Rule 1.8 Conflict Of Interest: Current Clients: Specific Rules Client-Lawyer Relationship

Question 1

Client-Lawyer Relationship

Rule 1.8(a) Conflict Of Interest: Current Clients: Specific Rules

Answer 1

(a) A lawyer shall not enter into a business transaction with a client or knowingly acquire an ownership, possessory, security or other pecuniary interest adverse to a client unless:
(1) the [transaction and terms on which the lawyer acquires the interest are fair and reasonable to the client] and are [fully disclosed and transmitted in writing ]in a manner that can be reasonably understood by the client;

(2) the client is [advised in writing] of the desirability of seeking and is given a reasonable opportunity to seek the advice of independent legal counsel on the
transaction;
and

(3) the client gives [informed consent, in a writing signed by the client,] to the essential terms of the transaction and the lawyer’s role in the transaction,
including whether the lawyer is representing the client in the transaction.

Question 2

Client-Lawyer Relationship

Rule 1.8(b) Conflict Of Interest: Current Clients: Specific Rules

Answer 2

(b) A lawyer [shall not use information relating to
representation of a client to the disadvantage of the client unless the client gives informed consent, ] except as
permitted or required by these Rules.

Question 3

Client-Lawyer Relationship

Rule 1.8(c) Conflict Of Interest: Current Clients: Specific Rules

Answer 3

(c) A lawyer [shall not solicit any substantial gift from a
client, ] including a testamentary gift, or prepare on behalf of a client an instrument giving the lawyer or a person related to the lawyer any substantial gift [unless the lawyer or other recipient of the gift is related to the client. ] For purposes of this paragraph, related persons include a spouse, child, grandchild, parent, grandparent or other relative or individual with whom the lawyer or the client maintains a close, familial relationship.

Question 4

Client-Lawyer Relationship

Rule 1.8(d) Conflict Of Interest: Current Clients: Specific Rules

Answer 4

(d) Prior to the conclusion of representation of a client, a lawyer shall not make or negotiate an agreement giving
the lawyer literary or media rights to a portrayal or
account based in substantial part on information relating to the representation.

Question 5

Client-Lawyer Relationship

Rule 1.8(e) Conflict Of Interest: Current Clients: Specific Rules

Answer 5

(e) A lawyer [shall not provide financial assistance to a
client in connection with pending or contemplated
litigation, except] that:

(1) a [lawyer may advance court costs and expenses of
litigation], the [repayment] of which may be contingent
on the outcome of the matter;

(2) a lawyer representing an [indigent client may pay court costs and expenses of litigation on behalf of the client];

and

(3) a lawyer representing an [indigent client pro bono], a lawyer representing an indigent client pro bono through a nonprofit legal services or public interest organization and a lawyer representing an indigent client pro bono through a law school clinical or pro bono program [may provide modest gifts to the client for food, rent, transportation, medicine and other basic living expenses. ] The lawyer:

(i) [may not promise, assure or imply the
availability of such gifts prior to retention] or as an
inducement to continue the client-lawyer
relationship after retention;

(ii) [may not seek or accept reimbursement] from
the client, a relative of the client or anyone
affiliated with the client;

and

(iii) [may not publicize or advertise a willingness to
provide such gifts to prospective clients.]

Financial assistance under this Rule may be provided even if the representation is eligible for fees under a fee-shifting statute.

Question 6

Client-Lawyer Relationship

Rule 1.8(f) Conflict Of Interest: Current Clients: Specific Rules

Answer 6

(f) A lawyer shall not accept compensation for
representing a client from one other than the client unless:

(1) the client gives informed consent;

(2) there is [no interference with the lawyer’s
independence of professional judgment or with the
client-lawyer relationship];

and

(3) information relating to representation of a client is
protected as required by Rule 1.6.

Question 7

Client-Lawyer Relationship

Rule 1.8(g) Conflict Of Interest: Current Clients: Specific Rules

Answer 7

(g) A lawyer who represents two or more clients shall not participate in making an aggregate settlement of the
claims of or against the clients, or in a criminal case an
aggregated agreement as to guilty or nolo contendere
pleas, unless each client gives informed consent, in a
writing signed by the client. The lawyer’s disclosure shall include the existence and nature of all the claims or pleas involved and of the participation of each person in the
settlement.

Question 8

Client-Lawyer Relationship

Rule 1.8(h) Conflict Of Interest: Current Clients: Specific Rules

Answer 8

(h) A lawyer shall not:

(1) make an agreement [prospectively limiting the
lawyer’s liability] to a client for malpractice [unless the client is independently represented in making the
agreement];

or

(2) [settle a claim or potential claim] for such liability
with an unrepresented client or former client [unless
that person is advised in writing of the desirability of
seeking and is given a reasonable opportunity to seek the advice of independent legal counsel] in connection therewith.

Question 9

Client-Lawyer Relationship

Rule 1.8(i) Conflict Of Interest: Current Clients: Specific Rules

Answer 9

(i) A lawyer shall not acquire a proprietary interest in the
cause of action or subject matter of litigation the lawyer is
conducting for a client, except that the lawyer may:

(1) acquire a lien authorized by law to secure the lawyer’s fee or expenses;

and

(2) contract with a client for a reasonable contingent fee in a civil case.

Question 10

Client-Lawyer Relationship

Rule 1.8(j) Conflict Of Interest: Current Clients: Specific Rules

Answer 10

(j) A lawyer shall not have sexual relations with a client
unless a consensual sexual relationship existed between
them when the client-lawyer relationship commenced.

Question 11

Client-Lawyer Relationship

Rule 1.8(k) Conflict Of Interest: Current Clients: Specific Rules

Answer 11

(k) While lawyers are associated in a firm, a prohibition in

the foregoing paragraphs (a) through (i) that applies to any one of them shall apply to all of them.

Question 12

Client-Lawyer Relationship
Comment 1 Rule 1.8 Conflict Of Interest: Current Clients: Specific Rules

Business Transactions between Client and Lawyer

Answer 12

[1] A lawyer’s legal skill and training, together with the relationship of trust and confidence between lawyer and client, create the possibility of overreaching when the lawyer participates in a business, property or financial transaction with a client, for example, a loan or sales transaction or a lawyer investment on behalf of a client. The requirements of paragraph (a) must be met even when the transaction is not closely related to the subject matter of the representation, as when a lawyer drafting a will for a client learns that the client needs money for unrelated expenses and offers to make a loan to the client. The Rule applies to lawyers engaged in the sale of goods or services related to the practice of law, for example, the sale of title insurance or investment services to existing clients of the lawyer’s legal practice. See Rule 5.7. It also applies to lawyers purchasing property from estates they represent. It does not apply to ordinary fee arrangements between client and lawyer, which are governed by Rule 1.5, although its requirements must be met when the lawyer accepts an interest in the client’s business or other nonmonetary property as payment of all or part of a fee. In addition, [the Rule does not apply to standard commercial transactions between the lawyer and the client for products or services that the client generally markets to others, for example, banking or brokerage services, medical services, products manufactured or distributed by the client, and utilities’ services. In such transactions, the lawyer has no advantage in dealing with the client], and the restrictions in paragraph (a) are unnecessary and impracticable.

Question 13

Client-Lawyer Relationship
Comment 2 Rule 1.8 Conflict Of Interest: Current Clients: Specific Rules

Business Transactions between Client and Lawyer

Answer 13

[2] Paragraph (a)(1) requires that the transaction itself be fair to the client and that its essential terms be communicated to the client, in writing, in a manner that can be reasonably understood. Paragraph (a)(2) requires that the client also be advised, in writing, of the desirability of seeking the advice of independent legal counsel. It also requires that the client be given a reasonable opportunity to obtain such advice. Paragraph (a)(3) requires that the lawyer obtain the client’s informed consent, in a writing signed by the client, both to the essential terms of the transaction and to the lawyer’s role. When necessary, the lawyer should discuss both the material risks of the proposed transaction, including any risk presented by the lawyer’s involvement, and the existence of reasonably available alternatives and should explain why the advice of independent legal counsel is desirable. See Rule 1.0(e) (definition of informed consent).

Question 14

Client-Lawyer Relationship
Comment 3 Rule 1.8 Conflict Of Interest: Current Clients: Specific Rules

Business Transactions between Client and Lawyer

Answer 14

[3] The risk to a client is greatest when the client expects the lawyer to represent the client in the transaction itself or when the lawyer’s financial interest otherwise poses a significant risk that the lawyer’s representation of the client will be materially limited by the lawyer’s financial interest in the transaction. Here the lawyer’s role requires that the lawyer must comply, not only with the requirements of paragraph (a), but also with the requirements of Rule 1.7. Under that Rule, the lawyer must disclose the risks associated with the lawyer’s dual role as both legal adviser and participant in the transaction, such as the risk that the lawyer will structure the transaction or give legal advice in a way that favors the lawyer’s interests at the expense of the client. Moreover, the lawyer must obtain the client’s informed consent. In some cases, the lawyer’s interest may be such that Rule 1.7 will preclude the lawyer from seeking the client’s consent to the transaction.

Question 15

Client-Lawyer Relationship
Comment 4 Rule 1.8 Conflict Of Interest: Current Clients: Specific Rules

Business Transactions between Client and Lawyer

Answer 15

[4] If the client is independently represented in the transaction, paragraph (a)(2) of this Rule is inapplicable, and the paragraph (a)(1) requirement for full disclosure is satisfied either by a written disclosure by the lawyer involved in the transaction or by the client’s independent counsel. The fact that the client was independently represented in the transaction is relevant in determining whether the agreement was fair and reasonable to the client as paragraph (a)(1) further requires.

Question 16

Client-Lawyer Relationship
Comment 5 Rule 1.8 Conflict Of Interest: Current Clients: Specific Rules

Use of Information Related to Representation

Answer 16

[5] Use of information relating to the representation to the disadvantage of the client violates the lawyer’s duty of loyalty. Paragraph (b) applies when the information is used to benefit either the lawyer or a third person, such as another client or business associate of the lawyer. For example, if a lawyer learns that a client intends to purchase and develop several parcels of land, the lawyer may not use that information to purchase one of the parcels in competition with the client or to recommend that another client make such a purchase. The Rule does not prohibit uses that do not disadvantage the client. For example, a lawyer who learns a government agency’s interpretation of trade legislation during the representation of one client may properly use that information to benefit other clients. Paragraph (b) prohibits disadvantageous use of client information unless the client gives informed consent, except as permitted or required by these Rules. See Rules 1.2(d), 1.6, 1.9(c), 3.3, 4.1(b), 8.1 and 8.3.

Question 17

Client-Lawyer Relationship
Comment 6 Rule 1.8 Conflict Of Interest: Current Clients: Specific Rules

Gift to Lawyers

Answer 17

[6] A lawyer [may accept a gift from a client, if the transaction meets general standards of fairness.] For example, [a simple gift ]such as a present given at a holiday or as a token of appreciation is permitted. [If a client offers the lawyer a more substantial gift, paragraph (c) does not prohibit the lawyer from accepting it, although such a gift may be voidable by the client under the doctrine of undue influence, which treats client gifts as presumptively fraudulent.] In any event, due to concerns about overreaching and imposition on clients, [a lawyer may not suggest that a substantial gift be made to the lawyer or for the lawyer’s benefit, except where the lawyer is related to the client] as set forth in paragraph (c).

Question 18

Client-Lawyer Relationship
Comment 7 Rule 1.8 Conflict Of Interest: Current Clients: Specific Rules

Gift to Lawyers

Answer 18

[7] If effectuation of a substantial gift requires preparing a legal instrument such as a will or conveyance, the client should have the detached advice that another lawyer can provide. The sole exception to this Rule is where the client is a relative of the donee.

Question 19

Client-Lawyer Relationship
Comment 8 Rule 1.8 Conflict Of Interest: Current Clients: Specific Rules

Gift to Lawyers

Answer 19

[8] This Rule does not prohibit a lawyer from seeking to have the lawyer or a partner or associate of the lawyer named as executor of the client’s estate or to another potentially lucrative fiduciary position. Nevertheless, such appointments will be subject to the general conflict of interest provision in Rule 1.7 when there is a significant risk that the lawyer’s interest in obtaining the appointment will materially limit the lawyer’s independent professional judgment in advising the client concerning the choice of an executor or other fiduciary. In obtaining the client’s informed consent to the conflict, the lawyer should advise the client concerning the nature and extent of the lawyer’s financial interest in the appointment, as well as the availability of alternative candidates for the position.

Question 20

Client-Lawyer Relationship
Comment 9 Rule 1.8 Conflict Of Interest: Current Clients: Specific Rules

Literary Rights

Answer 20

[9] An agreement by which a lawyer acquires literary or media rights concerning the conduct of the representation creates a conflict between the interests of the client and the personal interests of the lawyer. Measures suitable in the representation of the client may detract from the publication value of an account of the representation. Paragraph (d) does not prohibit a lawyer representing a client in a transaction concerning literary property from agreeing that the lawyer’s fee shall consist of a share in ownership in the property, if the arrangement conforms to Rule 1.5 and paragraphs (a) and (i).

Question 21

Client-Lawyer Relationship
Comment 10 Rule 1.8 Conflict Of Interest: Current Clients: Specific Rules

Financial Assistance

Answer 21

[10] Lawyers [may not subsidize lawsuits or administrative ]proceedings brought on behalf of their clients, [including making or guaranteeing loans to their clients for living expenses, because to do so would encourage clients to pursue lawsuits that might not otherwise be brought and because such assistance gives lawyers too great a financial stake in the litigation.] These dangers do not warrant a prohibition on a lawyer lending a client court costs and litigation expenses, including the expenses of medical examination and the costs of obtaining and presenting evidence, because these advances are virtually indistinguishable from contingent fees and help ensure access to the courts. Similarly, an exception allowing lawyers representing indigent clients to pay court costs and litigation expenses regardless of whether these funds will be repaid is warranted.

Question 22

Client-Lawyer Relationship
Comment 11 Rule 1.8 Conflict Of Interest: Current Clients: Specific Rules

Financial Assistance

Answer 22

[11] Paragraph (e)(3) provides another exception. A lawyer representing an indigent client without fee, a lawyer representing an indigent client pro bono through a nonprofit legal services or public interest organization and a lawyer representing an indigent client pro bono through a law school clinical or pro bono program may give the client modest gifts. Gifts permitted under paragraph (e)(3) include modest contributions for food, rent, transportation, medicine and similar basic necessities of life. If the gift may have consequences for the client, including, e.g., for receipt of government benefits, social services, or tax liability, the lawyer should consult with the client about these. See Rule 1.4.

Question 23

Client-Lawyer Relationship
Comment 12 Rule 1.8 Conflict Of Interest: Current Clients: Specific Rules

Financial Assistance

Answer 23

[12] The paragraph (e)(3) exception is narrow. Modest gifts are allowed in specific circumstances where it is unlikely to create conflicts of interest or invite abuse. Paragraph (e)(3) prohibits the lawyer from (i) promising, assuring or implying the availability of financial assistance prior to retention or as an inducement to continue the client-lawyer relationship after retention; (ii) seeking or accepting reimbursement from the client, a relative of the client or anyone affiliated with the client; and (iii) publicizing or advertising a willingness to provide gifts to prospective to clients beyond court costs and expenses of litigation in connection with contemplated or pending litigation or administrative proceedings.

Question 24

Client-Lawyer Relationship
Comment 13 Rule 1.8 Conflict Of Interest: Current Clients: Specific Rules

Financial Assistance

Answer 24

[13] Financial assistance, including modest gifts pursuant to paragraph (e)(3), may be provided even if the representation is eligible for fees under a fee-shifting statute. However, paragraph (e)(3) does not permit lawyers to provide assistance in other contemplated or pending litigation in which the lawyer may eventually recover a fee, such as contingent-fee personal injury cases or cases in which fees may be available under a contractual fee-shifting provision, even if the lawyer does not eventually receive a fee.

Question 25

Client-Lawyer Relationship
Comment 14 Rule 1.8 Conflict Of Interest: Current Clients: Specific Rules

Person Paying for a Lawyer’s Services

Answer 25

[14] Lawyers are frequently asked to represent a client under circumstances in which a third person will compensate the lawyer, in whole or in part. The third person might be a relative or friend, an indemnitor (such as a liability insurance company) or a co-client (such as a corporation sued along with one or more of its employees). Because third-party payers frequently have interests that differ from those of the client, including interests in minimizing the amount spent on the representation and in learning how the representation is progressing, lawyers are prohibited from accepting or continuing such representations unless the lawyer determines that there will be no interference with the lawyer’s independent professional judgment and there is informed consent from the client. See also Rule 5.4(c) (prohibiting interference with a lawyer’s professional judgment by one who recommends, employs or pays the lawyer to render legal services for another).

Question 26

Client-Lawyer Relationship
Comment 15 Rule 1.8 Conflict Of Interest: Current Clients: Specific Rules

Person Paying for a Lawyer’s Services

Answer 26

[15] Sometimes, it will be sufficient for the lawyer to obtain the client’s informed consent regarding the fact of the payment and the identity of the third-party payer. If, however, the fee arrangement creates a conflict of interest for the lawyer, then the lawyer must comply with Rule 1.7. The lawyer must also conform to the requirements of Rule 1.6 concerning confidentiality. Under Rule 1.7(a), a conflict of interest exists if there is significant risk that the lawyer’s representation of the client will be materially limited by the lawyer’s own interest in the fee arrangement or by the lawyer’s responsibilities to the third -party payer (for example, when the third-party payer is a co-client). Under Rule 1.7(b), the lawyer may accept or continue the representation with the informed consent of each affected client, unless the conflict is nonconsentable under that paragraph. Under Rule 1.7(b), the informed consent must be confirmed in writing.

Question 27

Client-Lawyer Relationship
Comment 16 Rule 1.8 Conflict Of Interest: Current Clients: Specific Rules

Aggregate Settlements

Answer 27

[16] Differences in willingness to make or accept an offer of settlement are among the risks of common representation of multiple clients by a single lawyer. Under Rule 1.7, this is one of the risks that should be discussed before undertaking the representation, as part of the process of obtaining the clients' informed consent. In addition, Rule 1.2(a) protects each client's right to have the final say in deciding whether to accept or reject an offer of settlement and in deciding whether to enter a guilty or nolo contendere plea in a criminal case. The rule stated in this paragraph is a corollary of both these Rules and provides that, [before any settlement offer or plea bargain is made or accepted on behalf of multiple clients, the lawyer must inform each of them about all the material terms of the settlement, including what the other clients will receive or pay if the settlement or plea offer is
accepted. ] See also Rule 1.0(e) (definition of informed consent). [Lawyers representing a class of plaintiffs or defendants, or those proceeding derivatively, may not have a full client-lawyer relationship with each member of the class; nevertheless, such lawyers must comply with applicable rules regulating notification of class members and other procedural requirements designed to ensure adequate protection of the entire class.]

Question 28

Client-Lawyer Relationship
Comment 17 Rule 1.8 Conflict Of Interest: Current Clients: Specific Rules

Limiting Liability and Settling Malpractice Claims

Answer 28

[17] Agreements prospectively limiting a lawyer’s liability for malpractice are prohibited unless the client is independently represented in making the agreement because they are likely to undermine competent and diligent representation. Also, many clients are unable to evaluate the desirability of making such an agreement before a dispute has arisen, particularly if they are then represented by the lawyer seeking the agreement. This paragraph does not, however, prohibit a lawyer from entering into an agreement with the client to arbitrate legal malpractice claims, provided such agreements are enforceable and the client is fully informed of the scope and effect of the agreement. Nor does this paragraph limit the ability of lawyers to practice in the form of a limited- liability entity, where permitted by law, provided that each lawyer remains personally liable to the client for his or her own conduct and the firm complies with any conditions required by law, such as provisions requiring client notification or maintenance of adequate liability insurance. Nor does it prohibit an agreement in accordance with Rule 1.2 that defines the scope of the representation, although a definition of scope that makes the obligations of representation illusory will amount to an attempt to limit liability.

Question 29

Client-Lawyer Relationship
Comment 18 Rule 1.8 Conflict Of Interest: Current Clients: Specific Rules

Limiting Liability and Settling Malpractice Claims

Answer 29

[18] Agreements settling a claim or a potential claim for malpractice are not prohibited by this Rule. Nevertheless, in view of the danger that a lawyer will take unfair advantage of an unrepresented client or former client, the lawyer must first advise such a person in writing of the appropriateness of independent representation in connection with such a settlement. In addition, the lawyer must give the client or former client a reasonable opportunity to find and consult independent counsel.

Question 30

Client-Lawyer Relationship
Comment 19 Rule 1.8 Conflict Of Interest: Current Clients: Specific Rules

Acquiring Proprietary Interest in Litigation

Answer 30

[19] Paragraph (i) states the traditional general rule that lawyers are prohibited from acquiring a proprietary interest in litigation. Like paragraph (e), the general rule has its basis in common law champerty and maintenance and is designed to avoid giving the lawyer too great an interest in the representation. In addition, when the lawyer acquires an ownership interest in the subject of the representation, it will be more difficult for a client to discharge the lawyer if the client so desires. The Rule is subject to specific exceptions developed in decisional law and continued in these Rules. The exception for certain advances of the costs of litigation is set forth in paragraph (e). In addition, paragraph (i) sets forth exceptions for liens authorized by law to secure the lawyer’s fees or expenses and contracts for reasonable contingent fees. The law of each jurisdiction determines which liens are authorized by law. These may include liens granted by statute, liens originating in common law and liens acquired by contract with the client. [When a lawyer acquires by contract a security interest in property other than that recovered through the lawyer’s efforts in the litigation, such an acquisition is a business or financial transaction with a client and is governed by the requirements of paragraph (a). ] Contracts for contingent fees in civil cases are governed by Rule 1.5.

Question 31

Client-Lawyer Relationship
Comment 20 Rule 1.8 Conflict Of Interest: Current Clients: Specific Rules

Client-Lawyer Sexual Relationships

Answer 31

[20] The relationship between lawyer and client is a fiduciary one in which the lawyer occupies the highest position of trust and confidence. The relationship is almost always unequal; thus, a sexual relationship between lawyer and client can involve unfair exploitation of the lawyer’s fiduciary role, in violation of the lawyer’s
basic ethical obligation not to use the trust of the client to the client’s disadvantage. In addition, such a relationship presents a significant danger that, because of the lawyer’s emotional involvement, the lawyer will be unable to represent the client without impairment of the exercise of independent professional judgment. Moreover, a blurred line between the professional and personal relationships may make it difficult to predict to what extent client confidences will be protected by the attorney-client evidentiary privilege, since client confidences are protected by privilege only when they are imparted in the context of the client-lawyer relationship. Because of the significant danger of harm to client interests and because the client’s own emotional involvement renders it unlikely that the client could give adequate informed consent, this Rule prohibits the lawyer from having sexual relations with a client regardless of whether the relationship is consensual and regardless of the absence of prejudice to the client.

Question 32

Client-Lawyer Relationship
Comment 21 Rule 1.8 Conflict Of Interest: Current Clients: Specific Rules

Client-Lawyer Sexual Relationships

Answer 32

[21] Sexual relationships that predate the client-lawyer relationship are not prohibited. Issues relating to the exploitation of the fiduciary relationship and client dependency are diminished when the sexual relationship existed prior to the commencement of the client-lawyer relationship. However, before proceeding with the representation in these circumstances, the lawyer should consider whether the lawyer’s ability to represent the client will be materially limited by the relationship. See Rule 1.7(a)(2).

Question 33

Client-Lawyer Relationship
Comment 22 Rule 1.8 Conflict Of Interest: Current Clients: Specific Rules

Client-Lawyer Sexual Relationships

Answer 33

[22] [When the client is an organization, paragraph (j) of this Rule prohibits a lawyer for the organization (whether inside counsel or outside counsel) from having a sexual relationship with a constituent of the organization who supervises, directs or regularly consults with that lawyer concerning the organization’s legal matters.]

Question 34

Client-Lawyer Relationship
Comment 23 Rule 1.8 Conflict Of Interest: Current Clients: Specific Rules

Imputation of Prohibitions

Answer 34

[23] Under paragraph (k), a prohibition on conduct by an individual lawyer in paragraphs (a) through (i) also applies to all lawyers associated in a firm with the personally prohibited lawyer. For example, one lawyer in a firm may not enter into a business transaction with a client of another member of the firm without complying with paragraph (a), even if the first lawyer is not personally involved in the representation of the client. The prohibition set forth in paragraph (j) is personal and is not applied to associated lawyers.