November 23, 2021

Effective November 23, 2021

In re:

Repeal of subdivision (e) and paragraphs [11] through [20] of the Comment of subdivision 4-1.8, entitled "Conflict of Interest: Prohibited Transactions," of Rule 4, entitled "Rules of Professional Conduct," and in lieu thereof adoption of a new subdivision (e) and new paragraphs [11] though [23] of the Comment of subdivision 4-1.8, entitled "Conflict of Interest: Prohibited Transactions."

1.  It is ordered that, effective November 23, 2021, subdivision (e) and paragraphs [11] through [20] of the Comment of subdivision 4-1.8 of Rule 4 be and the same are hereby repealed and a new subdivision (e) and new paragraphs [11] through [23] of the Comment of subdivision 4-1.8 are hereby adopted in lieu thereof to read as follows:

RULE 4-1.8  CONFLICT OF INTEREST: PROHIBITED TRANSCTIONS

*    *    *

(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, including medical evaluation of a client, 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.

(3) a lawyer representing an indigent client pro bono may provide emergency financial assistance to the client, whether monetary or in-kind, for food, housing, transportation, medicine, and other basic necessities. The lawyer:

(i) may not promise, assure, or imply the availability of such emergency financial assistance 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 emergency financial assistance to prospective clients.

Emergency financial assistance under this Rule may be provided even if the representation is eligible for fees under a fee-shifting statute.

*    *    *

*    *    *

*    *    *

[11] Another exception is provided in Rule 4-1.8(e)(3). A lawyer representing an indigent client pro bono or through nonprofit legal services, public interest organizations, law school clinical programs, or other pro bono programs may give emergency financial assistance to the client permitted under Rule 4-1.8(e)(3). Such assistance is limited to food, housing, transportation, medicine, and other basic necessities of life. Such emergency financial assistance may also be provided by the nonprofit legal services, public interest organizations, law school clinical programs, or other pro bono programs providing the representation. If the emergency financial assistance 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 4-1.4.

[12] The exception provided in Rule 4-1.8(e)(3) is narrow. Emergency financial assistance is allowed only in specific circumstances where it is unlikely to create conflicts of interest or invite abuse. It 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 emergency financial assistance to prospective clients beyond court costs and expenses of litigation in connection with contemplated or pending litigation or administrative proceedings. Emergency financial assistance is reasonable if the financial hardship would otherwise prevent the client from instituting or maintaining the proceedings or from withstanding delays that put substantial pressure on the client to settle.

[13] Financial assistance, including emergency financial assistance pursuant to Rule 4-1.8(e)(3), may be provided even if the representation is eligible for fees under a fee-shifting statute. However, 4-1.8(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. See Comment [19].

[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 4-5.4(c) (prohibiting interference with a lawyer's professional judgment by one who recommends, employs or pays the lawyer to render legal services for another).

[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 4-1.7. The lawyer must also conform to the requirements of Rule 4-1.6 concerning confidentiality. Under Rule 4-1.7(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 4-1.7(b), the lawyer may accept or continue the representation with the informed consent of each affected client, unless the conflict is nonconsentable under that Rule. Under Rule 4-1.7(b), the informed consent must be confirmed in writing.

[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 4-1.7, 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 4-1.2(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. Rule 4-1.8(g) 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 4-1.0(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.

[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. Rule 4-1.8(h) 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 Rule 4-1.8(h) 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 4-1.2 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.

[18] Agreements settling a claim or a potential claim for malpractice are not prohibited by this Rule 4-1.8(h). 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.

[19] Rule 4-1.8(i) states the traditional general rule that lawyers are prohibited from acquiring a proprietary interest in litigation. Like Rule 4-1.8(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. Rule 4-1.8(i) 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 Rule 4-1.8(e). In addition, Rule 4-1.8(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 Rule 4-1.8(a). Contracts for contingent fees in civil cases are governed by Rule 4-1.5.

[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 4-1.8(j) 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.

[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 4-1.7(a)(2).

[22] When the client is an organization, Rule 4-1.8(j) 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.

[23] Under Rule 4-1.8(k), a prohibition on conduct by an individual lawyer in Rule 4-1.8(a) to (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 Rule 4-1.8(a), even if the first lawyer is not personally involved in the representation of the client. The prohibition set forth in Rule 4-1.8(j) is personal and is not applied to associated lawyers.

2.  It is ordered that notice of this order be published in the Journal of The Missouri Bar.

3.  It is ordered that this order be published in the South Western Reporter.