THE COURTS
Title 204—JUDICIAL SYSTEM GENERAL PROVISIONS
PART V. PROFESSIONAL ETHICS AND CONDUCT
[ 204 PA. CODE CH. 81 ]
Proposed Amendments to the Pennsylvania Rules of Professional Conduct Relating to Conflict of Interest: Current Clients: Specific Rules
[51 Pa.B. 5356]
[Saturday, August 28, 2021]Notice is hereby given that The Disciplinary Board of the Supreme Court of Pennsylvania (''Board'') is considering recommending to the Supreme Court of Pennsylvania that the Court amend Pennsylvania Rule of Professional Conduct 1.8(e) and related commentary, as set forth in Annex A.
EXPLANATORY REPORT Rule 1.8(e) prohibits a lawyer from providing financial assistance to a client in connection with pending or contemplated litigation. There are two exceptions: advancing court costs and expenses of litigation, the repayment of which may be contingent on the outcome of the matter; and paying court costs and expenses of litigation on behalf of a client when a lawyer represents an indigent client. Comment (10) explains that allowing lawyers to subsidize lawsuits and administrative proceedings, including making or guaranteeing loans to their clients for living expenses, could encourage clients to pursue lawsuits that might not otherwise be brought and give lawyers too great a financial stake in the litigation. However, the advancement of court costs and litigation expenses is permissible because such costs and expenses are comparable to contingent fees and in the situation of representing indigent clients, helps ensure access to the courts.
The Board's proposal would add another exception to Rule 1.8(e) to allow a lawyer representing an indigent client pro bono to provide modest gifts to the client for food, rent, transportation, medicine, and other basic living expenses. Under the proposed new exception, a lawyer would not be permitted to (1) promise, assure or imply the availability of financial assistance before the client retains the lawyer or do so as a means to induce the client to continue the client-lawyer relationship; (2) seek or accept reimbursement from the client or a relative or affiliate of the client; and (3) publicize or advertise a willingness to provide gifts to prospective clients beyond court costs and expenses of litigation in connection with contemplated or pending litigation or administrative proceedings. The proposed exception represents narrow circumstances and none of the concerns raised by the current prohibition is present.
The proposal to add a narrow exception to RPC 1.8(e) reflects the recognition that the COVID-19 pandemic has financially impacted historically marginalized communities and has heightened concerns that vulnerable Pennsylvanians have restricted access to justice. The proposal is in keeping with the legal profession's ongoing efforts to afford access to justice to those in need. With the appropriate limitations in place to mitigate the risk of abuse, lawyers should have the discretion whether to make modest gifts to indigent clients they represent on a pro bono basis without fear of potential discipline.
In making this proposal, the Board notes that in August 2020, the American Bar Association (''ABA'') adopted an amendment to Model Rule of Professional Conduct 1.8(e) to permit lawyers to make modest gifts to pro bono clients for necessities.1 The proposed changes would substantially conform Pennsylvania's RPC 1.8(e) to correspond to the ABA Model Rule.
Interested persons are invited to submit written comments, suggestions or objections by mail, email or facsimile to the Executive Office, The Disciplinary Board of the Supreme Court of Pennsylvania, 601 Commonwealth Avenue, Suite 5600, PO Box 62625, Harrisburg, PA 17106-2625, facsimile number (717-231-3381), email address Dboard.comments@pacourts.us on or before September 27, 2021.
By The Disciplinary Board of the
Supreme Court of PennsylvaniaJESSE G. HEREDA,
Executive Director
Annex A
TITLE 204. JUDICIAL SYSTEM GENERAL PROVISIONS
PART V. PROFESSIONAL ETHICS AND CONDUCT
Subpart A. PROFESSIONAL RESPONSIBILITY
CHAPTER 81. RULES OF PROFESSIONAL CONDUCT
Subchapter A. RULES OF PROFESSIONAL CONDUCT § 81.4. Rules of Professional Conduct.
The following are the Rules of Professional Conduct:
CLIENT-LAWYER RELATIONSHIP Rule 1.8. Conflict of Interest: Current Clients: Specific Rules.
* * * * * (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[.]; and
(3) a lawyer representing an indigent client pro bono, a lawyer representing an indigent client pro bono through a nonprofit legal services or public interest organization, or a lawyer representing an indigent client pro bono through a law school clinical or pro bono program, may provide modest gifts to the client for food, rent, transportation, medicine and other basic living expenses. The lawyer:
(i) may not promise, assure or imply the availability of such gifts prior to retention or as an inducement to continue the client-lawyer relationship after retention;
(ii) may not seek or accept reimbursement from the client, a relative of the client or anyone affiliated with the client; and
(iii) may not publicize or advertise a willingness to provide such gifts to prospective clients.
Financial assistance under this Rule may be provided even if the representation is eligible for fees under a fee-shifting statute.
(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 relatioship; and
(3) information relating to representation of a client is protected as required by Rule 1.6.
Comment: * * * * * 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.
(11) Paragraph (e)(3) provides another exception. A lawyer representing an indigent client without fee, a lawyer representing an indigent client pro bono through a nonprofit legal services or public interest organization, or a lawyer representing an indigent client pro bono through a law school clinical or pro bono program may give the client modest gifts. Gifts permitted under paragraph (e)(3) include modest contributions for food, rent, transportation, medicine and similar basic necessities of life. If the gift may have consequences for the client, including, e.g., for receipt of government benefits, social services, or tax liability, the lawyer should consult with the client about these. See Rule 1.4.
(12) The paragraph (e)(3) exception is narrow. Modest gifts are allowed in specific circumstance where it is unlikely to create conflicts of interest or invite abuse. Paragraph (e)(3) prohibits the lawyer from (i) promising, assuring or implying the availability of financial assistance prior to retention or as an inducement to continue the client-lawyer relationship after retention; (ii) seeking or accepting reimbursement from the client, a relative of the client or anyone affiliated with the client; and (iii) publicizing or advertising a willingness to provide gifts to prospective clients beyond court costs and expenses of litigation in connection with contemplated or pending litigation or administrative proceedings.
(13) Financial assistance, including modest gifts pursuant to paragraph (e)(3), may be provided even if the representation is eligible for fees under a fee-shifting statute. However, paragraph (e)(3) does not permit lawyers to provide assistance in other contemplated or pending litigation in which the lawyer may eventually recover a fee, such as contingent-fee personal injury cases or cases in which fees may be available under a contractual fee-shifting provision, even if the lawyer does not eventually receive a fee.
Person Paying for a Lawyer's Services
[(11)] (14) 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)] (15) 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.
Aggregate Settlements
[(13)] (16) 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)] (17) 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. 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)] (18) 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)] (19) 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 originating 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)] (20) 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.
[(18)] (21) 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)] (22) 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 consults with that lawyer concerning the organization's legal matters.
Imputation of Prohibitions
[(20)] (23) Under paragraph (k), a prohibition on conduct by an individual lawyer in paragraphs (a) through (i) 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.
[Pa.B. Doc. No. 21-1375. Filed for public inspection August 27, 2021, 9:00 a.m.] _______
1 Eleven jurisdictions have an exception to the prohibition on financial assistance to clients. See, ABA Report 107.
No part of the information on this site may be reproduced for profit or sold for profit.This material has been drawn directly from the official Pennsylvania Bulletin full text database. Due to the limitations of HTML or differences in display capabilities of different browsers, this version may differ slightly from the official printed version.
