Can a bar association set up, and lawyers join, a plan to finance clients' legal fees through local banks?

Plain-English summary

In 1967 a county bar association had submitted a plan for financing legal fees, and the Committee's Opinion 115 disapproved it, not so much because it violated any particular canon but because it connoted a commercialization of the practice of law that might lower the standards of the profession and bring it into disrepute. The Committee was now asked by the New Jersey State Bar Association whether a state, county, or local bar association may organize, and attorneys participate in, a plan for financing legal fees through local banking institutions.

The plan now presented functioned as described in Opinion 115 with one major exception: it deleted the provision that, on a client's default, would have allowed the participating bank to retain the assigning attorney to sue the client (with the attorney paid 20% of any recovery as a fee to the bank), a provision the inquiry itself described as reprehensible. The Committee concluded that deleting that provision did not warrant a change in the views expressed in Opinion 115, because the plan still connotes a commercialization of the practice of law.

Currency note

This opinion was issued in July 1970, before New Jersey's September 13, 1971 adoption of the Disciplinary Rules (Code of Professional Responsibility), so the Committee was applying the Canons of Professional Ethics and its own prior opinions. It also predates the 1984 Rules of Professional Conduct and all later revisions; the bar's posture toward fee-financing and credit arrangements relaxed considerably in later years, so this disapproval does not reflect current practice. Questions about fee arrangements are now treated under RPC 1.5. Treat this page as historical context, not current guidance. Verify against current rules before relying on any specific rule or requirement mentioned here.

Common questions

Q: Could a bar association set up a bank plan to finance legal fees?

A: Not as presented. The Committee disapproved the plan because it still connoted a commercialization of the practice of law.

Q: Did removing the bank-sues-client provision save the plan?

A: No. The Committee said deleting that provision did not warrant changing the views in Opinion 115; the plan still connoted commercialization.

Background and rules framework

The opinion applied the Canons' concern with commercialization of the practice of law, reaffirming Opinion 115, to a bar-sponsored bank legal-fee financing plan. In current New Jersey terms questions about fee arrangements fall under RPC 1.5.

Citations and references

Other opinions cited:

• NJ ACPE Opinion 115, 90 N.J.L.J. 681 (1967)

See also

• NJ ACPE Op. 175: Collecting Legal Fees Through a Credit-Card Plan
• NJ ACPE Op. 178: Finder's Fees and Disclosure to the Client

Source

• Full text (Justia mirror): https://law.justia.com/cases/new-jersey/advisory-committee-on-professional-ethics/2004/acp180-1.html
• Issuing authority: New Jersey Supreme Court Advisory Committee on Professional Ethics, via the NJ Courts Supreme Court Committees page

Original opinion text

Reproduced from a full-text mirror of the official opinion for research purposes. The linked official source controls.

93 N.J.L.J. 481, July 9, 1970

OPINION 180

Legal Service Financing Plan

In 1967 a county bar association of this State submitted to this Committee a plan for the financing of legal fees.

This Committee rendered its Opinion 115, 90 N.J.L.J. 681 (1967), concluding that the plan should not be approved, not so much because it violated any particular canon of ethics, but because it connoted a commercialization of the practice of law. It was the opinion of this Committee that the plan might result in a lowering of the standards of the legal profession, tending to bring the profession into disrepute and, accordingly, the plan was disapproved.

We now have before us an inquiry by the New Jersey State Bar Association as follows:

May a State, County or Local Bar Association organize and may attorneys participate in a plan for financing of legal fees through local banking institutions?

We quote from the inquiry:

The legal service financing plan functions in the manner described in Opinion 115 of the Advisory Committee on Professional Ethics, 90 N.J.L.J. 681 (October 19, 1967), with one major exception. The specific plan discussed in that opinion provided that in the event of a default in payment, the participating bank might retain the assigning attorney to institute suit against the client, and in such event the attorney would be paid 20% of any recovery as a fee for his services to the bank. It is believed that such a provision is reprehensible, and that the plan containing such proposal was properly rejected by the Advisory Committee.

The deletion in the plan now before us of the provision allowing the participating bank to retain the assigning attorney to institute suit against the client, does not in our opinion warrant a change in the views expressed in Opinion 115. We conclude that the plan still connotes a commercialization of the practice of law.