding the verdict.
- The court held Passante did not establish an enforceable contract for the 3% stock interest and, independently, the agreement was unenforceable on public-policy grounds due to the attorney’s ethical violations.

## Legal Principles

- A post hoc promise made “in gratitude” for services or assistance may be treated as a gratuitous promise rather than a bargained-for exchange supported by consideration.
- When an attorney enters into a business transaction with a client or acquires a pecuniary interest adverse to a client, the attorney must satisfy strict fiduciary and ethics-based safeguards, including material disclosure and fair terms, and must advise the client to seek independent counsel.
- Courts may refuse to enforce agreements arising from an attorney’s breach of fiduciary and professional duties to a client; public policy favors protecting the attorney–client relationship over enforcing lawyer–client self-interested transactions formed without required protections.
- Judgment notwithstanding the verdict is appropriate where the material facts are undisputed and the claim fails as a matter of law, even if a jury found an oral promise and awarded damages.

## Conclusion

The court affirmed judgment for the company’s directors and officers, concluding the lawyer could not enforce an oral stock promise that was, at most, a gratuitous promise and, in any event, was barred by public policy because corporate counsel failed to meet ethical requirements for a business transaction with a client, including advising independent legal consultation.


Passante v. McWilliam, 62 Cal. Rptr. 2d 298 (Cal. Ct. App. 1997)