Pennsylvania Legal Ethics

1.8   Rule 1.8 Conflict of Interest: Prohibited Transactions

1.8:100   Comparative Analysis of Pennsylvania Rule

• Primary Pennsylvania References: PA Rule 1.8
• Background References: ABA Model Rule 1.8, Other Jurisdictions
• Commentary: ABA/BNA Lawyers' Manual on Professional Conduct 01:121-01:123

1.8:101      Model Rule Comparison

MR 1.8(a)(1) provides that a lawyer shall not enter into a business transaction with, or acquire a pecuniary interest adverse to, a client unless the terms of the transaction are "fair and reasonable to the client" and are fully disclosed to the client. The requirement that a transaction be fair and reasonable does not appear in PA-R 1.8(a)(1), which requires only full disclosure to the client. Otherwise, the language of PA-R 1.8 is substantially identical to the language of MR 1.8.

1.8:102      Model Code Comparison

DR 5-104(A) and EC 5-3 are substantially similar to PA-R 1.8(a) in prohibiting or discouraging business transactions with clients. DR 4-101(B)(3) provides a prohibition against the use of client information distinct from PA-R 1.8(b). While DR 4-101(B)(3) prohibits a lawyer from the "use [of] a confidence or secret of his client for the advantage of himself or a third person, unless the client consents after full disclosure," PA-R 1.8(b) prohibits the use of "information relating to representation of a client to the disadvantage of the client unless the client consents after consultation." PA-R 1.8(c) has no DR counterpart; however, EC 5-5 discourages a lawyer from suggesting to a client that a gift be made to the lawyer or for the lawyer's benefit. PA-R 1.8(d) is substantially similar to DR 5-104(B), but refers to "literary or media" rights rather than "publication" rights. PA-R 1.8(e)(1) is similar to DR 5-103(B), but excludes the requirement that the client remains ultimately liable for expenses. PA-R 1.8(e)(2), relating to the payment of court costs for indigent clients, has no counterpart in the Code. PA-Rs 1.8(f) and 1.8(g) are substantially the same as DR 5-107(A)(1) and DR 5-106, respectively. The first clause of PA-R 1.8(h) is similar to DR 6-102(A) in prohibiting a lawyer from limiting his or her malpractice liability to a client. The second clause of PA-R 1.8(h), regarding the settling of a legal malpractice claim with a client who is not independently represented, has no counterpart in the Code. PA-R 1.8(i), which addresses the representation of a client with an interest adverse to a lawyer's relative, similarly has no counterpart in the Code. PA-R 1.8(j) is substantially the same as DR 5-103(A).

1.8:200   Lawyer's Personal Interest Affecting Relationship

• Primary Pennsylvania References: PA Rule 1.8(a)
• Background References: ABA Model Rule 1.8(a), Other Jurisdictions
• Commentary: ABA/BNA § 51:501 et seq., ALI-LGL § 207, Wolfram §§ 7.6, 8.11

1.8:210      Sexual Relations with Clients

Pennsylvania Bar Association Committee on Legal Ethics and Professional Responsibility has recently issued Ethics Opinion 97-100 which states unequivocally that sexual relations between an attorney and a client is breach of the attorney's fiduciary duty to the client. Pa. Eth. op. 97-100 (1997). The Committee has proposed a Pennsylvania Rule of Professional Conduct 1.18 codifying this opinion.

1.8:220      Business Transactions with Clients

Note that the business-dealing conflicts between a lawyer and a client or potential client are not imputed to affiliated lawyers or to the lawyer's firm under PA-R 1.10(a) and MR 1.10(a); under the Code, however, DR-5-105(D) does require the imputation of business conflicts. Because unfairness to the client would imply a lack of full disclosure, a lawyer may still bear the burden of proving the fairness of business transactions with a client. For example, PA-R 1.8(a) would not prohibit a lawyer from entering an agreement with a client in which the lawyer would buy the right to collect a full settlement amount to be paid in the future in return for the immediate payment to the client of a percentage of the future settlement payment. The lawyer, however, should scrupulously comply with PA-R 1.8(a), for example, by documenting attempts to negotiate an immediate settlement payment. Phila. Eth. Op. 95-7 (1995).

1.8:300   Lawyer's Use of Client Information

• Primary Pennsylvania References: PA Rule 1.8(b)
• Background References: ABA Model Rule 1.8(b), Other Jurisdictions
• Commentary: ABA/BNA §§ 55:501-55:2001 , ALI-LGL §§ 113-117A, Wolfram § 6.7

1.8:400   Client Gifts to Lawyer

• Primary Pennsylvania References: PA Rule 1.8(c)
• Background References: ABA Model Rule 1.8(c), Other Jurisdictions
• Commentary: ABA/BNA § 51:601, ALI-LGL § 208, Wolfram § 8.12

A gift from a client to a relative of the client's lawyer does not violate PA-R 1.8(c) where there is evidence that the relative was a natural object of the client's generosity. In re Bloch (Super. Ct. 1993). While a court of law cannot punish attorney misconduct on the basis of a violation of the Rules of Professional Conduct, a lawyer can be denied relief at equity when conduct in violation of PA-R 1.8 constituted "unclean hands." In re Estate of Pedrick (1984).

1.8:500   Literary or Media Rights Relating to Representation

• Primary Pennsylvania References: PA Rule 1.8(d)
• Background References: ABA Model Rule 1.8(d), Other Jurisdictions
• Commentary: ABA/BNA § 51:701, ALI-LGL § 48, Wolfram § 9.3.3

1.8:600   Financing Litigation

• Primary Pennsylvania References: PA Rule 1.8(e)
• Background References: ABA Model Rule 1.8(e), Other Jurisdictions
• Commentary: ABA/BNA § 51:801, ALI-LGL § 48, Wolfram § 9.2.3

1.8:610      Litigation Expenses

Because PA-R 1.8(e) does not include the Code requirement that the client remains ultimately liable for expenses, the rule is not violated by an arrangement through which litigation expenses are averaged or estimated at the beginning of a representation agreement and paid as an indistinguishable part of contingency fees. Phila. Eth. Op. 93-10 (undated).

1.8:620      Living and Medical Expenses

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1.8:700   Payment of Lawyer's Fee by Third Person

• Primary Pennsylvania References: PA Rule 1.8(f)
• Background References: ABA Model Rule 1.8(f), Other Jurisdictions
• Commentary: ABA/BNA § 51:901, ALI-LGL §§ 215, 216, Wolfram § 8.8

1.8:710      Compensation and Direction by Third Person

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1.8:720      Insured-Insurer Conflicts [see also 1.7:315]

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1.8:730      Lawyer with Fiduciary Obligation to Third Persons [see 1.13:520]

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1.8:800   Aggregate Settlements

• Primary Pennsylvania References: PA Rule 1.8(g)
• Background References: ABA Model Rule 1.8(g), Other Jurisdictions
• Commentary: ABA/BNA § 51:375, ALI-LGL § 209, Wolfram § 8.15

1.8:900   Agreements Involving Lawyer's Malpractice Liability

• Primary Pennsylvania References: PA Rule 1.8(h)
• Background References: ABA Model Rule 1.8(h), Other Jurisdictions
• Commentary: ABA/BNA § 51:110l, ALI-LGL § 76, Wolfram § 5.6.7

1.8:910      Prospective Limitation of Malpractice Liability

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1.8:920      Settlement of Legal Malpractice Claim

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1.8:1000   Opposing a Lawyer Relative

• Primary Pennsylvania References: PA Rule 1.8(i)
• Background References: ABA Model Rule 1.8(i), Other Jurisdictions
• Commentary: ABA/BNA § 51:1301, ALI-LGL § 203, Wolfram § 7.6.6

1.8:1100   Lawyer's Proprietary Interest in Subject Matter of Representation

• Primary Pennsylvania References: PA Rule 1.8(j)
• Background References: ABA Model Rule 1.8(j), Other Jurisdictions
• Commentary: ABA/BNA § , ALI-LGL §§ 47, 53, 55, Wolfram §§ 8.13, 9.6.3

1.8:1110      Acquiring an Interest in Subject Matter of Representation

An arrangement between lawyer and client through which the client's spousal support check would be sent from family court to the lawyer for deduction of installment payment of fees based on hours of service would not violate PA- 1.8(j) as long as the lawyer conducts the arrangement carefully and does not charge the client for the time involved in the process. Phila. Eth. Op. 94-13 (1994).

1.8:1120      Contingent Fees [see also 1.5:600]

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1.8:1130      Lawyer Liens

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1.8:1140      Retention of Files to Collect Fees

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