Can a lawyer take suits referred by a lay collection agency where the agency pays the lawyer, uses his name, and controls the litigation?

Plain-English summary

Opinion E-61-1 examined an arrangement in which a collection agency retained an attorney on an annual retainer, obtained signed "suit authorization" forms from creditors when the agency took an account, and then commenced suits in the attorney's name without his knowledge of any particular case. The attorney did not appear on the return date, received no fee beyond the retainer in default or settled cases, and dealt with clients and accountings only through the agency. The committee concluded the attorney could not participate.

The committee held it clear that an attorney may not accept employment from a lay collection agency to litigate the agency's customers' claims where the arrangement (a) involves payment of the attorney's fees by the agency, (b) involves division of fees with the lay agency, (c) subjects the attorney to the agency's control, (d) involves retention arising out of the agency's solicitation, (e) permits the agency to use the attorney's name or process, or (f) serves as an aid to the agency's unauthorized practice of law. A lawyer may not permit his professional services to be controlled or exploited by a lay intermediary, and his relationship to the client must be personal and direct. The committee said this precludes furnishing blank signed process, or letting the agency sue in the lawyer's name or instruct a debtor to settle with the agency after suit. It found it equally improper for an attorney to be a regular employee or partner of a collection agency carrying on legal work for the agency's customers.

The committee analyzed the problem under five Canons: Canon 34 (division of fees), Canon 27 (advertising and solicitation), Canon 35 (intermediaries), Canon 41 (deception), and Canon 47 (aiding the unauthorized practice of law). It explained that a collection agency's attempt to collect its principals' claims in court is itself the unauthorized practice of law, that the agency may not solicit a claim on a representation that it will take legal action, and that a colorable or feigned assignment to permit suit is a deceptive sham barred by Canon 41 and by Wisconsin's real-party-in-interest rule (Wis. Stat. s. 260.13). The committee added that an agency could properly control such litigation only through a bona fide assignment for value in which the creditor relinquishes all right and title, that is, an outright purchase of the claim.

Currency note

This opinion was issued in 1961, before Wisconsin's July 1, 2007 adoption of the revised Rules of Professional Conduct for Attorneys (the state's Ethics 2000 update), and it applies former Canons 27, 34, 35, 41, and 47 of the Canons of Professional Ethics. The current counterparts are SCR 20:5.4 / Model Rule 5.4 (professional independence; fee sharing with and control by nonlawyers), SCR 20:5.5 / Model Rule 5.5 (unauthorized practice of law; assisting), and SCR 20:7.3 / Model Rule 7.3 (solicitation of clients). 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 retained by a collection agency to sue the agency's customers' debtors?

A: Under this opinion, not under the arrangement described. The committee held the lawyer may not participate where the agency pays or divides fees, controls the matter, solicits the work, or uses the lawyer's name.

Q: Can a lawyer let a collection agency file suits in his name?

A: No. The committee held a lawyer may not furnish blank signed process or permit the agency to bring suit in his name or instruct debtors to settle with the agency after suit.

Q: How could a collection agency properly bring suit on a claim?

A: The committee said the agency would need a bona fide assignment for value, with the creditor relinquishing all right and title, that is, an outright purchase of the claim.

Q: Is a collection agency's court collection itself a problem?

A: Yes. The committee stated that an agency's attempt to collect its principals' claims in court constitutes the unauthorized practice of law.

Background and rules framework

The opinion applied former Canon 34 (division of fees), Canon 27 (solicitation), Canon 35 (intermediaries), Canon 41 (deception), and Canon 47 (aiding unauthorized practice). The current counterparts are SCR 20:5.4 / Model Rule 5.4 (fee sharing with and control by nonlawyers), SCR 20:5.5 / Model Rule 5.5 (unauthorized practice), and SCR 20:7.3 / Model Rule 7.3 (solicitation).

Citations and references

Rules of Professional Conduct:

• Model Rule 5.4 / SCR 20:5.4 (professional independence; fee sharing with nonlawyers); former Canons 34, 35
• Model Rule 5.5 / SCR 20:5.5 (unauthorized practice of law; assisting); former Canon 47
• Model Rule 7.3 / SCR 20:7.3 (solicitation of clients); former Canon 27

Statutes:

• Wis. Stat. s. 260.13 (actions to be prosecuted in the name of the real party in interest)

Cases:

• Richmond Ass'n of Credit Men v. Richmond Bar Ass'n, 189 S.E. 153 (Va. 1937)
• Bay County Bar Ass'n v. Finance System, 345 Mich. 434, 76 N.W.2d 23 (1957)

See also

• WI Ethics Op. E-65-2: Lawyer-Employee of an Accounting Firm Serving Customers
• WI Ethics Op. E-72-2: Attorney Collection-Agency Form Arrangement

Source

• Landing page: https://www.wisbar.org/formembers/ethics/pages/formal-opinions.aspx
• Original PDF: https://www.wisbar.org/formembers/ethics/Ethics%20Opinions/E-61-1.pdf