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NVBAR April 18, 2017

Can a personal injury lawyer own a business that buys and sells the medical liens of other lawyers' injury clients?

Short answer: No. The Committee concludes it is unethical for a lawyer who handles personal injury cases to be in the business of buying and selling other attorneys' clients' medical liens, because the lawyer's personal financial stake creates a non-consentable conflict under Rule 1.7, risks a prohibited proprietary interest under Rule 1.8(i), threatens client confidentiality under Rule 1.6, and can compromise settlement loyalty and the duty to account for liens under Rules 1.2 and 1.15.

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This page answers the general question as of 2017. Ezel answers yours: whether it's allowed on your facts, under the current rules of professional conduct in your state, with citations.

Currency note: this opinion is from 2017
Subsequent statutory amendments, court decisions, or later opinions or rule amendments may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.
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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 as a PDF) is the authoritative source for any reliance.
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Plain-English summary

The Committee responded to requests from several Nevada attorneys about entering the business of purchasing medical liens for other attorneys' personal injury clients. The proposed model had an attorney buy non-client medical liens from care providers (with the liens anonymously and randomly assigned), then collect on them. The Committee answers that this is unethical.

The opinion explains how medical liens work in personal injury cases (a contract among client, provider, and attorney promising payment from any recovery, with higher costs to the client) and notes that in 2013 the Nevada Legislature made it a felony under NRS 629.078 for care providers to buy liens tied to claims in which they treated the client, to keep the medical and legal processes independent. The Committee applies the same scrutiny to attorney-owned lien companies.

The core problem is conflicts of interest. Under Rule 1.7, a lawyer may not represent a client where the representation is materially limited by the lawyer's personal interests, and the Committee concludes a personal injury lawyer's stake in a lien-buying business creates exactly that conflict, one it does not view as falling within the consentable exceptions. Rule 1.8(i) separately bars a lawyer from acquiring a proprietary interest in the cause of action; here the lawyer would profit both from the client's recovery and from collecting the highest possible lien amount. The opinion identifies further dangers: discovery into attorney-owners (citing California's Dodd v. Cruz) that could expose clients to "collusion" or "sham treatment" defenses and breach confidentiality under Rule 1.6; temptation to inject the lawyer's own case theories into lien-discount discussions; the awkward case of a client who later hires the attorney-owner holding the "anonymous" lien; and interpleader scenarios under Rule 1.15 (and Formal Opinion 31) where the attorney would have to sue his own company, with a temptation to pay the lien in full and deny the client a discount, against the duty to abide by the client's settlement decisions under Rule 1.2(a).

In practice

Under this opinion, a Nevada lawyer who handles personal injury matters may not own or operate a business that buys and sells other clients' medical liens. Per the opinion, the arrangement creates a personal-interest conflict under Rule 1.7 that the Committee does not treat as consentable, risks a proprietary interest in the litigation barred by Rule 1.8(i), and threatens confidentiality (Rule 1.6), the duty to honor the client's settlement decisions (Rule 1.2(a)), and the duty to account for and disburse liens (Rule 1.15). The opinion frames the harms concretely: added discovery and litigation cost, defense theories of collusion, and divided loyalty when negotiating or interpleading lien funds.

Common questions

Q: Can a personal injury lawyer invest in or run a medical-lien purchasing company?

A: No. The opinion concludes it is unethical for a lawyer who represents personal injury clients to be in the business of buying and selling other attorneys' clients' medical liens.

Q: Why is it a conflict if the liens belong to other lawyers' clients?

A: Because the lawyer's financial stake still collides with client duties. The opinion concludes the lawyer's interest in maximizing lien collection materially limits representation under Rule 1.7 and risks a proprietary interest barred by Rule 1.8(i).

Q: What practical harms does the opinion identify?

A: Per the opinion: discovery into attorney-owners and "collusion" or "sham treatment" defenses (as in Dodd v. Cruz), confidentiality risks under Rule 1.6, pressure to inject the lawyer's case theories into lien discounting, and divided loyalty when interpleading funds.

Q: Can the client just consent to the arrangement?

A: Not here. The opinion concludes the conflict does not fall within Rule 1.7's consentable exceptions, so client consent does not cure it.

Background and rules framework

The opinion applies Nevada RPC 1.7 (concurrent conflicts, including the personal-interest conflict) and Rule 1.8 (business transactions with clients under 1.8(a) and the bar on a proprietary interest in the litigation under 1.8(i)), corresponding to Model Rules 1.7 and 1.8. It also invokes Rule 1.6 (confidentiality), Rule 1.2(a) (the client's authority to decide whether to settle), and Rule 1.15 (safekeeping property and lien accounting), and the statute NRS 629.078.

Citations and references

Rules of Professional Conduct:

  • Nevada RPC 1.7 / Model Rule 1.7 (concurrent conflicts; personal-interest conflict)
  • Nevada RPC 1.8(a), 1.8(i) / Model Rule 1.8 (business transactions; proprietary interest in the litigation)
  • Nevada RPC 1.6 / Model Rule 1.6 (confidentiality)
  • Nevada RPC 1.2(a) (client's decision to settle); Nevada RPC 1.15 (safekeeping property; lien accounting)

Statutes:

  • NRS 629.078 (felony for a care provider to buy liens for claims in which it treated the client)

Cases:

  • Dodd v. Cruz, 223 Cal. App. 4th 933, 167 Cal. Rptr. 3d 601 (2014, depublished), discovery and collusion concerns where plaintiff's attorney owned the lien purchaser
  • In re Discipline of Singer, 109 Nev. 1117 (1993), temptation to temper loyalty where the lawyer's financial interests are involved
  • Michel v. Eighth Judicial District Court, 117 Nev. 145 (2001), priority of attorney's liens in interpleader

Other opinions cited:

  • NV Formal Op. 31 (2005) and Formal Op. 42 (2009): handling liens and disputed funds
  • Arizona State Bar Ethics Op. 96-05 (1996): conflicts from a lawyer's financial interest in a referral source

See also

Source

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