(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 to the client in a manner which can be reasonably understood by the client;
(2) The client is given a reasonable opportunity to seek the advice of independent counsel in the transaction; and
(3) The client gives informed consent in writing thereto.
(b) A lawyer shall not prepare an instrument giving the lawyer or a person related to the lawyer any substantial gift from a client, including a testamentary gift, except where the client is related to the donee. 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.
(c) 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.
(d) While representing a client in connection with contemplated or pending litigation or administrative proceedings, a lawyer shall not advance or guarantee financial assistance to the client, except that a lawyer may pay or otherwise provide:
(1) The expenses of litigation or administrative proceedings, including court costs, expenses of investigation, expenses or medical examination, costs of obtaining and presenting evidence; and
(2) Other financial assistance which is reasonably necessary to permit the client to institute or maintain the litigation or administrative proceedings.
(e) A lawyer shall not accept compensation for representing a client from one other than the client unless:
(1) The client gives informed consent after consultation;
(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.
(f) A lawyer who represents two or more clients shall not participate in making an aggregate settlement of the claims for 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 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.
(g) 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 malpractice arising out of the lawyer’s past conduct with unrepresented client or former client unless that person is advised in writing of the desirability of seeking the advice of independent legal counsel and is given a reasonable opportunity to do so in connection therewith.
(h) A lawyer related to another lawyer as parent, child, sibling, or spouse shall not represent a client in a representation directly adverse to a person who the lawyer knows is represented by the other lawyer except upon informed consent by the client after consultation regarding the relationship.
(i) A lawyer may acquire and enforce a lien granted by law to secure the lawyer’s fees or expenses, but a lawyer shall not impose a lien upon any part of a client’s files, except upon the lawyer’s own work product, and then only to the extent that the work product has not been paid for. This work product exception shall not apply when the client has become unable to pay, or when withholding the lawyer’s work product would present a significant risk to the client of irreparable harm.
(j) While lawyers are associated in a firm, a prohibition in the foregoing paragraphs (a) through (g) and (i) that applies to any one of them shall apply to all of them.
Comment
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 the 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 the requirements of this rule 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 and services that the
client generally markets to others; for example, banking or brokerage
services, medical services, products manufactured or distributed by
the client, and utility 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] The client’s consent need not be an actual
or electronic signature but must be in written or electronic form and
show the client’s assent to the terms communicated by the lawyer,
e.g., a return electronic mail. 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, where appropriate, should
explain that the client may wish to seek the advice of independent counsel.
[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 adversely
affected 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. For the definition of “informed
consent,” see Rule 1.0(e). 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] 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) requires.
[5] 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 be advised by the lawyer to obtain the detached advice that another
lawyer can provide. Paragraph (b) recognizes an exception where the
client is a relative of the donee or the gift is not substantial.
[6] 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 adversely affect 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.
[7] This rule does not prevent a lawyer from entering
into a contingent fee arrangement with a client in a civil case, if
the arrangement satisfies all the requirements of Rule 1.5(c).
Literary Rights
[8] 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 that might otherwise be taken in the representation
of the client may detract from the publication value of an account of
the representation. Paragraph (c) 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.
Paying Certain Litigation Costs and Client Expenses
[9] Historically, under the Code of Professional Responsibility,
lawyers could only advance the costs of litigation. The client remained
ultimately responsible, and was required to pay such costs even if the
client lost the case. That rule was modified by this court in 1980 in
an amendment to DR 5-103(B) that eliminated the requirement that the
client remain ultimately liable for costs of litigation, even if the
litigation was unsuccessful. The provisions of Rule 1.8(d) embrace the
result of the 1980 modification, but go further by providing that a
lawyer may also pay certain expenses of a client that are not litigation
expenses. Thus, under Rule 1.8(d), a lawyer may pay medical or living
expenses of a client to the extent necessary to permit the client to
continue the litigation. The payment of these additional expenses is
limited to those strictly necessary to sustain the client during the
litigation, such as medical expenses and minimum living expenses. The
purpose of permitting such payments is to avoid situations in which
a client is compelled by exigent financial circumstances to settle a
claim on unfavorable terms in order to receive the immediate proceeds
of settlement. This provision does not permit lawyers to “bid”
for clients by offering financial payments beyond those minimum payments
necessary to sustain the client until the litigation is completed. Regardless
of the types of payments involved, assuming such payments are proper
under Rule 1.8(d), client reimbursement of the lawyer is not required.
However, no lawyer is required to pay litigation or other costs to a
client. The rule merely permits such payments to be made without requiring
reimbursement by the client.
Person Paying for Lawyer’s Services
[10] 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. In some circumstances, such as the relationship
among insured, insurer, and defense counsel, substantive law regarding
the role of the third-party payer may affect the applicability of this
rule. Paragraph (e) requires disclosure of the fact that the lawyer’s
services are being paid for by a 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. 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). The requirements
of Rule 1.8(e)(1) do not apply to lawyers appointed to represent indigent
criminal defendants whose fees are paid under the Criminal Justice Act
or any similar statute or rule.
[11] 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(b)(4), a conflict of interest exists if there is a significant risk
that the lawyer’s representation will be adversely affected 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, the lawyer may accept or continue
the representation with the informed consent of each affected client,
unless the conflict is non-consentable under Rule 1.7(a).
Aggregate Settlements
[12] 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 paragraph (f) of this rule
is a corollary of both Rules 1.7 and 1.2(a), 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. Lawyers
representing a class of plaintiffs or defendants, or those proceeding
derivatively, must comply with applicable rules regulating notification
of class members, compensation of class counsel, and other procedural
requirements designed to ensure adequate protection of the entire class.
Limiting Liability and Settling Malpractice Claims
[13] Agreements prospectively limiting a lawyer’s
liability for malpractice are prohibited 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. Rule 1.8(g) does not, however, prohibit
a lawyer from entering into an agreement with the client to arbitrate
legal malpractice claims, to the extent that such an agreement is valid
and enforceable and the client is fully informed of the scope and effect
of the agreement. Nor does the rule 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.
[14] Agreements settling a claim or potential claim
for malpractice arising out of the lawyer’s past conduct are not
prohibited by Rule 1.8(g). Nevertheless, in view of the danger that
the lawyer will take unfair advantage of an unrepresented client or
a 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.
Settlement of a potential claim most often will occur in the context
of the resolution of an actual dispute between the attorney and the
client, whether concerning the claim itself or a dispute concerning
fees. The rule does not authorize the lawyer to solicit a blanket release
from the client as a routine incident of the conclusion of the legal
representation.
[15] Paragraph (h) applies to related lawyers who
are in different firms. Related lawyers in the same firm are governed
by Rules 1.7, 1.9, and 1.10. Pursuant to the provisions of Rule 1.8(j),
the disqualification stated in paragraph (h) is personal and is not
imputed to members of firms with whom the lawyers are associated. Since
each of the related lawyers is subject to paragraph (h), the effect
is to require the informed consent of all materially affected clients.
Romantic relationships between lawyers may create conflicts of interest
under Rule 1.7(b)(4), likewise requiring informed consent of all materially
affected clients.
[16] The substantive law of the District of Columbia
has long permitted lawyers to assert and enforce liens against the property
of clients. See, e.g., Redevelopment Land Agency v. Dowdey, 618
A.2d 153, 159-60 (D.C. 1992), and cases cited therein. Whether a lawyer
has a lien on money or property belonging to a client is generally a
matter of substantive law as to which the ethics rules take no position.
Exceptions to what the common law might otherwise permit are made with
respect to contingent fees and retaining liens. See, respectively, Rule
1.5(c) and Rule 1.8(i).
[17] Rule 1.16(d) requires a lawyer to surrender papers
and property to which the client is entitled when representation of
the client terminates. Paragraph (i) of this rule states a narrow exception
to 1.16(d): a lawyer may retain anything the law permits – including
property – except for files. As to files, a lawyer may retain
only the lawyer’s own work product, and then only if the client
has not paid for the work. However, if the client has paid for the work
product, the client is entitled to receive it, even if the client has
not previously seen or received a copy of the work product. Furthermore,
the lawyer may not retain the work product for which the client has
not paid, if the client has become unable to pay or if withholding the
work product might irreparably harm the client’s interest.
[18] Under Rule 1.16(d), for example, a lawyer would
be required to return all papers received from a client, such as birth
certificates, wills, tax returns, or “green cards.” Rule
1.8(i) does not permit retention of such papers to secure payment of
any fee due. Only the lawyer’s own work product – results
of factual investigations, legal research and analysis, and similar
materials generated by the lawyer’s own effort – could be
retained. (The term “work product” as used in paragraph
(i) is limited to materials falling within the “work product doctrine,”
but includes any material generated by the lawyer that would be protected
under that doctrine whether or not created in connection with pending
or anticipated litigation.) And a lawyer could not withhold all the
work product merely because a portion of the lawyer’s fees had
not been paid.
[19] There are situations in which withholding the
work product would not be permissible because of irreparable harm to
the client. The possibility of involuntary incarceration or criminal
conviction constitutes one category of irreparable harm. The realistic
possibility that a client might irretrievably lose a significant right
or become subject to a significant liability because of the withholding
of the work product constitutes another category of irreparable harm.
On the other hand, the mere fact that the client might have to pay another
lawyer to replicate the work product does not, standing alone, constitute
irreparable harm. These examples are merely indicative of the meaning
of the term “irreparable harm,” and are not exhaustive.
Attribution of Prohibitions
[20] Under paragraph (j), a prohibition of conduct
by an individual lawyer in paragraphs (a) through (g) and (i) applies
also 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
(h) is personal and is not applied to associated lawyers.
Sexual Relationships with Clients
[21] Concerns about personal relationships, including
sexual relationships, between lawyers and clients are addressed in Comments
[37]-[39] to Rule 1.7.
