Can a law firm take an assignment of a client's judgment as payment or security for fees while it is still handling the appeal of that judgment?

Short answer The opinion concluded that a firm may not take an assignment of a client's judgment while it is conducting the appeal of that judgment, because Rule 5.3(a) bars a lawyer from acquiring a proprietary interest in the cause of action or subject matter of litigation the lawyer is conducting. Generally a lawyer may not accept assignment of a client's judgment until all appeals are exhausted and the client has decided not to pursue collection, and even then purchasing judgments from one's own clients is not encouraged.

Bar

NCSB

Issued

July 17, 1992

Apply this to your situation

This page answers the general question as of 1992. Ask about yours and see what the current North Carolina Rules of Professional Conduct say for your facts, with citations.

How much weight this carries: Opinions adopted under North Carolina's earlier rules (the "RPC" series, 1985-1997, and the "CPR" series, 1974-1985) are binding unless overruled (27 N.C.A.C. 1D .0101(j)). Formal ethics opinions since 1997 are issued by the State Bar Council to give guidance and to establish principles of ethical conduct. Source.

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) is the authoritative source for any reliance.

Plain-English summary

The inquiry asked whether a law firm could take an assignment of a judgment, in whole or in part, as payment or security for fees, while the firm was representing the client in the active pursuit and appeal of that judgment and in various other matters.

The opinion concluded that it could not. Rule 5.3(a) provides that a lawyer shall not acquire a proprietary interest in the cause of action or subject matter of litigation he is conducting for a client. A lawyer's accepting an assignment of a judgment that is the subject of an appeal the lawyer is handling would violate Rule 5.3(a).

The opinion stated the general timing limit: a lawyer may not accept assignment of a client's judgment unless and until all appeals concerning the judgment have been exhausted and the client has determined not to pursue collection. Even under those circumstances, the opinion observed that the practice of lawyers purchasing judgments from their own clients is not encouraged, citing CPR 291.

Currency note

This opinion was issued in 1992, before the North Carolina State Bar's adoption of the 2003 revisions to the 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: Can a firm take a client's judgment as fee security while appealing that judgment?

A: No. The opinion held that taking an assignment of a judgment the firm is appealing would acquire a proprietary interest in the subject of the litigation, which Rule 5.3(a) prohibits.

Q: When, if ever, may a lawyer accept assignment of a client's judgment?

A: The opinion held that generally a lawyer may not do so until all appeals are exhausted and the client has decided not to pursue collection.

Q: Is buying a client's judgment encouraged once appeals end?

A: No. The opinion stated that even after appeals are exhausted, the practice of lawyers purchasing judgments from their own clients is not encouraged, citing CPR 291.

Background and rules framework

The opinion applied North Carolina Rule 5.3(a), barring a lawyer from acquiring a proprietary interest in the cause of action or subject matter of litigation the lawyer is conducting (corresponding to Model Rule 1.8(i)). The analysis turns on the live appeal: while the lawyer is still litigating the judgment, taking it by assignment gives the lawyer a forbidden proprietary stake.

Citations and references

Rules of Professional Conduct:

MR 1.8 (proprietary interest in the subject of litigation)
North Carolina Rule 5.3(a) (proprietary interest in the cause of action or subject matter)

Other opinions cited:

North Carolina CPR 291 (lawyers purchasing judgments from clients not encouraged)

Source

Landing page: https://www.ncbar.gov/for-lawyers/ethics-and-governing-rules/ethics-opinions/opinions/rpc-134/

Original opinion text

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

Inquiry:

May a law firm take an assignment of a judgment in whole or in part as payment/security for fees rendered to a client while the law firm is representing that client in the active pursuit and appeal of the judgment and while representing the client in various other matters?

Opinion:

No. Rule 5.3(a) of the North Carolina Rules of Professional Conduct provides generally that, "A lawyer shall not acquire a proprietary interest in the cause of action or subject matter of litigation he is conducting for a client,...." A lawyer's accepting an assignment of a judgment which is the subject of an appeal being handled by the lawyer would violate Rule 5.3(a). Generally speaking, a lawyer may not accept assignment of her client's judgment unless and until all appeals concerning the judgment have been exhausted and the client has determined not to pursue collection. Even under such circumstances, however, the practice of lawyers purchasing judgments from their own clients is not encouraged. CPR 291.

What do the rules say today, for your facts?

This opinion is from 1992. Ezel checks the current North Carolina Rules of Professional Conduct against your situation and cites the rules it relies on.

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