Rule 1.8. Conflict of Interest: Current Clients: Specific Rules

(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 lawyer advises the client in writing to seek

independent legal advice on the transaction and gives the client

a reasonable opportunity to do so; 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.

(b) A lawyer shall not use a confidence or secret of a

client to the disadvantage of the client unless the client gives

informed consent in a writing signed by the client, except as

permitted or required by these Rules.

(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 or domestic

relationship.

(d) Prior to the conclusion of the 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 a client’s confidences and

secrets.

ld,

parent, grandparent, or other relative or individual with whom

the lawyer or the client maintains a close familial or domestic

relationship.

(d) Prior to the conclusion of the 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 a client’s confidences and

secrets.

(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 may provide modest gifts to a 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.

Gifts that would compromise the lawyer’s independent

professional judgment are prohibited.

(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 a client’s confidences or

secrets are protected as required by Rule 1.6.

hibited.

(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 a client’s confidences or

secrets are protected as required by Rule 1.6.

(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.

(h) A lawyer shall not:

(1) make an agreement prospectively limiting the

lawyer’s liability to a client for malpractice; 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.

(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.

portunity to seek the advice of independent legal

counsel.

(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.

(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 and the sexual

relationship does not create a conflict under Rule 1.7(a)(2).

For purposes of this rule, when the client is an organization,

“client” means a constituent of the organization who

supervises, directs, or regularly consults with that lawyer

concerning the organization’s legal matters. See Rule 1.13(h)

for the definition of “constituent.”

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

in the foregoing paragraphs, except (j), that applies to any one

of them shall apply to all of them.

ALASKA COMMENT

The Committee concluded that written client consent is

required under Rule 1.8(b) in order to assure that there is

sufficient notice to client and that the consent is unequivocal.

The Committee concluded that lawyers should not be able

to make an agreement prospectively limiting the lawyer’s

liability to a client for malpractice.

The Committee concluded that in addition to advising an

unrepresented client about the appropriateness of seeking

independent counsel, the lawyer must provide a reasonable

opportunity for the client to do so.

See COMMENT to Rule 1.5 (Terms of Payment).

Subsection (k) abrogates the portion of Alaska Bar

Association Ethics Opinion 92-6 that extended the sexual

relationship disqualification to all members of the attorney’s

firm

tion to advising an

unrepresented client about the appropriateness of seeking

independent counsel, the lawyer must provide a reasonable

opportunity for the client to do so.

See COMMENT to Rule 1.5 (Terms of Payment).

Subsection (k) abrogates the portion of Alaska Bar

Association Ethics Opinion 92-6 that extended the sexual

relationship disqualification to all members of the attorney’s

firm.

COMMENT

Business Transactions Between Client and Lawyer

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

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.

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, to seek independent legal advice on the

transaction. 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 9.1(g) (definition of

informed consent).

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

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.

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.

Use of Information Related to Representation

Use of confidences and secrets 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 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.

Gifts to Lawyers

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).

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

ft 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).

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.

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.

Literary Rights

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)

asures 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).

Financial Assistance

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.

Under Paragraph (e)(3), a lawyer may give a client modest

gifts for food, rent, transportation, medicine, and similar basic

necessities of life. Because such gifts may have collateral

consequences for the client – for example, they may affect the

client’s tax liability or the client’s eligibility for

government benefits or social services – the lawyer should

consult with the client about these issues before giving the

gifts. See Rule 1.4

nt modest

gifts for food, rent, transportation, medicine, and similar basic

necessities of life. Because such gifts may have collateral

consequences for the client – for example, they may affect the

client’s tax liability or the client’s eligibility for

government benefits or social services – the lawyer should

consult with the client about these issues before giving the

gifts. See Rule 1.4.

Even though Paragraph (e)(3) allows lawyers to give

modest gifts to clients for the listed basic living expenses,

these gifts must not be so substantial that they would create a

conflict between the lawyer’s interests and the client’s interests

in regard to the handling or settling of the case. In addition,

Paragraph (e)(3) prohibits a lawyer from (i) promising,

assuring, or implying the availability of such financial

assistance prior to the lawyer’s 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.

Person Paying for a Lawyer’s Services

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)

inistrative proceedings.

Person Paying for a Lawyer’s Services

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).

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 not waived under that

paragraph. Under Rule 1.7(b), the informed consent must be

confirmed in writing

est 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 not waived under that

paragraph. Under Rule 1.7(b), the informed consent must be

confirmed in writing.

Aggregate Settlements

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 9.1(g)

(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.

Limiting Liability and Settling Malpractice Claims

Agreements prospectively limiting a lawyer’s liability for

malpractice are prohibited

ll 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.

Limiting Liability and Settling Malpractice Claims

Agreements prospectively limiting a lawyer’s liability for

malpractice are prohibited. 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.

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 the client in writing of the benefits 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.

Acquiring Proprietary Interest in Litigation

Paragraph (i) states the traditional general rule that

lawyers are prohibited from acquiring a proprietary interest in

litigation

iting of the benefits 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.

Acquiring Proprietary Interest in Litigation

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.

Client-Lawyer Sexual Relationships

The relationship between lawyer and client is a fiduciary

one in which the lawyer occupies the highest position of trust

and confidence

forts 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.

Client-Lawyer Sexual Relationships

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 frequently 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 and

secrets will be protected by the attorney-client evidentiary

privilege, since client confidences and secrets 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.

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

gardless of whether the

relationship is consensual and regardless of the absence of

prejudice to the client.

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 circum-

stances, 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).

Imputation of Prohibitions

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.