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

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 client is informed in writing that the client may seek the advice of independent legal

counsel on the transaction, and is given 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 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.

(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.

(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.

, child, grandchild, parent, grandparent

or other relative or individual with whom the lawyer or the client maintains a close, familial

relationship.

(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.

(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; and

(2) a lawyer representing an indigent client may pay court costs and expenses of litigation

on behalf of the client.

(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.

(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.

pate 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 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.

(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.

(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.

Adopted July 1, 2009, effective January 1, 2010.

Comment

Business Transactions Between Client and Lawyer

[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

10.

Comment

Business Transactions Between Client and Lawyer

[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. 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.

[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.

-2-

ibuted

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.

[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.

-2-

Paragraph (a)(2) requires that the lawyer inform the client in writing that the client may seek the

advice of independent legal counsel and provide a reasonable opportunity for the client to do so.

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). The common law regarding business transactions between lawyer and client

may impose additional requirements, such as encouraging the client to seek independent legal

counsel, in lawyer liability and other nondisciplinary contexts.

[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

resent 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.

[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.

Use of Information Related to Representation

[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

s 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.

-3-

Gifts to Lawyers

[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).

[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

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).

[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.

[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.

Literary Rights

[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

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).

Financial Assistance

[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.

-4-

Person Paying for a Lawyer’s Services

[11] 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)

e repaid is warranted.

-4-

Person Paying for a Lawyer’s Services

[11] 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).

[12] 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

tation 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.

Aggregate Settlements

[13] 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.

-5-

finition 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.

-5-

Limiting Liability and Settling Malpractice Claims

[14] 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.

[15] Agreements settling a claim or a potential claim for malpractice are not prohibited by this

Rule

otification 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.

[15] 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.

Acquiring Proprietary Interest in Litigation

[16] 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

tigation 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.

-6-

Client-Lawyer Sexual Relationships

[17] 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

pairment 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.

[18] 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).

[19] 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.

Imputation of Prohibitions

[20] 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

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.

Imputation of Prohibitions

[20] 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.

Adopted July 1, 2009, effective January 1, 2010.

-7-