November 13, 2002
A lawyer is not precluded by the Michigan Rules of Professional Conduct from seeking judicial approval of payment for time and expense incurred in responding to a grievance arising out of the lawyer's conduct as a court appointed receiver.
A receiver is an officer appointed by the court and is charged with enforcement of the court's orders pertaining to the receivership. A receiver does not have an attorney-client relationship with the party whose assets are subject to the receivership.
It is within the jurisdiction of the court appointing the receiver to review and approve compensation due for the receiver's services. The Michigan Rules of Professional Conduct do not prohibit a court, in its discretion, from awarding compensation to a receiver for the time and expense incurred in responding to a grievance.
References: MRPC 1.5(a); RI-296; Westgate v Westgate, 292 N.W. 569, 571 (Mich. 1940); Band v Livonia Associates, 439 N.W.2d 285, 293 (Mich. App. 1989); Hofmeister v Randall, 335 N.W.2d 65, 67 (Mich. App. 1983); Cohen v Bologna, 216 N.W.2d 586, 587 (Mich. App. 1974).
A lawyer has been appointed by various Michigan circuit courts to act as a receiver for debtors in domestic relations and other matters. Debtors or other parties interested in the receivership from time to time object to the receiver's conduct in administering the receivership. Occasionally, such parties complain to the Attorney Grievance Commission, necessitating a response by the lawyer with attendant time and expense. The lawyer wishes to include compensation for such time and expense in requests for approval of receiver's fees submitted to the appointing court. The lawyer requests an opinion whether the Michigan Rules of Professional Conduct preclude the lawyer from seeking and obtaining court approval for such time and expense as a compensable element of receiver's fees.
The Michigan Rules of Professional Conduct prohibit a lawyer from charging an excessive fee to a client. MRPC 1.5(a). The fees paid to a receiver, however, represent judicially approved payments for the receiver's services as a court appointed officer, and do not involve fee agreements with clients, or the charging or collecting of attorney's fees from clients.
A court appointed receiver is "a ministerial officer of the court appointing him." Cohen v Bologna, 216 N.W.2d 586, 587 (Mich. App 1974). The duty of the receiver is not to represent or advocate on behalf of a client, but "under the order of the court, to preserve and care for the property and turn it over to the person who is ultimately decided to be entitled thereto." Westgate v Westgate, 292 N.W. 569, 571 (Mich. 1940). "Figuratively, a receiver is the arm of the court, appointed to receive and preserve the litigating parties property." Hofmeister v Randall, 335 N.W.2d 65, 67 (Mich. App. 1983). The receiver "is charged with preserving the assets of the debtor for the benefit of both debtor and creditor and the receiver's jurisdiction over these assets is, in effect, that of the court itself." Cohen, 216 N.W.2d at 587. The receiver's power is derived from the court, not from representation of a litigating party. Therefore, a debtor whose property is the object of the receivership, and creditors of the debtor, are not clients of the lawyer by virtue of the lawyer's appointment as a receiver. The debtor and creditors have not entered into an arrangement with the lawyer for representation and payment of attorney's fees.
In RI-296, the Committee opined that a lawyer may charge a client only for time spent on the client's behalf. A lawyer may not charge for services that the client has not agreed to pay, and may not charge for time spent in responding to a grievance arising out of the lawyer's representation of the client.Fees for preparation of a response to a grievance filed by a client would not be appropriate, as the time expended on such matters inures to the benefit of the lawyer, not the client. RI-296.
A party whose property is the object of a receivership, however, is not a client of the receiver. Therefore, a receiver is not limited by ethical rules governing fees for which a lawyer may request compensation from a client.
The receiver's right to payment for service rendered in the course of the receivership is properly subject to judicial supervision and control. The receiver must submit to the court an account of expenses. The amount of compensation is within the discretion of the court. See Band v Livonia Associates, 439 N.W.2d 285, 293 (Mich. App. 1989). In addition, a "receiver cannot be sued without leave of the appointing court." Cohen, 216 N.W.2d at 587. If the party whose property is the object of a receivership, or a creditor of that party, believes the conduct of the receiver is inappropriate, the party's forum for redress is the court that appointed the receiver.
The Michigan Rules of Professional Conduct do not prohibit a court from compensating a receiver for time spent responding to an inquiry or investigation initiated by the Attorney Grievance Commission as a result of a complaint lodge by a party interested in the receivership proceedings.