Could a lawyer represent a collection agency in suits where the lawyer's fee was paid by the agency out of its collection commission?

Plain-English summary

The inquiry posed three variations on a lawyer handling collection suits for a collection agency: (a) suits filed in the names of the account owners with their consent, with the lawyer's fee paid by the agency out of its contingent commission; (b) suits where the fee was charged to the account owner but paid by the agency out of its commission, on a flat or contingent basis; and (c) suits where the agency took assignments of the accounts for the purpose of filing suit although it paid nothing for them. Assuming the inquiries referred to fees in connection with suits, as distinguished from collection commissions, the Board answered all three in the negative.

The Board relied on Rule 36, which provided that no division of fees for legal services was proper except with another lawyer based on a division of service or responsibility, and Rule 37, which barred the exploitation of a lawyer's professional services by any lay agency intervening between client and lawyer and required the lawyer's relation and responsibility to run directly to the client. The Board stated that the taking of assignments by the collection agency in inquiry (c) did not alter the situation, "being a mere subterfuge."

The Board added that Rules 36 and 37, read with Rule 29 (which interdicted the use of touters to secure business), were designed to prevent the commercialization of the profession, and that Cause No. 9 of the Causes for Disbarment independently made dividing fees with anyone other than another attorney a ground for disciplinary proceedings.

Currency note

This opinion was issued in 1934, 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 The rules cited here, Rules 29, 36, and 37, belong to that superseded canon-era code, though their core principle, that a lawyer may not share legal fees with or have professional services exploited by a lay intermediary, persists in the modern fee-division and independence rules. 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 Treat this page as historical context, not current guidance.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: Could a lawyer take collection suits paid for by a collection agency out of its commission?

A: No. The opinion held that all three variations of the arrangement were improper under Rules 36 and 37, which barred dividing legal fees with a lay agency and barred a lay intermediary from intervening between lawyer and client.

Q: Did it help if the agency took an assignment of the account before suit?

A: No. The Board described the assignment device in inquiry (c) as "a mere subterfuge" that did not change the analysis.

Q: What additional ground did the opinion cite?

A: Cause No. 9 of the Causes for Disbarment, which made dividing or agreeing to divide legal fees with anyone other than another attorney a cause for disciplinary proceedings.

Background and rules framework

The opinion applied Rule 36 (no division of fees except with another lawyer based on division of service or responsibility), Rule 37 (no exploitation of a lawyer's services by a lay agency intervening between client and lawyer), and Rule 29 (no use of touters to secure business) of the canon-era Oklahoma Rules of Professional Conduct, together with Cause No. 9 of the Causes for Disbarment. These rules were drawn from the ABA Canons of Professional Ethics. The opinion predates the Model Rules and made no Model Rule citation.

Citations and references

Rules of Professional Conduct:

• Rule 29 (1929 Oklahoma Rules of Professional Conduct): interdicting the use of touters to secure business.
• Rule 36 (1929 Oklahoma Rules of Professional Conduct): no division of fees for legal services except with another lawyer based on division of service or responsibility.
• Rule 37 (1929 Oklahoma Rules of Professional Conduct): a lawyer's services should not be exploited by a lay agency intervening between client and lawyer; the lawyer's relation and responsibility run directly to the client.

Other authorities:

• Cause No. 9 of the Causes for Disbarment: dividing fees for legal services with anyone other than another attorney is a cause for disciplinary proceedings.

See also

• Okla. Bar Ethics Op. 107: Sharing collection fees with a non-lawyer forwarder
• Okla. Bar Ethics Op. 10: Sharing a collection fee with a lay forwarder
• Okla. Bar Ethics Op. 7: Returning collected fees to a loan company

Source

• Landing page: https://www.okbar.org/ethics/ethics-opinion-no-72/

Original opinion text

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

Adopted June 22, 1934

The Board is in receipt of the following request for an opinion:

(a) "May an attorney represent a collection agency in suits in local courts, the fee to be paid by the agency and the suits to be filed in the name of the owners of the accounts with their consent where the collection agency has the claim for collection upon a contingent fee basis and the attorney fee will be paid out of the fee due to the agency?"

(b) "Can the collection agency be represented by an attorney where the fees are charged to the owner of the account but the fee to be paid by the agency out of its commission, the fee to be either a flat one or on a contingent basis?"

(c) "Can a collection agency be represented where assignments are taken of the account to the collection agency for the purpose of filing suit but where no money was actually paid by the agency for the account?"

Assuming that all the inquiries refer to "fees" in connection with suits as distinguished from collection commissions, all the inquiries are answered in the negative.

Rule 36 of the rules of professional conduct provides:

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

Rule 37, provides:

"The professional services of a lawyer should not be exploited by any lay agency, personal or corporate, which intervene between client and lawyer. A lawyer's responsibility and qualifications are individual. He should avoid all relations which direct the performance of his duties by or in the interest of such intermediary. A lawyer's relation to his client should be personal, and the responsibility should be direct to the client. …

A lawyer may accept appointment from any organization such as an association, club or trade organization, to render legal services in any matter in which the organization, as an entity, is interested, but this employment should not include rendering of legal services to the members of such organization in respect to their individual affairs."

The taking of assignments by the collection agency, as contemplated in inquiry (c) does not alter the situation, being a mere subterfuge.

The provisions of Rules 36 and 37 are clear and unambiguous and, now appearing as recently amended, taken in connection with the provisions of Rule 29 interdicting the use of touters to secure business, are designed to prevent the commercialism of the profession and its consequent demoralization.

In addition to the foregoing, Cause No. 9 of the Causes for Disbarment, etc., provides as a cause for disciplinary proceedings:

"That he (a member of the bar) has divided or agreed to divide fees for legal services with anyone other than another attorney entitled to practice law and if the fee is earned or received in a cause pending in court, then only with an attorney of record therein."