Formal Advisory Opinion No. 86-7
Ethics & Discipline / Advisory Opinions / Formal Advisory Opinions / Formal Advisory Opinion No. 86-7
State Bar of Georgia
Issued by the Supreme Court of Georgia
On December 17, 1987
Formal Advisory Opinion No. 86-7
For references to Standard of Conduct 31, please see Rules 1.5(a) and 1.8(j).
For references to Standard of Conduct 30, please see Rule 1.7(a).
For references to Standard of Conduct 33, please see Rule 1.8(a).
This opinion also relies on the Canons of Ethics, specifically Ethical Consideration 5.7 that bears upon matters addressed by Comment 10 of Rule 1.8.
For an explanation regarding the addition of headnotes to the opinion, click here.
Ethical Propriety of a Lawyer's Acquisition of a Security Interest in Marital Property to Secure Attorney's Fees in a Domestic Relations Case.
An attorney may acquire a security interest in marital property to secure reasonable attorney's fees in a domestic relations case if the security agreement is fully disclosed and consented to by the client in writing, and does not violate any court order. The security interest may serve no other purpose.
Correspondent asks whether it is ethically proper for a lawyer to take a security interest in marital property1 to secure his or her fee in a domestic relations case.
The question presented involves an interpretation of Standard No. 31.
A lawyer shall not acquire a proprietary interest in the cause of action or subject matter of litigation he is conducting for a client, except that he may:
(a) acquire a lien granted by law to secure his fee or expenses.
Standard No. 31's roots are in the common law crime of champerty. It is designed to prevent attorneys from acquiring financial interests in the outcome of litigation other than an attorney's interests in reasonable attorneys fees.2Standard No. 31 excepts "acquir/ing/ a lien granted by law to secure . . . fee/s/ or expenses.
Standard No. 31 is taken from Directory Rule 5-103. Interpretative guidance for Directory Rule 5-103 is found in the aspirational statement of Ethical Consideration 5-7.
The possibility of an adverse effect upon the exercise of free judgment by a lawyer on behalf of his client during litigation generally makes it undesirable for the lawyer to acquire a proprietary interest in the cause of his client or otherwise to become financially interested in the outcome of the litigation. However, it is not improper for a lawyer to protect his right to collect a fee for his services by the assertion of legally permissible liens, even though by doing so he may acquire an interest in the outcome of litigation.
The guidance of Ethical Consideration 5-7 is that "liens granted by law" should be read broadly as the equivalent of "legally permissible liens rather than narrowly as statutory charging liens and retaining liens for the benefit of attorneys." Such an interpretation is consistent with the champerty concerns underlying Standard No. 31, in that legally permissible liens used to secure attorneys fees do not create any financial motive for the attorney beyond that of collecting reasonable attorneys fees. A security interest in marital property used to secure attorneys fees in a domestic relations case is therefore permitted by Standard No. 31.
It would be improper to use such an arrangement to secure fees if it created an impermissible financial conflict in violation of Standard No. 30. Standard No. 30 would be violated if the attorney's security interest in the marital property would, or reasonably could, affect the exercise of the attorney's independent professional judgment on behalf of the client. An exception is provided under Standard No. 30 when the client gives written consent after full disclosure of the conflict's potential for affecting the attorney's independent professional judgment. Accordingly, an attorney may acquire a security interest in marital property to secure his or her fee in a domestic relations case if the client consents in writing after full disclosure, so long as the lawyer does not violate a court order.3
Consistent with the requirements of this opinion, the interest acquired by the attorney must be a security interest to secure reasonable attorneys fees. Any interest acquired in the subject matter of litigation beyond that necessary to secure fees would be in violation of Standard No. 31 and could violate Standard No. 33 as well. The Bar is cautioned that there are ethical opinions in other jurisdictions finding violation of DR 5-103 in situations in which the interest acquired by the attorney in the subject matter of litigation was not a security interest.4
1Marital property is defined in Georgia as "that property acquired as a direct result of the labor and investment of the /parties/during the marriage. . . ." Courtney v. Courtney, 256 Ga. 97, 98 (1986), citing White v. White, 253 Ga. 267, 269 (1984). See also Moore v. Moore, 249 Ga. 27 (l982). The legal issues raised by using marital property as security for attorney fees in a domestic relations case are not addressed in this advisory opinion.
2 Proprietary interests are prohibited under Standard No. 31. It is possible to interpret the term "proprietary" to exclude interests which serve only as security for fees. See, for example, Oklahoma Bar Association Advisory Opinion No. 297, May 16, 1980. It is, however, not necessary to attempt a definition of "proprietary" here.
3 In accord, Greater Cleveland Bar Association, Advisory Opinion No. 151 (May 11, 1983). See, also, Giles v. Russell, 222 Kan. 629, 567 P.2d 845 (1977).
4 See, for example, ABA Informal Opinion No. 1397.
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