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District of Columbia Legal Ethics
1.8:100 Comparative Analysis of DC Rule
Pursuant to a recommendation of the Ethics 2000 Commission, the title of Model Rule 1.8, which had previously read Conflict of Interest: Prohibited Transactions, was revised by deleting the phrase Prohibited Transactions and replacing it with Current Clients: Specific Rules. The DC Bar’s Rules Review Committee recommended that the caption to the DC Rule also be revised to substitute Specific Rules for Prohibited Transactions, explaining that this change would “avoid any misleading implication that Rule 1.8 prohibits most transactions, rather than allowing them to specified exceptions;” and this change in the rule’s caption was adopted by the DC Court of Appeals in 2006. The Committee appeared to have overlooked the other change that had been made in the Model -- the added reference to Current Clients -- and neither recommended that it also be made to the DC Rule nor gave any reason for not doing so.
DC Rule 1.8(a), (b), (c), (e), (f) and (h) as originally adopted were identical, or virtually so, to MR 1.8(a), (c), (d), (f), (g) and [former] (i), respectively. The DC Rule did not include a counterpart to MR 1.8(b) on use of client information to the disadvantage of the client, because that subject was covered in the DC version of Rule 1.6. See 1.6:101, above. DC Rule 1.8(d), expanded upon in a Comment  unique to DC, was quite different from the counterpart MR 1.8(e). The DC Rule allowed a lawyer to "pay or otherwise provide" expenses of litigation or administrative proceedings, with examples given, and
other financial assistance which is reasonably necessary to permit the client to institute or maintain the litigation or administrative proceeding.
Typical of the latter, according to Comment  (now renumbered as ), would be "medical expenses and minimum living expenses." MR 1.8(e), in contrast, restricts lawyers to advancing court costs and litigation expenses contingent on the outcome of the matter and paying such costs and expenses for an indigent client.
DC Rule 1.8(g), prohibiting agreements prospectively limiting a lawyer's malpractice liability, omitted the exception in the Model Rule for agreements that are permitted by law and as to which the client is independently represented. The Jordan Committee felt that there was no "clearly articulated basis or perceived need" for the exception, which was new to the Model Rules, and that "the potential for abuse by lawyers seemed to outweigh any benefits."
DC Rule 1.8(i) was limited to addressing lawyer's liens, and omitted the general prohibition in its counterpart MR 1.8(j) on acquiring a "proprietary interest in the cause of action or subject matter of the litigation." The Jordan Committee omitted this prohibition on the grounds that the authorization of contingent fees in Rule 1.5 had "effectively swallowed" it, and that the fairness and consent requirements of Rule 1.8(a) would prevent abuse. The Jordan Committee said that the wording of DC Rule 1.8(i) concerning liens, and new DC Comments elaborating upon it, reflected the "disquiet" expressed in several DC Ethics opinions with the breadth of the previous Code provision allowing the assertion of a lien against a client's papers in the lawyer's possession if the client owed the lawyer money. The Jordan Committee adopted limitations found in DC Ethics Opinion 59 (undated) and its progeny, i.e. imposing the lien only against a lawyer's work product and only to the extent that the work product had not been paid for. Even the work product exception would not apply when the client had become unable to pay, i.e. when the client was not willfully withholding the lawyer's fee, or when withholding the work product would present a significant risk of irreparable harm to the client. The Peters Committee recommended, and the Court of Appeals adopted effective November 1, 1996, an amendment to Rule 1.8(i) to eliminate uncertainty as to whether the Rule allowed all three kinds of liens recognized by DC law: retaining liens, charging liens and contractual liens. The new introductory clause to DC Rule 1.8(i) affirmatively stated that a lawyer
may acquire and enforce a lien granted by law to secure the lawyer's fees or expenses, but....
at which point the rule picked up the previous language regarding retaining liens on client files and work product. A related new Comment  (now ) was added on the Peters Committee's recommendation, referring to Redevelopment Land Agency v. Dowdey, 618 A.2d 153, 159-60 (DC 1992), and cases cited therein on substantive DC law as to asserting and enforcing liens against the property of clients.
Other changes in the Comments included modification of Comment  to state that a client "should be advised by the lawyer to obtain" — rather than "should have" — the detached advice of another lawyer if a substantial gift is to be made to a non-relative lawyer through a legal instrument; and the addition of a sentence to DC Comment (now )(corresponding to Model Rule 1.8 Comment ) clarifying that the effect of DC Rule 1.8(h) (MR 1.8(i)) was to require consent of all clients represented adversely to one another in a matter by lawyers who are spouses or close relatives.
One of the changes made in Model Rule 1.8 pursuant to recommendations of the ABA Ethics 2000 Commission was a change in the title, to omit "Prohibited Transactions" and substitute "Current Clients: Specific Rules." The DC Rule Review Committee also removed "Prohibited Transactions," but substituted only "Specific Rules." The other changes made in MR 1.8 and its DC counterpart as a result of the recommendations of the Commission and the Committee, respectively, are summarized below.
Model Rule 1.8(a)(3) was changed to elaborate its requirement of client consent (to business transactions between lawyer and client) by adding requirements not only that the consent be informed, but that the required writing be signed by the client and spell out the essential terms of the transaction and the lawyer's role therein. The DC Rule was changed only to add the requirement that the consent be informed.
Model Rule 1.8(c), regarding gifts by a client to the lawyer or the lawyer's family, was substantially elaborated by the Ethics 2000 Commission, but its counterpart DC Rule 1.8(b) was changed only to adopt the Model Rule's change elaborating on the meaning of the term "related persons."
Model Rule 1.8(f)(1) was slightly modified to substitute "gives informed consent" for "consents after consultation." The corresponding DC Rule 1.8(e)(1) was changed by insertion of "give informed" before "consent," but it retained the phrase "after consultation."
Model Rule 1.8(g), regarding aggregate settlements and plea agreements, was amended to require that clients' consent be informed and in writing; the same changes were made in the corresponding DC Rule 1.8(f).
Model Rule 1.8(h)(2), regarding agreements settling claims of malpractice against the lawyer was modified to require that the client be advised of the desirability of seeking the advice of independent counsel and a reasonable opportunity to do so. The same changes were made in the corresponding DC Rule 1.9(g)(2).
The former Model Rule 1.8(i), regarding situations where related lawyers are on opposite sides of a matter, was deleted on the ground of being both over- and underinclusive, and the problem of conflicts in such circumstance was addressed by a new Comment to Model Rule 1.7. Its counterpart, DC Rule 1.8(h), was retained, and modified only by insertion of "informed" before "consent." A new paragraph (j) was added to Model Rule 1.8, forbidding a lawyer's having sexual relations with a client unless the sexual relationship preexisted the lawyer-client relationship. No corresponding provision was added to the DC Rule; instead, the subject was dealt with by adding Comments -, which address the possible conflicts implications of such a relationship, to DC Rule 1.7. See 1:7:101, above.
Finally, a new paragraph (k) was added to Model Rule 1.8, addressing the imputation of Rule 1.8's various prohibitions to colleagues of the lawyer affected by those provisions. An identical provision was added as paragraph (j) to the DC Rule.
The revisions of the black letter text of Model Rule 1.8 were accompanied by substantial revisions and additions to its accompanying Comments. Many of these changes were also made in the Comments to DC Rule 1.8.
Paragraph (a) has no direct counterpart in the Model Code, although DR 5-104(A) addresses the same issues. Paragraph (b) has no counterpart in the Model Code. Paragraph (c) is substantially similar to DR 5-104(B). Paragraph (d) makes substantial changes in DR 5-103(B). DC had already amended DR 5-103(B) of the Model Code in 1980 to allow lawyers to pay -- as opposed to advancing, with the client assuming responsibility for repayment -- litigation costs; but the provision in DC Rule 1.8(d) for providing "other financial assistance" was without precedent in DC's version of the Code. Paragraph (e)(1) is very similar to DR 5-107(A)(1), while paragraphs (e)(2) and (3) add requirements not specified in the Model Code. Paragraph (f) is substantially the same as DR 5-106. Paragraph (g)(1) is substantially similar to DR 5-102(A), while paragraph (g)(2) has no counterpart in the Model Code. Paragraph (h) also has no counterpart in the Model Code. Paragraph (i) is much more restrictive than DR 5-103(A)(1), but reflects the discomfort with retaining liens expressed in opinions applying that provision, including DC Ethics Opinions 59 (undated), 90 (1980) and 107 (1981).
1.8:200 Lawyer's Personal Interest Affecting Relationship
There appear to be no pertinent DC court decisions or ethics opinions on this subject.
A mandatory arbitration agreement covering all disputes between lawyer and client is permissible only if the client is counselled by another attorney. DC Ethics Opinion 211 (1990). Consultation of another lawyer is not required for the effectiveness of an agreement limited to providing for arbitration of fee disputes before the D.C. Bar Attorney-Client Arbitration Board ("ACAB"), if the client is advised in writing of the availability of counselling by ACAB staff, "the lawyer encourages the client to contact the ACAB for counselling and information prior to deciding whether to sign the agreement," and the client consents in writing to mandatory arbitration. DC Ethics Opinion 218 (1991). Cf. Haynes v. Kuder, 591 A.2d 1286 (DC 1991), as discussed in 1.5:250 above.
In In re Austin, 858 A,2d 959 (DC 2004), the respondent was found to have violated both DC Rule 1.8(a) and Rule 8.4(c) by reason of having, over a period of eighteen months, taken advantage of a vulnerable, uneducated elderly client of very limited means by borrowing money from her in a series of ten instances, totaling almost $27,000, and not repaying any more than trifling amounts. He was found to have violated Rule 1.8(a) by failing to advise the client to consult other counsel before agreeing to lend money to the respondent, and Rule 8.4(c) by acts that amounted to theft and fraud, and which the Court also termed “fraudulent acts of dishonesty.” Id. at 977. Although the Board had recommended a sanction of eighteen months’ suspension, with reinstatement conditional upon full reimbursement of the loans he had extracted from his client, the Court imposed the sanction of disbarment, with reinstatement also conditioned on full restitution.
In re James, 452 A.2d 163, 167 (DC 1982), cert. denied, 460 US 1038 (1983), found that intent to defraud or other improper motive was not an element of a DR 5-104(A) violation.
The following are cases finding violations of Rule 1.8(a) or its predecessor DR 5-104(A) proven or adequately pled: In re McLain, 671 A.2d 951, 953 (DC 1996); In re Lenoir, 604 A.2d 14, 15 (DC 1992); Dalo v. Kivitz, 596 A.2d 35, 37 (DC 1991); In re Thompson, 579 A.2d 218, 219 n.2 (DC 1990); BCCI Holdings (Luxembourg), S.A. v. Clifford, 964 F. Supp. 468, 482 (DDC 1997); Avianca, Inc. v. Corriea, 705 F. Supp. 666, 678-82 (DDC 1989). See also Goodrum v. Clement, 277 F. 586 (DC Ct. App. 1922) (pre-Code decision on attorney-client business transactions).
D.C. Ethics Opinion 319 (2003) addressed the ethical propriety of a lawyer's purchasing a legal claim from a non-lawyer. Disagreeing with ABA Formal Opinion 51 (1931), which interpreted Canon 28's injunction against "stirring up strife and litigation" as prohibiting a lawyer from purchasing choses in action, the Opinion held that under the Rules of Professional Conduct there is no prohibition on a lawyer's doing so. The Opinion warned, however, that there is a risk in a lawyer's negotiating with a non-lawyer about the purchase of a legal claim, in that the latter may rely on statements the lawyer makes about the value of the claim, and thereby establish a lawyer-client relationship, bringing Rule 1.8(a) into play. The Opinion suggested, therefore, that before negotiating with a non-lawyer who is not represented by counsel, a lawyer should recommend that the non-lawyer seek the advice of counsel.
DC Ethics Opinion 300 (2000) considered the application of Rule 1.8(a) (along with Rules 1.5 and 1.7) to a lawyer's accepting an ownership interest in a corporate client as compensation for legal services. The Opinion is more fully described under 1.5:400, above.
DC Ethics Opinion 110 (2001) (more fully discussed under 1.5:400, above) pointed out that although fee arrangements might be viewed as business transactions with a client, involving the same sort of adverseness between the interests of lawyer and client as the transactions governed by Rule 1.9(a), they are not subject to the requirements of that Rule, but rather to the more flexible standard of reasonableness applied by Rule 1.5.
DC Ethics Opinion 306 (2001) (more fully discussed under 5.7:200 below), which addressed the ethical responsibilities of a lawyer who is also a licensed insurance broker, pointed out that if the lawyer sold insurance products to a client, the restrictions of Rule 1.8(a) would apply.
1.8:300 Lawyer's Use of Client Information
1.8:400 Client Gifts to Lawyer
As explained under 1.8:101 above, the provision of the DC Rules prohibiting a lawyer from preparing an instrument giving the lawyer or a member of the lawyer’s family a substantial gift from a client is paragraph (b) of DC Rule 1.8, rather than paragraph (c) as in the corresponding Model Rule. In In re Devaney, 870 A.2d 53 (DC 2005), a violation of that provision of the DC Rule was held to call for the respondent lawyer’s disbarment. In that case, the respondent had prepared three successive codicils for the will of a frail and elderly friend and neighbor that had originally been prepared by another lawyer. The cumulative effect of the codicils was to override the original provisions of the will, which would have left the bulk of the estate to various charitable organizations, and substitute the respondent lawyer’s wife and sons as the principal beneficiaries. In addition to violating DC Rule 1.8(b), this conduct was found to have constituted a failure to provide competent representation to this client, in violation of DC Rule 1.1(a). Furthermore, although the respondent was a member of the DC Bar, he resided in Virginia, where the elderly friend was his neighbor, but he was not admitted to practice in Virginia; in consequence he was also found to have violated DC Rule 5.5(a)’s prohibition on a lawyer’s engaging in the practice of law in a jurisdiction where the lawyer is not licensed. On appeal, the Court sustained the Board’s rejection of respondent’s claims that he was not practicing law but was only carrying our the wishes of a friend, and that there was no retainer agreement and therefore no attorney-client relationship. The respondent also contended, unsuccessfully, that he had not been aware of Rule 1.8(b) and therefore should not be disbarred for violating it: as to this, the Court observed that “an attorney is presumed to know the ethical rules governing his behavior, and ignorance neither excuses nor mitigates a violation,” Id. at 57; and in any event the Court rested its approval of the penalty of disbarment solely on the violation of Rule 1.8(b), without considering what penalty would be appropriate for the violations of Rules 1.1(a) and 5.5(a).
1.8:500 Literary or Media Rights Relating to Representation
DC Ethics Opinion 202 (1989), applying DR 5-104(B) and noting that Rule 1.8(c) is substantially similar, holds that a lawyer may not enter into a contingent fee agreement under which the lawyer receives 5% of any negotiated cash advance for the sale of the client's life story to the media where ongoing civil litigation is a substantial part of the client's life story.
DC Ethics Opinion 334 (2006) [more fully discussed under 1.7:500, above] holds that Rule 1.8(c) does not apply when a lawyer is approached about selling his or her own media rights relating to a representation but that such a situation raises issues under Rule 1.7.
1.8:600 Financing Litigation
DC Ethics Opinion 166 (1986), applying former DR 5-103(B), held, as Comment  to Rule 1.8 now indicates, that, absent a contrary understanding, an attorney may bill a pro bono client for litigation costs. The attorney should advise the client of the attorney's intent to do so.
DC Ethics Opinion 104 (1981), applying former DR 5-103(B), held that where a lawyer is appointed to represent an indigent, the lawyer must advance the expenses necessary for competent representation, and, as a practical matter, must absorb them if there is no mechanism for reimbursement. See also Arrocha v. McAuliffe, 109 FRD 397, 399-400 & n.4 (DDC 1986).
DC Rule 1.8(d), significantly expanding MR 1.8(e), authorizes the payment of client medical and living expenses if reasonably necessary to permit the client to institute or maintain litigation. See Comment  to DC Rule 1.8.
DC Ethics Opinion 196 (1989), applying DR 5-103(B), the narrower predecessor to Rule 1.8(d), held it proper for a lawyer to refer a client to a finance company that would lend moeny on the client's claim.
1.8:700 Payment of Lawyer's Fee by Third Person
One of the numerous ethical transgressions found in In re Hager, 812 A.2d 904 (DC 2002) [which is more fully discussed under 1.7:500, above] was a violation of Rule 1.8.(e)'s prohibition on accepting compensation from one other than the client where there in not client consent and/or there is interference with the lawyer's independence of professional judgment. In the underlying case the lawyers representing the plaintiffs in a potential class action had made a side deal with the defendant, unknown to their clients, under which the defendant paid them $225,000 as attorneys fees and expenses, the lawyers agreed never to represent anyone with related claims against the defendant and to keep totally confidential and not to disclose to anyone all information learned during their investigation relating to the case, and all the parties agreed not to disclose most of the terms of the settlement, even to the lawyers' clients. The respondent in the resulting disciplinary proceeding contended that Rule 1.8(e) was not violated because the clients had consented, in the engagement letter, to the lawyers being paid a fee by the defendant. The Court held, however, that
While clients are allowed to waive future conflicts of interest such as third-party compensation, for such a waiver "to be effective . . . [it] must contemplate that particular conflict with sufficient clarity so that the client's consent can reasonably be viewed as having been fully informed when it was given." [Quoting DC Ethics Opinion 298, referred to below.]
Id. at 915.
DC Ethics Opinion 289 (1999) [discussed more fully under 5.4:400, below], addressing various issues potentially presented by a nonprofit organization's program of "cause" litigation involving the representation or third persons, found certain aspects of the program to raise problems of lay interference with the lawyers conducting the litigation, in violation of Rule 1.8(e)(2) as well as Rule 5.4(c).
DC Ethics Opinion 290 (1999) addressed an inquiry by a law firm that defends insureds and is paid by their insurer to do so, as to its obligations of confidentiality in dealing with an outside agency retained by the insurer to audit its legal bills. The Opinion held that under both Rule 1.6 and Rule 1.8(e)(3) of the D.C. Rules (the latter corresponding to MR 1.8(f)(3)), a lawyer so retained may not, absent consent of the client insured, disclose information relating to the representation that is either a "confidence" or a "secret" protected by Rule 1.6 to the insurer, or a fortiori, to an auditor retained by the insured.
A corporation may pay the fee of a lawyer for representing a corporate constituent such as an officer or employee so long as Rule 1.8(e) is complied with. DC Ethics Opinion 269 (1997); see also DC Ethics Opinion 328 (2005).
DC Ethics Opinion 225 (1992) finds a prepaid legal services client agreement to satisfy the consent-after-consultation requirement of Rule 1.8(e).
DC Ethics Opinion 176 (1986), applying former DR 5-107(B), held that it does not impermissibly allow a non-lawyer to control a lawyer's professional judgment for a salaried attorney for a union to receive a fee award calculated on the basis of market fees higher than the attorney's salary compensation, and to deposit those fees into a legal assistance fund to be used to provide legal services to union members.
DC Ethics Opinion 155 (1985), applying former DR 5-107(B), held that a law firm could provide legal services to members of an organization under a prepaid legal services plan and pay 10% of the monthly charge for membership in the plan to the organization for the organization's costs of administering the plan, so long as the attorney-client relationship was with the members and the law firm gave undiluted loyalty to the members. The law firm "must not tailor its representation in order to maintain the favor of the parent organization that has arranged and recommended its services."
DC Ethics Opinion 118 (1982), citing former EC 5-13, stated that serious questions are raised by a lawyer's participating in a job action against the lawyer's employer at the behest of a union.
DC Ethics Opinion 30 (1977) held that if a union pays for or recommends a lawyer, the lawyer must represent the client "without in any way tailoring his representation or his advocacy in order to maintain the favor of the union."
1.8:720 Insured-Insurer Conflicts [see also 1.7:315]
An attorney hired by an insurance company to represent an insured must be loyal to the insured, and must not allow the lawyer's relationship with the insurance company to hinder the representation. DC Ethics Opinion 173 (1986) (applying former DR 5-105(B) and (C) and DR 5-107(B)).
1.8:730 Lawyer with Fiduciary Obligation to Third Persons [see 1.13:520]
There appear to be no pertinent DC court decisions or ethics opinions on this subject.
1.8:800 Aggregate Settlements
There appear to be no pertinent DC court decisions or ethics opinions on this subject.
1.8:900 Agreements Involving Lawyer's Malpractice Liability
DC Ethics Opinion 235 (1993) held that Rule 1.8(g) is not violated by incorporating a law firm under a limited liability statute, "if the individual lawyer who committed the malpractice remains personally liable to the client in all events, and if the client is made aware of the limitation of personal liability of the other lawyers in the law firm who were not involved in the malpractice."
A mandatory arbitration agreement between lawyer and client does not violate Rule 1.8(g). DC Ethics Opinions 211 (1990) and 218 (1991). However, Opinion 211 held that such an agreement may not have the effect of reducing the limitations period for malpractice actions, and DC Ethics Opinion 190 (1988), applying DR 6-102, held that such an agreement may not prevent the award of punitive damages for malpractice. Also, Opinion 218 held that a lawyer may use the rejection in such an arbitration of a defense of inadequate representation as a bar to a subsequent malpractice claim only if the client was counselled by another attorney before entering into the arbitration agreement.
DC Ethics Opinion 193 (1988), decided under DR 6-102(A), held that a corporation could negotiate an agreement with its staff attorneys under which the corporation would indemnify the attorneys for malpractice claims by third parties and waive its right to sue the attorneys for malpractice against the corporation. This was acceptable because the corporation, a sophisticated business, initiated the agreement as a strategy to save malpractice premiums, and was always free to discharge the staff attorneys. This Opinion may not survive the tighter wording of Rule 1.8(g)(1).
DC Ethics Opinion 260 (1995) held that, before settling a claim for malpractice with an unrepresented client or former client, a lawyer must allow that person a reasonable period to consult counsel and negotiate the matter.
1.8:1000 Opposing a Lawyer Relative
Decisions such as DC Ethics Opinion 137 (1984), which barred spouses from representing adverse parties even with consent, are superseded by DC Rule 1.8(h), allowing consent.
1.8:1100 Lawyer's Proprietary Interest in Subject Matter of Representation
1.8:1120 Contingent Fees [see also 1.5:600]
In In re Arneja, 790 A.2d 552 (DC 2002), the respondent sought to justify his foot-dragging in responding to a former client's demand that he turn over the client's files to successor counsel by arguing that he was seeking to protect his claim for fees for the work he had performed, under Rule 1.8(i). The Board on Professional Responsibility found, however, and the Court agreed, that this claim "came only belatedly," and was asserted even after successor counsel agreed to protect respondent's work product lien; and, in addition, that Rule 1.8(i) by its terms precluded reliance on the work product lien where, as here, "withholding the lawyer's work product would present a significant risk to the client of irreparable harm."
The DC Court of Appeals noted in In Re Waller [discussed in 1.5:230, above] that "there can be no doubt that where the fee demanded is clearly excessive, counsel cannot properly retain an erstwhile client's papers until counsel's fee is paid." 524 A.2d at 749 n.1.
A lawyer cannot rely on Rule 1.8(i) in refusing to surrender documents to a client, even if the lawyer's fees have not been paid, if the lawyer makes it a condition of such surrender that the client sign a general release from liability. In re Bernstein, 707 A.2d 371 (DC 1998).
DC Ethics Opinions 273 (1997) and 250 (1994) confirm DC's hostility to retaining liens on client files. They indicate that a lawyer may keep copies of files returned to a client, but Opinion 250, citing DC Ethics Opinion 168 (1986), states that the lawyer must bear the cost of copying. (Opinion 168 also stated that this could be varied by agreement.) Opinion 250 states that the work product provision "should be construed narrowly" and should be relied upon by a lawyer only where "clearly applicable," and only where "the lawyer's financial interests 'clearly outweigh the adversely affected interests of his former client'" (quoting DC Ethics Opinion 59 (undated)). Opinion 250 indicates that pleadings, government orders, papers prepared by persons outside the lawyer's law firm and correspondence to the client are not the lawyer's work product, while drafts, notes and research memoranda are. To be retained pursuant to a lien, work product must relate to the period for which fees were not paid, or, if the period covered by the unpaid fees cannot be clearly identified, "the lawyer may withhold only work product that has clearly not been paid for." A client assertion that irreparable harm would result from retaining files is not conclusive, but "must be given great weight." On the adoption of Rule 1.8(i), which narrowed earlier D.C. authority for retaining liens, see DC Ethics Opinion 230 (1992). Older decisions superseded by Rule 1.8(i) include DC Ethics Opinions 59 (undated), 90 (1980), 100 (1981), 103 (1981), 107 (1981) and 191 (1988).