December 28, 1995
A law firm governed by the Legal Services Corporation Act which refers a client to private counsel for collection of a judgment obtained by the firm may not concurrently pursue collection on its own behalf of the attorney fees awarded by the court when there are insufficient assets to satisfy both the client's judgment and the fee award, unless the former client consents.
References: MRPC 1.9(a); RI-137, RI-174.
A non-profit law firm governed by the Legal Services Corporation Act is prohibited from undertaking of fee generating cases and is required to refer fee generating cases to private counsel where a contingent fee is possible. In a particular matter, the law firm has prevailed for the client and been awarded attorney fees by the court. Ordinarily, the matter of collecting the client's judgment would be referred to the private bar as a fee generating matter.
The inquirer asks whether it can collect attorney fees on its own behalf when it cannot collect the monetary judgment on its client's behalf due to its fee generating nature. Further, if the resources available from the adverse party are limited, would the law firm's actions in pursuing the award impermissibly conflict with the client's ability to recover?
MRPC 1.9(a) addresses conflicts of interest with a former client, and states:
"(a) A lawyer who has formerly represented a client in a matter shall not thereafter represent another person in the same or a substantially related matter in which that person's interests are materially adverse to the interests of the former client unless the former client consents after consultation."
MRPC 1.9(a) forbids a lawyer from undertaking new representation substantially related to the representation of a former client and materially adverse to the former client's interests, unless the former client consents. Once the referral is made to the private law firm, the client is a "former client" within MRPC 1.9(a). Independent pursuit of the court-awarded fees from the opposing party is "substantially related" to the representation of the former client in the primary matter.
Is the pursuit of the court-awarded fees "materially adverse" to the former client? If there are limited assets from which recovery may be had, then the law firm's pursuit of the court-awarded fees competes with the private law firm's collection action on behalf of the client. In RI-137, we opined that where success of a lawyer in a prospective case would detrimentally affect a former client's ability to collect, the lawyer has a conflict of interest under MRPC 1.9(a). Similarly, in RI-174, a lawyer was prohibited from undertaking new representation which would have challenged the right of the lawyer's former client to property obtained for the client through the lawyer's services. In the current inquiry, unless the client consents, the law firm may not pursue the court-awarded fees in competition with the former client when there are insufficient assets to satisfy both parties.