Ethics Hotline & Opinions

ETHICS DOCKET NO. 1989-48

"

MARYLAND STATE BAR ASSOCIATION, INC.

COMMITTEE ON ETHICS

ETHICS DOCKET NO. 1989-48

Attorney taking contingency fee from judgment against defendant rather than from settlement funds from insurer


Your letter poses the following facts:

You represent the plaintiff in a personal injury action resulting from an automobile accident. Defendant is represented by an attorney for her insurance carrier and by her private counsel. The parties have reached a tentative agreement as to the amount of the damage to be paid to your client. The agreed amount is to be paid by the insurance carrier to the extent of the policy limits with the balance to be paid by the defendant personally. A judgment would be entered against the defendant for the amount of the settlement. However, because of her circumstances, the defendant cannot pay her portion of the judgment immediately.

If permitted by the Maryland Rules of Professional Conduct, you propose to forego collecting any portion of your contingent fee from the amounts paid by the insurance carrier and accept an assignment from your client of the judgment against the defendant. Any difference between the amount to be paid personally by the defendant and the amount of your fee would be paid by you to your client in cash. You then would collect the unpaid portion of the judgment from the defendant as she pays in accordance with the settlement agreement.

You question whether such an arrangement would be in conflict with Rule 1.8(j) of the Maryland Rules of Professional Conduct. Rule 1.8(j) provides:

A lawyer shall not acquire a propriety interest in the cause of action of subject matter of litigation the lawyer is conducting for client, except that the lawyer may:

  1. Acquire a lien granted by law to secure the lawyer's fear of expenses; an
  2. Subject to rule 1.5 contract with the client for a reasonable contingent fee in a civil case.

Rule 1.8(j) is similar to the old Disciplinary Rule 5-103(A). A similar inquiry was addressed by this Committee in Docket 78-15 under Disciplinary Rule 5-103(A). In the situation involved in Docket 78-15, the inquiry was whether an assignment of a potential judgment in ongoing litigation would be in violation of the Disciplinary Rule. The Committee was of the opinion that the taking of an assignment or the obtaining of a lien against a potential judgment did not create the type of personal interest sought to be barred by the Rule. We believe the situation to be the same in the circumstances outlined by you and that your proposed arrangement does not violate Rule 1.8(j) of the Maryland Rules of Professional Conduct.


"
DISCLAIMER: Opinions of the Maryland State Bar Association (MSBA) Ethics Committee are an uncompensated service of the MSBA. This Committee’s opinions are not binding on the Maryland Court of Appeals, Maryland Attorney Grievance Commission, MSBA or this Committee. The reader is advised that subsequent judicial opinions, revisions to the rules of professional conduct, and future opinions of this Committee may render the Opinions stated herein outdated. As such, the Committee’s opinions are advisory only and neither the Committee nor the MSBA assumes any liability whatsoever with respect thereto. Accordingly, reliance upon the opinions of this Committee is solely at the risk of the user.