Can a lawyer's engagement agreement require a corporate client to indemnify the lawyer against civil claims by a nonclient, like an investigated employee?
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This page answers the general question as of 2005. Ezel answers yours: whether it's allowed on your facts, under the current Oregon Rules of Professional Conduct, with citations.
Plain-English summary
A lawyer's corporate client asks the lawyer to investigate one of its employees for possible malfeasance that, if confirmed, might lead to terminating the employee. The lawyer wants to include a provision in the engagement agreement under which the client would indemnify or hold the lawyer harmless from independent civil claims the employee might later assert against the lawyer as a result of the investigation. The opinion asks whether the lawyer may include such a provision if the client consents, and answers yes.
The opinion applies Oregon RPC 1.8(h), which bars a lawyer from prospectively limiting the lawyer's malpractice liability to a client unless the client is independently represented, and from limiting a client's right to file a bar complaint, among other things. It reasons that the rule lets a lawyer obtain advance exoneration from legal malpractice only if the client is separately represented, but that no rule prohibits a client's advance agreement to indemnify the lawyer on matters that do not constitute legal malpractice, such as third-party claims by a nonclient. It cites South Carolina Ethics Advisory Op. No. 85-30, Restatement section 54 (indemnity arrangements with employers are permissible), and a New York County opinion.
The opinion adds that any such indemnification provision is subject to the reasonableness standards that govern fee agreements generally under Oregon RPC 1.5 (citing OSB Formal Ethics Op. No. 2005-97). It expressly declines to opine on whether such a provision must also satisfy Oregon RPC 1.8(a) governing business transactions with a client.
In practice
This opinion was issued in 2005, after Oregon's adoption of the current Rules of Professional Conduct, so it interprets the current rule numbering, but readers should treat its specifics with care given its age. The opinion holds that Oregon RPC 1.8(h)'s bar reaches only prospective limits on the lawyer's malpractice liability to the client, not a client's promise to indemnify against a nonclient's claims, which is permitted subject to Oregon RPC 1.5 reasonableness. Per the opinion, the analysis turns on the distinction between limiting client malpractice claims (restricted) and indemnifying against third-party claims (permitted). Verify the current text of Oregon RPC 1.8 and 1.5 before relying on any specific point.
Common questions
Q: Can a lawyer have a corporate client agree to indemnify the lawyer against a nonclient's claims?
A: Yes. The opinion concludes a lawyer may include an engagement provision under which the client indemnifies the lawyer against independent civil claims by a nonclient, because that is not the kind of malpractice-limiting agreement Oregon RPC 1.8(h) restricts.
Q: Could the lawyer also limit the client's own malpractice claims this way?
A: Only with separate representation. The opinion explains that Oregon RPC 1.8(h) permits advance exoneration from legal malpractice to the client only if the client is independently represented in making the agreement.
Q: Are there other limits on the indemnification provision?
A: Yes. The opinion concludes the provision is subject to the reasonableness standards governing fee agreements under Oregon RPC 1.5, and it does not decide whether Oregon RPC 1.8(a) on business transactions also applies.
Background and rules framework
The opinion interprets Oregon RPC 1.8(h) (limiting malpractice liability) and Oregon RPC 1.5 (reasonableness of fee agreements), corresponding to Model Rules 1.8 and 1.5, distinguishing client malpractice claims from third-party indemnification in an engagement with a corporate client.
Citations and references
Rules of Professional Conduct:
- Oregon RPC 1.8(h) / Model Rule 1.8 (limiting malpractice liability; bar-complaint rights)
- Oregon RPC 1.5 / Model Rule 1.5 (reasonableness of fee agreements)
Other opinions cited:
- OSB Formal Ethics Op. No. 2005-97 (fee-agreement reasonableness)
- South Carolina Ethics Advisory Op. No. 85-30; New York County Legal Ethics Op. No. 715
See also
- OSB Ethics Op. 2005-97: Fee-Agreement Modifications and Interest Charges
- OSB Ethics Op. 2005-149: Replenishing a Trust Account When Fees Are Disputed
- OSB Ethics Op. 2005-111: Bankruptcy Client Owing the Lawyer Fees
Source
- Landing page: https://www.osbar.org/ethics/toc.html
- Original PDF: https://www.osbar.org/_docs/ethics/2005-165.pdf
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