Comment (As Amended Effective June 23, 2008)
Transactions Between Client and Lawyer
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.
A lawyer may accept a gift from a client, if the transaction meets general standards of fairness. For example, a simple 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.
Emergency Financial Assistance
On occasion, a client of a lawyer may suffer a financial emergency. The client may be totally unable to turn to traditional sources of emergency financial assistance such as banks, families, or neighbors to obtain necessary assistance in meeting such a financial emergency. While the client may have an expectation that a recovery in a pending lawsuit would provide ample funds from which to repay a loan, the collateralization of a loan with the anticipated proceeds of litigation is not generally accepted as a good business practice. In these circumstances, the only alternative to whom the client may realistically be able to turn is the lawyer handling the lawsuit. For true financial emergencies, arising from circumstances beyond the control of the client, the Rule permits the lawyer either to advance a loan to the client or to guarantee the repayment of a loan by a third party to the client. A lawyer departs from the role of advocate when the lawyer becomes a lender to the client. The lawyer as lender is placed in a position adverse to the client, particularly if the client refuses to repay. Since the repayment by the client may not be contingent on the outcome of a matter, the client is always responsible for repayment of any loan, whether the client wins or loses the pending lawsuit.
Rule 1.8(e)(3) permits the lawyer to act as both advocate for and lender to the client under only the narrowest and most compelling of circumstances. The lawyer must not, prior to employment, directly or indirectly, have assured the client of the availability of emergency financial assistance. The assistance must meet a true emergency. Emergency financial assistance does not include the regular provision of income and support to a client. Rather, the Rule is intended to permit the lawyer to help in those few cases which rise to the level of an emergency. The lawyer is never obligated to provide such assistance, and he is obligated to attempt collection from the client regardless of the outcome of the matter.
Literary Rights
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).
Person Paying for Lawyer's Services
Paragraph (f) requires disclosure of the fact that the lawyer's services are being paid for by a third party. Subsection (1) in this paragraph expressly recognizes that in the insurance defense practice, attorneys are appointed by insurers to represent insureds as clients. The insurer's authority to appoint counsel springs from its contract with the insured. In the normal insurance defense relationship where, for example, there are no coverage issues, appointed counsel has two clients, the insured and the insurer. Hence, the insurer is not a third party. Additionally, all arrangements pursuant to paragraph (f) must also conform to the requirements of Rule 1.6 concerning confidentiality and Rule 1.7 concerning conflict of interest. Where the client is a class, consent may be obtained on behalf of the class by courtsupervised procedure.
Limiting Liability Paragraph (h) is not intended to apply to customary qualifications and limitations in legal opinions and memoranda.
Family Relationships Between Lawyers
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.
Acquisition of Interest in Litigation
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 of the costs of litigation set forth in paragraph (e).
Representation of Both Parties in Domestic Cases
In domestic relations cases, the lawyer is prohibited from representing both of the opposing parties, who generally are spouses or former spouses. This prohibition is applicable in a broad range of domestic relations cases, including divorce, child custody, child support, alimony, or other proceedings which generally fall under this category. The prohibition applies even in uncontested matters; thus, representation of both parties is not allowed even if the lawyer concludes that he could conduct the representation in a manner consistent with Rule 1.7, concerning conflicts of interest generally, or Rule 2.2, concerning intermediation between clients. This Rule is grounded in the view that, in domestic relations matters, the appropriate policy is a broad-based proscription not subject to waiver by the parties or the lawyer.
Often a lawyer is confronted with a situation in which the opposing parties in a divorce case have agreed, or can agree, on the terms of the divorce concerning such matters as alimony, child custody, and child support. In such a situation, paragraphs (k)(1)-(4) permit a lawyer representing one of the parties to provide an answer and waiver to the unrepresented party if the unrepresented party knowingly executes a specified form of document, which must be filed in the proceeding. The document contains disclosures and disclaimers directed towards the unrepresented party. Having complied with paragraphs (k)(1)-(4), the lawyer may have contact with the unrepresented party. Upon request of the unrepresented party, the lawyer may prepare an answer to a petition or complaint, as well as other appropriate pleadings and agreements, for the signature of the unrepresented party. This Rule thus permits a lawyer to facilitate his representation of one party by preparing documents for the unrepresented party to sign. If these activities are performed in accordance with the specified procedure, the lawyer is not in violation of the prohibition upon representation of opposing parties in domestic proceedings.
Sexual Relations Between Lawyer and Client
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 the lawyer and the 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 the exercise of independent professional judgment being impaired. 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, because client confidences are protected by privilege only when they are imparted in the context of the lawyer-client relationship. Because of the significant danger of harm to the client's 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.
Spousal relationships and sexual relationships that predate the lawyer-client relationship, however, are not prohibited. Issues relating to the exploitation of the fiduciary relationship and client dependency are diminished when the sexual relationship existed before the commencement of the lawyer-client 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.
Imputation of Prohibitions
Under paragraph (n), a prohibition on conduct by an individual lawyer in paragraphs (a) through (h) and in paragraphs (j) and (k) also applies to all lawyers associated in a firm with the lawyer who is personally prohibited from representing the client. For example, one lawyer in a firm may not enter into a business transaction with a client of another member of the firm without complying with paragraph (a), even if the first lawyer is not personally involved in the representation of the client. The prohibition set forth in paragraphs (l) and (m) are personal and are not imputed to associated lawyers. Comparison with former Alabama Code of Professional Responsibility
With regard to paragraph (a), DR 5-104(A) provided 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 stated 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.”
With regard to paragraph (b), DR 4-101(B)(3) provided 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.”
There was no counterpart to paragraph (c) in the Disciplinary Rules. EC 5-5 stated that a lawyer “should not suggest to his client that a gift be made to himself or for his benefit. If a lawyer accepts a gift from his client, he is peculiarly susceptible to the charge that he unduly influenced or overreached the client. If a client voluntarily offers to make a gift to his lawyer, the lawyer may accept the gift, but before doing so, he should urge that the client secure disinterested advice from an independent, competent person who is cognizant of all the circumstances. Other than in exceptional circumstances, a lawyer should insist that an instrument in which his client desires to name him beneficially be prepared by another lawyer selected by the client.”
Paragraph (d) is substantially similar to DR 5-104(B), but refers to “literary or media” rights, a more generally inclusive term than “publication” rights.
Paragraph (e)(1), permitting the lawyer to advance costs which are repayable contingent on the outcome of the litigation, is a change from the accepted interpretation of DR 5-103(B). See Morrow, “Opinions of the General Counsel,” 44 Ala. Law 168 (1983).
Paragraph (e)(2) has no counterpart in the former Code.
Paragraph (e)(3) is substantially identical to DR 5-103(B).
Paragraph (f) is substantially identical to DR 5-107(A).
Paragraph (g) is substantially identical to DR 5-106.
The first clause of paragraph (h) is similar to DR 6-102(A). There was no counterpart in the former Code to the second clause of paragraph (h). Paragraph (i) has no counterpart in the former Code.
Paragraph (j) is substantially identical to DR 5-103(A).
Paragraph (k) is substantially identical to the last part of DR 5-105(C). This provision is unique to Alabama and is carried forward into the Rules.
Note from the reporter of decisions: The order amending Rule 1.8, the Comment to Rule 1.8, Rule 1.10(a), the Comment to Rule 1.10, Rule 1.12, Rule 1.14, the Comment to Rule 1.14, the Comment to Rule 3.2, Rule 3.6, the Comment to Rule 3.7, Rule 3.9, and Rule 4.4 is published in that volume of Alabama Reporter that contains Alabama cases from 983 So.2d.
