Other Payer Settings

Rule 1.8(f) looks to the source of the payment, not the payer's line of business: a lawyer shall not accept compensation for representing a client from one other than the client unless the rule's conditions are met.¹ The conditions are three. The client gives informed consent; nothing interferes with the lawyer's independent professional judgment or with the client-lawyer relationship; and information relating to the representation stays protected as Rule 1.6 requires.² They bind a lawyer funded by a relative, an employer, or a legal aid program exactly as they bind one funded by an insurer. Rule 5.4(c) reaches wider still, because it forbids a lawyer to let anyone who recommends, employs, or pays the lawyer to serve another person direct or regulate the lawyer's professional judgment.³

The insurance triangle was where these rules first took shape, but the same triangle forms wherever a funder or a spokesperson stands between a lawyer and the person represented. Three more versions follow: a relative who pays, an employer that funds counsel for an employee, and an organization whose managers or board sit between the lawyer and the client. Each analysis runs on the same three questions. Who is the client, since the client alone holds the lawyer's loyalty? Who may hear the lawyer's confidences, which again means the client alone? And is the payer, or the person speaking for the client, positioned to bend the lawyer's judgment? The questions recur because someone who funds or speaks for a client can want something the client does not, and a lawyer who depends on that person for fees, referrals, or access has reason to listen closely.

The relationships differ in what makes listening tempting. A relative's tie is personal and affectionate, so sharing information and deferring to the payer feel natural. An employer's tie is economic, and the employer may have a stake of its own in the very matter at issue. An organization can act only through people, so the manager giving instructions speaks for the client without being the client. The relative comes first.

Family-Funded Representation

Informed consent is the first condition of Rule 1.8(f), and it belongs to the client, not the payer.⁴ When a relative offers to pay, the first question is whose matter it is, because that answer decides who must consent, who is owed loyalty, and who may hear what the lawyer learns. The rule lets relatives help, since they are often the only people able to fund the work. The danger is that a relative who pays and attends the meetings may come to expect a say in the matter, and a lawyer who lets payment become participation has moved the lawyer's loyalty without anyone deciding that it should move.

In elder law the client is the older person. A lawyer may represent that person even though someone else pays the legal costs, if the older person is so informed and consents, and the lawyer must also determine that the arrangement will not interfere with the lawyer's independence of professional judgment or with the client-lawyer relationship.⁵ The Model Rules do not contemplate “the family” as a client. They do permit representation of several people, even several generations, so long as there is no concurrent conflict of interests. If there is one, the lawyer may proceed only when the lawyer reasonably believes that competent and diligent representation can be provided to each affected client and each gives informed consent, confirmed in writing.⁶

The family cannot be the client because even loving families contain people whose interests diverge. A mother who creates a joint bank account with her son so that he can handle her finances may be putting at risk her plan to split her estate between him and her daughter, since he can drain the account for his own benefit.⁷ A lawyer who counted both children as clients would have trouble warning the mother about that danger without disadvantaging one of them; a lawyer whose only client is the mother can simply give the advice. The same logic explains why a relative's payment buys no seat at the table. The payer may want an outcome the client's own interests do not support.

The third condition completes the picture. Information relating to the representation must be protected as Rule 1.6 requires, so the relative's payment gives the relative no claim on the client's confidences.⁸ A funder who asks for an update is asking for protected information, and the lawyer may answer only as far as the client authorizes.

Each step the lawyer took answers one condition. Explaining the risks and alternatives to Denise before taking any money produced her informed consent. Telling both siblings that Denise directs the case kept the brother outside the client-lawyer relationship. Limiting reports to what she authorizes kept her information with her. The brother's generosity was the same as in any family-funded matter, so what protects Denise is the structure the lawyer built around it.

Reverse the facts and the failure becomes visible.

Those facts also raise a concern that goes beyond the payment rule. The lawyer must always consider the possibility of undue influence, which in the family setting means asking whether the arrangement is really the older person's wish or primarily the child's idea.⁹ If the older person lives in the child's home, overreaching or pressure is more likely, and overt threats are often unnecessary, because ongoing patterns of behavior can be enough to manifest undue influence, or even abuse in extreme cases.¹⁰ Such considerations cannot easily be disregarded, even though they are hard to detect. Undue influence is the payer-interference problem in its family form: the person who pays and attends may also be steering the client's decisions, and a lawyer who never speaks with the client alone cannot tell whether that is happening.

Estate planning sharpens the problem because the payer may profit from the client's choices. A devisee, meaning a person who receives property under a will, who pays a lawyer to draft the testator's will creates a potential violation of the rules that in general prohibit lawyers from accepting compensation from someone other than the client.¹¹ Most relatives who fund a lawyer only want to help, but a paying devisee gains or loses by what the will says, so the chance that the payer's interest will shape the advice is built into the arrangement. The danger is also evidentiary. Courts contesting a will for undue influence often ask whether the testator had independent advice, and the independent adviser most often mentioned is the lawyer who drafted the will.¹²

Hypothetical Illustration

Walter's nephew, who stands to take the largest share under the will Walter is said to want, picks a lawyer, pays the fee, and relays Walter's wishes. The lawyer first speaks with Walter when he arrives to sign. Walter never gave informed consent to the nephew's payment, because no one explained it to him. The nephew stood between the lawyer and the client, and the lawyer is exposed to a charge of accepting compensation from someone other than the client. If the will is contested, the lawyer who should have supplied independent advice supplied none. Now change the facts: Walter chooses the lawyer, discusses the plan with the lawyer directly, and agrees to the nephew's payment after hearing its risks. Then the lawyer can serve as the independent adviser the will needs.

Employer-Paid Counsel

An employer that pays for a worker's lawyer is a person other than the client compensating the lawyer, so Rule 1.8(f) governs and the lawyer may take the money only if its conditions are met.¹⁴ Those conditions are the client's informed consent, no interference with the lawyer's independent judgment or the client-lawyer relationship, and protection of the client's information under Rule 1.6.¹⁵ The classic case is an employee subpoenaed to testify before a grand jury. There the employer's offer to pay is common, and so are the pressures that offer creates.

Employers pay for different reasons. Indemnification provisions in employment contracts, charters, or by-laws, sometimes prescribed by state law, may require an employer to pay the fees of employees called to testify. Even an employer under no such duty may offer, because paying helps it monitor the grand jury proceeding.¹⁶ That second motive shows why the offer carries risk: the payer wants a view into a proceeding in which the employee is a witness. The potential for a serious conflict is almost invariably present, and the key question is whether the arrangement sufficiently ensures that counsel will act solely out of concern for the client's best interests.¹⁷ The procedure itself keeps the two lawyers apart. A testifying employee cannot ask to leave for an anteroom consultation with the employer's counsel, but may do so to consult his own counsel, who may, with the client's permission, share what he has learned with the employer's counsel.¹⁸

Close work with the employer's counsel may even serve the employee's interests. That cooperation alone does not justify disqualification if the structure of the retainer does not point counsel in that direction.¹⁹ Because the risk lies in structure, the protection is structural too. Retainer agreements drafted to avoid disqualification provide five things:

The firm's sole obligation is to the employee, which answers any claim by the employer on the lawyer's loyalty.
The firm need not disclose any legal strategy, theory, or plan of action to the employer, which also makes acceptable invoices that lack the detail that would reveal them.
No condition of cooperation with the employer is imposed, so funding cannot depend on joining a joint defense agreement.
Payments follow a schedule, so the employer cannot delay payment to pressure the firm.
The firm's retention cannot be terminated before the representation is complete except with the court's approval.²⁰

Each term takes away a lever the employer might otherwise pull: a claim on loyalty, a window into strategy, a price for cooperation, a payment squeeze, and the power to dismiss a lawyer who disappoints it. The strategy term also serves the third condition of Rule 1.8(f), because a lawyer who owes the employer no strategy reports and sends it no detailed invoices keeps the employee's information protected.²¹ Rule 5.4(c) adds a bar that no consent lifts, since its text contains no consent exception: an employer that pays may not direct or regulate the lawyer's professional judgment, so an instruction about how to handle the employee's defense is off limits.²²

Who chose the lawyer matters less than one might expect. If the employee selects the firm, the concern about the firm's hope of future retention by the employer disappears, and disqualification does not follow simply because the employer chose the attorney or offered the employee a list of acceptable lawyers.²³ Where indemnification is mandatory, the employer may even be contractually barred from imposing conditions that limit the selection of counsel or that require cooperation, such as joining a joint defense agreement.²⁴ The weight shifts when the lawyer currently represents the employer in other matters, because the incentive to keep that business is more likely to be viewed as a serious conflict.²⁵

Hypothetical Illustration

A hospital group under grand jury investigation for billing practices offers to pay for counsel for a subpoenaed billing clerk and proposes its regular outside firm, which earns a large share of its fees from the group. The retainer says nothing about whom the firm serves, and the group's general counsel asks for a weekly summary of how the clerk's preparation is going. The firm currently represents the employer, the retention carries none of the protective terms, and the summaries would hand over information the clerk never authorized. The firm cannot satisfy the independence or the confidentiality condition.

Another employee of the group, offered the same funding, receives a list of four independent criminal-defense firms, none of which does other work for the group, and chooses one. The retainer provides that the firm's sole obligation is to the employee, that no strategy disclosure or cooperation is required, that payments follow a schedule, and that the firm cannot be terminated early without court approval. The employer drew up the list, which does not disqualify the firm, and the employee made the choice. With the employee's informed consent, the firm may accept the funding.

What moved the answer was the first firm's present financial tie to the payer, compounded by a retainer with no protective terms. The employer's offer to pay and its role in producing a list were the same in both scenes.

Everything so far assumes the employer is only a payer. Employment immigration work breaks that assumption. A company retains a lawyer to obtain an immigration benefit for a non-citizen it wants to hire, and the lawyer ends up with two clients, because the immigration system requires the lawyer to obtain confidential information from the employee and the lawyer may be asked to advise the employee on visa eligibility.²⁷ Dual representation is possible because both seek the same objective: a benefit that lets the non-citizen work for the employer.²⁸ Because the company is a client, it is owed the lawyer's loyalty, and a retainer designed to insulate the lawyer from the company, as in the grand jury setting, is the wrong tool. The lawyer's task is to reconcile two clients' claims.

Two ethical concerns demand special care from the outset. The first is confidentiality: the lawyer cannot reveal the non-citizen's statement to the employer, yet owes the employer a duty to keep it reasonably informed about the status of the matter, as Rule 1.4 requires.²⁹ The second is conflict of interest. Rule 1.7 permits a lawyer to represent clients with conflicting interests if the lawyer reasonably believes the representation of each will not adversely affect the relationship with the other and each client consents in writing after consultation, which is informed consent. The lawyer should consider the likelihood that a difference in interests will eventuate and, if it does, whether it will materially interfere with the lawyer's independent professional judgment or foreclose courses of action that reasonably should be pursued for the client.³⁰

Consent also supplies the tool for managing both problems. The lawyer and the two clients can agree that the scope of the employee's representation is limited to obtaining the visa and that the lawyer will not disclose confidential information given by either client unless required by law. The lawyer must also explain to the employee that the lawyer will review some information pertinent to the petition process, such as prevailing wage determinations, that the employee will not see.³¹

Timing is critical. If a conflict or confidentiality problem arises and the lawyer did not obtain written consent at the start of the dual representation, the lawyer may be forced to withdraw.³²

A lawyer who cannot use independent judgment on each client, or cannot assure each client that confidences will be kept, must withdraw from representing both. Seeking consent after the conflict has surfaced is an alternative, but the duties of loyalty and confidentiality will often make that nearly impossible.³³

Keep the two employer settings apart, because they call for opposite remedies. A grand jury witness's employer buys no loyalty, no confidences, and no say over strategy, so the lawyer is protected by walling the employer off. An immigration employer is owed loyalty and information, so the lawyer cannot wall it off and instead reconciles two clients through disclosure, written consent, and a defined scope. The first question on any stem with an employer payer is whether the employer became a client. Facts that make it one include the employer's retaining the lawyer for an objective both share, the lawyer's collecting the employee's confidential information, and the lawyer's advising the employee.

Organizational Clients and Legal Aid

Rule 5.4(c) supplies the controlling text: a lawyer may not permit a person who recommends, employs, or pays the lawyer to render legal services for another to direct or regulate the lawyer's professional judgment in rendering those services.³⁵ The insurer, the relative, and the employer each put a payer between a lawyer and the person represented. Two more settings reproduce that structure with the roles rearranged. In one, the client is an organization, and the people who speak for it may have agendas of their own. In the other, an organization pays lawyers to serve individuals, and its board holds the leverage. The question that has organized this chapter governs both: who is the client, and has anyone gotten between the lawyer and that client?

An organization can act only through people, so a lawyer whose client is the entity takes instructions from the officers, managers, and directors authorized to act for it. When one of them conveys what the organization needs from its lawyer, the lawyer is hearing from the client, and no one has been interposed. Trouble begins when the same person pursues a personal interest under the organization's authority, for example by avoiding blame for a failure or concealing a scheme that benefits the manager. Such a manager often controls the lawyer's assignments and job security, which is the kind of leverage over a lawyer that Rule 5.4(c) addresses in anyone who recommends, employs, or pays a lawyer to serve another.³⁶ A manager with that leverage and a private stake in the outcome is a third party as to the organization, however senior the title.

A stem featuring an executive's instruction therefore asks whose interest the instruction serves. The speaker's title does not answer that question, and the same chief executive can appear on either side of the line.

Hypothetical Illustration

An operations vice president tells the company's in-house lawyer that a supplier contract must be reviewed before Friday's signing and that the company wants the termination clause tightened. The vice president is stating what the company needs from its lawyer, so the lawyer is hearing from the client, and nothing has been interposed.

The in-house lawyer at another company discovers that the chief executive has been falsifying inventory reports sent to the company's lenders. The chief executive tells the lawyer to keep the matter quiet. The instruction protects the chief executive from discovery and does nothing for the company, which has every interest in learning of the fraud and dealing with it. The chief executive's authority over the lawyer's position gives the instruction real weight, yet it comes from a person pursuing a personal interest between the lawyer and the client. The lawyer's loyalty stays with the company, and the instruction cannot redefine what the company wants.

The distinction guards against two opposite failures. If every instruction from a manager counted as interference, an entity could never direct its own lawyer. If none did, any officer with a private motive could capture the lawyer and turn the organization's counsel against the organization. Asking whose interest the instruction serves keeps the lawyer responsive to the entity's real needs and resistant to a constituent's personal ones. This unit does not address what the lawyer must do after declining such an instruction.

Legal aid shows the pattern from the other side. A legal aid program employs and pays lawyers to represent people who cannot pay, and the client is the person served. The program and its board are therefore outside payers: Rule 1.8(f) allows a lawyer to accept compensation for representing a client from someone other than the client only if its conditions are met.³⁷ Those conditions are informed consent, no interference with the lawyer's independent judgment or the client-lawyer relationship, and protection of the client's information under Rule 1.6.³⁸ Because the program also employs the lawyer to serve another, Rule 5.4(c) applies as well, and its text contains no consent exception that a client's agreement to take free services could invoke.

The board's case-acceptance guidelines are the channel through which influence is most likely to flow. Programs have limited resources, so boards adopt policies about which kinds of matters the program will take, and that decision is made at the door, before any lawyer-client relationship exists in the matter. On the rule's text, such a policy does not direct or regulate professional judgment in rendering services, because it tells no lawyer how to handle any client's case. The risk lies in how the board's leverage over funding and employment can be used afterward, to discourage steps in an accepted case that would displease a donor, an agency, or a political ally of the board. At that point the directive reaches the judgment the rule protects.

The organizational client and the legal aid program teach one lesson. Whoever speaks for the client or funds the lawyer has influence over the lawyer, and the lawyer's duty stays with the actual client, whether an entity or an individual served by a funded program. Constituents who articulate the entity's interests are the client's voice. Constituents who pursue their own interests, and boards that reach into accepted cases, are third parties.