Can a Maine lawyer pay a client's former non-lawyer Social Security advocate out of the lawyer's fee?

Plain-English summary

A lawyer represented a Social Security claimant who had previously been represented by a non-attorney advocate; the advocate had withdrawn but was waiting to be paid. The lawyer had collected his fee and wanted to pay the advocate, treating the payment as a "cost" rather than a fee, but worried this would violate Rule 5.4's prohibition on fee splitting with non-lawyers. The Commission concludes the arrangement would be an impermissible fee split: labeling the payment a cost does not change its character.

The opinion lays out the proper route. The advocate should file a Fee Petition with the Social Security Administration, which must be filed within 60 days of the Notice of Favorable Decision; the Administration will adjust the attorney's fee agreement or petition as appropriate for the advocate's services. If the 60-day deadline has passed, or (as here) the attorney has already been paid his entire fee, the attorney may refund a portion of his fee to the client so the client can pay the advocate directly, if the attorney believes keeping the entire fee would make the client's total fees unreasonable under Rule 1.5(a). A lawyer is always free to discount the fee to the client.

The Commission concludes a lawyer may not share fees with a non-lawyer except as Rule 5.4 allows, which is not the case here. It emphasizes that full disclosure and counsel to the client about potential liability for a prior advocate's fees is paramount in Social Security and similar administrative matters, to avoid exposing the client to collection litigation by the advocate. The opinion suggests adding two clauses to the standard contingent fee agreement: one in which the attorney inquires about and discloses potential separate liability to a prior non-attorney advocate, and one in which the attorney agrees to promptly provide the advocate a copy of any Notice of Favorable Decision so the advocate can file a fee petition.

In practice

Under the Maine rules as the opinion read them in 2009, a lawyer handling a Social Security matter may not pay a client's former non-lawyer advocate out of the lawyer's fee, because that is fee sharing barred by Rule 5.4, and calling the payment a "cost" does not cure it. The opinion holds the proper route is for the advocate to file an SSA fee petition (within 60 days of the Notice of Favorable Decision), after which the SSA adjusts the attorney's fee. It holds that if the deadline has passed or the attorney already has the full fee, the attorney may refund part of the fee to the client to pay the advocate directly where keeping the whole fee would make the total unreasonable under Rule 1.5(a). The opinion directs lawyers to disclose to the client the potential separate liability to a prior advocate, and suggests fee-agreement clauses to that effect.

Common questions

Q: Can a Maine lawyer pay a client's former Social Security advocate from the lawyer's fee?

A: No, not as a payment from the lawyer. The opinion concludes that doing so is fee sharing with a non-lawyer prohibited by Rule 5.4, and that labeling it a "cost" does not change its character.

Q: What is the proper way for the advocate to get paid?

A: The opinion states the advocate should file a Fee Petition with the Social Security Administration within 60 days of the Notice of Favorable Decision, and the SSA will adjust the attorney's fee as appropriate.

Q: What if the lawyer already collected the entire fee?

A: The opinion states the lawyer may refund a portion of the fee to the client (who can then pay the advocate) if keeping the entire fee would make the client's total fees unreasonable under Rule 1.5(a).

Q: What should the lawyer tell the client?

A: The opinion stresses that full disclosure of the client's potential separate liability to a prior non-attorney advocate is paramount, and suggests fee-agreement clauses documenting that disclosure and the attorney's agreement to forward the decision so the advocate can file a fee petition.

Background and rules framework

The opinion interprets Maine Rule of Professional Conduct 5.4 (professional independence; sharing legal fees with non-lawyers) and Rule 1.5(a) (reasonable fees), corresponding to the ABA Model Rules, against the Social Security Administration's fee-petition procedures and 60-day deadline.

Citations and references

Rules of Professional Conduct:

• Model Rules 5.4, 1.5
• Maine R. Prof. Conduct 5.4, 1.5(a)

See also

• ABA Formal Op. 464: Fee Division With Lawyers Who Share With Nonlawyers
• ABA Formal Op. 487: Fee Division With a Client's Prior Counsel

Source

• Landing page: https://mebaroverseers.org/attorney_services/opinion.html?id=90798

Original opinion text

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

Issued by the Professional Ethics Commission

Date Issued: December 4, 2009

Attorney X has inquired for guidance in a case where a Social Security Claimant was previously represented by a non-attorney advocate. Attorney X stated that the advocate had withdrawn from the case but was waiting to get paid. Attorney X had received his fee and told the client that he would pay the advocate for her services but was concerned about a possible violation of Rule 5.4 of the Maine Rules of Professional Conduct, which prohibits fee splitting with non-lawyers, notwithstanding the attorney's proposed treatment of the disbursement as a "cost" and not a fee.

Question

Does the arrangement proposed by Attorney X violate the requirements of the Maine Rules of Professional Conduct?

Discussion

The proper route for Attorney X and the non-attorney advocate to take is to have the advocate file a Fee Petition with the Social Security Administration. The Administration requires that the Petition be filed within 60 days of the date of the Notice of Favorable Decision. Attorney X's Fee Agreement or Fee Petition will be adjusted by the Administration, if appropriate, for services rendered by the non-attorney advocate. If the 60-day deadline has passed, and/or, as in the instant case, Attorney X has already been paid his entire fee, Attorney X may refund a portion of his fee to the client to make a direct payment to the non-attorney advocate, if he believes that keeping his entire fee would render the client's total fees unreasonable. See Rule 1.5(a) of the Maine Rules of Professional Conduct. An attorney is always free to discount his/her fee to a client.

Conclusion

A lawyer may not share fees with a non-lawyer except under those circumstances set forth in Rule 5.4 of the Maine Rules of Professional Conduct, which are not present here. This Commission acknowledges that full disclosure and counsel to the client regarding his/her potential liability for fees to a prior non-attorney advocate is paramount, in Social Security and other similar administrative matters, to avoid exposing the client to litigation by the non-attorney advocate to collect his or her fees. The Commission suggests that lawyers handling these cases incorporate the following language into the standard contingent fee agreement, found at the end of Rule 1.5 of the Maine Rules of Professional Conduct:

(7) Attorney has inquired of Client as to any prior representation in this matter by a non-attorney advocate and has advised Client that he/she may be separately liable to that advocate for fees incurred for services rendered. Client states that a non-attorney advocate has/has not provided services to Client in this matter. (Insert name and address of non-attorney advocate).

(8) Attorney agrees to promptly provide the non-attorney advocate named above with a copy of any Notice of Favorable Decision rendered in this matter, so that the advocate may file a Fee Petition with the Social Security Administration, if appropriate, within 60 days of the date of the Notice. The Client understands that he/she has the right to agree or object to any Fee Petition filed with the Administration and that if he/she objects, he/she must do so in a timely fashion.