Under the old rule, no disclosure or consent was needed if other law authorizes nondisclosure, or if the lawyer was to render services on behalf of a public agency.  (Former Rule 3-310(F)(3)(a)-(b).)  The Comment to the former rule also indicated that the rule need not be followed in insurance situations where the insurer has the unilateral right to select the attorney for the insured, where there is no conflict of interest.

New Rule 1.8.6 maintains the substance of the former rule, with some changes.  The first significant change is in the application of the rule; under Rule 1.8.6, a lawyer “shall not enter into an agreement for, charge, or accept compensation for representing a client from one other than the client” without adhering to its requirements.  Thus, a lawyer may be found to violate the rule simply by entering into a contract with a client by which the lawyer will be paid by someone else without getting the client’s  informed written consent.

A second change that recognizes practical considerations is found in Comment [4] to the rule.  Comment [4] explains that there are certain limited circumstances in which the lawyer may not be able to obtain the client’s  written consent before undertaking the representation.  Such circumstances include when a lawyer is hired by a family member or friend to represent an incarcerated person, or when a lawyer agrees to take on representation of creditors, to be paid by the creditors’ committee, before all creditors have been identified.  In such situations, the lawyer must obtain the client’s informed written consent “as soon thereafter as reasonably practicable.” (Comment [4] to Rule 1.8.6.)

When advising the client in writing about having another person compensate the client’s attorney, the attorney should advise the client of potential adverse consequences, such as the risk that the payor may attempt to: (1) interfere with the attorney-client relationship between the attorney and client, (2) interfere with the attorney’s exercise of independent professional judgment on behalf of the client, or (3) seek access to client confidential information.  (See Sharp v. Next Entertainment, Inc. (2008) 163 Cal.App.4th 410,428-429 (“‘there is [a] danger that the lawyer will tailor his [or her] representation to please the payor rather than the client….”‘ ), quoting 1 Hazard & Hodes, The Law of Lawyering (3d ed., 2008 supp.) §11.8, p. 11-23.)  The attorney should also clarify that the sole attorney-client relationship is between the attorney and client. The attorney should further assure the client that the payor does not become privy to the attorney-client communications  and the client’s confidential information simply by virtue of the payment of the client’s legal fees.

In addition to the written requirements, best practice is to orally explain to both the client and the payor that the attorney’s  duties of loyalty, communication  and confidentiality lie with the client, and not the payor.