Rule 1.8 Conflict of Interest: Prohibited Transactions

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.

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. Such an arrangement 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 court-supervised 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).

Sexual Relations with Clients.

After careful study, the Supreme Court declined in 1998 to adopt a proposal to amend Rule 1.8

to limit sexual relationships between lawyers and clients. The Michigan Rules of Professional

Conduct adequately prohibit representation that lacks competence or diligence, or that is

shadowed by a conflict of interest. With regard to sexual behavior, the Michigan Court Rules

provide that a lawyer may be disciplined for “conduct that is contrary to justice, ethics, honesty,

or good morals.” MCR 9.104(3). Further, the Legislature has enacted criminal penalties for

certain types of sexual misconduct. In this regard, it should be emphasized that a lawyer bears a

fiduciary responsibility toward the client. A lawyer who has a conflict of interest, whose actions

interfere with effective representation, who takes advantage of a client’s vulnerability, or whose

behavior is immoral risks severe sanctions under the existing Michigan Court Rules and

Michigan Rules of Professional Conduct.

Humanitarian Exception.

Paragraph (e)(3) serves as a humanitarian exception. The lawyer can assist the client with needs

that frustrate the client’s access to the justice system in the specific matter for which the

representation was undertaken, while still preserving the nature of the attorney-client

relationship. For purposes of this rule, indigent is defined as people who are unable, without

substantial financial hardship to themselves and their dependents, to obtain competent, qualified

legal representation on their own.