Can a lawyer agree to be paid for a client's criminal defense out of the client's personal injury recovery in another matter the same firm handles?

Plain-English summary

The inquirer's firm handles personal injury, criminal defense, and other matters. Sometimes a personal injury client also becomes involved in a criminal matter and asks the firm to defend it, and a client who cannot pay in advance proposes to secure the criminal-defense fees against the prospective personal injury recovery. The opinion modifies N.Y. State 808 (2007).

The committee treats the first two questions as one: may the firm have the criminal-defense fees paid out of, or secured by, the personal injury recovery? It first distinguishes this from a prohibited criminal contingent fee: the criminal fee is billed at a fixed or hourly rate and is not contingent on the criminal outcome, so Rule 1.5(d)(1) is not violated; the personal injury recovery is merely an additional source of payment if the client cannot pay otherwise. On the lien itself, the committee revisits N.Y. State 808, which under the former Code (DR 5-103(A), allowing only liens "granted by law") barred a lawyer from taking a security interest in a client's claim. New York's Rule 1.8(i) instead permits a lien "authorized by law," which the committee, citing ABA Op. 02-247 and Rule 1.8 Comment [16], reads to allow a lien acquired by contract with the client. So a contractual lien on the personal injury recovery falls within the Rule 1.8(i) exception. This is the modification of N.Y. State 808.

The arrangement still must satisfy Rule 1.8(a) on business transactions with a client, because acquiring a security interest in property other than that recovered through the litigation is a business transaction (Comment [16]). The lawyer and client have "differing interests" (Rule 1.0(f)) in the personal injury matter: the lawyer might, for example, push the client to reject an otherwise acceptable settlement that would not cover the criminal-defense costs, or to accept a settlement that secures those costs rather than risk trial for a larger recovery. The committee also notes the client, as an individual with no other counsel whose lawyer handles the subject area, is likely to expect the lawyer to exercise professional judgment for the client. So the lawyer must determine the transaction is fair and reasonable (a fact-specific inquiry), fully disclose it in writing the client can understand, obtain informed written consent to the terms and the lawyer's role after explaining the material risks and alternatives, and advise and give the client a reasonable chance to seek independent counsel. The third question (whether a charging lien could be created if the client fails to pay) is moot unless Rule 1.8(a) cannot be satisfied, and if not, whether such a lien exists is a question of law outside the committee's scope.

In practice

Under this opinion, a firm representing a client in both a personal injury matter and a contemporaneous criminal defense may fund the criminal fees from the personal injury recovery, provided it meets Rule 1.8(a). The committee holds that a contractual lien securing the criminal fees against the personal injury recovery is a lien "authorized by law" within Rule 1.8(i), modifying the contrary reading in N.Y. State 808 under the former Code. Because the arrangement is a business transaction in which lawyer and client have differing interests over the size and timing of the personal injury recovery, the lawyer must make it fair and reasonable, fully disclose it in writing, obtain the client's informed written consent after explaining the risks and alternatives, and give the client a chance to consult independent counsel.

Common questions

Q: Is paying criminal-defense fees from a personal injury recovery a prohibited criminal contingent fee?

A: No. The criminal fee is billed at a fixed or hourly rate, not contingent on the criminal outcome; the personal injury recovery is just an additional payment source, so Rule 1.5(d)(1) is not violated (Opinion 1146 ¶ 3).

Q: Can the lawyer take a lien on the personal injury recovery to secure the criminal fees?

A: Yes. A lien acquired by contract with the client is "authorized by law" within Rule 1.8(i), which modifies the older reading in N.Y. State 808 under the former Code (¶ 4).

Q: What does the lawyer have to do before entering this arrangement?

A: Satisfy Rule 1.8(a): make the transaction fair and reasonable, fully disclose it in understandable writing, obtain informed written consent after explaining the risks and alternatives, and give the client a chance to seek independent counsel (¶¶ 5-7).

Background and rules framework

The opinion applies Rule 1.8(i) (Model Rule 1.8) on liens to secure a lawyer's fee, reading New York's "authorized by law" language to permit a contractual lien, and Rule 1.8(a) (Model Rule 1.8) on business transactions with a client, using the Rule 1.0(f) definition of "differing interests" and the Rule 1.0(j) informed-consent standard. Rule 1.5(a) (Model Rule 1.5) supplies the general fee constraint, and Rule 1.5(d)(1) the criminal-contingent-fee bar the arrangement avoids.

Citations and references

Rules of Professional Conduct:

• New York Rule 1.8(i) (Model Rule 1.8): liens authorized by law; contractual liens
• New York Rule 1.8(a) (Model Rule 1.8): business transactions with a client
• New York Rule 1.5(a), 1.5(d)(1) (Model Rule 1.5): fees; criminal contingent-fee bar
• New York Rule 1.0(f), (j): differing interests; informed consent

Other opinions cited:

• N.Y. State 808 (2007): security interest in a client's claim under the former Code (modified by this opinion)
• N.Y. State 1139 (2017): differing interests in fee arrangements tied to a recovery
• N.Y. State 913 (2012): fairness of a business transaction is fact-specific
• ABA Op. 02-247; ABA Op. 11-458; ABA Op. 00-418: liens "authorized by law" and fee-arrangement transactions

See also

• NY State Bar Op. 1156: Securing a fee with a mortgage in a divorce matter
• NY State Bar Op. 1181: Charging interest on contingency-case disbursements
• NY State Bar Op. 1145: Investing in a litigation funder that finances the lawyer's clients

Source

• Landing page: https://nysba.org/ethics-opinion-1146/