Similar to the District of Columbia , under North Dakota law , the existence of an attorney-client relationship is based on a person ’ s subjective understanding of the relationship :
Traditionally , it has been said the lawyer-client relationship begins when the client acknowledges the lawyer ' s capacity to act in his behalf and the lawyer agrees to act for the benefit and under the control of the client . The existence of an attorneyclient relationship is a fact question , necessarily dependent on the particular circumstances of the case . An attorney-client relationship may be implied from the conduct of the parties . It may arise when a putative client reasonably believes a particular lawyer is representing him and the lawyer does not disabuse the individual of this belief . The existence of the relationship does not depend on an express contract or the payment of fees . In re Disciplinary Action Against McKechnie , 2003 ND 22 , ¶ 19 , 656 N . W . 2d 661 ( internal citation omitted ).
An attorney purchasing choses in action must take great care to prevent the person from believing an attorney-client relationship is being formed . The facts and circumstances determine whether or not an attorney-client relationship has been formed . If an attorney-client relationship is formed , then the transaction is prohibited by Rule 1.8 ( i ).
Question 2 : Can a lawyer purchase claims from the current clients and pursue them in their own name or in the name of an entity the lawyer owns and controls if the transaction is fair and reasonable to the client and the client is consulted , advised to seek independent legal counsel , and consents to the transaction ?
Rule 1.8 ( i ) prohibits an attorney from directly or indirectly purchasing claims from his or her current clients . See N . D . R . Prof . Conduct 1.8 ( i ). Rule 1.8 ( i ) prohibits an attorney from acquiring a proprietary interest in a cause of action or subject matter of litigation the lawyer is conducting for a client : ( i ) A lawyer shall not acquire a proprietary interest in the cause of action or subject matter of litigation the lawyer is conducting for a client , except that the lawyer may :
( 1 ) acquire a lien authorized by law to secure the lawyer ' s fee or expenses ; and
( 2 ) contract with a client for a contingent fee in a civil case as permitted by Rule 1.5 .
N . D . R . Prof .. 1.8 ( i ). The Comment explains Rule 1.8 ( i ) further : 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 . 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 . N . D . R . Prof . Conduct . 1.8 cmt 17 .
We believe Rule 1.8 ( i ) prohibits this transaction . The requesting lawyers assert Rule 1.8 ( i ) does not prohibit the purchase :
We do not believe we are acquiring a “ proprietary interest in the cause of action or subject matter of the litigation the lawyer is conducting for a client ” because we will not be conducting litigation “ for the client .” Instead , the LLC would purchase the entire interest and pursue it on its behalf .
The requesting lawyers misinterpret Rule 1.8 ( i ). First , the plain language does not support this interpretation . The phrase “ for the client ” is meant only to identify the “ cause of action or subject matter of the litigation .” The phrase is not meant to limit the reach of the prohibition based on whose benefit it is being prosecuted . Under the fact scenario presented , whether or not the transaction is closed , the lawyer still acquired a cause of action the lawyer is conducting for a client . We do not believe “ is conducting ” is strictly meant to be present tense . Second , this interpretation would lead to an absurd result . It would allow a lawyer to purchase a whole interest but prohibit selling a partial interest . We do not believe this is what was intended by Rule 1.8 ( i ). Third , the interpretation would render Rule 1.8 ( i ) almost meaningless and invite abuse . If an attorney could escape the reach of Rule 1.8 ( i ) by closing the transaction , then the Rule does not provide the intended protection to the public . Lastly , the interpretation conflicts with the rationale behind Rule 1.8 generally :
Business transactions between an attorney and client are fraught with pitfalls and traps , and an attorney , with his superior knowledge and education , engages in business transactions with a client at the attorney ' s peril and is held to the highest standards .
We have said the prohibition against transactions with a client continues as long as the influence arising from the attorneyclient relationship continues . . . . An attorney must take precautions to ensure a client is fully aware of the details and risks of such a transaction , and a passing suggestion to consult a second attorney does not discharge an attorney ' s obligation .
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