Michigan Legal Ethics
1.8 Rule 1.8 Conflict of Interest: Prohibited Transactions
1.8:100 Comparative Analysis of MI Rule
¥ Primary Michigan References:
MI Rule 1.8
¥ Background References: ABA
Model Rule 1.8, Other Jurisdictions
¥ Commentary:
1.8:101 Model Rule Comparison
MRPC 1.8 is substantially identical to the Model Rule.
1.8:102 Model Code Comparison
[The discussion of this topic has not yet been written.]
1.8:200 Lawyer's Personal Interest Affecting Relationship
¥ Primary Michigan References:
MI Rule 1.8(a)
¥ Background References: ABA
Model Rule 1.8(a), Other Jurisdictions
¥ Commentary: ABA/BNA ¤ 51:501 et
seq., ALI-LGL ¤ 126, Wolfram ¤¤ 7.6, 8.11
¥ MI Commentary: Dubin and Schwartz MRPC 1.8
1.8:210 Sexual Relations with Clients
The Michigan Supreme Court recently considered and rejected a proposed amendment to MRPC 1.8 which would have specifically prohibited attorneys from having sexual relations with a current client. The Court felt that the Rules as currently adopted provide sufficient prohibitions against improper sexual relations with clients without the necessity of adopting a specific prohibition in 1.8. In fact, the Attorney Grievance Commission has investigated a number of requests for investigation alleging improper attorney/client sexual conduct of some nature, and the number of requests for investigation of improprieties has increased in recent years. The Attorney Discipline Board has disciplined attorneys for engaging in improper conduct of a sexual nature with their clients, generally based upon MCR 9.104(1)(4) and MRPC 8.4 which require that lawyers avoid, inter alia, conduct prejudicial to the administration of justice and conduct that subjects the profession to obloquy, contempt, censure or reproach. Other possible sources for pursuing discipline for improper attorney/client sexual conduct include MRPC 1.6, MRPC 2.1 and MRPC 1.7(b).
1.8:220 Business Transactions with Clients
The Rule specifically addresses business transactions with clients in Paragraph (a). In Tai v Charfoos, 183 BR 131 (Bankr ED Mich, 1994), the bankruptcy court applied MRPC 1.8 in holding that a lawyerÕs debt to a client was not dischargeable in bankruptcy proceedings. The court stated that the lawyer did not meet the full disclosure requirements of MRPC 1.8(a)(1) by failing to disclose to the client Òwhat one might reasonably expect to be disclosed in connection with an armÕs-length commercial loan transaction of that magnitude.Ó Id. at 137. The court also stated the general proposition that a Òlawyer-client relationship imposes strong and affirmative duties on the lawyer to eliminate the necessarily inherent perception ... that the lawyerÕs duty ... to fully represent the client in the litigation might ... be affected by ... the business transaction.Ó Id. See also In re Temrowski, 409 Mich 262; 293 NW2d 346 (1980) where an attorney was disciplined for entering into a business relationship with his divorced client for the purchase of a Ford automobile. The relationship became complicated when the client reconciled with her former husband and demanded return of the automobile.
1.8:300 Lawyer's Use of Client Information
¥ Primary Michigan References:
MI Rule 1.8(b)
¥ Background References: ABA
Model Rule 1.8(b), Other Jurisdictions
¥ Commentary: ABA/BNA ¤¤ 55:501-55:2001 , ALI-LGL
¤ 61, Wolfram ¤ 6.7
¥ MI Commentary: Dubin and Schwartz MRPC 1.8
The Rule makes clear that, except as permitted or required by MRPC 1.6 or 3.3, the lawyer shall not use information relating to the representation of a client to the clientÕs disadvantage unless the client consents after consultation. In Barkley v Detroit, 204 Mich App 194; 514 NW2d 242 (1993), the court found a conflict of interest where a city lawyer appointed to represent a city employee in an underlying tort suit was at the same time representing the city in arbitration proceedings related to the same employee.
1.8:400 Client Gifts to Lawyer
¥ Primary Michigan References:
MI Rule 1.8(c)
¥ Background References: ABA
Model Rule 1.8(c), Other Jurisdictions
¥ Commentary: ABA/BNA ¤ 51:601, ALI-LGL ¤ 127, Wolfram
¤ 8.12
¥ MI Commentary: Dubin and Schwartz MRPC 1.8
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. This Rule is subject to an exception where the client is a relative of the donee or the gift is not substantial. Paragraph (c). See Comment to MRPC 1.8.
1.8:500 Literary or Media Rights Relating to Representation
¥ Primary Michigan References:
MI Rule 1.8(d)
¥ Background References: ABA
Model Rule 1.8(d), Other Jurisdictions
¥ Commentary: ABA/BNA ¤ 51:701, ALI-LGL ¤ 36, Wolfram
¤ 9.3.3
¥ MI Commentary: Dubin and Schwartz MRPC 1.8
An agreement by which a lawyer acquires literary or media rights concerning the conduct of the representation creates a conflict between the interest of the client and the personal interest of the lawyer. For example, measures suitable in the representation of the client may detract from the publication value of the account of the representation. See Comment to MRPC 1.8.
1.8:600 Financing Litigation
¥ Primary Michigan References:
MI Rule 1.8(e)
¥ Background References: ABA
Model Rule 1.8(e), Other Jurisdictions
¥ Commentary: ABA/BNA ¤ 51:801, ALI-LGL ¤ 36, Wolfram
¤ 9.2.3
¥ MI Commentary: Dubin and Schwartz MRPC 1.8
1.8:610 Litigation Expenses
Paragraph (e) provides the circumstances under which the lawyer may advance court costs and expenses of litigation. See also State Bar of Michigan Informal Opinion RI-14 relating to advancement of expenses, RI-91 concerning costs for indigent clients, and RI-321 which addresses the impropriety of a lawyerÕs agreement to refer clients to a venture capital company which would advance funds in return for a share of the anticipated judgment.
1.8:620 Living and Medical Expenses
There is no provision in the Rule authorizing the lawyer to pay for the clientÕs living and medical expenses as part of the attorney/client relationship. If the matter involves litigation, such practice would appear to be prohibited by Paragraph (e).
1.8:700 Payment of Lawyer's Fee by Third Person
¥ Primary Michigan References:
MI Rule 1.8(f)
¥ Background References: ABA
Model Rule 1.8(f), Other Jurisdictions
¥ Commentary: ABA/BNA ¤ 51:901, ALI-LGL ¤ 134, Wolfram
¤ 8.8
¥ MI Commentary: Dubin and Schwartz MRPC 1.8
Paragraph (f) requires disclosure of the fact that the lawyerÕs 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. See Comment to MRPC 1.8.
In a case where an attorney represented a paying client and two other indigent clients, the court held that separate counsel should have been appointed for the co-defendants. Under the circumstances, counsel was unable to make any decisions of consequence respecting the indigent co-defendants without harming the defense of the paying client. People v Hilton, 26 Mich App 274; 182 NW2d 29 (1970).
1.8:710 Compensation and Direction by Third Person
See Discussion under 1.8:700 above.
1.8:720 Insured-Insurer Conflicts [see also 1.7:315<]
See Discussion under 1.7:315 above.
1.8:730 Lawyer with Fiduciary Obligation to Third Persons [see 1.13:520]
See Discussion under 1.7:340 above.
1.8:800 Aggregate Settlements
¥ Primary Michigan References:
MI Rule 1.8(g)
¥ Background References: ABA
Model Rule 1.8(g), Other Jurisdictions
¥ Commentary: ABA/BNA ¤ 51:375, ALI-LGL ¤ 129, Wolfram
¤ 8.15
¥ MI Commentary: Dubin and Schwartz MRPC 1.8
The prohibitions of MRPC 1.8(g) do not apply to lawyers acting as an arbitrator. Informal Opinion RI-268.
1.8:900 Agreements Involving Lawyer's Malpractice Liability
¥ Primary Michigan References:
MI Rule 1.8(h)
¥ Background References: ABA
Model Rule 1.8(h), Other Jurisdictions
¥ Commentary: ABA/BNA ¤ 51:110l, ALI-LGL ¤ 54, Wolfram
¤ 5.6.7
¥ MI Commentary: Dubin and Schwartz MRPC 1.8
1.8:910 Prospective Limitation of Malpractice Liability
Paragraph (h)(1) specifically prohibits limiting the lawyerÕs liability to a client for malpractice unless such limitation is permitted by law and the client is independently represented in making the agreement. That provision is not intended to apply to customary qualifications and limitations in legal opinions and memoranda. Comment to MRPC 1.8. See also State Bar of Michigan Informal Opinion RI-196 (Arbitration Clause and Retainer Agreement). But see Watts v Polaczyk, 240 Mich App 600; 619 NW2d 714 (2000) where the Michigan Court of Appeals upheld a provision requiring arbitration in a retainer agreement although the client in a claim for legal malpractice contended the attorney had not advised him of the agreement and its consequences.
1.8:920 Settlement of Legal Malpractice Claim
See Discussion under 1.8:910 above.
1.8:1000 Opposing a Lawyer Relative
¥ Primary Michigan References:
MI Rule 1.8(i)
¥ Background References: ABA
Model Rule 1.8(i), Other Jurisdictions
¥ Commentary: ABA/BNA ¤ 51:1301, ALI-LGL ¤ 123, Wolfram
¤ 7.6.6
¥ MI Commentary: Dubin and Schwartz MRPC 1.8
The provisions of Paragraph 1.8(i) have been construed in Informal Opinions RI-228 and RI-230.
1.8:1100 Lawyer's Proprietary Interest in Subject Matter of Representation
¥ Primary Michigan References:
MI Rule 1.8(j)
¥ Background References: ABA
Model Rule 1.8(j), Other Jurisdictions
¥ Commentary: ALI-LGL ¤¤ 43, 125, Wolfram ¤¤ 8.13,
9.6.3
¥ MI Commentary: Dubin and Schwartz MRPC 1.8
1.8:1110 Acquiring an Interest in Subject Matter of Representation
In Williams v Logan, 184 Mich App 472; 459 NW2d 62 (1990), the court held that an attorney was not privy to an action for collateral estoppel purposes because the attorney was forbidden from acquiring an interest in the subject matter of the litigation by MRPC 1.8(j). The following State Bar of Michigan Informal Ethics Opinions have addressed this Subrule: RI-5 (Ownership Interest in Title Company), RI-27 (Insurance Policy on Life of Client), RI-60 (Tenancy in Building Indirectly Owned by Client), RI-65 (Lawyer as Surety of Client), RI-182 (Lien on Subject Matter of Litigation), RI-197 (Loans to Sports Agent Client).
1.8:1120 Contingent Fees [see also 1.5:600]
Reasonable contingent fees are permitted under MRPC 1.5.
1.8:1130 Lawyer Liens
A lawyer may obtain a mortgage on a clientÕs property to secure payment of fees if the transaction and terms in which the lawyer acquires the interest are fair and reasonable and fully disclosed, the client is given a reasonable opportunity to seek the advice of independent counsel and the client consents in writing. Informal Ethics Opinion RI-40. However, a lawyer may not acquire construction liens on the subject matter of the litigation, whether or not title to the property is ultimately obtained. Informal Opinion RI-182. A lawyer may not ethically exercise a retaining lien on client property if the client needs the property to pursue the clientÕs legal rights or when a refusal to turn over the file would prejudice the clientÕs case. Nor may a lawyer ethically charge the client for copying a representation file in the absence of an agreement with the client to pay for file copies. Informal Opinion RI-203.
See also Discussion under 1.5:240 above.