RULE 1.8 CONFLICT OF INTEREST: PROHIBITED TRANSACTIONS

Obsolete Date: 8/1/2006

(a) Except for standard commercial transactions involving products or services that the client generally markets to others, a lawyer shall not enter into a business, financial or property transaction with a client unless:

(1) The transaction is fair and reasonable to the client; and

(2) After consultation, including advice to seek independent counsel, the client consents to the transaction.

(b) Except as permitted or required in Rules 1.6 and 3.3, a lawyer shall not use information relating to representation of a client to the disadvantage of the client for purposes of furthering either the lawyer's or another person's interest unless after consultation, including advice to seek independent counsel, the client consents.

(c) A lawyer shall not prepare an instrument giving the lawyer or a person related to the lawyer as parent, child, sibling, or spouse any substantial gift from a client, including a testamentary gift, unless the client is related to the donee.

(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;

(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 guarantee a loan reasonably needed to enable the client to withstand delay in litigation that would otherwise put substantial pressure on the client to settle a case because of financial hardship rather than on the merits, provided the client remains ultimately liable for repayment of the loan without regard to the outcome of the litigation and, further provided, that no promise of financial assistance was made to the client by the lawyer or by another in the lawyer's behalf, prior to the employment of that lawyer by the client.

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

(1) there is no interference with the lawyer's independence of professional judgment or with the client-lawyer relationship;

(2) information relating to representation of a client is protected as required by Rule 1.6;and

(3) after consultation, the client consents.

(g) A lawyer who represents two or more clients, other than in class actions, 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 pleas, unless, after consultation, including disclosure of the existence and nature of all the claims or pleas involved and of the participation of each person in the settlement, each client consents.

(h) A lawyer shall not settle a claim for the lawyer's liability for malpractice with an unrepresented client or former client unless, after consultation, including advice to seek independent counsel, the client or former client consents.

(i) A lawyer shall not make an agreement prospectively limiting the lawyer's liability to the client for malpractice except in an emergency where:

(1) referral to or consultation or association with another lawyer has been found to be impractical; or

(2) the lawyer's advice to a client to seek consultation or association with another lawyer is unequivocally rejected; and

(3) the immediate services of a lawyer who has advised the client that the lawyer does not have the ordinary skill required to give competent representation in the matter are unequivocally requested.

(j) A part-time prosecutor or judge permitted by law to engage in the practice of law in addition to the part-time service shall not in that practice represent a client if the representation will or probably will require any pleading or appearance on the client's behalf:

(1) If the lawyer is a part-time prosecutor and the client is charged or expects to be charged with crime, in the jurisdiction in which the lawyer holds the prosecutorial appointment; and

(2) If the lawyer is a part-time judge, in:

(i) the court in which the judge holds appointment; or

(ii) any court from which appeals may be brought to the court in which the judge holds appointment.

COMMENT

Transactions Between Client and Lawyer

As a general principle, all transactions between client and lawyer should be fair and reasonable to the client. The lawyer has a duty to consult with the client about the transaction and any possible adverse consequences and to advise the client to seek review by independent counsel.

Furthermore, a lawyer may not exploit information relating to the representation to the client's disadvantage. For example, a lawyer who has learned that the client is investing in specific real estate may not, without the client's consent, seek to acquire nearby property where doing so would adversely affect the client's plan for investment. Paragraph (a) does not, however, 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.

In dealing with confidential information of the client, the lawyer needs also to consult Rule 1.6 and Rule 3.3 in determining whether or not the lawyer may use information relating to the representation of a client to the disadvantage of that client. Rule 1.8(b) also requires that an attorney who contemplates using information relating to representation of a client received from a client in a manner disadvantageous to that client must advise that client to seek independent counsel.

Gifts

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 effectuation of a substantial gift requires preparing a legal instrument such as a will or conveyance, however, the client should have the detached advice that another lawyer can provide. Paragraph (c) recognizes an exception where the client is a relative of the donee or the gift is not substantial.

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 Rules 1.5 and 1.7.

Financial Assistance to Client

Rule 1.8(e) recognizes the impact of finances on a client's access to the judicial system and provides limited avenues to improve the client's financial ability to be represented by counsel through negotiation or litigation or both without undue financial pressure to settle prematurely.This provision is not to be interpreted as requiring lawyers to provide financial assistance to clients.

Person Paying for Lawyer's Service

Rule 1.8(f) requires disclosure of the fact that the lawyer's services are being paid for by the third party. Such an arrangement must also conform to the requirements of Rule 1.6 concerning confidentiality and Rule 1.7 concerning conflict of interest. Where the client is a class, consent may be obtained on behalf of the class by court-supervised procedure.

Lawyer Liability

Rule 1.8(i) provides that a lawyer cannot prospectively limit liability for negligence, except in an emergency. This exception is limited to situations in which employment of another lawyer is impractical or the client unequivocally rejects the lawyer's advice to seek other counsel. In all cases covered by paragraph 1.8(i), the client must unequivocally request the immediate services of the lawyer after the lawyer advises the client that the lawyer does not have the ordinary skill required to give competent representation. This exception is consistent with the comment to Rule 1.1.

Law Practice by Part-Time Prosecutors and Part-Time Judges

Part-time prosecutors or part-time judges permitted by law to practice in addition to the part-time service must not engage in that practice in matters which compromise their public functions. This rule identifies the circumstances in which the public function would be compromised. There is no compromise of the public function when a part-time municipal prosecutor or judge defends persons charged with crime to be tried in another court, or when a part-time state's attorney defends a person charged with a crime to be tried in another county. Persons associated in the practice of law with a part-time prosecutor or judge may not, of course, take on a representation denied to the part-time official by this Rule. See Rule 1.10. Other considerations may prohibit a part-time judge or prosecutor, or another lawyer associated with the part-time official in practice, from accepting or combining representations not specifically prohibited by this Rule; for instance, even though a matter will be defended in a court other than the one which the part-time official serves, and thus would not be forbidden by this rule, that matter could still not be undertaken if it involved parties or issues with which the part-time official had had any involvement as a judge or prosecutor.

Definition of "Matter"

For purposes of this Rule, the term "matter" is defined in Rule 1.7(e).

Reference: Minutes of the Professional Conduct Subcommittee of the Attorney Standards Committee on 09/13/84, 10/19/84, 12/14/84, 02/08/85, 03/11/85, 04/26/85, 08/23/85, 09/20/85, 01/10/86, 01/31/86 and 03/15/86