Can a lawyer take cases through an attorney-matching service that pays part of the fee but forbids the lawyer from telling the client what the service paid?

Plain-English summary

A potential client paid a fee to a group, XYZ, that acts as an attorney-matching service for family court matters. In return, XYZ would pay an attorney $800 plus filing fees to consult with the client, prepare pleadings, and attend one hearing, after which the attorney would bill the client at the attorney's normal hourly rate. The attorney knows before taking the case that the matter will need legal services beyond those XYZ paid for; the typical retainer for the services requested is $2,500. XYZ requires the attorney to sign a contract with a clause preventing discussion of the particulars of the agreement, including payment, between attorney and XYZ. The inquiry asked whether a fee agreement could adequately inform the client without violating that contract, whether the attorney could honor the duty of loyalty and still comply with the contract, and whether the arrangement involves impermissible fee splitting.

The committee concluded that Rule 1.8(f) and its comments prevent the attorney from entering this arrangement, so it was unnecessary to address each question separately. Rule 1.8(f) sets the conditions for accepting compensation from someone other than the client: the client must give informed consent, the lawyer's professional judgment must not be compromised, and information relating to the representation must be protected under Rule 1.6. Because XYZ's contract prohibits the lawyer from disclosing the amount XYZ paid, the lawyer cannot obtain the client's informed consent. The committee noted that comment 12 to Rule 1.8 suggests such fee arrangements may create a conflict prohibited by Rule 1.7, since signing the XYZ contract places at risk both the duty to the client (informed consent) and the lawyer's own personal interests (the contractual obligations to XYZ). Because Rules 1.8(f) and 1.7 appear to prohibit the arrangement, the committee saw no need to respond to the specific inquiries.

In practice

The opinion holds that, under South Carolina Rule 1.8(f), a lawyer may not accept cases through an attorney-matching service whose contract bars disclosing the service's payment to the client, because the client's informed consent to the third-party payment cannot be obtained. The opinion treats the gag clause as also implicating Rule 1.7 (comment 12 to Rule 1.8), pitting the lawyer's duty to the client against the lawyer's contractual obligation to the service. The opinion does not separately resolve the fee-splitting question, finding the Rule 1.8(f) and 1.7 problems dispositive.

Common questions

Q: Can a lawyer take third-party-funded cases from a matching service that says payment terms are confidential?

A: No. The committee said Rule 1.8(f) requires the client's informed consent to a third party paying the fee, and a contract barring the lawyer from disclosing what the service paid makes that consent impossible.

Q: Why is the confidentiality clause the problem?

A: It blocks informed consent. The committee said the lawyer cannot obtain the client's informed consent under Rule 1.8(f) when prohibited from telling the client the amount the service paid.

Q: Does the arrangement also create a conflict of interest?

A: It risks one. The committee said comment 12 to Rule 1.8 suggests these fee arrangements may create a Rule 1.7 conflict, because the lawyer's contract with the service is set against the duty to the client.

Background and rules framework

The opinion interprets South Carolina Rule 1.8(f) (compensation from a third party; informed consent, uncompromised judgment, and confidentiality under Rule 1.6) and Rule 1.7 (conflicts; comment 12 to Rule 1.8), which correspond to the like-numbered Model Rules. The analysis turns on the impossibility of informed consent when the lawyer is contractually barred from disclosing the third party's payment.

Citations and references

Rules of Professional Conduct:

• MR 1.8 / SC Rule 1.8(f) and Comment 12 (third-party compensation; informed consent; possible conflict)
• MR 1.7 / SC Rule 1.7 (conflicts of interest)
• MR 1.6 / SC Rule 1.6 (confidentiality)

See also

• SC Bar Ethics Op. 13-04: Nonprofit-Funded Trust Money
• SC Bar Ethics Op. 12-03: Lawyers on Q&A Pay Sites

Source

• Landing page: https://www.scbar.org/for-lawyers/quicklinks/legal-resources/ethics-advisory-opinions/ethics-advisory-opinion-14-01/
• Original PDF: https://www.scbar.org/media/pykeirgz/14-01.pdf

Original opinion text

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

UPON THE REQUEST OF A MEMBER OF THE SOUTH CAROLINA BAR, THE ETHICS ADVISORY COMMITTEE HAS RENDERED THIS OPINION ON THE ETHICAL PROPRIETY OF THE INQUIRER’S CONTEMPLATED CONDUCT. THIS COMMITTEE HAS NO DISCIPLINARY AUTHORITY. LAWYER DISCIPLINE IS ADMINISTERED SOLELY BY THE SOUTH CAROLINA SUPREME COURT THROUGH ITS COMMISSION ON LAWYER CONDUCT.

Ethics Advisory Opinion 14-01

SC Rules of Professional Conduct: 1.6, 1.7, 1.8

Facts:

A potential client paid a fee to a group called XYZ that acts as an attorney matching service for family court matters. In return, XYZ will pay $800, plus filing fees, for an attorney to consult with the client, prepare pleadings, and attend one hearing. Thereafter, the attorney is to bill the client at his/her normal hourly rate. The attorney knows, before taking the case, that the matter will require legal services to the client beyond those paid for by XYZ. The typical retainer for the kind of legal services requested by the client is $ 2,500.00.

XYZ requires that the attorney sign a contract for services that includes a clause that prevents discussing the particulars of the agreement, including payment, between attorney and XYZ.

Questions:

1. Is it possible to craft a fee agreement that adequately informs the client without violating the contract referenced above?

2. Can the attorney honor the duty of loyalty and still comply with the contract from XYZ?

3. Would this arrangement involve impermissible fee splitting?

Summary:

Rule 1.8(f) and the comments following the rule prevent the attorney from entering into this arrangement. It is unnecessary to specifically address each question since the requirements of Rule 1.8(f) cannot be met under the contractual restrictions required by XYZ.

Opinion:

Rule 1.8(f) of the Rules of Professional Conduct sets forth the conditions under which a lawyer can accept compensation for representation from someone other than the client. In order to accept compensation from someone other than the client, the client must give informed consent, the lawyer’s professional judgment must not be compromised, and the information relating to the representation of the client must be protected as required by Rule 1.6.

Rule 1.8(f) requires the lawyer to obtain informed consent from the client to proceed with a scenario in which a third party pays the attorney’s fee. Since the contract between XYZ and the lawyer prohibits the lawyer from disclosing the amount paid to the lawyer by XYZ, the lawyer is unable to obtain the client’s informed consent. Comment 12 to Rule 1.8 also suggests that these fee arrangements may create a conflict of interest prohibited by Rule 1.7. By signing the contract with XYZ, the attorney places at risk the duty to the client (informed consent) and his own personal interests (contractual obligations to XYZ).

As Rule 1.8(f) and Rule 1.7 appear to prohibit this type of contractual arrangement, the Committee finds no need to respond to to the specific inquiries.