Ezel / Ethics Opinions / NYSBA
NYSBA 2017-12-11

Can a law firm amend its retainer mid-case to secure unpaid fees with a confession of judgment and a mortgage?

Short answer: Yes, if it complies with Rule 1.8(a). Securing accrued, fixed-amount fees by a confession of judgment and collateral mortgage during a pending matter is a business transaction with differing interests, so it needs fairness, full written disclosure of the credit consequences, informed written consent, and a chance to consult independent counsel.
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.
Disclaimer: Advisory only. Not binding precedent.
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 at the bottom of this page) is the authoritative source for any reliance.

NY State Bar Ethics Opinion 1139: Securing fees by confession of judgment and mortgage

Short answer: A law firm may amend its retainer during a pending matter to secure accrued but unpaid fees, in a fixed amount the parties agree on, by client confessions of judgment and collateral mortgages, but only if it complies with Rule 1.8(a) on business transactions with a client and remains mindful of ongoing Rule 1.7 conflicts.

Disclaimer: This is an advisory ethics opinion. Advisory opinions are not binding; they interpret the New York Rules of Professional Conduct and are persuasive authority. This summary is for research purposes only and is not legal advice. Verify current rules before acting on any specific guidance.

About this page: The plain-English summary and Q&A below were written by Ezel based on the official opinion. We do not reproduce the opinion text on this page; follow the linked source for the official text, which controls.

View original opinion

Plain-English summary

A firm defending clients in a hotly contested dissolution proceeding is owed substantial fees. The clients are in poor financial shape, and the firm does not want to withdraw and burden them. With the clients' consent, the firm proposes to amend the retainer (which contains no security provision) so the clients execute confessions of judgment and a collateral mortgage securing the fixed amount currently due for services already performed. The committee assumes, without deciding, that the arrangement does not violate receivership law or third-party rights, and notes that domestic relations matters are governed by special rules (Rule 1.5(d)(5)(iii); see N.Y. State 1134).

Retainers may be amended by agreement, but such amendments raise concern because the lawyer can take unfair advantage (N.Y. State 910). The committee concludes Rule 1.8(a) governs: acquiring a security interest in property other than that recovered through the litigation is a business transaction with the client (Comment [16]), so the requirements apply even if the security had been in the original retainer. Here the lawyer and clients have "differing interests" (Rule 1.0(f)) because confessions of judgment and recorded mortgages place the lawyer in direct adversity to the clients, and the clients (unrepresented, mid-litigation) likely expect the firm to exercise professional judgment for them.

So the firm must satisfy Rule 1.8(a): the transaction must be fair and reasonable, with the secured amount commensurate with the value of services and not excessive (Rule 1.5(a)); the terms must be fully and understandably disclosed in writing (1.8(a)(1)); the clients must give informed written consent to the essential terms and the lawyer's role (1.8(a)(3)), after being told the material consequences (including the effect of a docketed judgment on credit and the possible waiver of fee-arbitration rights) and reasonable alternatives such as holding but not filing the documents; and the clients must be advised in writing to seek, and given a chance to obtain, independent counsel (1.8(a)(2)). The committee also notes that informed consent requires freedom of choice, and that because the firm has a right to withdraw for nonpayment under Rule 1.16(c)(5), the clients' difficult position does not make consent coercive. Finally, even after a compliant amendment, the firm must monitor Rule 1.7(a)(2) personal-interest conflicts, since the security interests could affect its judgment in the litigation.

In practice

Under this opinion, a firm may secure already-earned, unpaid fees by confession of judgment and collateral mortgage through a mid-representation retainer amendment, provided it meets Rule 1.8(a). Because acquiring such security is a business transaction in which lawyer and client have differing interests, the firm must make the deal fair and reasonable, fully disclose the terms and consequences in writing (including the credit impact of a docketed judgment), obtain the clients' informed written consent after explaining risks and alternatives, and give them a chance to consult independent counsel. The firm must also keep watching for Rule 1.7(a)(2) conflicts, since its security interests could influence how it litigates. Domestic relations matters are subject to additional rules and are outside this holding.

Common questions

Q: Does securing fees with a confession of judgment trigger Rule 1.8(a)?

A: Yes. Acquiring a security interest in property other than that recovered in the litigation is a business transaction with the client, so Rule 1.8(a) applies even if the security had been part of the original retainer (Opinion 1139 ¶ 7).

Q: What must the firm disclose to get valid consent?

A: The material consequences, including the effect of a docketed judgment on credit and employment, any post-judgment interest, any waiver of fee-arbitration rights, and reasonable alternatives such as holding but not filing the documents (¶ 12).

Q: Is the clients' weak financial position a problem for consent?

A: No. Because the firm has a right to withdraw for nonpayment under Rule 1.16(c)(5), the committee finds the clients' difficult position does not render consent coercive under Rule 1.8(a) (¶ 13).

Background and rules framework

The opinion applies Rule 1.8(a) (Model Rule 1.8) on business transactions with a client, using the Rule 1.0(f) "differing interests" and Rule 1.0(j) "informed consent" definitions, and Rule 1.5(a) (Model Rule 1.5) on reasonable fees. It addresses the firm's right to withdraw under Rule 1.16(c)(5), (d) (Model Rule 1.16) and the continuing Rule 1.7(a)(2) (Model Rule 1.7) personal-interest conflict. Domestic relations fee security is governed separately by Rule 1.5(d)(5)(iii).

Citations and references

Rules of Professional Conduct:

  • New York Rule 1.8(a) (Model Rule 1.8): business transactions with a client
  • New York Rule 1.5(a), (d)(5), (f) (Model Rule 1.5): reasonable fees; domestic relations security; fee arbitration
  • New York Rule 1.7(a)(2) (Model Rule 1.7): ongoing personal-interest conflict
  • New York Rule 1.16(c)(5), (d) (Model Rule 1.16): withdrawal for nonpayment

Other opinions cited:

  • N.Y. State 910 (2012): amending a retainer for security; Rule 1.8 scrutiny
  • N.Y. State 1051 (2015); N.Y. State 1104 (2016); N.Y. State 913 (2012): when Rule 1.8(a) applies and fairness factors
  • N.Y. State 474 (1977): confession of judgment must be commensurate with services
  • ABA Op. 02-427 (2002); ABA Op. 11-458 (2011): security interests for fees

See also

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