Can a lawyer let a loan company file form collection suits in his name and keep the attorney's fees the suits recover?

Plain-English summary

The opinion (rendered June 26, 1975, and amended April 6, 2013) addressed an arrangement between Lawyer A and a loan company. Lawyer A is paid a monthly retainer to handle the company's collections in Justice of the Peace Court. When the company wants to sue, its employee types up a fill-in-the-blanks declaration that names Lawyer A as the plaintiff's attorney and files it, though Lawyer A does not sign it, does not see it before filing, and is unaware the specific suit is being filed. The declaration requests an award of attorney's fees as provided in the note. If the defendant defaults, judgment is taken for the note amount plus the attorney's fee and Lawyer A never learns the suit was filed; the attorney's fee is paid to the loan company. Lawyer A handles a case only if the defendant contests it, and he receives only his monthly retainer.

The Committee concluded that this activity constitutes the unauthorized practice of law and is improper under MRPC 5.3, 5.4, and 5.5. Under Rule 5.3, the lawyer must ensure the firm has measures giving reasonable assurance that a non-lawyer's conduct is compatible with the lawyer's professional obligations, and is responsible for a non-lawyer's conduct that he orders or, knowing the specific conduct, ratifies. Rule 5.4 prohibits sharing legal fees with a non-lawyer, and Rule 5.5 prohibits assisting a non-member of the bar in the unauthorized practice of law.

Applying those rules, the opinion found that the lawyer knew of the specific conduct (the fee-sharing) through his review of any contested declaration and ratified it by accepting files from the loan company. The Committee held that a non-lawyer's acceptance of an attorney's fee is the unauthorized practice of law, and the lawyer's failure to take reasonable steps to prevent the company from accepting attorney's fees on judgments obtained this way is assisting that unauthorized practice.

In practice

Under this opinion, a lawyer cannot lend his name to a non-lawyer's collection operation in which form declarations are filed in the lawyer's name and a non-lawyer collects and retains the attorney's fees the suits produce. The Committee read MRPC 5.3, 5.4, and 5.5 together to make the lawyer responsible for the non-lawyer conduct he ratifies; on these facts, letting the loan company keep the attorney's fees both shares fees with a non-lawyer and aids the unauthorized practice of law. The opinion also points to the lawyer's affirmative duty to take reasonable steps to prevent the non-lawyer from collecting attorney's fees in this manner.

Common questions

Q: Can a lawyer let a loan company file collection suits in his name if he only handles the contested ones?

A: No. The opinion concluded the arrangement is improper under MRPC 5.3, 5.4, and 5.5, because the lawyer ratifies the non-lawyer conduct by accepting files and lends his name to suits a non-lawyer files and profits from.

Q: Why is it a problem that the loan company keeps the attorney's fees?

A: The opinion held that a non-lawyer's acceptance of an attorney's fee is the unauthorized practice of law, and Rule 5.4 separately prohibits a lawyer from sharing legal fees with a non-lawyer.

Q: Does it help that the lawyer never saw the specific default declarations?

A: Per the opinion, no. The Committee found the lawyer knew of the specific fee-sharing conduct through his review of contested declarations and ratified it by accepting files, and that his failure to stop the company from taking the fees was itself assisting the unauthorized practice of law.

Background and rules framework

The opinion interprets three Mississippi Rules of Professional Conduct: MRPC 5.3 (responsibilities regarding non-lawyer assistants), MRPC 5.4 (professional independence; no fee sharing with non-lawyers), and MRPC 5.5 (no assisting the unauthorized practice of law). These correspond to Model Rules 5.3, 5.4, and 5.5.

Citations and references

Rules of Professional Conduct (Mississippi; cf. Model Rules):

• MRPC 5.3 (non-lawyer assistants; ratification) (cf. Model Rule 5.3)
• MRPC 5.4 (no fee sharing with non-lawyers) (cf. Model Rule 5.4)
• MRPC 5.5 (no assisting unauthorized practice of law) (cf. Model Rule 5.5)

See also

• MS Bar Ethics Op. 25: Form Collection Letters
• MS Bar Ethics Op. 33: Lender Loan Closings & UPL
• ABA Formal Op. 464: Fee Division Across Jurisdictions
• ABA Formal Op. 506: Nonlawyer Assistants & Intake

Source

• Landing page: https://www.msbar.org/ethics-discipline/ethics-opinions/formal-opinions/32/
• Original PDF: https://www.msbar.org/media/1074/et_op_32-amended.pdf

Original opinion text

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

ETHICS OPINION NO. 32

OF THE MISSISSIPPI BAR

RENDERED June 26, 1975

AMENDED April 06, 2013

AIDING THE UNAUTHORIZED PRACTICE OF LAW - A lawyer shall not aid a non-lawyer in the unauthorized practice of law.

The Ethics Committee of the Mississippi Bar has been requested to render an opinion on the following situation:

Lawyer A represents a client with regard to the company's collections in Justice of the Peace Court. Lawyer A is paid a monthly retainer for this work. When the loan company desires to file suit in the Justice of the Peace Court, the loan company employee types up a "fill-in-the-blanks" declaration and files it in the Justice of the Peace Court. Lawyer A's name appears on the declaration as the attorney for the Plaintiff Loan Company. However, Lawyer A does not sign the declaration; did not see the declaration before it was filed; and is not aware that the specific declaration is being filed. The declaration requests an award of attorney's fees as provided for in the note. If the defendant does not appear, default judgment is taken for the amount of the note sued for, plus attorney's fee, and lawyer A will never be aware that the suit is filed. The attorney's fee will be paid to the Loan Company. If the defendant contests the action, then the Loan Company will notify Lawyer A and Lawyer A will handle the case from that point on. All attorney's fees obtained through these suits are paid to the Loan Company. Lawyer A is paid only his regular monthly retainer.

It is the opinion of the Ethics Committee that such activity would constitute unauthorized practice of law, and would therefore be improper pursuant to Rules 5.3, 5.4 and 5.5 of the Mississippi Rules of Professional Conduct ("MRPC").

Rule 5.3, MRPC states that:

With respect to a non-lawyer . . . associated with a lawyer:

(a) a lawyer shall ensure "the firm has in effect measures giving reasonable assurance that the person's conduct is compatible with the professional obligations of the lawyer."

. . .

(c) a lawyer shall be responsible for conduct of such a person that would be a violation of the rules of professional conduct if engaged in by the lawyer if:

(1) the lawyer orders or, with the knowledge of the specific conduct, ratifies the conduct involved."

Rule 5.4, MRPC, states that "a lawyer shall not share legal fees with a non-lawyer."

Rule 5.5, MRPC, states that a lawyer shall not "assist a person who is not a member of the bar in the performance of activity that constitutes the unauthorized practice of law.

In this hypothetical, the lawyer knew of the specific conduct (sharing legal fees) by virtue of his or her review of any declaration from the loan company that was contested. The lawyer ratified the conduct by accepting files from the loan company.

The Committee finds that the acceptance of an attorney's fee by a non-lawyer constitutes the unauthorized practice of law. The failure of the lawyer to take reasonable steps to prevent the loan company from accepting attorney's fees in the course of collecting judgments obtained in this manner further constitutes assisting a non-lawyer in the unauthorized practice of law.