Can a divorce lawyer settle with the client for less than a court-awarded fee and promise to repay the client anything the opposing party later pays toward that award?

Plain-English summary

In a matrimonial matter, a court awarded the lawyer counsel fees under Domestic Relations Law section 237, payable by the adverse spouse directly to the lawyer; the adverse spouse did not pay. To settle the debt the client owed under the fee agreement, the lawyer agreed to accept an immediate payment (the retainer plus an amount less than total time charges, and so less than the judicial award) in full satisfaction. In exchange, the client wanted the lawyer's promise that if the adverse party later paid any amount up to the settlement figure, the lawyer would remit it to the client to make the client whole. The lawyer asked whether reimbursing the client this way is improper fee sharing with a non-lawyer.

The committee concludes it is not. Assuming the arrangement complies with DR 2-106(C)(2) (domestic-relations fee agreements) and Part 1400 of the Appellate Division rules, and leaving questions of law about section 237 aside, the proposed settlement is not an unethical fee-sharing compact. Section 237 lets a court make the more affluent spouse pay the other spouse's legal expenses; a section 237 award replaces amounts the client may have paid but does not release the client from liability for the full fee if the adverse party does not pay, and a lawyer can be required to refund to the client amounts the lawyer later collects from the adverse party that duplicate what the client already paid. The settlement here fits that structure: the client ends up paying an agreed amount, but only to the extent the responsible party fails to pay.

The committee explains that DR 3-102(A)'s bar on fee sharing exists to keep non-lawyers from interfering with a lawyer's judgment or pressuring improper methods, perils that arise from sharing fees with non-client third parties. None of those concerns exists in allocating fees between a lawyer and the client, especially under a fee-shifting statute meant to make the client whole. The committee adds a caveat: the arrangement must be consistent with any statements or submissions the lawyer made to the court about the fee award, and the lawyer must avoid fraud or knowingly false statements (DR 1-102(A)(4), DR 7-102(A)(5)) and correct or amend any inconsistent representation.

In practice

The opinion holds, under the former Code as it stood at the time, that reimbursing a client out of a section 237 fee award is an allocation of fees between lawyer and client, not prohibited fee sharing under DR 3-102(A), because the anti-sharing rule targets sharing with non-client third parties. The committee frames the permission with a candor caveat: the settlement must square with what the lawyer represented to the court about the awarded funds, and any inconsistent statement must be corrected. It expressly assumes compliance with DR 2-106(C)(2) and Part 1400 and does not opine on the meaning of section 237 itself.

Common questions

Q: Is it improper fee sharing to repay a client amounts the opposing party pays toward a court-awarded fee?

A: No. The committee concludes that allocating fees between a lawyer and the lawyer's own client is not the fee sharing DR 3-102(A) prohibits, because that rule targets sharing fees with non-client third parties, not making a client whole under a fee-shifting award.

Q: Can a lawyer accept less than the full court-awarded fee from the client?

A: Yes. The committee concludes a lawyer may settle the client's fee debt for less than the judicially-determined section 237 amount, subject to the conditions in the opinion, because the award does not release the client from liability for the full agreed fee if the adverse party does not pay.

Q: What is the main limit on this kind of fee settlement?

A: Candor to the court. The committee cautions that the arrangement must be consistent with any statements the lawyer made to the court about the use of the awarded funds, and the lawyer must correct or amend any inconsistent representation and avoid fraud or knowingly false statements.

Background and rules framework

The opinion interprets DR 3-102(A) (the bar on sharing legal fees with non-lawyers, the analogue of ABA Model Rule 5.4(a)), DR 2-106(C)(2) (domestic-relations fee agreements, in the area of ABA Model Rule 1.5), DR 1-102(A)(4) and DR 7-102(A)(5) (dishonesty and false statements, the area of ABA Model Rule 8.4(c) and candor duties), and DR 9-102(C)(4) (prompt delivery of client funds), against Domestic Relations Law section 237 and Part 1400 of the Appellate Division rules.

Citations and references

Rules of Professional Conduct:

• MR 5.4 (professional independence, fee sharing); MR 1.5 (fees); MR 8.4 (misconduct, dishonesty)
• Former Code DR 3-102(A); DR 2-106(C)(2); DR 1-102(A)(4); DR 7-102(A)(5); DR 9-102(C)(4)

Statutes:

• Domestic Relations Law section 237 (counsel-fee awards in matrimonial actions); Part 1400, Rules of the Appellate Divisions

Cases:

• O'Shea v. O'Shea, 93 N.Y.2d 187 (1999), purpose of section 237 fee awards
• Seth Rubenstein, P.C. v. Ganea, 41 A.D.3d 54 (2d Dep't 2007), a section 237 award does not preclude recovering the balance from the client under the retainer

Other opinions cited:

• N.Y. State 727 (2000); N.Y. State 705 (1998): purpose of the rule against non-lawyer fee sharing

See also

• NY State Bar Op. 827: Paying a client's billing auditor a percentage of billings
• NY State Bar Op. 845: Lawyer-real estate broker sharing a brokerage commission

Source

• Landing page: https://nysba.org/ethics-opinion-819/