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RICHMOND COUNTY BAR ASSOCIATION
COMMITTEE ON PROFESSIONAL ETHICS
OPINION # 6
January 22, 1992
The Committee is in receipt of an inquiry from an attorney who is considering becoming a participant in a
program sponsored by Legal Services Funding, Inc. (“LSF”). The program concerns the advance of credit to the attorney's clients,
on a basis substantially the same as the use of a credit card.
The participation Agreement permits the attorney to forward applications and vouchers representing and evidencing
legal services rendered to the client, to LSF which, after approval, provides the participating attorney with
a check for 90% of the face amount of the voucher.
The agreement also provides that (1) no false, fraudulent or misleading representations were made nor were unfair
or deceptive trade practices engaged in with respect to the Application and voucher; (2) the Application and
Voucher accurately describe and evidence the type of Service which has been and will be provided to Client;
(3) no Application or Voucher is subject to any dispute, offset, counter-claim or defense of any kind;
(4) the attorney has in force professional liability insurance in an amount no less than that considered prudent
for other professionals engaged in similar type of practice;
(5) any payment received by participant or participant's office which relates to any Voucher purchased by LSF
shall be delivered by participant to LSF immediately after participant s receipt of such payment;
(6) any person associated with participant s office is duly authorized to sign on behalf of participant and submit vouchers signed by the Client to LSF for payment and participant acknowledges that participant is fully responsible pursuant to the terms of this Agreement for all vouchers submitted to LSF, (7) participant shall not pass on to clients any amounts charged participant pursuant to the terms of this Agreement; and (8) the participating attorney will repurchase the vouchers from IJSF if the client refuses to pay due to a claim or complaint regarding the quality or amount of services rendered by the attorney, and the dispute is not resolved within 25 days.
The use of credit cards or similar arrangements whereby credit is advanced to the client for payment of legal services,
has been considered and approved in principal by the New York State Bar Association s Committee on
Professional Ethics, Op. #362.
Opinion 362 sets forth various safeguards and conditions of which lawyers should be aware when participating in
such arrangements. For example, the plan must specifically provide that the bank waives all defenses a holder
in due course might have in any action against the client. No such provision is to be found in the proposed Agreement
submitted to the Committee.
The opinion also states that the attorney must inform the client, orally and in writing, that any
assertable defenses the client may have regarding the legal services rendered can be asserted against
the bank as well, and that any dispute between lawyer and client is to be submitted to arbitration.
The proposed Agreement, by contrast, provides that no “Application or Voucher (submitted for approval)
is subject to any dispute, offset, counter—claim, or defense of any kind.”
The agreement contains a provision for mandatory arbitration of disputes, but it is between
the participating attorney and LSF, and thus not binding on the client.
The proposed agreement further mandates the participating attorney to subordinate his rights to recover
fees from the client on his own open account by requiring the client to pay all amounts owed LSF prior
to paying any amounts owed by the client to the participating attorney. This arrangement might very well
be construed as the equivalent of an assignment of the attorney's right to his fee to the extent of the
amount first owed to LSF, and thus a surrender by the lawyer of the power to determine whether or not to
enforce payment by the client, which is an essential feature of the attorney-client relationship.
(N.Y. County Op. #601; citing N.Y. State Op. #117; EC 2-23).
Finally, the proposed agreement permits the voucher and application to be signed by
“the person who will be responsible for repaying the credit extended under the system.”
If someone other than the client is responsible for the payment of fees, it must be done with the
consent of the client after full disclosure. If not, the lawyer is not permitted to accept compensation
for legal services from anyone other than the client (D.R. 5-107(a)(1)).
The inquirer’s attention is directed to these and other safeguards set forth in Opinions 117, 362, and 399
of the New York State Bar Association s Professional Ethics Committee, and he should ascertain
that all of the caveats contained therein are satisfied before entering into such an arrangement.
The Opinion #362 also advises participating attorneys to be aware of the following Ethical Considerations:
2-9, 2-10, 2-17, 5-2, 5-21, and 5-22.
Pursuant to Article VI, Section 19 of the R.C.]3.A. By-Laws, please be advised that the statements
contained herein express the Opinion of the Committee alone, and have not been passed upon the Association.
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Wayne M. Ozzi
Chairman, Professional
Ethics Committee |
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