Can a lawyer secure a fee with a lien on the very property in dispute, or take a contingent fee as an assigned interest in that property?

Plain-English summary

The Committee was asked whether a lawyer could secure his fee with a lien on real property that was itself the subject of the litigation he was bringing for the client, or, alternatively, negotiate a contingent fee under which the client would assign the lawyer an interest in that property. On the facts, the lawyer represented the former owner of a large parcel that had been subdivided and sold; the unrecorded transactions had soured, and the client, unable to afford fees, retained the lawyer to set aside the conveyances.

The opinion applied DR 5-103(A), which bars a lawyer from acquiring a proprietary interest in the cause of action or subject matter of litigation, except that the lawyer may acquire a lien to secure a fee or expenses and may contract for a reasonable contingent fee in a civil case. Citing EC 5-7, the opinion recognized that asserting a permissible lien or taking a reasonable contingent fee is proper even though it gives the lawyer a financial interest in the outcome, because a contingent fee may be the only way a layperson can obtain counsel of choice. The opinion concluded that either arrangement could be made, subject to DR 5-103(B) (no advance or guarantee of financial assistance other than litigation expenses), EC 2-19, and Bar Rule 35(c).

The opinion stressed that the legal effect of any lien is a matter of law, not ethics, and beyond its scope. Drawing an analogy to ABA Informal Opinion 1461, it concluded that in deciding whether to secure fees by a lien the lawyer should weigh factors such as the client's financial situation and sophistication, whether the fee is reasonable and clearly understood and agreed to, whether a lien would prejudice important rights of the client or others, whether the absence of a lien would invite fraud or gross imposition by the client, and whether less stringent means exist to secure the amount owed.

Currency note

This opinion was issued in 1988, before the Alaska Bar Association's adoption of the 2009 revisions to the Alaska Rules of Professional Conduct (and before Alaska adopted the Rules of Professional Conduct at all; it applies the former Code of Professional Responsibility). Subsequent rule amendments or later opinions may have changed the analysis, and the cited bar rule may have been renumbered. 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: Can a lawyer take a lien on the property that is the subject of the lawsuit to secure the fee?

A: The opinion concluded a lawyer may acquire a lien to secure a fee or expenses, an express exception in DR 5-103(A) to the bar on acquiring a proprietary interest in the litigation.

Q: Can the fee instead be a contingent assignment of an interest in that property?

A: The opinion concluded a reasonable contingent fee in a civil case is permitted under DR 5-103(A), even when it gives the lawyer a financial interest in the outcome of the litigation.

Q: Are there limits on these arrangements?

A: Yes. The opinion noted both are subject to DR 5-103(B), which prohibits advancing or guaranteeing financial assistance other than litigation expenses, and to EC 2-19 and Bar Rule 35(c); it also said the lien's legal effect is a matter of law, not ethics.

Background and rules framework

The opinion interpreted DR 5-103 of the former Alaska Code of Professional Responsibility, the rule restricting a lawyer's acquisition of an interest in litigation, which is the analog of Model Rule 1.8(i), read together with the contingent-fee principles now in Model Rule 1.5. It treated the lien and contingent-fee exceptions of DR 5-103(A) against the financial-assistance limit of DR 5-103(B) and the fee guidance of EC 2-19 and Bar Rule 35(c).

Citations and references

Rules of Professional Conduct (former Code; cf. Model Rules):

• DR 5-103(A) (interest in litigation; lien and contingent-fee exceptions) (cf. Model Rule 1.8(i))
• DR 5-103(B) (no financial assistance beyond litigation expenses) (cf. Model Rule 1.8(e))
• EC 5-7; EC 2-19; Alaska Bar Rule 35(c)

Other opinions cited:

• ABA Informal Opinion 1461 (factors for asserting an attorney's lien)

See also

• AL Ethics Op. 1990-86: Fired Lawyer's Fee Lien
• Alaska Ethics Op. 92-4: Contingent Fee for Subrogation
• ABA Formal Op. 94-389: Contingent Fees

Source

• Landing page: https://alaskabar.org/ethics-discipline/ethics-opinions/adopted-ethics-opinions-chronological/
• Original PDF: https://alaskabar.org/wp-content/uploads/88-6.pdf

Original opinion text

Reproduced from the official source for research purposes. The linked source is authoritative.

ALASKA BAR ASSOCIATION
ETHICS OPINION NO. 88-6
Contingent fee or lien on real property
in quiet title litigation
The Committee has been asked whether it is unethical for an attorney to enter into an agreement with a client to secure the attorney's fees by means of a lien on real property which is the subject matter of litigation brought by the attorney on behalf of the client. Further, and as an alternative, the Committee has been asked if a contingent fee arrangement can be negotiated with the client under which the client would agree to assign an interest in real property subject to the litigation to the attorney as a contingent fee. The attorney represents the former owner of a large parcel which was subsequently subdivided and sold to a number of purchasers. None of the subsequent transactions were recorded, and many of the purchasers have ceased making payments due to misrepresentations. The former owner has retained the attorney to bring suit to set aside the original conveyances. The former owner is unable to afford the fees, and the attorney wishes to either secure the fees through an attorney's lien on the property or negotiate an assignment of an interest in the property, in the event the property is recovered from the purchasers. DR 5-103 of the Code of Professional Responsibility proves that: (A)

A lawyer shall not acquire a proprietory interest in the cause of action or subject matter of litigation he is conducting for a client, except that he may: (1)

Acquire a lien granted to secure his fee or expenses.

(2)

Contract with a client for a reasonable contingent fee in civil case.

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EC 5-7 recognizes that it is not improper for a lawyer to protect his right to collect a fee for his services by the assertion of legally permissible liens, even though by doing so he may acquire an interest in the outcome of litigation. It further recognizes that although a contingent fee arrangement gives a lawyer a financial interest in the outcome of litigation, a reasonable contingent fee is permissible in civil cases because it may be the only means by which a layman can obtain the services of a lawyer of his choice. Based on the above, and subject to subsection (B) of DR 5-103 which prohibits an advance or guarantee of financial assistance other than the expenses of litigation, it appears that either arrangement could be made between the attorney and the client. Such an arrangement is subject to Canon EC 2-19 and Bar Rule 35(c). The legal effect of any lien which might be asserted or created is a matter of law, rather than a matter of ethics, and is beyond the scope of this opinion. American Bar Association Informal Opinion No. 1461 should be taken into account in determining whether or not to assert an attorney's lien. By analogy to Opinion 1461, when determining whether to secure the payment of fees by a statutory or contractual lien, the lawyer should take into account the financial situation of the client, the sophistication of the client in dealing with lawyers, whether the fee is reasonable, whether the client clearly understands and agrees to pay the fee, whether imposition of a lien would prejudice important rights or interests of the client or of other parties, whether the failure to impose the lien would result in fraud or gross imposition by the client, and whether there are less stringent means by which the matter can be resolved or the amount which is owed or will be owing can be secured. Submitted by the Alaska Bar Association Ethics Committee this 20th day of October, 1988. Adopted by the Board of Governors this 22nd day of October, 1988.

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