Can a lawyer's fee agreement direct the clerk of court to send a domestic client's alimony or child support payments to the lawyer to cover unpaid fees?

Plain-English summary

A lawyer proposed a standard fee agreement charging $125 per hour against a "nonrefundable retainer fee" described as becoming the lawyer's sole property, with excess time billed monthly. In domestic matters, the agreement authorized the lawyer, on nonpayment of fees, to direct the clerk of superior court to forward all of the client's alimony or child support payments to the lawyer, to endorse those checks in the client's name, deposit them in the lawyer's trust account, and withdraw up to 50 percent of each payment toward the past-due balance. The inquiry asked whether the agreement complied with the Rules of Professional Conduct.

The opinion concluded it did not. The provision routing the client's support payments to the lawyer violated Rule 5.3(a), because it essentially gave the lawyer a security interest in the very child support and alimony payments the lawyer was hired to pursue. Rule 5.3(a) bars a lawyer from acquiring a proprietary interest in the subject matter of litigation the lawyer is conducting, except for a lien granted by law to secure the fee or a reasonable contingent fee in a civil case; the statutory-lien exception did not apply because statutory liens do not arise by contract between lawyer and client, citing Chapter 44A. The opinion explained the prohibition exists to keep a lawyer from holding a personal financial stake in the outcome that could affect professional judgment, and here the lawyer's interest in the future support payments could cloud his judgment on the client's right to and amount of support. As to the remaining terms, the opinion noted that a lawyer may charge an advance fee billed against future services and take it immediately if the client agrees it is earned immediately, citing RPC 158, but the agreement should disclose this and not mislabel the advance fee a "nonrefundable retainer," citing RPC 50. The opinion added that if the lawyer's services are terminated, any portion of the fee that is clearly excessive may be refundable whether held in the trust or operating account.

Currency note

This opinion was issued in 1994, 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 fee agreement route a client's support payments to the lawyer for unpaid fees?

A: No. The opinion concluded that directing alimony or child support payments to the lawyer creates a proprietary interest in the subject of the litigation, barred by Rule 5.3(a).

Q: Does the statutory attorney's-lien exception save the provision?

A: No. The opinion held the lien exception does not apply because statutory liens do not arise by contractual agreement between a lawyer and a client, citing Chapter 44A.

Q: Why is a lawyer's interest in the client's support payments a problem?

A: It can affect judgment. The opinion reasoned the lawyer's security interest in future support could cloud his professional judgment on the client's right to and the amount of support.

Q: Are the agreement's advance-fee terms acceptable?

A: Partly. The opinion stated a lawyer may take an advance fee immediately if the client agrees it is earned immediately, but the agreement should not mislabel it a "nonrefundable retainer," and any clearly excessive fee may be refundable if the representation ends.

Background and rules framework

The opinion applied North Carolina's then-current Rule 5.3(a), which corresponds to Model Rule 1.8(i) and prohibits a lawyer from acquiring a proprietary interest in the subject matter of the litigation the lawyer is conducting, subject to the lien and contingent-fee exceptions. It read the support-payment provision as an impermissible security interest and the statutory-lien exception as inapplicable to a contractual arrangement under Chapter 44A. The advance-fee analysis drew on the State Bar's earlier opinions RPC 158 and RPC 50.

Citations and references

Rules of Professional Conduct:

• MR 1.8 (conflict of interest; proprietary interest in cause of action or subject of litigation)
• North Carolina Rule 5.3(a)

Statutes:

• N.C. Gen. Stat. Chapter 44A (statutory liens)

Other opinions cited:

• North Carolina RPC 158 (advance fee earned on receipt)
• North Carolina RPC 50 (use of the term "nonrefundable retainer")

See also

• NC Ethics Op. RPC 186: security interest in property that is the subject of domestic litigation
• NC Ethics Op. RPC 196: recovering legal fees from the opposing party
• NC Ethics Op. RPC 205: referral fees

Source

• Landing page: https://www.ncbar.gov/for-lawyers/ethics-and-governing-rules/ethics-opinions/opinions/rpc-187/

Original opinion text

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

Inquiry:

Attorney has a fee agreement that he would like to use with his clients. In the agreement, the client promises to pay Attorney a "nonrefundable retainer fee" which "shall become the sole property of Attorney." Pursuant to the agreement, the services of Attorney are to be charged at $125 per hour. The retainer will be applied against accrued legal fees until the retainer is exhausted. The excess amount will then be billed on a monthly basis. The agreement further provides that in the event the legal matter is settled or there is a reconciliation in a domestic action, Attorney shall keep the "retainer fee" unless Attorney withdraws from the representation of the client. In the event Attorney withdraws, the agreement provides that Attorney will be compensated for the actual time spent on the legal matter at Attorney's regular hourly rate and any portion of the "nonrefundable retainer fee" in excess of this amount shall be refunded to the client. The agreement also contains the following provision:

In matters pertaining to alimony and/or child support, in the event of nonpayment of fees as provided in paragraph 5 herein, I hereby authorize Attorney to direct the clerk of superior court to forward all alimony and/or child support payments for my benefit to the offices of Attorney until such time as my bill is paid in full. I further authorize Attorney, or his agent, to endorse any alimony and/or child support checks so forwarded in my name such that said check(s) may be deposited in the bank trust account of Attorney. Attorney and I agree that he may withdraw and apply up to 50 percent of any such payments deposited in his trust account for application to any past due account balance, with the balance paid to me.

Are the provisions of the agreement in compliance with the Rules of Professional Conduct?

Opinion:

No. The provision of the agreement authorizing the clerk of court to pay the client's alimony and/or child support payments directly to Attorney in the event that the client's legal fees are unpaid violates Rule 5.3(a) of the Rules of Professional Conduct. This provision essentially gives Attorney a security interest in the client's child support and/or alimony payments which Attorney has been hired to pursue. Rule 5.3(a) prohibits a lawyer from acquiring a proprietary interest in the subject matter of the litigation he is conducting for a client except that he may (1) acquire a lien granted by law to secure his fee, or (2) contract with a client for a reasonable contingent fee in civil cases. The exception allowing a lawyer to secure a fee by asserting a lien granted by law does not apply in this situation because statutory liens do not arise by contractual agreement between a lawyer and a client. See Chapter 44A. The purpose of the prohibition on acquiring an interest in the subject matter of litigation is to prevent a lawyer from having a personal financial stake in the outcome of the case which may adversely affect the lawyer's professional judgment. In the instant case, Attorney's security interest in the future child support and/or alimony payments of his client may cloud his professional judgment with regard to the negotiation and resolution of the domestic dispute including the issue of the client's right to and the amount of child support and alimony.

With regard to the other provisions of the fee contract, lawyer may charge a client an advance fee against which future services will be billed and may pay the money to himself immediately if the client agrees the fee is earned immediately. See RPC 158. The agreement in the present inquiry should fully disclose to the client and the client should explicitly agree that the advance fee (which the agreement incorrectly describes as a "nonrefundable retainer," see RPC 50) will be paid to Attorney immediately and not held in Attorney's trust account for the possible refund of any excess balance at a later date. It should be noted that despite the provision of the agreement stating that the excess balance will be refunded only if Attorney withdraws, if a lawyer's services are terminated, any portion of the fee that is clearly excessive may be refundable to a client whether the fee is deposited in the trust account or the operating account. See RPC 158.