Rule 1.5. , although its requirements must be met when the lawyer accepts an interest

in the client's business or other non-monetary 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. 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).

[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

t 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

nt 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. 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

earns 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

[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.

[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 interests in obtaining the appointment will materially

limit the lawyer's independent professional judgment in advising the client

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 interests 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 (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

(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.

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

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

be confirmed in writing.

Aggregate Settlements

r 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.

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.

Limiting Liability and Settling Malpractice Claims

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

[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. Paragraph (h)(1) 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

cation 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

tain 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.

Imputation of Prohibitions

[17] Under paragraph (j), 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.