Rejected | amendments to Rule 1.8 regarding conflict of interest: prohibited
transactions.
July 21, 2021
On July 21, 2021, the Supreme Court of Virginia denied the VSB petition to
amend Rules 1.8, 1.10, and 1.15, of the Rules of Professional Conduct.
The proposal was presented to the Court in a group of amendments to Rules 1.8,
1.10, and 1.15, of the Rules of Professional Conduct. Read more.
April 29, 2021
At its meeting on April 21, 2021, VSB Council approved amendments to Rule 1.8
to add section (k) prohibiting a lawyer from having sexual relations with a
client (and associated re-enumeration of Rule 1.10) The proposed changes will
be presented to the Supreme Court of Virginia for approval. (The petition to
the Court will be posted here after it is sent.)
April 7, 2021
Bar Council will review the proposed changes at its meeting on April 21,
2021.
The Standing Committee on Legal Ethics will consider the amendments at its
October 20 meeting.
December 16, 2019
Pursuant to Part 6, § IV, ¶ 10-2(C) of the Rules of the Supreme
Court of Virginia, the Virginia State Bar’s
Standing Committee on Legal Ethics is seeking public comment on proposed amendments to Rule 1.8 of the Rules of
Professional Conduct.
The proposed amendments would add a new paragraph (k) to Rule 1.8 prohibiting
a lawyer from having sexual relations with a current client unless the
relationship predated the lawyer-client relationship. This proposed amendment
brings the rule in line with the ABA Model Rules and the rules of at least 43
other jurisdictions that address this issue through a rule and/or comment
rather than merely an advisory ethics opinion. The proposed amendments also
add three new comments, [17]-[19], explaining the purposes and scope of
the prohibition, as well as the fact that it is not imputed to other lawyers
in a firm. Current paragraph (k), governing the imputation of conflicts
arising under Rule 1.8, is renumbered to become paragraph (l).
The issue of sexual relations with a client is currently addressed in
Legal Ethics Opinion 1853, which follows much of the same reasoning as the proposed comments to
Rule 1.8 and concludes that sexual relations with a client will be prohibited
in many cases. The proposed amendments establish a bright-line rule to
that effect, based on the same concerns about conflict of interest and
overreaching.
Inspection and Comment
The proposed rule amendments may be inspected below or at the office of the
Virginia State Bar, 1111 East Main Street, Suite 700, Richmond, Virginia
23219, between the hours of 9:00 a.m. and 4:30 p.m., Monday through Friday,
excluding holidays, or by contacting the Office of Ethics Counsel at
804-775-0557.
Any individual, business, or other entity may file or submit written comments
in support of or in opposition to the proposed amendments with Karen A. Gould,
executive director of the Virginia State Bar, not later than March 20, 2020. Comments may be submitted via email to [email protected].
proposed amendments underlined
RULE 1.8 Conflict of Interest: Prohibited
Transactions
(a) A lawyer shall not enter into a business transaction with a client or
knowingly acquire an ownership, possessory, security or other pecuniary
interest adverse to a client unless:
(1) the transaction and terms on which the lawyer acquires the
interest are fair and reasonable to the client and are fully disclosed and
transmitted in writing to the client in a manner which can be reasonably
understood by the client;
(2) the client is given a reasonable opportunity to seek the advice
of independent counsel in the transaction; and
(3) the client consents in writing thereto.
(b) A lawyer shall not use information relating to representation of a
client for the advantage of the lawyer or of a third person or to the
disadvantage of the client unless the client consents after consultation,
except as permitted or required by Rule 1.6 or Rule 3.3.
(c) A lawyer shall not solicit, for himself or a person related to the
lawyer, any substantial gift from a client including a testamentary
gift. A lawyer shall not accept any such gift if solicited at his
request by a third party. A lawyer shall not prepare an
instrument giving the lawyer or a person related to the lawyer any
substantial gift from a client, including a testamentary gift, unless the
lawyer or other recipient of the gift is related to the
client. For purposes of this paragraph, a person related to a
lawyer includes a spouse, child, grandchild, parent, or other relative or
individual with whom the lawyer or the client maintains a close, familial
relationship.
(d) Prior to the conclusion of all aspects of a matter giving rise to the
representation of a client, a lawyer shall not make or negotiate an
agreement giving the lawyer literary or media rights to a portrayal or
account based in substantial part on information relating to the
representation.
(e) A lawyer shall not provide financial assistance to a client in
connection with pending or contemplated litigation, except that:
(1) a lawyer may advance court costs and expenses of litigation, the
repayment of which may be contingent on the outcome of the matter;
and
(2) a lawyer representing an indigent client may pay court costs and
expenses of litigation on behalf of the client.
(f) A lawyer shall not accept compensation for representing a client from
one other than the client unless:
(1) the client consents after consultation;
(2) there is no interference with the lawyer's independence of
professional judgment or with the client-lawyer relationship;
and
(3) information relating to representation of a client is protected
as required by Rule 1.6.
(g) A lawyer who represents two or more clients shall not participate in
making an aggregate settlement of the claims of or against the clients, or
in a criminal case an aggregated agreement as to guilty or nolo contendere
pleas, unless each client consents after consultation, including disclosure
of the existence and nature of all the claims or pleas involved and of the
participation of each person in the settlement.
(h) A lawyer shall not make an agreement prospectively limiting the
lawyer’s liability to a client for malpractice, except that a lawyer
may make such an agreement with a client of which the lawyer is an employee
as long as the client is independently represented in making the
agreement.
(i) A lawyer related to another lawyer as parent, child, sibling or spouse,
or who is intimately involved with another lawyer, shall not represent a
client in a representation directly adverse to a person whom the lawyer
knows is represented by the other lawyer except upon consent by the client
after consultation regarding the relationship.
(j) A lawyer shall not acquire a proprietary interest in the cause of
action or subject matter of litigation the lawyer is conducting for a
client, except that the lawyer may:
(1) acquire a lien granted by law to secure the lawyer's fee or
expenses; and
(2) contract with a client for a reasonable contingent fee in a
civil case, unless prohibited by Rule 1.5.
(k) A lawyer shall not have sexual relations with a client unless a
consensual sexual relationship existed between them when the client-lawyer
relationship commenced.
(lk) While lawyers are associated in a firm, none of them
shall knowingly enter into any transaction or perform any activity when one
of them practicing alone would be prohibited from doing so by paragraphs
(a), (b), (c), (d), (e), (f), (g), (h), or (j) of this Rule.
Comment
Transactions Between Client and Lawyer
[1] As a general principle, all transactions between client and lawyer should
be fair and reasonable to the client. In such transactions a review by
independent counsel on behalf of the client is often advisable. Furthermore, a
lawyer may not exploit information relating to the representation to the
client's disadvantage. For example, a lawyer who has learned that the
client is investing in specific real estate may not, without the client's
consent, seek to acquire nearby property where doing so would adversely affect
the client's plan for investment. Paragraph (a) does not, however, apply
to standard commercial transactions between the lawyer and the client for
products or services that the client generally markets to others, for example,
banking or brokerage services, medical services, products manufactured or
distributed by the client, and utilities services. In such transactions, the
lawyer has no advantage in dealing with the client, and the restrictions in
paragraph (a) are unnecessary and impracticable. Similarly, paragraph (b) does
not limit an attorney’s use of information obtained independently
outside the attorney-client relationship.
[2-5] ABA Model Rule Comments not adopted.
[6] A lawyer may accept ordinary gifts from a client. For example, an ordinary
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. Paragraph (c) recognizes an
exception where the client is a relative of the donee or the gift is not
substantial.
[7-8] ABA Model Rule Comments not adopted.
Literary Rights
[9] An agreement by which a lawyer acquires literary or media rights
concerning the conduct of the representation creates a conflict between the
interests of the client and the personal interests of the lawyer. Measures
suitable in the representation of the client may detract from the publication
value of an account of the representation. Paragraph (d) 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, if the arrangement conforms to Rule 1.5 and paragraph (j).
Financial Assistance
[10] Lawyers may not subsidize lawsuits or administrative proceedings
brought on behalf of their clients, including making or guaranteeing loans to
their clients for living expenses, because to do so would encourage clients to
pursue lawsuits that might not otherwise be brought and because such
assistance gives lawyers too great a financial stake in the litigation. These
dangers do not warrant a prohibition on a lawyer lending a client court costs
and litigation expenses, including the expenses of medical examination and the
costs of obtaining and presenting evidence, because these advances are
virtually indistinguishable from contingent fees and help ensure access to the
courts. Similarly, an exception allowing lawyers representing indigent clients
to pay court costs and litigation expenses regardless of whether these funds
will be repaid is warranted.
Person Paying for a Lawyer's Services
[11] Paragraph (f) requires disclosure of the fact that the lawyer's
services are being paid for by a third party. Such an arrangement must also
conform to the requirements of Rule 1.6 concerning confidentiality, Rule 1.7
concerning conflict of interest, and Rule 5.4(c) concerning the professional
independence of a lawyer. Where the client is a class, consent may be obtained
on behalf of the class by court-supervised procedure.
Family Relationships Between Lawyers
[12] Paragraph (i) applies to related lawyers who are in different firms.
Related lawyers in the same firm are governed by Rules 1.7, 1.9, and 1.10. The
disqualification stated in paragraph (i) is personal and is not imputed to
members of firms with whom the lawyers are associated.
[13-15] ABA Model Rule Comments not adopted.
Acquisition of Interest in Litigation
[16] Paragraph (j) states the traditional general rule that lawyers are
prohibited from acquiring a proprietary interest in litigation. This general
rule, which has its basis in common law champerty and maintenance, is subject
to specific exceptions developed in decisional law and continued in these
Rules, such as the exception for reasonable contingent fees set forth in Rule
1.5 and the exception for certain advances or payment of the costs of
litigation set forth in paragraph (e).
Client-Lawyer Sexual Relationships
[17] The relationship between lawyer and client is a fiduciary one in which the
lawyer occupies the highest position of trust and confidence. The
relationship is almost always unequal; thus, a sexual relationship between
lawyer and client can involve unfair exploitation of the lawyer's
fiduciary role, in violation of the lawyer's basic ethical obligation
not to use the trust of the client to the client's disadvantage. In
addition, such a relationship presents a significant danger that, because of
the lawyer's emotional involvement, the lawyer will be unable to
represent the client without impairment of the exercise of independent
professional judgment. Moreover, a blurred line between the professional and
personal relationships may make it difficult to predict to what extent
client confidences will be protected by the attorney-client evidentiary
privilege, since client confidences are protected by privilege only when
they are imparted in the context of the client-lawyer relationship. Because
of the significant danger of harm to client interests and because the
client's own emotional involvement renders it unlikely that the client
could give adequate informed consent, this Rule prohibits the lawyer from
having sexual relations with a client regardless of whether the relationship
is consensual and regardless of the absence of prejudice to the client.
Like a conflict arising under paragraph (i) of this Rule, this conflict is
personal to the lawyer and is not imputed to other lawyers in the firm with
which the lawyer is associated.
[18] Sexual relationships that predate the client-lawyer relationship are
not prohibited. Issues relating to the exploitation of the fiduciary
relationship and client dependency are diminished when the sexual
relationship existed prior to the commencement of the client-lawyer
relationship. However, before proceeding with the representation in these
circumstances, the lawyer should consider whether the lawyer's ability
to represent the client will be materially limited by the relationship. See
Rule 1.7(a)(2).
[19] When the client is an organization, paragraph (k) of this Rule
prohibits a lawyer for the organization (whether inside counsel or outside
counsel) from having a sexual relationship with a constituent of the
organization who supervises, directs or regularly consults with that lawyer
concerning the organization's legal matters.