Can a lawyer join a program that buys client fee bills and collects the fees from the client?

Plain-English summary

The opinion examined a fee collection program that purchased client fee bills from lawyers and then collected the fees from clients. To participate, a lawyer had to enroll, pay a fee, assign the client's fee bills, and share information about the client and the case with the program. Depending on the client's creditworthiness, the program either paid the bill and collected from the client on an installment basis with interest, or collected for the lawyer and remitted only 80 percent of the fees. The lawyer had to grade clients by their legal needs and ability to pay, disclose circumstances affecting creditworthiness, and have the client sign a voucher warranting the satisfactory nature of the services and the reasonableness of the fees.

The Board emphasized the lawyer's role as an officer of the court and fiduciary, citing Sams v. Olah, 225 Ga. 497 (1969), and First Bank & Trust Co. v. Zagoria, 250 Ga. 844 (1983). It said the basic vice of the program is that it dilutes the lawyer's fiduciary role, for example by requiring the client to sign a warranty that purports to contract away the client's right to complain or to discharge the lawyer, contrary to the rule that a client may discharge the attorney at any time, even without cause.

The Board concluded that participation entails the possible violation of at least six Standards: Standard 23 (refunding unearned fees on withdrawal), Standard 26 (no fee sharing with a nonlawyer), Standard 28 (no revealing client confidences or secrets), Standard 30 (no representation where the lawyer's judgment may be affected by the lawyer's own financial interest), Standard 31(a) (no clearly excessive fee), and Standard 40 (no compensation from a third party without the client's consent). Because participation would result in violating one or more of these Standards, Georgia lawyers cannot ethically participate.

Currency note

This opinion was issued in 1995, before the State Bar of Georgia adopted the Georgia Rules of Professional Conduct in 2001, which replaced the Standards of Conduct this opinion construes. The State Bar's headnotes map Standard 23 to Rule 1.16(d), Standard 26 to Rule 5.4(a), Standard 28 to Rules 1.6 and 1.8(b), Standard 30 to Rule 1.7, Standard 31(a) to Rule 1.5(a), and Standard 40 to Rule 1.8(f). Subsequent rule amendments or later opinions may have changed the analysis. Treat this page as historical context, not current guidance. Verify against the current Rules of Professional Conduct before relying on any specific rule mentioned here.

Common questions

Q: Can a Georgia lawyer join a program that buys and collects client fee bills?

A: Under this opinion, no. The Board concluded participation would result in violating one or more disciplinary Standards, so members of the State Bar cannot ethically participate.

Q: Why is this different from accepting a credit card for fees?

A: The opinion said a program voucher is not analogous to an all-purpose credit card; the program is essentially a finance company designed exclusively for lawyers and clients, and participation dilutes the lawyer's fiduciary role.

Q: Which standards does participation threaten?

A: The opinion identified Standards 23, 26, 28, 30, 31(a), and 40, covering unearned fees, fee sharing with a nonlawyer, client confidentiality, conflicting financial interest, excessive fees, and third-party compensation without client consent.

Background and rules framework

The opinion construed former Standards of Conduct 23, 26, 28, 30, 31(a), and 40 of the State Bar of Georgia, now associated with Rules 1.16(d), 5.4(a), 1.6 and 1.8(b), 1.7, 1.5(a), and 1.8(f). It framed the analysis around the lawyer's duties as an officer of the court and fiduciary to the client.

Citations and references

Rules of Professional Conduct:

• MR 5.4 / Ga. RPC 5.4(a) (fee sharing with a nonlawyer; former Standard 26)
• MR 1.6 / Ga. RPC 1.6, 1.8(b) (client confidentiality; former Standard 28)
• MR 1.7 / Ga. RPC 1.7 (conflicting financial interest; former Standard 30)
• MR 1.5 / Ga. RPC 1.5(a) (excessive fees; former Standard 31(a))
• MR 1.8 / Ga. RPC 1.8(f) (third-party compensation; former Standard 40)

Former standards construed:

• Standards of Conduct 23, 26, 28, 30, 31(a), and 40

Cases:

• Sams v. Olah, 225 Ga. 497 (1969) (lawyer as officer of the court)
• First Bank & Trust Co. v. Zagoria, 250 Ga. 844 (1983)
• White v. Aiken, 197 Ga. 29 (1943) (client's right to discharge the attorney)

See also

• GA Ethics Op. 88-2: In-House Lawyer Collecting Fees That Benefit a Lay Employer
• GA Ethics Op. 86-7: Security Interest in Marital Property to Secure Fees

Source

• Landing page: https://www.gabar.org/handbook?rule=rule497

Original opinion text

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

State Bar of Georgia

Issued by the Supreme Court of Georgia

On October 4, 1995

Formal Advisory Opinion No. 95-1

For references to Standard of Conduct 23, please see Rule 1.16(d) .

For references to Standard of Conduct 26, please see Rule 5.4(a) .

For references to Standard of Conduct 28, please see Rules 1.6 and 1.8(b) .

For references to Standard of Conduct 30, please see Rule 1.7 .

For references to Standard of Conduct 31(a), please see Rule 1.5(a) .

For references to Standard of Conduct 40, please see Rule 1.8(f) .

For an explanation regarding the addition of headnotes to the opinion, click here .

QUESTION PRESENTED:

May a lawyer practicing law in Georgia ethically participate in a fee collection program which purchases client fee bills from lawyers and collects the fees from the client? To participate in the program, the lawyer must enroll and pay a fee; and agree to assign the client's fees bills and share information about the client and the client's case with the program.

SUMMARY ANSWER:

Because the lawyer's participation will result in a violation of one or more disciplinary Standards, members of the State Bar of Georgia cannot ethically participate in the program.

OPINION:

I. Introduction and Background

A fee collection program purchases client fee bills from lawyers and collects the fees from the client. To participate in the program, the lawyer must enroll and pay a fee; and agree to assign the client's fees bills and share information about the client and the client's case with the program.

If the client is credit worthy, the program will pay the client's bill and then proceed to collect the fees from the client on an installment basis, charging interest according to the credit worthiness of the client; if the client is not credit worthy, the program will proceed to collect the fees for the lawyer, but without any advance payment, remitting only 80% of the amount of the fees collected.

The lawyer is required by the program's Participation Agreement to grade clients according to their legal needs and ability to pay. The Participation Agreement contains the following provisions:

The lawyer must "disclose events or circumstances materially affecting...credit worthiness "of the client. The lawyer is required to warrant and covenant, among other terms, the following: that the application, credit agreement and voucher "have been signed by either the Client, a person authorized to sign on the Client's behalf, or the person who will be responsible for repaying the credit extended under the Program, and such Client or person has been identified by a valid driver's license or state identification card;""the Voucher accurately describes and evidences the type of service which has been provided to the Client;""the Client is not in default with respect to any agreement between Client and Participant (lawyer), other than regarding accounts receivable;"and "Participant has no knowledge of any facts which may result in the uncollectability and/or unenforceability of the Credit Agreement."

Thus to participate in the program, the lawyer must provide information about the client that may well violate the client's right of confidentiality. Moreover, the client must sign the lawyer's voucher warranting the satisfactory nature of the lawyer's services, acknowledging that the fees are reasonable, and agreeing to pay finance charges in addition to the reasonable fee.

II. The Ethical and Legal Considerations in the Program

Preliminarily, it should be noted that a client's use of a program voucher is not analogous to a client's use of all­-purpose credit cards to pay for services of a lawyer. Rather, the program is essentially a finance company designed to provide a service exclusively for lawyers and clients.

In Georgia, lawyers are officers of the Court, Platen v. Byck , 50 Ga. 245, 248 (1873); Bibb County v. Hancock , 211 Ga. 429, 438 (1955); Sams v. Olah , 225 Ga. 497, 504 (1969), and, as members of the State Bar, are members of the administrative arm of the Georgia Supreme Court engaged in the administration of justice.

The office of attorney is indispensable to the administration of justice and is intimate and peculiar in its relation to, and vital to the well-being of, the court.

Sams v. Olah , supra, at 504. Thus, the lawyer is "an officer of the state, with an obligation to the courts and to the public no less significant than his obligation to his client,"id., and the legal profession "[d]emands adherence to the public interest as the foremost obligation of the practitioner." First Bank &Trust Co. v. Zagoria , 250 Ga. 844, 845 (1983).

The basic vice of the program is that it violates both the spirit and the letter of these precepts by requiring the lawyer to dilute his or her role as fiduciary. For example, the lawyer requires the client to sign a warranty as to the services rendered, which purports to contract away the client's legal right to complain or to dismiss the lawyer. A fundamental rule applicable to the lawyer as fiduciary is that "a client has the absolute right to discharge the attorney and terminate the relation at any time, even without cause." White v. Aiken , 197 Ga. 29 (1943). ( See also Standard 26).

The dilution of the lawyer's fiduciary role is further indicated by the fact that a lawyer's participation in the program entails the possible violation of at least six standards of the State Bar of Georgia: Standards 23, 26, 28, 30, 31(a), and 40.

Standard 23 requires a lawyer who withdraws from employment to refund any unearned fees. Standard 26 prohibits a lawyer from sharing legal fees with a non-lawyer. Standard 28 prohibits a lawyer from revealing the confidences or secrets of a client. Standard 30 prohibits representation where the lawyer's exercise of professional judgment on behalf of a client may be affected by his own financial, business, property or personal interest. Standard 31(a) prohibits the lawyer from charging a clearly excessive fee. And Standard 40 prohibits a lawyer from accepting compensation from one other than the client for representation of the client without the consent of the client.

Because the lawyer's participation will result in a violation of one or more of these Standards, members of the State Bar of Georgia cannot ethically participate in the program.