Ind. Prof. Cond. Rule 1.8

Rules

Effective May 3, 2006

(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 in a manner that can

be reasonably understood by the client;

(2) the client is advised in writing of the desirability of seeking and is given a reasonable

opportunity to seek the advice of independent legal counsel on the transaction; and

(3) the client gives informed consent, in a writing signed by the client, to the essential

terms of the transaction and the lawyer's role in the transaction, including whether the

lawyer is representing the client in the transaction.

(b) A lawyer shall not use information relating to representation of a client to the disadvantage of the client unless the client gives informed consent, except as permitted or

required by these Rules.

(c) A lawyer shall not solicit any substantial gift from a client, including a testamentary gift, or

prepare on behalf of a client an instrument giving the lawyer or a person related to the lawyer any substantial gift unless the lawyer or other recipient of the gift is related to the client.

For purposes of this paragraph, related persons include a spouse, child, grandchild, parent,

grandparent or other relative or individual with whom the lawyer or the client maintains a

close, familial relationship.

(d) Prior to the conclusion of 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 gives informed consent;

(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 gives informed consent, in a

writing signed by the client. The lawyer's disclosure shall include 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:

(1) make an agreement prospectively limiting the lawyer's liability to a client for malpractice unless the client is independently represented in making the agreement; or

(2) settle a claim or potential claim for such liability with an unrepresented client or former

client unless that person is advised in writing of the desirability of seeking and is given a

reasonable opportunity to seek the advice of independent legal counsel in connection

therewith.

(i) 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 authorized 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.

(j) A lawyer shall not have sexual relations with a client unless a consensual sexual relationship existed between them when the client-lawyer relationship commenced.

(k) While lawyers are associated in a firm, a prohibition in paragraphs (a) through (i) and (l)

that applies to any one of them shall apply to all of them.

(l) A part-time prosecutor or deputy prosecutor authorized by statute to otherwise engage in

the practice of law shall refrain from representing a private client in any matter wherein

exists an issue upon which said prosecutor has statutory prosecutorial authority or responsibilities. This restriction is not intended to prohibit representation in tort cases in which investigation and any prosecution of infractions has terminated, nor to prohibit representation in

family law matters involving no issue subject to prosecutorial authority or responsibilities.

Upon a prior, express written limitation of responsibility to exclude prosecutorial authority in

matters related to family law, a part-time deputy prosecutor may fully represent private clients in cases involving family law.

Comment

Business Transactions Between Client and Lawyer

[1] A lawyer's legal skill and training, together with the relationship of trust and confidence

between lawyer and client, create the possibility of overreaching when the lawyer par-

ticipates in a business, property or financial transaction with a client, for example, a loan

or sales transaction or a lawyer investment on behalf of a client. The requirements of paragraph (a) must be met even when 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. The Rule

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 of the lawyer's legal practice. See Rule 5.7. It also applies to lawyers purchasing property from

estates they represent. It does not apply to ordinary initial fee arrangements between client and lawyer, which are governed by Rule 1.5, although its requirements must be met

when the lawyer accepts an interest in the client's business or other nonmonetary property as payment of all or part of a fee. Paragraph (a) applies when a lawyer seeks to rene-

gotiate the terms of the fee arrangement with the client after representation begins in

order to reach a new agreement that is more advantageous to the lawyer than the initial

fee arrangement. In addition, the Rule does not 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.

[2] Paragraph (a)(1) requires that the transaction itself be fair to the client and that its

essential terms be communicated to the client, in writing, in a manner that can be reasonably understood. Paragraph (a)(2) requires that the client also be advised, in writing, of

the desirability of seeking the advice of independent legal counsel. It also requires that

the client be given a reasonable opportunity to obtain such advice. Paragraph (a)(3)

requires that the lawyer obtain the client's informed consent, in a writing signed by the client, both to the essential terms of the transaction and to the lawyer's role. When necessary, the lawyer should discuss both the material risks of the proposed transaction,

including any risk presented by the lawyer's involvement, and the existence of reasonably

available alternatives and should explain why the advice of independent legal counsel is

desirable. See Rule 1.0(e) (definition of informed consent).

[3] The risk to a client is greatest when the client expects the lawyer to represent the client

in the transaction itself or when the lawyer's financial interest otherwise poses a significant risk that the lawyer's representation of the client will be materially limited by the

lawyer's financial interest in the transaction. Here the lawyer's role requires that the lawyer must comply, not only with the requirements of paragraph (a), but also with the requirements of Rule 1.7. Under that Rule, the lawyer must disclose the risks associated with the

lawyer's dual role as both legal adviser and participant in the transaction, such as the risk

that the lawyer will structure the transaction or give legal advice in a way that favors the

lawyer's interests at the expense of the client. Moreover, the lawyer must obtain the client's informed consent. In some cases, the lawyer's interest may be such that Rule 1.7

will preclude the lawyer from seeking the client's consent to the transaction.

[4] If the client is independently represented in the transaction, paragraph (a)(2) of this

Rule is inapplicable, and the paragraph (a)(1) requirement for full disclosure is satisfied

either by a written disclosure by the lawyer involved in the transaction or by the client's

independent counsel. The fact that the client was independently represented in the transaction is relevant in determining whether the agreement was fair and reasonable to the client as paragraph (a)(1) further requires.

Use of Information Related to Representation

[5] Use of information relating to the representation to the disadvantage of the client viol-

ates the lawyer's duty of loyalty. Paragraph (b) applies when the information is used to

benefit either the lawyer or a third person, such as another client or business associate of

the lawyer. For example, if a lawyer learns that a client intends to purchase and develop

several parcels of land, the lawyer may not use that information to purchase one of the

parcels in competition with the client or to recommend that another client make such a purchase. The Rule does not prohibit uses that do not disadvantage the client. For example,

a lawyer who learns a government agency's interpretation of trade legislation during the

representation of one client may properly use that information to benefit other clients.

Paragraph (b) prohibits disadvantageous use of client information unless the client gives

informed consent, except as permitted or required by these Rules. See Rules 1.2(d), 1.6,

1.9(c), 3.3, 4.1(b), 8.1 and 8.3.

Gifts to Lawyers

[6] 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 a client offers the lawyer a more substantial gift, paragraph (c)

does not prohibit the lawyer from accepting it, although such a gift may be voidable by the

client under the doctrine of undue influence, which treats client gifts as presumptively

fraudulent. In any event, due to concerns about overreaching and imposition on clients, a

lawyer may not suggest that a substantial gift be made to the lawyer or for the lawyer's

benefit, except where the lawyer is related to the client as set forth in paragraph (c).

[7] If effectuation of a substantial gift requires preparing a legal instrument such as a will

or conveyance the client should have the detached advice that another lawyer can

provide. The sole exception to this Rule is where the client is a relative of the donee.

[8] This Rule does not prohibit a lawyer from seeking to have the lawyer or a partner or

associate of the lawyer named as executor of the client's estate or to another potentially

lucrative fiduciary position. Nevertheless, such appointments will be subject to the general conflict of interest provision in Rule 1.7 when there is a significant risk that the lawyer's interest in obtaining the appointment will materially limit the lawyer's independent

professional judgment in advising the client concerning the choice of an executor or other

fiduciary. In obtaining the client's informed consent to the conflict, the lawyer should

advise the client concerning the nature and extent of the lawyer's financial interest in the

appointment, as well as the availability of alternative candidates for the position.

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 paragraphs (a) and (i).

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 indis-

tinguishable 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] Lawyers are frequently asked to represent a client under circumstances in which a

third person will compensate the lawyer, in whole or in part. The third person might be a

relative or friend, an indemnitor (such as a liability insurance company) or a co-client

(such as a corporation sued along with one or more of its employees). Because third-party payers frequently have interests that differ from those of the client, including

interests in minimizing the amount spent on the representation and in learning how the

representation is progressing, lawyers are prohibited from accepting or continuing such

representations 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. See also Rule 5.4(c) (prohibiting interference with a lawyer's professional judgment

by one who recommends, employs or pays the lawyer to render legal services for

another).

[12] Sometimes, it will be sufficient for the lawyer to obtain the client's informed consent

regarding the fact of the payment and the identity of the third-party payer. If, however, the

fee arrangement creates a conflict of interest for the lawyer, then the lawyer must comply

with Rule 1. 7. The lawyer must also conform to the requirements of Rule 1.6 concerning

confidentiality. Under Rule 1.7(a), a conflict of interest exists if there is significant risk that

the lawyer's representation of the client will be materially limited by the lawyer's own

interest in the fee arrangement or by the lawyer's responsibilities to the third-party payer

(for example, when the third-party payer is a co-client). Under Rule 1.7(b), the lawyer may

accept or continue the representation with the informed consent of each affected client,

unless the conflict is nonconsentable under that paragraph. Under Rule 1.7(b), the

informed consent must be confirmed in writing.

Aggregate Settlements

[13] Differences in willingness to make or accept an offer of settlement are among the

risks of common representation of multiple clients by a single lawyer. Under Rule 1.7, this

is one of the risks that should be discussed before undertaking the representation, as part

of the process of obtaining the clients' informed consent. In addition, Rule 1.2(a) protects

each client's right to have the final say in deciding whether to accept or reject an offer of

settlement and in deciding whether to enter a guilty or nolo contendere plea in a criminal

case. The rule stated in this paragraph is a corollary of both these Rules and provides

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. See also Rule 1.0(e) (definition of informed consent). Lawyers representing a class of

plaintiffs or defendants, or those proceeding derivatively, may not have a full client-lawyer

relationship with each member of the class; nevertheless, such lawyers must comply with

applicable rules regulating notification of class members and other procedural requirements designed to ensure adequate protection of the entire class.

Limiting Liability and Settling Malpractice Claims

[14] Agreements prospectively limiting a lawyer's liability for malpractice are prohibited

unless the client is independently represented in making the agreement because they are

likely to undermine competent and diligent representation. Also, many clients are unable

to evaluate the desirability of making such an agreement before a dispute has arisen, particularly if they are then represented by the lawyer seeking the agreement. This

paragraph does not, however, prohibit a lawyer from entering into an agreement with the

client to arbitrate legal malpractice claims, provided such agreements are enforceable

and the client is fully informed of the scope and effect of the agreement. Nor does this

paragraph limit the ability of lawyers to practice in the form of a limited-liability entity,

where permitted by law, provided that each lawyer remains personally liable to the client

for his or her own conduct and the firm complies with any conditions required by law, such

as provisions requiring client notification or maintenance of adequate liability insurance.

Nor does it prohibit an agreement in accordance with Rule 1.2 that defines the scope of

the representation, although a definition of scope that makes the obligations of representation illusory will amount to an attempt to limit liability.

[15] Agreements settling a claim or a potential claim for malpractice are not prohibited by

this Rule. Nevertheless, in view of the danger that a lawyer will take unfair advantage of

an unrepresented client or former client, the lawyer must first advise such a person in writing of the appropriateness of independent representation in connection with such a settlement. In addition, the lawyer must give the client or former client a reasonable

opportunity to find and consult independent counsel.

Acquiring Proprietary Interest in Litigation

[16] Paragraph (i) states the traditional general rule that lawyers are prohibited from

acquiring a proprietary interest in litigation. Like paragraph (e), the general rule has its

basis in common law champerty and maintenance and is designed to avoid giving the lawyer too great an interest in the representation. In addition, when the lawyer acquires an

ownership interest in the subject of the representation, it will be more difficult for a client to

discharge the lawyer if the client so desires. The Rule is subject to specific exceptions

developed in decisional law and continued in these Rules. The exception for certain

advances of the costs of litigation is set forth in paragraph (e). In addition, paragraph (i)

sets forth exceptions for liens authorized by law to secure the lawyer's fees or expenses

and contracts for reasonable contingent fees. The law of each jurisdiction determines

which liens are authorized by law. These may include liens granted by statute, liens ori-

ginating in common law and liens acquired by contract with the client. When a lawyer

acquires by contract a security interest in property other than that recovered through the

lawyer's efforts in the litigation, such an acquisition is a business or financial transaction

with a client and is governed by the requirements of paragraph (a). Contracts for contingent fees in civil cases are governed by Rule 1.5.

Client-Lawyer Sexual Relationships

[17] The relationship between lawyer and client is a fiduciary one in which the lawyer occu-

pies 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 pre-

judice to the client.

[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 (j) 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 con-

sults with that lawyer concerning the organization's legal matters.

Imputation of Prohibitions

[20] Under paragraph (k), a prohibition on conduct by an individual lawyer in paragraphs

(a) through (i) and (l) also applies to all lawyers associated in a firm with the personally

prohibited lawyer. 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 paragraph (j) is personal and is not applied to associated lawyers.

Part-time prosecutor or deputy prosecutor

[21] Under paragraph (l) special rules are provided for part-time prosecutors and deputy

prosecutors.