Can a lawyer trade help collecting a doctor's bills for patient referrals, and can a non-law business tell customers its lawyer escrows all sale proceeds?

Plain-English summary

The inquiry raised two questions. First, may a lawyer ask a doctor for referrals and, in return, agree to protect the doctor's medical fees out of any suit recovery or settlement (with the referred client's consent)? Second, may a non-law business tell its customers that all funds it receives from sales or rentals are escrowed by the business's attorney?

On the first question, the committee said no. It read the arrangement as a quid pro quo in which the physician refers patients with potential claims to the lawyer, who in turn guarantees, where there is recovery, payment of outstanding medical bills. Rule 7.2(c) is explicit that a lawyer shall not give anything of value to a person for recommending the lawyer's services, and assurances of help collecting medical bills are arguably of value, so the arrangement is proscribed (citing In re Bloom). The committee distinguished a permissible practice: a lawyer may, on behalf of an existing client, assure a physician that bills will be paid to obtain continued treatment or needed reports, with the client to reimburse those costs, so long as the arrangement serves an existing client rather than rewarding the solicitation of business.

On the second question, the committee said nothing in the Rules forbids a lawyer from escrowing a business's sales proceeds on a regular basis, provided the lawyer complies with Rule 1.15(b), which requires promptly notifying the client or third party of deposits, accounting for the funds on request, and promptly delivering funds to which a client or third party is entitled. The committee flagged that the prompt-delivery duty can place the lawyer in conflict if a dispute arises between the client and a customer, noting (per the Rule 1.15 commentary) that a lawyer may have to protect third-party claims and may refuse to surrender property to the client, but may not unilaterally arbitrate a client-third-party dispute. It also observed that, under Rule 4.1, if the lawyer learned the client was not escrowing all funds after representing that it would, the lawyer could be required to inform the customers, and that such a wholesale arrangement would be difficult and warranted careful consideration of the responsibilities and costs.

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 offer to help collect a doctor's bills in exchange for patient referrals?

A: The committee said no; assurances of help collecting medical bills are arguably of value, so trading them for referrals gives something of value for a recommendation contrary to Rule 7.2(c).

Q: Can a lawyer ever assure a doctor that a client's bills will be paid?

A: The committee said yes, when done on behalf of an existing client to obtain continued treatment or needed reports, with the client to reimburse the costs, rather than as a reward for soliciting business.

Q: Can a lawyer escrow a non-law business's sale proceeds?

A: The committee said yes, if the lawyer complies with Rule 1.15(b)'s notice, accounting, and prompt-delivery duties and the arrangement is not misrepresented to the business's customers; it cautioned that a client-customer dispute could create a conflict the lawyer may not unilaterally arbitrate.

Background and rules framework

The opinion applies Rule 7.2(c) (giving value for recommendations), Rule 1.15 (safekeeping property), and Rule 4.1 (truthfulness to others), each corresponding to the like-numbered Model Rule. The committee treated the referral arrangement as governed by the anti-payment-for-recommendation rule and the escrow arrangement as governed by the trust-accounting and candor rules.

Citations and references

Rules of Professional Conduct:

• South Carolina RPC 7.2(c) / Model Rule 7.2: a lawyer shall not give anything of value to a person for recommending the lawyer's services.
• South Carolina RPC 1.15 / Model Rule 1.15: safekeeping of client and third-party funds, including notice, accounting, and prompt delivery.
• South Carolina RPC 4.1 / Model Rule 4.1: truthfulness in statements to others.

Cases:

• In re Bloom, 217 S.E.2d 143 (1975).

Other opinions cited:

• ABA Informal Ethics Opinions 664 (1963) and 1084 (1969): a lawyer may assure a physician of payment to obtain treatment or reports for an existing client.

See also

• SC Bar Ethics Op. 18-02: Chiropractor-Funded Ads
• SC Bar Ethics Op. 00-16: Debt-Firm Referral Fees
• SC Bar Ethics Op. 90-36: Highway Patrol Referrals

Source

• Landing page: https://www.scbar.org/for-lawyers/quicklinks/legal-resources/ethics-advisory-opinions/ethics-advisory-opinion-90-40/

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 90-40

All facts provided with this inquiry are contained in the text of the questions.

Questions:

1. May an attorney ask for referrals from a doctor and agree to protect the doctor's medical fees (if the referral consents to this, of course) from the results of suit or settlement?
2. May a business not engaged in the practice of law advise customers (or potential customers) that all funds received from sales or rentals are escrowed by the business's attorney?

Summary:

1. An attorney may not exchange assistance in collecting medical fees for referral of client. Rule of Professional Conduct. 7.2(c).
2. An attorney may provide escrow services for a client provided he complies with the requirement of the rules for maintenance of client funds and the arrangement is not misrepresented to the business's customers. Rules of Professional Conduct 1.15 and 4.1.

Opinion:
Question 1. This question implies a quid pro quo with a physician referring patients with potential legal claims to an attorney who in turn guarantees in all instances where there is recovery and the client agrees to pay outstanding medical bills.

Rule 7.2(c) is explicit: A lawyer shall not give anything of value to a person for recommending the lawyer's services,...

Assurances of assistance in the collection of outstanding medical bills are questionably of value and therefore this arrangement is proscribed by the Rules. See also In Re Bloom, 217 S.E. 2d 143 (1975).

However, it is permissible for a lawyer on behalf of a client to assure a physician that their bills will be paid in order to obtain continued treatment for the client or reports necessary to pursue the client's legal claims. The lawyers arrangement with the client should provide for reimbursement by the client for these costs. See ABA Informal Ethics Opinion 664 (1963) and 1084 (1969). The arrangement must be in the interest of an existing client rather than as a reward for soliciting business on behalf of an attorney. Question 2. The second question presented by the inquiry asks whether an attorney can escrow sales proceeds for a client on a regular basis. Nothing in the rules forbids this practice provided the attorney complies with Rule 1.15(b) which sets forth the conditions for an attorney holding funds for a client or third party. These include promptly notifying the client or third party of the deposit of such funds, providing a full accounting of the funds for the client or third party on request and promptly delivering funds to which a client or third party is entitled.

The third requirement of prompt delivery has the potential for placing the attorney in a position of conflict with his client should a dispute arise between the client and a customer about the disposition of funds. The commentary at Rule 1.15 discusses this situation:

"Third parties, such as client's creditors, may have just claims against funds or other property in a lawyer custody. A lawyer may have a duty applicable law to protect such third-party claims against wrongful interference by the client, and accordingly may refuse to surrender the property to the client. However, a lawyer may not unilaterally assume to arbitrate a dispute between the client and third party." These considerations and the possible difficulties should be discussed thoroughly with the client prior to undertaking such an arrangement. Furthermore, the client should be informed that if the attorney became aware that the client was not escrowing all funds with him after such assertions were made, Rule 4.1 could require the attorney to unilaterally inform the client's customers of this fact. While the rules do not prohibit such an arrangement, it would be fraught with difficulties if done on a wholesale basis and should only be undertaken after careful considerations by the attorney and client of the responsibilities and potential costs involved.