Ezel / Ethics Opinions / ABA
ABA April 7, 2000

Can a lawyer buy a client's accounts receivable and collect on them?

Short answer: Yes, with safeguards. The opinion concluded a lawyer could purchase a client's accounts receivable if the transaction met Rule 1.8(a) (fair terms, written disclosure, written consent, and a chance to consult independent counsel), and where the receivables were disputed or in litigation the lawyer conducted, additional conflict checks and Rule 1.8(j) applied.

Apply this to your situation

This page answers the general question as of 2000. Ezel answers yours: whether it's allowed on your facts, under the current rules of professional conduct in your state, with citations.

Currency note: this opinion is from 2000
Subsequent statutory amendments, court decisions, or later opinions or rule amendments may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.
Disclaimer: Advisory only. Not binding precedent.
About this page: The plain-English summary, reader guidance, and Q&A below were written by Ezel based on the official ethics opinion. The original opinion (linked on this page as a PDF) is the authoritative source for any reliance.
View original ethics opinion (PDF)

Plain-English summary

The committee treated a lawyer's purchase of accounts receivable from a client as "a business transaction between a client and a lawyer," which made Rule 1.8(a) the governing provision. That rule required the transaction to be fair and reasonable, its terms to be transmitted to the client in writing with a reasonable opportunity to consult independent counsel, and the client's consent to be in writing. The committee stressed that "these safeguards are for the protection of the client" and that a failure to make the necessary disclosures or obtain informed consent "places the lawyer in violation of Rule 1.8(a)."

The committee identified a conflict the lawyer had to manage. Because a lawyer who buys receivables at a discount may be tempted to collect them less vigorously, or may face a divergence of interest from the client, the arrangement implicated Rule 1.7(b); using information from the prior representation to the client's disadvantage would implicate Rule 1.8(b) or Rule 1.9(c). The lawyer had to preserve independent professional judgment and ensure the deal was objectively reasonable in terms and price.

A further requirement applied when the receivable was itself the subject of litigation the lawyer was handling. There, Rule 1.8(j), rooted in the doctrines of maintenance and champerty, was implicated alongside Rule 1.8(a). The committee said compliance could be achieved either by the lawyer acquiring the entire claim or by withdrawing from the representation and having an independent lawyer substitute in to pursue collection.

Currency note

This opinion was issued in 2000, before the American Bar Association's adoption of the 2002 (Ethics 2000) revisions to the Model Rules of Professional Conduct. Subsequent rule amendments or later opinions may have changed the analysis. Treat this page as historical context, not current guidance. Verify against current rules before relying on any specific rule, deadline, or requirement mentioned here.

Common questions

Q: Could a lawyer buy debts owed to a client?

A: Yes, as a Rule 1.8(a) business transaction. The opinion required the deal to be fair and reasonable, disclosed in writing, and consented to in writing, with a chance for the client to consult independent counsel.

Q: What conflict did the opinion flag?

A: A lawyer who acquires receivables at a discount may be tempted to collect less zealously or may have interests diverging from the client's, raising a Rule 1.7(b) concern the lawyer had to address.

Q: What if the receivable was already in litigation the lawyer was handling?

A: Then Rule 1.8(j) (maintenance and champerty) also applied; the opinion said the lawyer should either acquire the entire claim or withdraw and let an independent lawyer pursue collection.

Background and rules framework

The opinion interpreted Rule 1.8(a) (business transactions with a client), Rule 1.8(b) (using client information to the client's disadvantage), and Rule 1.8(j) (acquiring an interest in litigation), alongside Rule 1.7(b) (material-limitation conflicts) and Rule 1.9(c) (former-client information). Because the opinion predated the 2002 revisions, it applied these provisions as they then stood.

Citations and references

Rules of Professional Conduct:

  • ABA Model Rule 1.8(a) (business transactions with a client)
  • ABA Model Rule 1.8(b) (using client information to the client's disadvantage)
  • ABA Model Rule 1.8(j) (acquiring an interest in litigation; maintenance and champerty)
  • ABA Model Rule 1.7(b) (material-limitation conflicts) and Rule 1.9(c) (former-client information)

Statutes:

  • Fair Debt Collection Practices Act, 15 U.S.C. § 1692

Cases:

  • Heintz v. Jenkins, 514 U.S. 291 (1995)
  • Capobianco v. Halebass Realty, Inc., 72 A.D.2d 804, 421 N.Y.S.2d 924 (N.Y. App. Div. 1979)

See also

Source

Get today's answer for your situation

You just read a 2000 opinion on this question. Ezel checks the current rules of professional conduct in your state and answers your specific situation, with citations.

Opens in Ezel Pro. Every answer cites the rules it relies on.