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| When a Friend or Relative Pays the Client’s
Legal Fee Fee payment by friends or relatives is a
common occurrence in the areas of family law, juvenile law and criminal
law. Clients with these types
of legal problems typically have an immediate need for legal advice
or representation and are without means to pay, even over an extended
period time, for a lawyer’s services.
Where the client does not qualify for public defender or legal
aid representation, the financial assistance of a friend or relative
may be the only alternative. The Rules of Professional Conduct authorize
a lawyer to accept compensation from someone other than a client under
the following circumstances:
Regardless of whether the friend or relative
is or is not a client, the consultation contemplated by Rule 1.8(f)
includes examination of the differing interests of the client and
the third-party payor.
The potential effect of the payor’s
probable interest in minimizing the expense of the representation
should be discussed with all clients.
For example, will the lawyer’s representation be conditioned
upon the payor’s continuing willingness
to pay fees? If a flat fee
for a specific service or services has been paid, were the terms or
limits of the service clearly communicated in writing to the client? A third-party payor’s
desire or need to monitor the progress of the representation must
be addressed. Even among friends
and relatives, few are willing to blindly pay another’s legal fees
without some degree of accountability.
Payors may demand status reports as a condition of providing
financial assistance to the client.
Where the lawyer requires the payor
to formally sign a fee agreement, the obligation to provide accountings
to the payor for trust account funds belonging to third parties1
should also be disclosed. The payor’s desire
or demand to learn about the progress of the representation will have
its largest impact on confidentiality.
If a friend or relative conditions payment upon being able
to monitor the representation, the effect of such a demand on confidentiality,
and more importantly attorney-client privilege, should be made clear
to the client. Where necessary the appropriate waivers should
be obtained. If the consequences
of jeopardizing the attorney-client privilege could result in client
prejudice (e.g., criminal
defense cases), the lawyer should make it clear to both parties, at
the outset of representation, that disclosures will be tailored to
accommodate the payor’s desire for accountability
without risking waiver of the attorney-client privilege.
In some representations, this may require the lawyer to generate
two sets of billing statements; a detailed invoice for the client,
and a more general progress-oriented statement for the payor. Although the ethical rules permit lawyers
to accept fees from nonclients, they are
less clear on the duties owed to the payors
of these fees. Unless the payor is
a coclient, most friends or relatives who
pay, or who agree to pay a client’s legal fees do not qualify as clients. While those who sign a fee agreement may acquire
some rights that mirror those of clients, prudent business practices
dictate that the written fee agreement clearly spell out the limits
of the lawyer’s duties.2
The status of those who gratuitously pay a friend or
relative’s legal fees is less clear.
This is especially true where the financial assistance is procured
by the client without the lawyer’s assistance and there has been little
or no contact between the lawyer and the payor. A recent ethics
complaint filed by a relative who paid a client’s legal fee illustrates
the vagaries of these as well as the consequences of failing to clarify
the lawyer’s role. The lawyer had been retained by an adult
son to represent him in an emergency post-decree visitation motion. The motion sought to terminate the son’s visitation
rights with his children and the son was without the ability to pay
the lawyer’s fee. Because the
son still owed the lawyer for fees incurred in the divorce, the lawyer
declined to represent the son in the visitation motion without first
being paid a $2,500 retainer. The
son later called his father and related the lawyer’s demand for a
retainer. The father confirmed the retainer amount by
telephone with the lawyer and provided the lawyer a $2,500 check. Three days later, the son terminated the lawyer
and demanded that the unused portion of the retainer (i.e., $2,250)
be refunded to the son. The
lawyer refunded the retainer to the son, who then failed to remit
any of the funds to his father. The father later filed an ethics complaint against
the lawyer for refunding the balance of the retainer to the son instead
of the father. Even though the father’s ethics complaint
was ultimately dismissed, the manner in which the lawyer handled this
problem did not represent good lawyering. Moreover, the father’s dissatisfaction with
the situation was not entirely attributable to the fraudulent behavior
of his son. In his ethics complaint,
the father took the not unreasonable position that he had hired the
lawyer. In support he offered the receipt given to him
by the lawyer and his canceled check evidencing the $2,500 retainer
payment. The lawyer countered that he did not represent
the father. Although he knew
the father was the source of the retainer funds, the son had falsely
represented to the lawyer that the retainer funds constituted a loan
for which the son remained obligated to pay his father.
When the lawyer suggested contacting the father, the son refused
to authorize the communication because he did not want his parents
to know of his intention to hire new counsel.
Citing his client confidentiality obligation, the lawyer claimed
he was unable to contact the father to confirm whether the retainer
funds were indeed a loan. Clearly, the son’s fraudulent behavior was
the primary cause of this unfortunate situation. At the same time, the lawyer’s failure to clarify
the nature of his relationship with the payor
of his client’s fees created the opportunity for this problem to occur.3 Minimal disclosures
to the son, the father, or preferably both would have eliminated,
or at least minimized, the son’s ability to use the lawyer to take
advantage of his father’s generosity.
Although the lawyer escaped professional
discipline, it is doubtful he was unscathed by this incident. Years ago a senior lawyer practicing in greater
Minnesota told me, “Out here it takes less than a week for a client
with a legitimate beef against a lawyer to negate years and thousands
of dollars worth of advertising.”
This lawyer undoubtedly understood that the Rules of Professional
Conduct represent the bare minimum standard below which no lawyer’s
conduct may fall without being subject to professional discipline.
From my experience, he, like most NOTES 2. When it becomes clear to a lawyer that
a nonclient payor
misunderstands the lawyer’s role and perceives the lawyer as also
representing the payor, the lawyer may be
obligated under Rule 4.3 to correct the payor’s
misunderstanding. Even where the ethics rules do not require the
lawyer to correct this misperception, sound business practices and
good lawyering would entail such a disclosure to minimize the opportunities
for client dissatisfaction and malpractice claims alleging client
by estoppel. 3. Because of his limited contact with the
father, and the son’s misrepresentations about the nature of the retainer,
there was not clear and convincing evidence that the lawyer had an
ethical duty to account to the father for the balance of the retainer
funds. Nevertheless, the lawyer could have avoided
this problem by simply refusing to release the funds until the son
obtained authorization from the father or provided verification or
evidence of the purported loan. |
