Can a lawyer on a monthly retainer or salary from a loan company collect the attorney fees stipulated in the company's notes and turn those fees over to the company?

Plain-English summary

A bar member asked about two arrangements involving loan companies. In the first, a general-practice attorney accepted a monthly retainer from a personal or chattel loan company under an agreement to sue for and collect the company's notes, including the stipulated attorney fee, and to return both the principal and interest and the collected attorney fee to the company, with the monthly retainer as his only compensation. In the second, the attorney was not in general practice but was employed on a regular salary by the company and likewise collected and returned the stipulated attorney fee.

For the first arrangement, the Board concluded that delivering the collected attorney fees to the client, to the extent they exceeded the retainer, violated Rule 36 of the Rules of Professional Conduct, which permitted division of fees only with another lawyer based on a division of services or responsibility, and was a cause for discipline under Cause Nine. Even if the fees delivered were less than the retainer, the Board concluded the practice violated the spirit of Rule 36 and Cause Nine and was to be severely condemned.

For the second arrangement, the Board concluded that it was not only unethical for a salaried attorney to collect the stipulated attorney fee and deliver it to the employer in lieu of salary, but also a sufficient cause for discipline under Cause Eleven, which addressed paying fees earned or received to one's employer in lieu of salary.

Currency note

This opinion was issued in 1936, decades before Oklahoma replaced its original Rules of Professional Conduct (patterned on the ABA Canons of Professional Ethics) with the Oklahoma Rules of Professional Conduct (adopted 1988) and the later Ethics 2000 revisions. The rule number cited here, Rule 36, belongs to that superseded canon-era code and does not correspond to the current Oklahoma Rules of Professional Conduct. Subsequent rule amendments and 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 Treat this page as historical context, not current guidance.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 on retainer to a loan company turn the collected attorney fees over to the company?

A: The opinion concluded that delivering collected attorney fees to the company, beyond the retainer, was an improper division of fees with a non-lawyer under Rule 36 and a cause for discipline.

Q: Does it matter if the lawyer is salaried rather than on a retainer?

A: The opinion concluded a salaried attorney who collected the stipulated attorney fee and delivered it to the employer in lieu of salary acted unethically and gave a sufficient cause for discipline under Cause Eleven.

Q: What if the fees returned were less than the retainer?

A: The opinion concluded that even then the practice violated the spirit of Rule 36 and Cause Nine and was to be severely condemned.

Background and rules framework

The opinion applied Rule 36 of the then-current Oklahoma Rules of Professional Conduct, permitting fee division only with another lawyer based on a division of services or responsibility, along with Causes Nine and Eleven of the Causes for Disbarment, Suspension, or Other Disciplinary Action. Rule 36 was drawn from the ABA Canons of Professional Ethics in force at the time. The prohibition on sharing fees with non-lawyers corresponds in current practice to the rule on fee division with nonlawyers, though the opinion predates the Model Rules and made no such citation.

Citations and references

Rules of Professional Conduct:

• Rule 36 (1929 Oklahoma Rules of Professional Conduct): no division of fees for legal services is proper except with another lawyer based on a division of services or responsibility.

Other authority:

• Cause Nine of the Causes for Disbarment, Suspension, or Other Disciplinary Action (dividing fees with anyone other than a licensed attorney)
• Cause Eleven of the Causes for Disbarment, Suspension, or Other Disciplinary Action (paying fees to one's employer in lieu of salary)

See also

• Okla. Bar Ethics Op. 6: Sharing a Fee With the Client
• ABA Formal Op. 464: Fee Division Across Jurisdictions
• ABA Formal Op. 95-392: Sharing Fees With Employer

Source

• Landing page: https://www.okbar.org/ethics/ethics-opinion-no-7/

Original opinion text

Reproduced from the official source for research purposes. The linked source is authoritative.

Adopted September 25, 1936

A member of The State Bar of Oklahoma has requested the Board of Governors of The State Bar of Oklahoma to express its opinion in answer to the following inquiries:

(1) "I understand that there are a number of attorneys in Oklahoma who, being in the general practice of law, accept monthly retainers from Personal or Chattel Loan Companies under an agreement whereby they will sue for and collect the notes of such company, including the stipulated attorney's fee in such notes, and upon collection will return the principal and interest collected upon the judgment and will also return the amount of the attorney's fee collected through judgment to such company. The only compensation to the attorney being the monthly retainer.

(2) Suppose the attorney for such loan company is not in the general practice but is employed on a regular salary by such company. Is it ethical for such attorney to collect the attorney fee stipulated in the notes collected and return such fee to such loan company?"

With reference to the first inquiry:

Assuming that the inquiry implies that the amount of the attorney's fee so delivered to the client is in excess of his retainer, it is the opinion of the Board of Governors that the delivery to such client of fees so collected by such lawyer constitutes a violation of Rule 36 of the Rules of Professional Conduct which provides:

"No division of fees for legal services is proper, except with another lawyer, based upon a division of services or responsibility."

The Board of Governors is also of the opinion that the delivery by the lawyer of fees so collected by him constitutes a cause for disbarment, suspension or other disciplinary action. The causes for disbarment, etc., adopted by the Board of Governors and approved by the Supreme Court, provides:

"That the following shall be considered sufficient causes for disbarment, etc., …

9. That he has divided or agreed to divide fees for legal services with anyone other than another attorney entitled to practice law. …"

If the amount of fees delivered to the client is less than the retainer, the Board of Governors is still of the opinion that the delivery of such fees to the client is in violation of the spirit of Rule 36 and of cause 9 of the Causes for Disbarment, etc., and is a practice to be severely condemned.

In answer to inquiry No. 2:

It is the opinion of the Board of Governors that it is not only unethical for an attorney to collect the attorney's fee stipulated in the notes and to deliver such fees to his client in lieu of his salary, but also that such act is a sufficient cause for disbarment or suspension or for the imposition of disciplinary measures upon the attorney. The causes for disbarment, etc., provide:

"That the following shall be considered sufficient causes for disbarment, etc., …

11. That he has divided or agreed to divide fees earned or received with his client or has paid such fees to his employer in lieu of salary or compensation received from his employer."