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ER 1.8 Conflict of Interest: Current Clients: Specific Rules

The Standard

Certain situations between a client and lawyer may create a conflict of interest that either requires specific waivers/disclosures or is prohibited altogether. 

FAQs

A prospective (or existing) client can't pay my advanced fee deposit with cash, but she has a spare vehicle she no longer needs. Can she give me the car to pay for her representation?

As long as you comply with ER 1.8(a), requirements for a business transaction, you could accept property in payment of your legal services.  If you do this, make sure that you get the item appraised (in writing) so you and the client both agree on the value of the property.  The same requirements under ER 1.8(a) apply if you barter your legal services for a service performed by the client, such as landscaping or construction or the like.  Because many issues arise when you either accept property or barter for your services, use extra caution when doing this.  It is so much easier and safer to accept only money as payment for your legal services.

Is it ok to loan money to a client while we're waiting for a settlement in a case?

Not a good idea because ER 1.8(e) prohibits advancing funds other than for litigation expenses.  A lawyer may assist a client in obtaining a loan from a third party or the lawyer may gift a de minimus amount to a client (See Ariz. Op 95-01), but it shouldn’t be done in connection while awaiting a settlement.

One of my long-time clients gives me a substantial unsolicited testamentary gift. Am I allowed to accept that?

Under ER 1.8(c), a lawyer cannot solicit a substantial gift from a client.  But if the client gives you something in her will, that you did not prepare, even something substantial, you can accept that gift. See Ariz. Ethics Op. 95-05

If my client offers me a business opportunity/investment, I don’t have to follow all of those written disclosure requirements, do I, since the client is making the offer?

Wrong.  Regardless of whether it is the client, or the lawyer, who offers a business opportunity, any “business transaction” with a client requires very specific written disclosures with the client, that must be signed by the client, giving informed consent to waive the possible conflict created by the business transaction.  ER 1.8(a). This applies even if the business transaction is unrelated to the representation of the client.

Note, too, that if you have a certain amount of ownership/equity interest in a client, your malpractice policy most likely will have an exclusion from coverage for that client.

If I refer my client to my spouse who is a realtor, is that a business transaction?

Yes. The lawyer must comply with ER 1.8(a). The lawyer must also assess whether the lawyer’s personal interest in the transaction materially limits the ability to represent the client (ER 1.7(a)(2)) and must not disclose confidential information to the spouse without the client’s consent (ER 1.6(a)).  

What do I have to disclose to my client in a fee agreement, if someone else (besides the client) is going to pay the client’s legal fees?

ER 1.8(f) requires that if someone other than the client is paying the legal fees – such as family members, an employer, or an insurance company – the lawyer must obtain the client’s consent, explain that the third-party payor cannot direct the representation and is not entitled to know anything about the representation (and by disclosing information to the third party, the client may be waiving the attorney/client privilege).  It is advisable to include a clause discussing these matters in the fee agreement, along with an explanation about who will receive any advance fee deposit refund at the end of the matter.

I forgot to renew my client’s judgment – can I offer to pay the full amount of the judgment to the client to settle with them?

Yes, if you follow the requirements in ER 1.8(h)(3), explaining to the client what happened (yes, you have to tell them), what you are offering to resolve the mistake, AND that the client is welcome to consult independent counsel regarding the offer.

Note that if you hope to have any insurance coverage for the mistake, you should check with your malpractice carrier BEFORE making any offers to a client.

I missed a filing deadline to disclose an expert witness in a case – do I have to tell my client?

Yes.  And then you should explain how you corrected the mistake or if it cannot be corrected, what options exist for the client to either retain new counsel or waive the conflict to permit you to continue to represent them.  ABA Op. 481 (2018).

I represent multiple family members as plaintiffs in a case and they want me to divide up the lump sum offer from the insurance company – what do I need to do?

ER 1.8(g) prohibits a lawyer from accepting or apportioning an aggregate settlement without first informing all of the clients of all claims involved, and directing that either the clients decide among themselves how to divide a lump sum offer, or the clients agree to have an independent third-party evaluator (such as a mediator) decide on the division.  Hopefully, you also had all co-clients (including spouses, and other family members where appropriate) sign a joint representation conflict waiver at the beginning of the representation that identifies what happens if an actual conflict arises among them, and how information material to the joint representation will be shared with all of them.

One client wants to buy some property and another client is interested in selling some property – can I put the two clients in contact with each other and take a finder’s fee?

So, you want to get paid for connecting two existing clients?  Not a great idea because this could go wrong in many ways, meaning you will lose two clients.  This could be a waivable conflict, with each client first giving  informed consent for you to disclose the interest of the other, and then waiving the conflict to enter into a business transaction with you (that complies with ER 1.8(a) requirements as explained above), and then agreeing to how the fee will be paid.  And presumably, you are not trying to “represent” either client on the transaction – or at least only representing one and again getting waivers from both, so they understand your role and who you are, and are not, advising on the deal. You must also examine whether brokering this client-to-client transaction creates a conflict by materially limiting your ability to represent either or both clients on their original legal matters. But the bottom line is that even if you can meet all those requirements, this is not a good idea.

Is there a waiver I can have a client sign to continue representing him and also have a “personal” (aka sexual) relationship with him?

No.  Pick which role you want, but you can only be one – lawyer or intimate partner.  ER 1.8(j) prohibits sexual relationships with clients…for many, many reasons.  Note, however, that if you withdraw from representing the client to pursue a sexual relationship, someone else at your firm may represent the client in the legal matter. You should be screened from the matter. 

The opposing counsel in a case is in a law firm with my spouse. Do I have to tell my client?

If your spouse is not opposing counsel on the case, but is just a lawyer at a firm where another lawyer is your opposing counsel, ER 1.8(l) does not require disclosing to your client (and getting  consent) that your spouse just works at the other firm.  It is only a mandatory disclosure and client-consent situation if your husband, child, parent, sibling, or cohabitant actually is the opposing counsel.  However, it’s still a good idea to mention to your client that your relative works at the other firm but will not be participating in the case.  Disclosure is far better than the appearance that you were concealing the fact.

Can I have the client waive filing a bar charge as part of my settlement of the malpractice case filed against me?

NO!  You can never require a client to waive the filing of a bar charge. See Ariz. Ethics Op. 91-23

This page is managed by Patricia Seguin