May lawyers split a contingent fee after one withdraws to testify, and may a lawyer later lend the collected fee to the client?

Plain-English summary

One lawyer had worked on a contingent-fee matter but withdrew to become a witness. The committee said sharing the fee with that lawyer was not unethical if the division was based in some way on each lawyer's work, was reasonable, and had the client's informed consent and approval. It referred to Rule 1.5(e) and DR 2-107 as stated in the letter.

The committee also addressed collecting a contingent fee and then lending some of the money to the client. It said collecting a legitimate fee was ethical if there was no attempt to defraud creditors by directing the fee to the lawyer. For a later loan, it pointed to Rule 1.8 on business transactions with a client, said the loan should not depend on pending or threatened litigation's outcome, and treated a completely independent loan as unrelated to fee collection.

Currency note

This opinion was issued in 1987, before North Dakota's 2006 revisions to its Rules of Professional Conduct. The later North Dakota Opinion 06-05 states: “On August 1, 2006, material changes to N.D.R. Prof. Conduct 1.10(a) will take effect.” 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 Treat this page as historical context, not current guidance.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.

Common questions

Q: What conditions did the committee place on dividing the contingent fee?

A: The split had to relate to each lawyer's work, be reasonable, and receive the client's informed consent and approval.

Q: Could the lawyer lend part of the collected fee to the client?

A: The committee advised careful compliance with Rule 1.8 and said loans should not depend on pending or threatened litigation's outcome. It treated a completely independent loan as unrelated to collecting the fee.

Background and rules framework

The letter cites Rule 1.5(e), DR 2-107, Rule 1.8, and Rule 1.8(e)(3) using the source's terminology. It distinguishes fee division, legitimate fee collection without creditor fraud, and a later business transaction with the client.

Citations and references

Rules of Professional Conduct:

• Rule 1.5(e) and DR 2-107, cited by the committee for division of a contingent fee.
• Rule 1.8 and Rule 1.8(e)(3), cited for business transactions with a client and loans related to litigation.

See also

• ND Ethics Op. 04-02: Fee Splitting With a Suspended Lawyer
• ND Ethics Op. 11-06: Out-of-State Pre-Paid Legal Services Referral Arrangement

Source

• Landing page: https://www.sband.org/page/ethics_opinions
• Original PDF: https://web.archive.org/web/20250000000000id_/https://www.sband.org/resource/resmgr/docs/for_lawyers/87-11.pdf

Original opinion text

Best-effort transcription from a scanned PDF. Minor errors may remain; the linked PDF is authoritative.

December 29, 1987

Re: Ethics Opinion

This is to let you know that the Ethics Committee considered the questions presented by your letter of December 9, 1987, at its meeting on December 29, 1987.

The first question you presented was whether it is ethically proper for a contingent fee to be shared with an attorney who had previously worked on the case but was required to withdraw from representation in order to become a witness. The Committee would direct your attention to both Rule 1.5(e) of the Model Code of Professional Responsibility and Rule DR2-107 of the Code of Professional Responsibility and suggest that the safest course would be compliance with both. As long as the split of the contingent fee is somehow based on the amount of work put into the case by each of the lawyers, is reasonable, and is made with the consent and approval of the client after knowledge, there would be nothing unethical about your proposed sharing of the fee.

The second question you presented was whether it would be permissible for you to collect your portion of the fee, claim it as income and pay taxes on it, and turn around and loan some or all of that money back to the client. The Committee’s opinion is that as long as the fees you are collecting are a legitimate contingent fee and there is no attempt to defraud creditors in the direction of that fee to the attorney the collection of the fee would be ethical. With regard to loaning money to the client we would suggest that you comply carefully with Rule 1.8 of the Model Code of Professional Responsibility dealing with business transactions with a client. Loans should clearly not be contingent on the outcome of any pending or threatened litigation. Rule 1.8(e)(3). So long as the loan is a completely independent transaction to anything related to the legal relationship between lawyer and client, we feel it is a totally unrelated transaction to the actual collection of the fee.

I hope this response assists you in clarifying the questions that you have and deciding what course to follow.

Sincerely,

Patrick J. Ward, Chairman
Ethics Committee, State
Bar Association of North
Dakota

PJW:gb