Can a lawyer charge a contingent fee to collect child-support arrearages, and can the lawyer loan money to the opposing party to enable payment?

Plain-English summary

This opinion revisited the same facts as 94-F-134: a lawyer representing a woman seeking past-due child support from her ex-husband under a one-third contingent fee proposed to loan the ex-husband the money so he could pay the support. On the loan, the opinion repeated the conclusion that the arrangement was improper. Providing the means to pay the past-due support gave the lawyer a proprietary interest in the subject matter of the litigation under DR 5-103(A), and loaning the ex-husband the funds amounted, in a roundabout way, to advancing financial assistance to the lawyer's own client in circumvention of DR 5-103(B). The opinion again noted that loaning money to an adverse party creates an appearance of impropriety.

On the fee, the opinion modified the position 94-F-134 had taken. It recited that 94-F-134 had concluded a contingent fee in a child-support case was against public policy because the money was earmarked for the child's welfare, then turned to the Tennessee Court of Appeals' decision in Hall v. Davis (Carter v. Carter). That decision held there is no per se prohibition against a contingent fee in an action to collect child-support arrearages: a contingent fee is appropriate where the child is no longer a minor or the recovery is for reimbursement of the custodial parent rather than the present needs of the child, but it is improper where the recovery is for the present needs of the child, who should not be deprived of support by the deduction of fees. The Board stated that it agreed with the Court of Appeals' reasoning and that 94-F-134 was modified to conform with the ruling.

Currency note

This opinion was issued in 1994, before Tennessee's adoption of the 2003 Rules of Professional Conduct, which replaced the former Code of Professional Responsibility (including DR 5-103(A), DR 5-103(B), and DR 2-106) on which it relied, and before the ABA's 2002 Ethics 2000 revisions. The modern analogs are RPC 1.8(e) (financial assistance to a client), RPC 1.8(i) (proprietary interest in litigation), and RPC 1.5(d) (contingent fees in domestic relations matters). Subsequent rule amendments or later opinions may have changed the analysis. Treat this page as historical context, not current guidance, and verify against the current rules before relying on any specific requirement mentioned here.

Common questions

Q: Can a Tennessee lawyer charge a contingent fee to collect child-support arrearages?

A: Per the opinion, there is no per se prohibition. Following Hall v. Davis, a contingent fee is appropriate where the child is no longer a minor or the recovery reimburses the custodial parent, but it is improper where the recovery is for the child's present needs.

Q: How did this opinion change 94-F-134?

A: 94-F-134 had concluded a contingent fee in a child-support case was against public policy. This opinion modified that holding to conform to Hall v. Davis, which permits such a fee except where the recovery is for the child's present needs.

Q: Could the lawyer loan the opposing party money to pay the child support?

A: No. The opinion reaffirmed that doing so gave the lawyer a proprietary interest in the litigation (DR 5-103(A)) and was a roundabout advance of financial assistance to the lawyer's own client (DR 5-103(B)), besides creating an appearance of impropriety.

Background and rules framework

The opinion interpreted former DR 5-103(A) (proprietary interest in litigation), DR 5-103(B) (advancing financial assistance to a client), and the Code's fee provisions (DR 2-106), as applied through the Court of Appeals' decision in Hall v. Davis. The modern analogs are Model Rule 1.8(i) / Tennessee RPC 1.8(i) (no proprietary interest in the cause of action), Model Rule 1.8(e) / Tennessee RPC 1.8(e) (financial assistance to a client), and Model Rule 1.5(d) / Tennessee RPC 1.5(d) (limits on contingent fees in domestic relations matters).

Citations and references

Rules of Professional Conduct (former Code):

• DR 5-103(A) (proprietary interest in the subject matter of litigation). Modern analog: Model Rule 1.8(i) / Tennessee RPC 1.8(i)
• DR 5-103(B) (advancing financial assistance to a client). Modern analog: Model Rule 1.8(e) / Tennessee RPC 1.8(e)
• DR 2-106 (fees). Modern analog: Model Rule 1.5(d) / Tennessee RPC 1.5(d)

Cases:

• Hall v. Davis (Carter v. Carter), 19 TAM 41-7 (Tenn. App., M.S., Cantrell, 1994) (no per se bar on a contingent fee to collect child-support arrearages; improper where the recovery is for the child's present needs)

Other opinions cited:

• Tennessee Formal Ethics Opinion 94-F-134 (modified by this opinion)

See also

• Tennessee Op. 94-F-134: Loan to Adverse Party; Child-Support Contingent Fee (Modified)
• AL Ethics Op. 1998-01: Contingent Fees to Collect Child-Support Arrearages
• AL Ethics Op. 1996-01: No Contingent Fees in Divorce
• ABA Formal Op. 04-432: Posting Bail for a Client

Source

• Landing page: https://www.tbpr.org/ethic_opinions/94-f-134a

Original opinion text

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

94-F-134(a) - Attorney loaning funds to adverse party and contingent fee in child support matter

BOARD OF PROFESSIONAL RESPONSIBILITY OF THE SUPREME COURT OF TENNESSEE

FORMAL ETHICS OPINION 94-F-134(a)

Inquiry is made as to the propriety of an attorney loaning funds to the adverse party and whether a contingent fee may be charged in a child support matter.

The attorney represents a woman in an action to recover past due child support from her ex-husband. The ex-husband does not have the funds available to pay the child support. Therefore, the attorney offered to loan the ex-husband the funds so he can pay the attorney's client the past due child support. The attorney has a one-third contingent fee arrangement with his client.

The arrangement proposed by the attorney is clearly improper. DR 5-103(A) prohibits an attorney from acquiring a propriety interest in the subject matter of litigation he is conducting. In this case, the subject matter of the litigation is past due child support. By providing the means to pay the child support, the attorney is obtaining a proprietary interest in the subject matter of the litigation.

DR 5-103(B) prohibits an attorney from advancing or guaranteeing financial assistance to his client except in certain specified instances. The purpose of the loan would be to enable the exhusband to pay the past due child support. In a roundabout way, the attorney is providing financial assistance to his own client. Such a circumvention of the disciplinary rules is prohibited.

Furthermore, an attorney loaning money to an adverse party creates an appearance of impropriety. As the preamble to the Code of Professional Responsibility points out, lawyers, as guardians of the law, play a vital role in the preservation of society. By virtue of this position, a lawyer is held to higher standards of competency and integrity than a non-lawyer. Therefore, an attorney should avoid any actions that may cast suspicion on his integrity or motives. The loan arrangement proposed by the attorney would undermine society's respect and confidence in the attorney and the legal profession as a whole.

Also at issue is whether the attorney may charge a contingent fee to collect the past due child support. The board opined in Formal Ethics Opinion 94-F-134 that it is against public policy to charge a contingent fee in a child support case because that is money earmarked for the child's welfare.

The Court of Appeals in the recent case Hall v. Davis, Carter v. Carter 19 TAM 41-7 (Tenn. App., M.S., Cantrell, 1994) ruled there is no per se prohibition against a contingency fee in an action to collect child support arrearages. Contingent fees are appropriate where the child is no longer a minor and/or the recovery is for reimbursement of the custodial parent rather than the present needs of the child. However, the Court of Appeals went on to state that if the recovery is for the present needs of the child, a contingent fee is improper. The child should not be deprived of support by the deduction of fees for its recovery.

The Board of Professional Responsibility agrees with the Court of Appeals reasoning in the Hall v. Davis opinion. Formal Ethics Opinion 94-F-134 is modified to conform with the ruling in that opinion.

This 9th day of December, 1994.

ETHICS COMMITTEE:

Herman Morris, Jr.

James M. Glasgow, Jr.

Walker T. Tipton

APPROVED AND ADOPTED BY THE BOARD