May a Nebraska workers' compensation lawyer withhold client proceeds to repay a lawsuit-funding company?

Plain-English summary

An injured worker considered an advance from a lawsuit-funding company secured by part of anticipated workers' compensation benefits. The funder asked the worker's lawyer to withhold proceeds and pay the agreed amount when benefits arrived.

The threshold question was whether Neb. Rev. Stat. § 48-149's restrictions on assignment, attachment, or garnishment of workers' compensation benefits prohibited the proposed withholding. The Committee declined to interpret the statute because that legal question fell outside its advisory function.

The Committee instead assumed for its ethics analysis that the statute prohibited the withholding. The Rules' preamble requires lawyer conduct to conform to law and confines pursuit of a client's interests to lawful means.

Rule 1.2 gives the client authority over representation objectives, but only within legal and professional limits. If § 48-149 prohibits withholding the benefits, counsel must decline to honor the lien regardless of the client's wishes or counsel's view that the transaction serves the client's interests.

The opinion is expressly conditional. It does not determine whether the particular funding arrangement or lien actually violates § 48-149.

In practice

Under this opinion, the ethics result depends on the statute's application. Client direction cannot authorize counsel to perform a withholding that governing law forbids.

Common questions

Q: Did the Committee decide that § 48-149 prohibits the funding lien?

A: No. It declined to interpret the statute.

Q: What ethical conclusion did the Committee reach?

A: If the statute prohibits withholding the proceeds, the lawyer may not do it.

Q: Does the client's agreement change that conclusion?

A: No. Rule 1.2 makes client authority subject to legal and professional limits.

Q: What if the lawyer thinks the advance is in the client's interests?

A: That belief does not permit conduct prohibited by law.

Background and rules framework

Rule 1.2 allocates authority between client and lawyer while preserving limits imposed by law and professional obligations. The Rules' preamble likewise requires lawyer conduct to conform to law.

Citations and references

Nebraska Rules of Professional Conduct:

• Neb. R. Prof. C. § 3-501.2

Statutes:

• Neb. Rev. Stat. § 48-149

See also

• California Formal Op. 2020-204: Litigation funding
• Florida Ethics Op. 00-3: Nonrecourse litigation funding
• New York State Op. 1051: Fee from a litigation-funding advance

Source

• Landing page: Nebraska lawyer ethics opinions archive
• Original PDF: Nebraska Ethics Advisory Opinion 13-01

Original opinion text

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

NEBRASKA ETHICS ADVISORY OPINION FOR LAWYERS NO. 13-01

WHETHER OR NOT A NEBRASKA ATTORNEY MAY WITHHOLD A
PORTION OF WORKERS COMPENSATION PROCEEDS IN ORDER
TO HONOR A “LIEN” ON BEHALF OF A THIRD-PARTY WHO HAS
ADVANCED FUNDS TO THE CLIENT IS DEPENDENT ON AN
INTERPRETATION OF NEB. REV. STAT. §48-149. HOWEVER, IF
THE WITHHOLDING OF PROCEEDS DOES VIOLATE §48-149, A LAWYER MAY NOT ETHICALLY HONOR THE “LIEN.”

STATEMENT OF FACTS

A Nebraska attorney who represents an injured worker in a pending

workers compensation proceeding has requested an opinion regarding

whether honoring a potential agreement between the client and a third-party

“lawsuit funding company” would violate the Nebraska Rules of Professional

Conduct. Specifically, the attorney has indicated that the client was severely

injured during the course of his employment and has been unable to return to

work. As a result, the client has suffered significant financial hardship and

has sought the assistance of a third-party “lawsuit funding company” who

would provide advance funding to the client in anticipation of receiving a

portion of the client’s forthcoming workers compensation benefits.

A representative of the potential lender approached the attorney and

inquired whether the attorney would agree to withhold from the client a

portion of potential proceeds payable to the client if the client and lender

were able to reach an agreement as to the amount. The attorney expressed

concern that such an agreement would violate the general prohibition on the

assignment, attachment, or garnishment of workers compensation benefits

2965 found in Neb. Rev. Stat. §48-149 and sought assistance from the advisory

committee as to whether agreeing to withhold the funds would constitute an

ethical violation.

APPLICABLE RULES OF PROFESSIONAL CONDUCT

The following rules of professional conduct are instructive with respect

to the question presented:

Preamble to Nebraska Rules of Professional Conduct, Paragraph 5:

A lawyer's conduct should conform to the requirements of the
law, both in professional service to clients and in the lawyer's
business and personal affairs. A lawyer should use the law's
procedures only for legitimate purposes and not to harass or
intimidate others. A lawyer should demonstrate respect for the
legal system and for those who serve it, including judges, other
lawyers and public officials. While it is a lawyer's duty, when
necessary, to challenge the rectitude of official action, it is also a
lawyer's duty to uphold legal process.

Preamble to Nebraska Rules of Professional Conduct, Paragraph 6:

As a public citizen, a lawyer should seek improvement of the
law, access to the legal system, the administration of justice and
the quality of service rendered by the legal profession. As a
member of a learned profession, a lawyer should cultivate
knowledge of the law beyond its use for clients, employ that

2966 knowledge in reform of the law and work to strengthen legal
education. In addition, a lawyer should further the public's
understanding of and confidence in the rule of law and the
justice system because legal institutions in a constitutional
democracy depend on popular participation and support to
maintain their authority. A lawyer should be mindful of
deficiencies in the administration of justice and of the fact that
the poor, and sometimes persons who are not poor, cannot afford
adequate legal assistance. Therefore, all lawyers should devote
professional time and resources and use civic influence to ensure
equal access to our system of justice for all those who because of
economic or social barriers cannot afford or secure adequate
legal counsel. A lawyer should aid the legal profession in
pursuing these objectives and should help the bar regulate itself
in the public interest.

Preamble to Nebraska Rules of Professional Conduct, Paragraph 9:

The Rules of Professional Conduct often prescribe terms for
resolving such conflicts. Within the framework of these Rules,
however, many difficult issues of professional discretion can
arise. Such issues must be resolved through the exercise of
sensitive professional and moral judgment guided by the basic
principles underlying the Rules. These principles include the

2967 lawyer's obligation zealously to protect and pursue a client's
legitimate interests, within the bounds of the law, while
maintaining a professional, courteous and civil attitude toward
all persons involved in the legal system.

§3-501.2: Scope of representation and allocation of authority between

client and lawyer.

(a) Subject to paragraphs (b), (c), (d), (e), and (f), a lawyer
shall abide by a client's decisions concerning the objectives of
representation and, as required by Rule 1.4 shall consult with
the client as to the means by which they are to be pursued. A
lawyer may take such action on behalf of the client as is
impliedly authorized to carry out the representation. A lawyer
shall abide by a client's decision whether to settle a matter. In a
criminal case, the lawyer shall abide by the client's decision,
after consultation with the lawyer, as to a plea to be entered,
whether to waive jury trial and whether the client will testify.

Comment 1: Paragraph (a) confers upon the client the ultimate
authority to determine the purposes to be served by legal
representation, within the limits imposed by law and the
lawyer's professional obligations.

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 DISCUSSION

At the outset of this discussion, it must first be noted that the nature

of this request primarily turns on an interpretation of Neb. Rev. Stat. §48-

149—specifically, whether the statute prohibits an attorney from withholding

workers compensation benefits from the client as part of a contract between

the client and a third-party lender. The committee is of the opinion that this

question essentially calls for a legal interpretation which is outside of the

scope of the committee’s stated function. While the inability to provide

guidance as to the applicability of the statute may not result in a thoroughly

satisfactory opinion to the requesting attorney, this opinion will nevertheless

attempt to provide guidance to the requesting attorney by assuming

arguendo that §48-149 does prohibit an attorney from withholding workers

compensation proceeds from the client under the circumstances provided and

discussing what the attorney’s ethical responsibilities would therefore entail.

The committee is of the opinion that, if §48-149 does prohibit an

attorney from withholding workers compensation proceeds from a client in

order to ensure payment to a third-party lender, then the lawyer must refrain

from doing so even if the client desires the lawyer to do so and even if the

lawyer believes the arrangement to be in the client’s best interests. That is, a

fundamental underpinning of the Nebraska Rules of Professional Conduct is

that a lawyer must at all times conduct himself, and his representation of the

client, within the confines of the law. For example, Paragraph five (5) of the

2969
Preamble to the Nebraska Rules of Professional Conduct states that, “[a]

lawyer's conduct should conform to the requirements of the law, both in

professional service to clients and in the lawyer's business and personal

affairs.” Similarly, in Paragraph nine (9), the Preamble discusses the

fundamental ethical principle that a lawyer’s representation must, “zealously

. . . protect and pursue a client's legitimate interests, within the bounds of the

law . . . .” (Emphasis added). Finally, Rule 3-501.2, and its associated

Comment 1, specifies that a lawyer’s duty to the client is restrained by “the

limits imposed by law and the lawyer's professional obligations.”

In light of the foregoing, the requesting attorney in this instance must

at all times conduct himself within the confines of the law even if the client

requests him to do otherwise and even if the lawyer reasonably believes that

client would benefit from the potential contractual arrangement. To the

extent that Neb. Rev. Stat. §48-149 prohibits an attorney from withholding

workers compensation benefits from her client, then the attorney must not do

so irrespective of any agreement that may have been contemplated between

the client and a third-party lender. Again, however, this opinion is not to be

construed as an interpretation of §48-149 and its effect on the particular

factual scenario at issue.

CONCLUSION

Much of this request turns on the question of whether Neb. Rev. Stat.

§48-149 prohibits an attorney from withholding workers compensation

2970 proceeds from the client as part of a contractual obligation entered into

between the client and a third-party “lawsuit funding company.” While the

Committee cannot take a position on the applicability of the statute to the

circumstances at hand, it is clear that the lawyer must at all times conduct

his representation within the confines of the law. Accordingly, if §48-149

prohibits the lawyer from withholding workers compensation benefits from

the client under the particular scenario at hand, then the lawyer must not do

so even if the client desires the lawyer to do so and even if the lawyer believes

that the proposed contractual agreement would be in the best interests of the

client.

2971