RI-132
May 27, 1992
SYLLABUS
A lawyer may not undertake representation of prospective clients under an arrangement whereby a third party pays the lawyer's fee, the fee is contingent upon the prospective client settling the matter on terms favored by the third party, and the scope of the representation is limited by the third party to explaining the terms of the proposed settlement.
References: MRPC 1.2, 1.7(b), 1.8(f), 5.4(c).
TEXT
Approximately 700 parties were offered an opportunity to settle potential liability claims in an environmental law matter. A number of parties wanted to accepted the offer and executed the proper documents, but the proposal was rejected by the US Environmental Protection Agency. A counter-proposal by the EPA would involve additional documents, recontacting the interested parties, and incur transaction costs and legal fees.
The "moving party" which the EPA holds accountable for remediation has approached several law firms to act as joint counsel to facilitate and expedite the settlement. The moving party proposes to pay legal fees for the parties from a common trust fund, but requires that the legal services be limited to advice regarding the terms of the EPA's counter-proposal, and preparation of pleadings and appearance at the necessary court proceedings to execute the EPA's counter-proposal. The moving party would not pay for work outside the services described, and would only pay counsel if the clients in fact settle. One of the lawyers approached to act as joint counsel under the arrangement asks whether it is proper.
MRPC 1.8(f) prohibits a lawyer from accepting compensation from someone other than the client unless the client consents after consultation, there is no interference with the lawyer's independent professional judgment or with the lawyer-client relationship, and information regarding the representation is protected. Thus the lawyer may not agree to accept payment from the moving party unless these conditions are met.
MRPC 1.2 states:
"(a) A lawyer shall seek the lawful objectives of a client through reasonably available means permitted by law and these rules. A lawyer does not violate this rule by acceding to reasonable requests of opposing counsel which do not prejudice the rights of the client, by being punctual in fulfilling all professional commitments, by avoiding offensive tactics, or by treating with courtesy and consideration all persons involved in the legal process. A lawyer shall abide by a client's decision whether to accept an offer of settlement or mediation evaluation of a matter. In a criminal case, the lawyer shall abide by the client's decision, after consultation with the lawyer, as to a plea to be entered, whether to waive jury trial, and whether the client will testify. In representing a client, a lawyer may, where permissible, exercise professional judgment to waive or fail to assert a right or position of the client.
"(b) A lawyer may limit the objectives of the representation if the client consents after consultation.
"(c) A lawyer shall not counsel a client to engage, or assist a client, in conduct that the lawyer knows is illegal or fraudulent, but a lawyer may discuss the legal consequences of any proposed course of conduct with a client and may counsel or assist a client to make a good-faith effort to determine the validity, scope, meaning, or application of the law.
"(d) When a lawyer knows that a client expects assistance not permitted by the Rules of Professional Conduct or other law, the lawyer shall consult with the client regarding the relevant limitations on the lawyer's conduct."
Only the client may determine whether to accept a settlement under MRPC 1.2(a). MRPC 1.7(b) states:
"(b) A lawyer shall not represent a client if the representation of that client may be materially limited by the lawyer's responsibilities to another client or to a third person, or by the lawyer's own interests unless:
"(1) the lawyer reasonably believes the representation will not be adversely affected; and
"(2) the client consents after consultation. When representation of multiple clients in a single matter is undertaken, the consultation shall include explanation of the implications of the common representation and the advantages and risks involved."
The facts state that the moving party is interested in settlement and so are the prospective clients. However, the legal services proposed do not address the need of the prospective clients, but rather the preferences of the moving party. Clearly the scenario presented is a conflict of interest. The fact that the lawyer is paid only if the prospective clients agree to the settlement violates MRPC 1.7(b), since the lawyer's desire for payment would materially limit the lawyer's ability to adequately counsel the prospective client regarding alternatives to settlement and the viability of the proposed settlement for that particular client. The fact that the clients want to settle and may well be fully informed, does not remove the stench of conflict of interest or the service onerous of two masters.
MRPC 5.4(c) states:
"(c) A lawyer shall not permit a person who recommends, employs, or pays the lawyer to render legal services for another to direct or regulate the lawyer's professional judgment in rendering such legal services."
The moving party is contracting with the lawyer to "shepherd" the clients to a settlement, and will not pay if the lawyer provides services beyond those stipulated. The lawyer's independent judgment concerning the options available to the prospective client is extinguished.
Therefore, the proposed arrangement violates MRPC 1.2, 1.7, 1.8(f) and 5.4(c), and a lawyer may not ethically participate in the proposed arrangement.