Can a lawyer represent someone whose business is to acquire other people's claims and then sue on them?

Plain-English summary

The inquiry asked whether a lawyer could represent an individual whose business is to acquire claims by purchase or assignment, where the individual would pursue litigation as the owner or assignee of the claim. The Committee drew a distinction between claims that are purchased and claims that are merely assigned.

Where a claim is merely assigned, the Committee said its prior opinion controlled. In Opinion 17 it had held that it would be improper for an attorney to be engaged by a commercial collection agency to sue the debtors of that agency's customers, because that arrangement violates Canon 35: it is an exploitation of the attorney's services by an intermediary between client and attorney.

Where the claims are purchased and become the property of the individual, however, the Committee found no objection to the individual engaging an attorney to represent him in collecting the debts due him. In that situation the individual is the real party in interest pursuing his own property, not an intermediary interposed between the lawyer and the underlying creditors.

Currency note

This opinion was issued in January 1965, before New Jersey's September 13, 1971 adoption of the Disciplinary Rules (Code of Professional Responsibility), and well before the 1984 Rules of Professional Conduct and all later revisions. It applied Canon 35 of the former Canons of Professional Ethics, which guarded against intermediaries interposed between client and lawyer; the professional-independence concern is now treated under RPC 5.4. Treat this page as historical context, not current guidance.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: Can a lawyer sue on a claim that a client bought outright?

A: Yes. The Committee said where the claims are purchased and become the individual's property, there is no objection to his engaging an attorney to collect the debts due him.

Q: What if the claim was only assigned, not purchased?

A: Then the Committee's Opinion 17 controls and the engagement is improper. That opinion held it improper for an attorney to be engaged by a commercial collection agency to sue the debtors of the agency's customers.

Q: Why does the purchase-versus-assignment distinction matter?

A: Because Canon 35 bars an intermediary from exploiting an attorney's services. A purchaser who owns the claim is the real party pursuing his own property; a mere assignee operates as the kind of intermediary between client and attorney the canon condemns.

Background and rules framework

The opinion applied Canon 35 of the former Canons of Professional Ethics, which barred the exploitation of a lawyer's services by an intermediary interposed between client and attorney. In current New Jersey terms, the professional-independence concern is addressed by RPC 5.4. The Committee relied on its earlier Opinion 17 for the assigned-claim scenario.

Citations and references

Rules of Professional Conduct (as in effect at the time):

• Canon of Professional Ethics 35 (exploitation of a lawyer's services by an intermediary between client and attorney)

Other opinions cited:

• N.J. ACPE Opinion 17, 87 N.J.L.J. 113 (1964): improper for an attorney to be engaged by a commercial collection agency to sue the debtors of its customers

See also

• NJ ACPE Op. 338: Engagement by a Collection Agency Suing Debtors of Its Customers
• NJ ACPE Op. 175: Credit-Card Collection Plan for Attorneys
• NJ ACPE Op. 723: Selling a Firm's Accounts Receivable to a Collection Agency

Source

• Landing page: https://law.justia.com/cases/new-jersey/advisory-committee-on-professional-ethics/2004/acp66-1.html

Original opinion text

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

88 N.J.L.J. 49
January 28, 1965

OPINION 66

Representing Collection Agency

An inquiry has been made as to the propriety of an attorney representing an individual, whose business it is to acquire claims by purchase or assignment. Litigation would be pursued by the individual as the owner or assignee of the claim.

A distinction should be made between claims which are purchased and those which are merely assigned.

Where there is merely an assignment of a claim, then our prior opinion on the subject would control. N.J. Advisory Committee on Professional Ethics, Opinion 17, 87 N.J.L.J. 113 (1964). In that opinion we held that it would be improper for an attorney to be engaged by a commercial collection agency for the purpose of instituting suit against the debtors of the customers of such agency. This would result in a violation of Canons of Professional Ethics, Canon 35, since it is an exploitation of the service of an attorney by an intermediary between client and attorney.

Where, however, the claims are purchased and become the property of the individual, there would appear to be no objection to his engaging an attorney to represent him in the collection of the debts which are due him.