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End-of-life notice: American Legal Ethics Library

As of March 1, 2013, the Legal Information Institute is no longer maintaining the information in the American Legal Ethics Library. It is no longer possible for us to maintain it at a level of completeness and accuracy given its staffing needs. It is very possible that we will revive it at a future time. At this point, it is in need of a complete technological renovation and reworking of the "correspondent firm" model which successfully sustained it for many years.

Many people have contributed time and effort to the project over the years, and we would like to thank them. In particular, Roger Cramton and Peter Martin not only conceived ALEL but gave much of their own labor to it. We are also grateful to Brad Wendel for his editorial contributions, to Brian Toohey and all at Jones Day for their efforts, and to all of our correspondents and contributors. Thank you.

We regret any inconvenience.

Some portions of the collection may already be severely out of date, so please be cautious in your use of this material.

Delaware Legal Ethics

1.8 Conflict of Interest: Prohibited Transactions

1.8:100 Comparative Analysis of DE Rule

1.8:101 Model Rule Comparison

DLRPC 1.8 is identical to Model Rule 1.8.

1.8:102 Model Code Comparison

1.8(a) differs from DR 5-104(A) and EC 5-3. DR 5-104(A) states that a lawyer “shall not enter into a business transaction with a client if they have differing interests therein and if the client expects the lawyer to exercise his professional judgment therein for the protection of the client, unless the client has consented after full disclosure.” EC 5-3 provides that a lawyer “should not seek to persuade his client to permit him to invest in an undertaking of his client nor make improper use of his professional relationship to influence his client to invest in an enterprise in which the lawyer is interested.”

1.8(b) differs from DR 4-101(B)(3). DR 4-101 (B)(3) provides that a lawyer should not use “a confidence or secret of his client for the advantage of himself, or of a third person, unless the client consents after full disclosure.” 1.8(c) does not correspond to a Model Code provision.

1.8(d) is similar to DR 5-104(B). However, DR 5-104(B) refers to “publication rights,” while 1.8(d) refers to “literary or media rights.”

1.8(e)(1) is similar to DR 5-103(b). Rule 1.8(e) does not require that the client remain “ultimately liable” for certain expenses, since repayment may be contingent on the outcome of the matter. (referring to a lawyer’s financial assistance in connection with pending or contemplated litigation). Rule 1.8(e)(2) has no counterpart in the Model Code.

1.8(f) is substantially the same as DR 5-107(A)(1), while 1.8(g) is identical to DR 5-106. The first clause of 1.8(h) is similar to DR 6-102(A), but the Model Code does not address the settling of a malpractice claim with a client. 1.8(i) has no Model Code counterpart, but 1.8(j) is substantially identical to DR 5-103(A).

1.8:200 Lawyer’s Personal Interest Affecting Relationship

1.8:210 Sexual Relations with Clients

DLRPC 1.8(j) states that "[a] lawyer shall not have sexual relations with a client unless a consensual sexual relationship existed between them when the client-lawyer relationship commenced." DLRPC 1.8(j).

While not specifically targeting subsection (j) of DLRPC 1.8, a Delaware lawyer was suspended for three years for ethical violations, including a violation of DLRPC 1.8. The lawyer made inappropriate statements and gestures during the course of representing the client in a child support and visitation matter. Some of the statements were: “I cannot believe a woman with your looks and personality isn't dating"; "What would you do for a man who had a four hour erection?;" and “When are you going to have sex with me?" The lawyer also made an “open-arm gesture and refused to let Jones [the client] leave his office until she hugged him.” In re Tenenbaum, 2005 Del. LEXIS 309 (August 5, 2005).

1.8:220 Business Transactions with Clients

A lawyer must not enter into a business transaction with a client that is knowingly adverse, even if “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.” DLRPC 1.8 cmt. 1.

Business transactions with clients are presumptively invalid unless there is clear and convincing evidence showing “full and complete disclosure of all facts known to the attorney and absolute independence of action on the part of the client.” Melson v. Michlin, 223 A.2d 338, 344 (Del Ch. 1966). The attorney must prove that the transaction is free from taint. If the conflict was reasonably foreseeable, the transaction is voidable. Id.

Over the course of several years, an attorney entered into business contracts with his client. Litigation ensued over the transactions and the Court found that the business contracts were not “fair and reasonable” to the client. The lawyer was privately admonished. Private Admonition-Board Case No. 17, 1992. Date of Sanction: September 11, 1992.

In Matter of Nitsche, the lawyer entered into a business partnership with the client. The lawyer violated 1.8(a) because the lawyer performed legal transactions for both the client and the partnership. The client was forced into bankruptcy when the business failed. The Court publicly reprimanded the attorney. In the Matter of a Member of the Bar of the State of Delaware: Gary S. Nitsche, 1995 Del. LEXIS 404 (November 21, 1995) affirming Board Case Nos. 29 and 30, 1994.

Comment [1] states that DLRPC 1.8 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 existing clients.” DLRPC also applies to a lawyer “purchasing property from estates they represent.” DLRPC 1.8 cmt. 1.

DLRPC 1.8 does not apply to ordinary fee arrangements, unless a lawyer “accepts an interest in the client’s business or other nonmonetary property as payment of all or part of a fee.” Id.; See also DLRPC 1.5.

1.8:300 Lawyer’s Use of Client Information

The lawyer’s use of client information violates the lawyer’s duty of loyalty if the information relating to the representation is used to the disadvantage of the client. Yet, a lawyer may use information that does not disadvantage a client, such as a government agency’s interpretation of legislation. DLRPC 1.8 cmt. 5.

The lawyer may be able to use the client’s information if the client gives informed consent. Id.

1.8:400 Client Gifts to Lawyer

A lawyer may accept a client gift if the “transaction meets general standards of fairness.” DLRPC 1.8 cmt. 6.

A Delaware attorney was privately admonished for preparing a document that amended the lawyer’s long-time friend and neighbor’s trust agreement. The amendment provided the attorney’s children with monetary gifts. The attorney advised the client to have the document reviewed by the client’s financial advisors and local attorney. The Board found that the attorney’s substantial experience in the practice of law was an aggravating factor against the lawyer. Private Admonishment-Board Case No. 45, 2001. Date of Sanction: February 7, 2002. See DLRPC 1.8(c).

Comment [6] states that a lawyer may not “suggest that a substantial gift be made to the lawyer or for the lawyer’s benefit,” unless the lawyer is related to the client. DLRPC 1.8 cmt. 6. The client should have another lawyer prepare a legal instrument that provides for a substantial client gift to a lawyer. Id. at cmt. 7.

The lawyer prepared a will for the client and named himself as the contingent beneficiary of the client’s estate. The lawyer had a long-standing relationship with the client, and there was no evidence of undue influence. Furthermore, the lawyer did not receive any proceeds from the estate. The Board found the lawyer’s actions unethical under DLRPC 1.8(c). The lawyer was privately admonished. Private Admonition-Board Case No. 111, 1997. Date of Sanction: December 8, 1997.

In 1985, Mrs. Ben bequeathed ten percent of her estate to lawyer McCann, without his knowledge or involvement. McCann was not related to Mrs. Bow. However, in 1990, McCann prepared Mrs. Bow’s will with knowledge of the client’s intent to leave him ten percent of her estate. The 1990 will “revoked and annulled all previous wills.” The lawyer knew that he would receive approximately $15,000 from the instrument but did not advise the client to obtain independent counsel. As a result, the lawyer violated DLRPC 1.8(c). In The Matter of A Member of the Bar of the Supreme Court of the State of Delaware: Richard S. McCann, 669 A.2d 49, 55 (Del. 1995).

1.8: 500 Literary or Media Rights Relating to Representation

Comment [9] “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…” DLRPC 1.8 cmt. 9.

1.8:600 Financing Litigation

1.8:610 Litigation Expenses

A lawyer may not subsidize a lawsuit. A lawyer may lend “court costs and litigation expenses, including the expenses of medical examination and the costs of obtaining and presenting evidence.” If the lawyer is representing an indigent client, the lawyer may pay court costs and litigation expenses without being repaid for these expenses. DLRPC 1.8. cmt. 10.

1.8:620 Living and Medical Expenses

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

1.8:710 Compensation and Direction by Third Person

Comment [11] states, “lawyers are prohibited from accepting or continuing” representation paid by a third-party payer, “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.” DLRPC 1.8 cmt. 11.

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

There is no relevant Delaware specific authority on this topic.

1.8:730 Lawyers with Fiduciary Obligations to Third Persons [see1.13:520]

In Matter of Maguire, attorney Maguire was given a one year public probation with conditions, after he had an improper conflict of interest with the client’s guardian. The client’s guardian retained the lawyer to represent the client in a criminal matter. The lawyer charged an unreasonable fee, and also entered into an impermissible business arrangement with the client’s guardian while representing the client. Matter of Maguire, Del Supr., No. 562, 1992 (2/9/93) Board Case No. 40, 1991.

1.8.800 Aggregate Settlements

Comment [13] declares 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.” A lawyer must comply with this rule even when representing a class of plaintiffs or defendants. A lawyer must also act in accordance with DLRPC 1.7 and DLRPC 1.2. DLRPC 1.8 cmt. 13.

1.8:900 Agreements Involving Lawyer’s Malpractice Liability

1.8:910 Prospective Limitation of Malpractice Liability

A lawyer may not enter into an agreement prospectively limiting malpractice liability unless “the client is independently represented in making the agreement.” Such an agreement is “likely to undermine competent representation.” DLRPC 1.8 cmt. 14.

The Delaware Supreme Court approved the Board’s decision to impose two private admonitions for limiting malpractice liability. The lawyer represented two clients in an automobile personal injury action and persuaded the clients to sign waivers. The waivers forfeited the clients’ rights to all claims which arose out of the automobile accident and all claims relating to legal representation. The lawyer did not advise the clients to seek independent counsel. Private Admonition-Board Case Nos. 38 & 48, 1994. Date of Sanction: December 28, 1995. See DLRPC 1.8(h).

1.8:920 Settlement of Legal Malpractice Claim

A lawyer may settle a legal malpractice claim. The lawyer must advise the client in writing “of the appropriateness of independent representation in connection with such a settlement” and give the client a “reasonable opportunity to find and consult independent counsel.” DLRPC 1.8 cmt. 15.

1.8:1000 Opposing a Lawyer Relative

There is no relevant Delaware specific authority on this topic.

1.8.1100 Lawyer’s Propriety Interest in Subject Matter of Representation

1.8:1120 Contingent Fees [see 1.5:600]

1.8:1130 Lawyer Liens

There is no relevant Delaware specific authority on this topic.

1.8:1140 Retention of Files to Collect Fees

There is no relevant Delaware specific authority on this topic.