Can a retired lawyer assign unpaid client accounts receivable to other lawyers for collection?
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This page answers the general question as of 1993. Ezel answers yours: whether it's allowed on your facts, under the current New York Rules of Professional Conduct, with citations.
Plain-English summary
A lawyer who retired for medical reasons was still owed fees by former clients and asked whether he could assign those accounts receivable to other lawyers for consideration. Assuming the fees had been fully earned and no further legal services were required, the committee answered yes, subject to caveats, finding no per se prohibition on assigning a lawyer's accounts receivable.
The committee identified the ethical concerns that attach because client accounts are not ordinary business receivables. The assignees must satisfy themselves that the fees they collect were reasonable, since a lawyer must be able to show a fee was fair and the client understood the services (DR 2-106). In describing the services to the assignees, only confidences or secrets necessary to collect the fee may be disclosed (DR 4-101(C)). Because EC 2-23 directs that a lawyer should avoid fee controversies and should not sue a client except to prevent fraud or gross imposition, the committee concluded the assigning lawyer remains responsible to the former clients and, before assigning, should agree with the assignees that they will not sue a client without the assigning lawyer's consent. The committee drew on ABA Formal Op. 302/320, which approved bank financing of legal fees because the lawyer kept the right to repurchase the loan before suit, and recommended a similar arrangement so the assigning lawyer controls whether litigation against a client is commenced. It also flagged Judiciary Law section 488 (descended from the champerty statute), noting an assignee should give a client in arrears sufficient notice and opportunity to cure.
On fee division, the committee concluded that assigning accounts receivable is not a prohibited division of fees under DR 2-107 so long as the fees were already fully earned by the assigning lawyer. Finally, the clients must be told of the assignment and to whom, and told that the assignees are not now their lawyers; the assignees must not give the impression they represent the clients and must observe the anti-solicitation rules of DR 2-103 and DR 2-104. Subject to those caveats, the committee answered the question in the affirmative.
Currency note
This opinion was issued in 1993, before New York replaced the Code of Professional Responsibility (the Disciplinary Rules and Ethical Considerations cited here) with the New York Rules of Professional Conduct, effective April 1, 2009. The current rules address fees, confidentiality, fee division, and solicitation through Rules 1.5, 1.6, and 7.2, among others. 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 lawyer assign unpaid client fees to another lawyer?
A: The committee concluded there is no per se prohibition on assigning fully earned accounts receivable to other lawyers, subject to caveats protecting the former clients.
Q: Does assigning receivables count as illegal fee splitting?
A: The committee concluded it is not a prohibited division of fees under DR 2-107 so long as the assigned fees were already fully earned by the assigning lawyer.
Q: Can the assignee lawyer sue the former client for the fee?
A: The committee concluded the assigning lawyer should agree with the assignees that they will not sue a client without his consent, so the assigning lawyer retains control over fee litigation under EC 2-23; an assignee should also give a client in arrears notice and a chance to cure.
Q: What about the former clients' confidences?
A: The committee concluded that only the confidences or secrets necessary to collect the fee may be disclosed to the assignees, consistent with DR 4-101(C).
Background and rules framework
The opinion applied New York Code DR 2-106 (reasonable fees), DR 4-101(C) (disclosure of confidences necessary to collect a fee), DR 2-107 (division of fees among lawyers), DR 2-103 and DR 2-104 (solicitation), and EC 2-23 (avoiding fee controversies and suing clients), read against Judiciary Law section 488 (champerty). The analysis corresponds to ABA Model Rules 1.5 (fees), 1.6 (confidentiality), and 7.2 (solicitation and references).
Citations and references
Rules of Professional Conduct:
- New York Code DR 2-106, DR 4-101(C), DR 2-107, DR 2-103, DR 2-104; EC 2-23 (applied in the opinion)
- MR 1.5 (fees); MR 1.6 (confidentiality); MR 7.2 (solicitation and references)
Statutes:
- New York Judiciary Law section 488 (assignment of a debt with intent to bring an action; champerty)
Cases:
- Cooper v. Conklin, 197 A.D. 205, 189 N.Y.S. 552 (2d Dep't 1921), lawyer's burden to show a fee was fair and reasonable
- 1015 Gerard Realty Corp. v. A & S Improv. Corp., 91 A.D.2d 927, 457 N.Y.S.2d 821 (1st Dep't 1983), curing default avoids a section 488 violation
Other opinions cited:
- ABA Formal Op. 302/320 (1968): bank financing of legal fees with a lawyer's right to repurchase before suit
- N.Y. State 608 (1990): using a collection agent for an already-earned fee
See also
- NYC Bar Formal Op. 1991-3: Nonrefundable Retainers and Advance Fees
- NYC Bar Formal Op. 1995-1: Credit Cards and Other Fee Financing
Source
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