Can a lawyer take a matter from an out-of-state collection agency on terms that forbid the lawyer from contacting or billing the actual client?

Plain-English summary

An out-of-state company hired an out-of-state collection agency to handle an account tied to materials supplied for a South Carolina property, authorizing the agency to file a mechanic's or materialman's lien. The agency, a corporation not authorized to do business in South Carolina, then hired a South Carolina lawyer to file and serve the lien notice, on the condition that the lawyer deal only with the agency: no direct contact with, and no direct billing of, the underlying company. The question was whether the agency was engaged in the unauthorized practice of law and whether the lawyer would violate the Rules by taking the work on those terms.

The committee said the definition of the practice of law (and what is unauthorized) is a question of substantive law outside its scope, so it did not decide whether the agency was practicing law. It explained that if the lawyer concludes the agency's activities are the unauthorized practice of law, Rule 5.5 prohibits assisting in that activity (citing State ex rel. Frierson v. Isner). The committee then held that even if the agency is not engaged in unauthorized practice, the lawyer still could not accept employment on the stated conditions. Rule 1.2 requires the lawyer to abide by the client's decisions on the objectives of the representation and to consult on means, and Rule 1.4 requires keeping the client reasonably informed, both of which the no-contact condition makes impossible. The arrangement also violates Rule 1.8(f), which allows third-party compensation only with the client's consent and without interference with the lawyer's independent judgment or the client-lawyer relationship, and Rule 5.4(c), which forbids a lawyer from letting the person who recommends, employs, or pays the lawyer direct or regulate the lawyer's professional judgment.

Currency note

This opinion was issued in 1990, before the South Carolina Bar's adoption of the 2005 revisions to the Rules of Professional Conduct. 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 Treat this page as historical context, not current guidance.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: Can a lawyer be hired by a collection agency to file a lien for the agency's customer?

A: The committee said not on terms that cut the lawyer off from the actual client. Even setting aside any unauthorized-practice issue, the conditions barring contact with and billing of the client violate Rules 1.2, 1.4, 1.8(f), and 5.4(c).

Q: Did the committee decide the agency was practicing law without a license?

A: No. It said whether conduct is the practice of law, or the unauthorized practice of it, is a question of substantive law outside the committee's scope, so it left that determination to the lawyer.

Q: Why does a "deal only with the agency" condition matter?

A: Because, the committee said, it prevents the lawyer from consulting with and informing the client as Rules 1.2 and 1.4 require, and it lets the paying third party direct the representation contrary to Rules 1.8(f) and 5.4(c).

Background and rules framework

The opinion applies Rule 5.5 (unauthorized practice), Rule 1.2 (scope and client decisions), Rule 1.4 (communication), Rule 1.8(f) (compensation from a third party), and Rule 5.4(c) (professional independence), each tracking the like-numbered Model Rule. The committee framed the analysis as two independent grounds: the unauthorized-practice prohibition (left to the lawyer to apply) and the duties owed directly to the client that the agency's conditions would defeat.

Citations and references

Rules of Professional Conduct:

• South Carolina RPC 5.5 / Model Rule 5.5: a lawyer shall not assist in the unauthorized practice of law.
• South Carolina RPC 1.2 / Model Rule 1.2: the lawyer abides by the client's decisions on objectives and consults on means.
• South Carolina RPC 1.4 / Model Rule 1.4: the lawyer keeps the client reasonably informed.
• South Carolina RPC 1.8(f) / Model Rule 1.8(f): a lawyer may accept third-party compensation only with the client's consent and without interference with judgment or the relationship.
• South Carolina RPC 5.4(c) / Model Rule 5.4(c): a lawyer shall not let a person who recommends, employs, or pays the lawyer direct or regulate the lawyer's professional judgment.

Cases:

• State ex rel. Frierson v. Isner, 168 W. Va. 758, 285 S.E.2d 641, cited for an analysis of the unauthorized practice of law by a collection agency.

See also

• SC Bar Ethics Op. 00-16: Debt-Firm Referral Fees
• SC Bar Ethics Op. 02-18: Hiring a Nonlawyer Lobbyist
• SC Bar Ethics Op. 90-44: Insurer-Directed Defense and Rule 5.4(c)

Source

• Landing page: https://www.scbar.org/for-lawyers/quicklinks/legal-resources/ethics-advisory-opinions/ethics-advisory-opinion-90-33/

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 90-33

Out-of -state company "C" hires out-of-state collection agency "A" to handle an account for materials provided for the construction or repair of a South Carolina property. Agency A is specifically authorized to take steps necessary to comply with statutory limitations and file a mechanic's or material man's lien on behalf of Company "C". Agency A simply hired a South Carolina attorney to file and serve a notice of lien at an agreed fee to be billed to the Agency. A condition of the hiring of the South Carolina attorney is that he is not to contact directly or bill directly Company C. All contact, correspondence, and billing must be directed by the attorney to Agency A. Agency A, by the way, is a corporation, not authorized to do business in South Carolina.

Question:
Is Agency A involved in the unauthorized practice of law and is the South Carolina attorney violating the Rules of Professional Conduct by participating in this activity?

Summary:
If the agency is involved in the unauthorized practice of law the attorney is prohibited from assisting in such activity. Even if the agency is not involved in the unauthorized practice of law the attorney would be violating the Rules of Professional Conduct by undertaking such a representation.

Opinion:
The definition of what constitutes the practice of law, or the unauthorized practice thereof, is a question of substantive law, not ethics, and does not come within the scope of this Committee. In the event that the attorney determines that the activities of Agency A constitute the unauthorized practice of law he is prohibited by Rule 5.5 of the Rules of Professional Conduct from assisting in such activity. (For an analysis of the unauthorized practice of law by collection agency, see State ex. rel. Frierson v. Isner, 168 W. Va. 758, 285 S.E. 2d 641.) Even if the agency is not involved in unauthorized practice of law the attorney would be prohibited from accepting employment under the conditions imposed by the agency. The Rules of Professional Conduct impose strict duties on an attorney concerning both communications with a client and lack of influence from a third party.

Rule 1.2 states that a lawyer shall abide by a client's decisions concerning the objectives of representation and shall consult with the client as to the means by which they are to be pursued. Based on the facts of this question the attorney is not to contact company "C", the client, and is, therefore, unable to fulfill his obligations under this rule. Under Rule 1.4, a lawyer is required to keep a client reasonably informed about the status of a matter and to explain a matter to the extent reasonably necessary to permit the client to take informed decisions regarding the representation. Agency "A"s condition that the lawyer not contact the client would prevent the attorney from complying with this requirement.

It is clear that the representation outlined in the facts of this question is also violative of Rule 1.8(f) which states "A lawyer shall not accept compensation for representing a client from one other than the client unless: (1) the client consents after consultation; (2) there is no interference with the lawyer's independent professional judgment or with the client-lawyer relationship.

Finally, the contemplated employment would also be in violation of Rule 5.4(c) which states: "A lawyer shall not permit a person who recommends, employs, or pays the lawyer to render legal services for another to direct or regulate the lawyer's professional judgment in rendering such legal services."