Being Paid By Someone Other Than Your Client?

May a client’s family member, friend, employer, legal services plan, or insurance company foot your bill?  The answer is yes, so long as:

  • The client gives informed consent;
  • The third party does not interfere with the lawyer’s “independence of professional judgment or with the client-lawyer relationship;” and
  • The client’s confidential information is protected (or the client consents to disclosure of information after informed consent).  ORPC 1.8(f).

“Informed” Means More than Consent to the Mere Fact that Someone Else is Paying the Fee

Clearly, the lawyer who is considering accepting payment from someone other than the client must ensure that the client makes an informed choice. This means inquiring about and understanding any limitations on the third-person’s ability or willingness to pay and then communicating the information to the client. While RPC 1.8(f) does not require the client’s consent to be confirmed in writing, documenting the basis upon which the client’s informed consent was given will go a long way to resolving any subsequent concernsFrom Sylvia E. Stevens, “Avoid Serving Two Masters,” Oregon State Bar Bulletin (July 2009).

Preventing Third Party Interference

At the very least … (explain) to the third party that paying fees doesn’t make one a client and that the lawyer cannot permit the third party payor to dictate the objectives of the representation or the strategy or tactics for achieving those objectives. And of course, the lawyer must be watchful throughout the representation for pressure from the payor, particularly in the face of explicit or implicit threats to cease funding the case if the lawyer won’t do as the payor desires.

Similarly, a third party cannot be allowed to interfere with the client-lawyer relationship itself, such as by firing the lawyer unilaterally. If the payment stream stops, the lawyer may well wish to withdraw from the representation, but the lawyer can be fired only by the client.  From Sylvia E. Stevens, “Avoid Serving Two Masters,” Oregon State Bar Bulletin (July 2009).

Protecting Confidentiality and Attorney-Client Privilege When Billing

Many of the issues relating to confidentiality and attorney-client privilege arise in the context of billing.  The best practice is to send detailed bills to the client and redacted bills to the third party paying your fee.  However, if your client gives informed consent to disclosure of confidential information, it is ethically permissible to provide a detailed billing to the third party.  See OSB Formal Ethics Op. No. 2005-157.

Craft Your Fee Agreement to Address the Issue of Unearned Fees

If your representation is concluded and unearned fees remain, to whom will you issue the refund?  ORPC 1.15-1(d) requires lawyers to deliver funds requested by a client which the client is entitled to receive.  (Emphasis supplied.)  “If the client is not entitled to the funds, the lawyer may be civilly liable to the payor for conversion or otherwise.”  Sylvia E. Stevens, “Ethics Issues Arising in Fee Agreements,” Fee Agreement Compendium (OSB BarBooks 20o7).

Ethically and legally the path seems clear – refund the money to the party who paid your fee – but nonetheless, this is an issue best addressed in your written fee agreement.  Otherwise, you may find yourself in the middle of a dispute between your client and the third party. Read more about third party payment dilemmas here.