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Rule1.8. Conflict of interest: currentclients: specific rules.

(a) A licensed paralegal practitioner shall not enterinto a business transaction with a
client or
knowingly acquirean ownership, possessory, security or other pecuniary interest adverse to aclient unless:

(a)(1) the transaction and terms on which the licensedparalegal practitioner acquires
the interest are fair and
reasonable tothe client and are fully disclosed and transmitted in
writing ina manner that can be reasonably understoodby the client;

(a)(2) the client is advised in writing ofthe desirability of seeking and is given
a
reasonable opportunityto seek the advice of independent legal counsel on the
transaction; and

(a)(3) the client gives informed consent, ina writing signedby the client, to the
essential terms of the transaction and the licensed paralegal practitioner?srole in the
transaction, including whether the licensed paralegal practitioner isrepresenting the client
in the transaction.

(b) A licensed paralegal practitioner shall not useinformation relating to
representation of a client to the disadvantage of the client unless the clientgives
informed consent, exceptas permitted or required by these Rules.

(c) A licensed paralegal practitioner shall not solicitany substantial giftfrom a client,
including a testamentary gift.

(d) Prior to the conclusion of representation of aclient, a licensed paralegal practitioner
shall not make or negotiate an agreement giving the licensed paralegalpractitioner literary
or media rights to a portrayal or an account based in
substantial parton information
relating to the representation.

(e) A licensed paralegal practitioner shall not providefinancial assistance to a client in connection with pending or contemplatedlitigation, except that:

(e)(1) a licensed paralegalpractitioner may advance court costs and expenses of
litigation, the repayment of which may be contingent on the outcome of thematter; and

(e)(2) a licensed paralegalpractitioner representing an indigent client may pay court
costs and expenses of litigation, and minor expenses
reasonably connectedto the litigation,
on behalf of the client.

(f) A licensed paralegal practitioner shall not acceptcompensation for
representing a client from one other than the client unless:

(f)(1) the client gives informed consent;

(f)(2) there is no interferencewith the licensed paralegal practitioner?s independence
of professional judgment or with the licensed paralegal practitioner-clientrelationship; and

(f)(3) information relating torepresentation of a client is protected as required by Rule
1.6.

(g) A licensed paralegal practitioner who represents twoor more clients shall not
participate in making an aggregate settlement of the claims of or against theclients unless
each client gives
informed consent, in writing signed by the client. The licensedparalegal practitioner?s disclosure shall include the existence and nature ofall the claims involved
and of the participation of each person in thesettlement.

(h) A licensed paralegal practitioner shall not:

(h)(1) make an agreementprospectively limiting the licensed paralegal practitioner?s
liability to a client for malpractice unless the client is independentlyrepresented in making
the agreement; or

(h)(2) settle a claim or potential claim for suchliability with an unrepresented client or
former client unless that person is advised in
writing ofthe desirability of seeking, and is
given a
reasonable opportunityto seek, the advice of independent legal counsel in
connection therewith.

(i)Alicensed paralegal practitioner shall not acquire a proprietary interest in thecause
of action or subject matter of litigation the licensed paralegal practitioneris providing
services on for a client.

(j) A licensed paralegal practitioner shall not engage insexual relations with a client
that exploit
the licensed paralegal practitioner-client relationship.For the purposes of this
Rule:

(j)(1) ?sexual relations? meanssexual intercourse or the touching of an intimate part of another person forthe purpose of sexual arousal, gratification, or abuse; and

(j)(2) except for a spousalrelationship or a sexual relationship that existed at the commencement of thelicensed paralegal practitioner-client relationship, sexual relations
between the licensed paralegal practitioner and the client shall be presumed tobe
exploitive. This presumption is rebuttable.

(k) While licensed paralegal practitioners are associatedin a firm, aprohibition in the foregoing paragraphs (a) through (i)that applies to any one of the firm shall apply to all
members of the firm.

 

Comment

Business Transactions BetweenClient and Licensed Paralegal Practitioner

[1] A licensed paralegal practitioner?s legal skill andtraining, together with the
relationship of trust and confidence between licensed paralegal practitionerand client,
create the possibility of overreaching when the licensed paralegal practitionerparticipates
in a business, property or financial transaction with a client, for example, aloan or sales transaction or a licensed paralegal practitioner investment onbehalf of a client. The
requirements of paragraph (a) must be met even when the transaction is notclosely
related to the subject matter of the representation, as when a licensedparalegal
practitioner drafting a will for a client learns that the client needs moneyfor unrelated
expenses and offers to make a loan to the client. The Rule applies to licensedparalegal practitioners engaged in the sale of goods or services related to thepractice of law, for
example, the sale of title insurance or investment services to existing clientsof the licensed paralegal practitioner?s legal practice. It does not apply toordinary fee arrangements
between client and licensed paralegal practitioner, which are governed by Rule1.5,
although its requirements must be met when the licensed paralegal practitioneraccepts an interest in the client?s business or other nonmonetary property aspayment of all or part of
a fee. In addition, the Rule does not apply to standard commercial transactionsbetween the licensed paralegal practitioner and the client for products orservices that the client
generally markets to others, for example, banking or brokerage services, medicalservices, products manufactured or distributed by the client, and utilities?services. In such
transactions, the licensed paralegal practitioner has no advantage in dealingwith the client,
and the restrictions in paragraph (a) are unnecessary and
impracticable.

[2] Paragraph (a)(1) requiresthat the transaction itself be fair to the client and that its
essential terms be communicated to the client, in writing, in a manner that canbe
reasonably understood. Paragraph (a)(2) requires thatthe client also be advised, in
writing, of the desirability of seeking the advice of independent legalcounsel. It also
requires that the client be given a reasonable opportunity to obtain suchadvice. Paragraph
(a)(3) requires that the licensed paralegal practitioner obtain the client?sinformed consent,
in a writing signed by the client, both to the essential terms of thetransaction and to the
licensed paralegal practitioner?s role. When necessary, the licensed paralegalpractitioner
should discuss both the material risks of the proposed transaction, includingany risk
presented by the licensed paralegal practitioner?s involvement,and the existence of
reasonably
available alternatives and should explain why the advice ofindependent legal
counsel is desirable. See Rule 1.0(f) (definition of informed
consent).

[3] The risk to a client is greatest when the clientexpects the licensed paralegal
practitioner to represent the client in the transaction itself or when thelicensed paralegal practitioner?s financial interest otherwise poses asignificant risk that the licensed
paralegal practitioner?s representation of the client will be materiallylimited by the
licensed paralegal practitioner?s financial interest in the transaction. Herethe licensed
paralegal practitioner?s role requires that the licensed paralegal practitionermust comply,
not only with the requirements of paragraph (a), but also with the requirementsof Rule
1.7. Under that Rule, the licensed paralegal practitioner must disclose therisks associated
with the licensed paralegal practitioner?s dual role as both legal adviser andparticipant in
the transaction, such as the risk that the licensed paralegal practitioner willstructure the transaction or give legal advice in a way that favors thelicensed paralegal practitioner?s
interests at the expense of the client. Moreover, the licensed paralegalpractitioner must
obtain the client?s informed consent. In some cases, the licensed paralegalpractitioner?s
interest may be such that Rule 1.7 will preclude the licensed paralegalpractitioner from
seeking the client?s consent to the transaction.

[4] If the client is independently represented in thetransaction, paragraph (a)(2) of this
Rule is inapplicable, and the paragraph (a)(1) requirement for full disclosureis satisfied
either by a written disclosure by the licensed paralegal practitioner involvedin the
transaction or by the client?s independent counsel. The fact that the clientwas
independently represented in the transaction is relevant in determining whetherthe
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 tothe disadvantage of the client
violates the licensed paralegal practitioner?s duty of loyalty. Paragraph (b)applies when
the information is used to benefit either the licensed paralegal practitioneror a third
person, such as another client or business associate of the licensed paralegalpractitioner.
For example, if a licensed paralegal practitioner learns that a client intendsto purchase and develop several parcels of land, the licensed paralegalpractitioner may not use that
information to purchase one of the parcels in competition with the client or torecommend
that another client make such a purchase. The rule does not prohibit uses thatdo not disadvantage the client. Paragraph (b) prohibits disadvantageous use ofclient information
unless the client gives informed consent, except as permitted or required bythese Rules.
See Rules 1.6, 1.9(c), 3.3, 4.1(b), 8.1 and8.3.

Gifts to Licensed Paralegal Practitioners

[6] A licensed paralegal practitioner may accept a giftfrom a client, if the transaction
meets general standards of fairness. For example, a simple gift such as apresent given at a holiday or as a token of appreciation is permitted. If aclient offers the licensed paralegal practitioner a more substantial gift,paragraph (c) does not prohibit the licensed paralegal practitioner fromaccepting it, although such a gift may be voidable by the client under thedoctrine of undue influence, which treats client gifts as presumptivelyfraudulent. In any
event, due to concerns about overreaching and imposition on clients, a licensedparalegal practitioner may not suggest that a substantial gift be made to thelicensed paralegal
practitioner or for the licensed paralegal practitioner?s
benefit.

[7] If effectuation of a substantial gift requires preparinga legal instrument such as a
will or conveyance, the client should have the detached advice that anotherlicensed
paralegal practitioner or a lawyer can provide.

[8] This Rule does not prohibit a licensed paralegalpractitioner from seeking to have
the licensed paralegal practitioner or a partner or associate of the licensed
paralegal
practitioner named as executor of the client?s estate or to another potentiallylucrative
fiduciary position. Nevertheless, such appointments will be subject to thegeneral conflict of interest provision in Rule 1.7. In obtaining the client?sinformed consent to the conflict, the licensed paralegal practitioner shouldadvise the client concerning the nature and extent of
the licensed paralegal practitioner?s financial interest in the appointment, aswell as the availability of alternative candidates for the position.

Literary Rights

[9] An agreement by which a licensed paralegal practitioneracquires literary or media
rights concerning the conduct of the representation creates
a conflictbetween the interests
of the client and the personal interests of the licensed paralegalpractitioner. Measures
suitable in the representation of the client may detract from the publicationvalue of an
account of the representation.

Financial Assistance

[10] Licensed paralegal practitioners may not subsidizelawsuits brought on behalf of
their clients, including making or guaranteeing loans to their clients forliving expenses,
because to do so would encourage clients to pursue lawsuits that might nototherwise be
brought and because such assistance gives licensed paralegal practitioners toogreat a
financial stake in the litigation. These dangers do not warrant a prohibitionon a licensed paralegal practitioner lending a client court costs andlitigation expenses.

Person Paying for a LicensedParalegal Practitioner?s Services

[11] Licensed paralegal practitioners are frequentlyasked to represent a client under circumstances in which a third person willcompensate the licensed paralegal practitioner,
in whole or in part. The third person might be a relative or friend. Becausethird-party
payers frequently have interests that differ from those of the client,including interests in minimizing the amount spent on the representation and inlearning how the representation
is progressing, licensed paralegal practitioners are prohibited from acceptingor continuing
such representations unless the licensed paralegal practitioner determines thatthere will
be no interference with the licensed paralegal practitioner?s independentprofessional
judgment and there is informed consent from the client. See also Rule 5.4(c)(prohibiting interference with a licensed paralegal practitioner?s professionaljudgment by one who recommends, employs or pays the licensed paralegalpractitioner to render legal services
for another).

[12] Sometimes, it will be sufficient for the licensedparalegal practitioner to obtain the
client?s informed consent regarding the fact of the payment and the identity ofthe third-
party payer. If, however, the fee arrangement creates a conflict of interestfor the licensed paralegal practitioner, then the licensed paralegalpractitioner must comply with Rule. 1.7.
The licensed paralegal practitioner must also conform to the requirements ofRule 1.6
concerning confidentiality. Under Rule 1.7(a), a conflict of interest exists ifthere is
significant risk that the licensed paralegal practitioner?s representation ofthe client will be materially limited by the licensed paralegal practitioner?sown interest in the fee
arrangement or by the licensed paralegal practitioner?s responsibilities to thethird-party
payer (for example, when the third-party payer is a co-client). Under Rule1.7(b), the
licensed paralegal practitioner may accept or continue the representation withthe
informed consent of each affected client, unless the conflict is nonconsentable
under that paragraph. Under Rule 1.7(b), theinformed consent must be confirmed in writing.

Aggregate Settlements

[13] Differences in willingness to make or accept anoffer of settlement are among the
risks of common representation of multiple clients by a single licensedparalegal
practitioner. Under Rule 1.7, this is one of the risks that should be discussedbefore
undertaking the representation, as part of the process of obtaining theclients? informed
consent. In addition, Rule 1.2(a) protects each client?s right to have thefinal say in deciding whether to accept or reject an offer of
settlement.

Limiting Liability and Settling Malpractice Claims

[14] Agreements prospectively limiting a licensedparalegal practitioner?s liability for malpractice are prohibited unless theclient is independently represented in making the agreement because they arelikely to undermine competent and diligent representation.
Also, many clients are unable to evaluate the desirability of making such anagreement
before a dispute has arisen, particularly if they are then represented by thelicensed
paralegal practitioner seeking the agreement. This paragraph does not, however,prohibit a licensed paralegal practitioner from entering into an agreement withthe client to arbitrate
legal malpractice claims, provided such agreements are enforceable and theclient is fully informed of the scope and effect of the agreement. Nor doesthis paragraph limit the ability
of licensed paralegal practitioners to practice in the form of alimited-liability entity, where permitted by law, provided that each licensedparalegal practitioner remains personally
liable to the client for his or her own conduct and the firm complies with anyconditions
required by law, such as provisions requiring client notification ormaintenance of
adequate liability insurance. Nor does it prohibit an agreement in accordancewith Rule 1.2
that defines the scope of the representation, although a definition of scopethat makes the obligations of representation illusory will amount to an attemptto limit liability.

[15] Agreements settling a claim or a potential claim formalpractice are not prohibited
by this Rule. Nevertheless, in view of the danger that a licensed paralegalpractitioner will
take unfair advantage of an unrepresented client or former client, the licensedparalegal practitioner must first advise such a person in writing of theappropriateness of
independent representation in connection with such a settlement. In addition,the licensed paralegal practitioner must give the client or former client areasonable opportunity to find
and consult independent counsel.

Acquiring Proprietary Interest in Litigation

[16] Paragraph (i) states thetraditional general rule that licensed paralegal
practitioners are prohibited from acquiring a proprietary interest in litigation.Like
paragraph (e), the general rule has its basis in common law champertyand maintenance
and is designed to avoid giving the licensed paralegal practitioner too greatan interest in
the representation. In addition, when the licensed paralegal practitioneracquires an
ownership interest in the subject of the representation, it will be moredifficult for a client
to discharge the licensed paralegal practitioner if the client so desires. Therule is subject to specific exceptions developed in decisional law andcontinued 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 liensauthorized by law to secure the licensed
paralegal practitioner?s fees or expenses and contracts for reasonablecontingent fees. The
law of each jurisdiction determines which liens are authorized by law. Thesemay include
liens granted by statute, liens originating in common law and liens acquired bycontract
with the client. When a licensed paralegal practitioner acquires by contract asecurity
interest in property other than that recovered through the licensed paralegalpractitioner?s
efforts in the litigation, such an acquisition is a business or financialtransaction with a
client and is governed by the requirements of paragraph (a). Contracts forcontingent fees
in civil cases are prohibited by Rule 1.5.

Client-Licensed Paralegal Practitioner SexualRelationships

[17] The relationship between licensed paralegalpractitioner and client is a fiduciary
one in which the licensed paralegal practitioner occupies the highest positionof trust and confidence. The relationship is almost always unequal; thus, asexual relationship between licensed paralegal practitioner and client caninvolve unfair exploitation of the licensed
paralegal practitioner?s fiduciary role, in violation of the licensed paralegalpractitioner?s
basic ethical obligation not to use the trust of the client to the client?sdisadvantage. In
addition, such a relationship presents a significant danger that, because ofthe licensed
paralegal practitioner?s emotional involvement, the licensed paralegalpractitioner will be
unable to represent the client without impairment of the exercise ofindependent
professional judgment. Because of the significant danger of harm to clientinterests and
because the client?s own emotional involvement renders it unlikely that theclient could
give adequate informed consent, this Rule creates a rebuttable prohibition onthe licensed paralegal practitioner?s having sexual relations with a clientregardless of whether the
relationship is consensual and regardless of the absence of prejudice to the
client.

[18] Spousal relationships and sexual relationships thatpredate the licensed paralegal practitioner-client relationship are notprohibited. Issues relating to the exploitation of the
fiduciary relationship and client dependency are diminished when the sexualrelationship
existed prior to the commencement of the licensed paralegal
practitioner-client
relationship. However, before proceeding with the representation in thesecircumstances,
the licensed paralegal practitioner should consider whether the licensedparalegal
practitioner?s ability to represent the client will be materially limited bythe relationship.
See Rule 1.7(a)(2).

Imputation of Prohibitions

[20] Under paragraph (k), a prohibition on conduct by anindividual licensed paralegal practitioner in paragraphs (a) through (i) also applies to all licensedparalegal practitionersassociated in a firm with the personally prohibited licensed paralegalpractitioner. For
example, one licensed paralegal practitioner in a firm may not enter into abusiness
transaction with a client of another member of the firm without complying withparagraph
(a), even if the first licensed paralegal practitioner is not personallyinvolved in the
representation of the client. The prohibition set forth in paragraph (j) ispersonal and is not applied to associated licensed paralegal practitioners.

 

Effective January 16, 2019