BAR ASSOCIATION OF NASSAU COUNTY
COMMITTEE ON PROFESSIONAL ETHICS
Opinion No. 2002-4
(Inquiry No. 696 )
Conflict of interest of attorney solicited by private school to represent students and their parents in dispute with local school districts over the proper placement of students in “appropriate” schools, where the private school pays the attorneys fees, and an “appropriate” school in the clients’ best interests may be one other than the school soliciting the attorney and paying the fees.
It is permissible for an attorney solicited by a private school to represent students and their parents in disputes with local school districts over the proper placement of students with special needs in appropriate schools where the attorney will be paid by the private school provided: (i) that full disclosure of the nature and extent of the relationship between the attorney and the soliciting school is given by the attorney to the client, (ii) the client consents to payment by the soliciting school, (iii) nothing of value is given by the attorney to the soliciting school, (iv) the attorney does not permit the soliciting school to effect, direct or regulate his or her professional judgment, and (v) the attorney does not compromise his or her duty to maintain the clients’ confidences.
DR 5-105 (A), (C)
DR 5-107 (A)(1 ),(2)
Model Rule, 1.7, Comment 10
The inquiring attorney has stated that in disputes over the placement of students in what is characterized as appropriate schools, certain provisions of the State Education Law provide for the payment of attorneys fees by the school district if the child and parents substantially prevail at an impartial hearing. However, if the school district settles the dispute before the hearing, attorneys fees may not be part of the settlement and, under the statutory provisions, if a settlement is rejected by the child and parents before a hearing, and the child and parents do not obtain an award substantially more than was presented in settlement, attorneys fees are not paid. According to the inquiring attorney, the effect of these fee provisions is that a plaintiff in such actions who cannot afford to pay an attorney, usually cannot find an attorney to represent them. In recognition of this situation and to accommodate that problem, a private school has solicited and agreed to pay an attorney to represent students and their parents in disputes with local school districts over placement of students in appropriate schools. However, in a given case, an appropriate school placement for the child may tum out to be at a school different from the private school which is paying the attorney’s fees.
May an attorney accept payment of fees from a private school to represent parents and students in a dispute with local school districts over the placement of students in appropriate schools where it is possible that the clients’ interests may require the attorney to advocate for the placement of clients in schools other than the private school paying the attorney’s fees?.
Yes, provided: (i) that full disclosure of the relationship between the attorney and the soliciting school is given by the attorney to the client; (ii) the client, under the standard enunciated in DR 5-105 (C) consents to payment by the soliciting school; (iii) nothing of value is given by the attorney to the soliciting school; (iv) the attorney does not permit the soliciting school to effect, direct or regulate his or her professional judgment; and (v) the attorney does not compromise his or her duty to maintain the clients’ confidences.
To begin with, the facts presented bring into play several intertwined provisions of the Code of Professional Responsibility. DR5-101(A) provides that:
[a] lawyer shall not accept or continue employment if the exercise of professional judgment on behalf of the client will be or reasonably may be affected by the lawyer’s own financial, business, property or personal interests, unless a disinterested lawyer would believe that the representation of the client will not be adversely affected thereby and the client consents to the representation after full disclosure of the implications of the lawyer’s interest.
This code provision is implicated because of the obvious personal business interest the inquiring attorney has or would have in maintaining the soliciting school as a source of clients. DR5-105(A) further mandates that a lawyer:
shall decline proffered employment if the exercise of independent professional judgment in behalf of a client will be or is likely to be adversely affected by the acceptance of the proffered employment, or if it would be likely to involve the lawyer in representing differing interests ….
Finally, DR5-107(A)(1) and (2) and DR5-107(B) address the issue of an attorney accepting payment of fees by someone other than the client. These provisions provide as follows:
A. Except with consent of the client after full disclosure a lawyer shall not:
1. Accept compensation for legal services from one other than the client.
2. Accept from one other than the client anything of value related to his or her representation of or employment by the client.
B. Unless authorized by law, a lawyer shall not permit a person who recommends, employs or pays the lawyer to render legal services for another to direct or regulate his or her professional judgment in rendering such legal services, or to cause the lawyer to compromise the lawyer’s duty to maintain the confidence and secrets ofthe client under DR 4-101.
The relevant Ethical Considerations provide additional guidance and reinforce these Disciplinary Rules. A lawyer’s professional judgment should be “free of compromising influence and loyalties” (ECS-1), and a lawyer should not accept employment if the lawyer’s personal interests “will, or there is a reasonable probability that they will,” affect adversely the advice given to the client (ECS-2). A lawyer also should not accept “anything of value from someone other than the client “without the knowledge and consent of the client after full disclosure” (EC2-21), and the professional judgment of the lawyer should be exercised “solely for the benefit of the client” and “free of compromising influences and loyalties.” (ECS-1). See also ECS-14 and ECS-23. Finally, ECS-22 cautions that, where compensation is from a source other than the client, “the lawyer may feel a sense of responsibility to someone other than the client.”
In grappling with this issue, the ABA Model Rule 1.7 -Conflict of Interest: General Rule Comment 10-Interest of Person Paying for a Lawyer’s Service provides further guidance and states that:
“[a] lawyer may be paid from a source other than the client, if the client is informed ofthat fact and consents and the arrangement does not compromise the lawyer’s duty of loyalty to the client.”
This Committee has had occasion in the past in other factual settings to consider certain issues implicated in the facts presented. In opinion 94-7 (1994), the Committee recognized the permissible acceptance of payment of fees by an attorney from one other than the client. In that situation, the Committee concluded that the Code of Professional responsibility permitted a lawyer in a criminal case to accept payment from a defendant’s sister, provided the attorney adhered to the mandates ofDRS-107(A) and (B), in that the client consents after full disclosure and the attorney exercises his or her independent professional judgment solely for the benefit of the client. In opinion 01-0S (2001), the Committee placed particular emphasis on the lawyer’s ability “to represent the interests of the client irrespective of the source of payment of the lawyer’s fees.” Finally, in opinion 98-13 (1998), the Committee concluded that an attorney, on a list of attorneys maintained by a home builder for referral to purchasers, may represent purchasers of homes sold by the builder where the builder referred the attorney to the purchaser and where the builder paid the attorney’s fees, provided the attorney complied with DRS-1 07. In reaching its conclusion, the Committee emphasized that the attorney must make full disclosure of the relationship with the builder to the client, obtain the client’s consent ,and not permit the builder “to direct or regulate” the attorney’s professional judgment in rendering services to the client. On the other hand, this Committee, in opinion 97-11 (1997), determined that an attorney could not participate in a “Make a Will” fund-raising program for the benefit of a non-profit organization where the “client” would pay a fee directly to the sponsoring organization. In addition to being concerned that such a program violated DR2-103(B) (which prohibits a lawyer from the giving of value to a third party for recommending the lawyer’s employment), the Committee also expressed concern that the lawyer “might be reluctant to seem disloyal to the fund-raising organization by recommending against a gift to the organization, even if advising against such a gift would be in the best interest of the testator.”
Other bar associations have considered arrangements between attorneys and thirdparty fee payers and determined that the attorney may not represent clients under the circumstances there presented. In N. Y. State Bar Op. 694 (1997), that Committee determined that an attorney may not participate in a program operated by a real estate broker which offered prospective home purchasers reduced closing costs if the purchasers used an attorney selected by the real estate broker to represent both the lender and the purchaser. In reaching its conclusion, that Committee determined that the attorney has a conflict of interest under DRS-I0l(A) which could not be cured by the client’s consent, cited the attorney’s “strong interest” in the success of the broker, and concluded that “the personal financial incentive for the attorney to use his or her influence over the purchaser to secure an enforceable contract of sale and to close the transaction is sufficiently great that it is not at all obvious that the attorney can adequately represent the interests of the purchaser and the Lender as well.” Similarly, in Suffolk County Bar Op. 99-1 (1999), that Committee concluded that an attorney’s placement on an “Attorney List” provided by a company and given to people contemplating entering into transactions with the providing company, violated DRS-l 0 1 (A) because economic pressures “may arise” if the attorney “becomes the beneficiary of a sizeable amount of client referrals” which might affect the attorney’s “ability to exercise independent judgment” on behalf of his or her clients. See also N.Y. County Lawyers’ Op. 729 (2000)(attorney may represent witness even though his or her fee is to be paid by someone other than the client provided the attorney exercises his professional judgment solely for the benefit of his client; but if the “lawyer’s connections to or relationship with” the referring party “will affect adversely” the advise to be given to his or her client, the lawyer may not undertake the representation).
In the facts presented here, two scenarios are possible. In the first, the school paying the attorney’s fees will be the most “appropriate” school for the child and placement in that school plainly will be in the best interest ofthe child and his or her parents. This is the easy case. In these circumstances, the interests of the client and the “payer” private school are aligned. There is no conflict of interest and the attorney may undertake the representation, provided there is full disclosure to the client of the relationship between the attorney and the private school, the client consents to the payment relationship, the attorney exercises independent professional judgment on behalf of the client and without interference from the “payer” private school, and client confidences are preserved in accord with DR4-101.
But what happens in those circumstances when, as the inquiring attorney acknowledges may be possible, the best interests of the child and his or her parents require the attorney to advocate for placement in a school other than the school paying the attorney’s legal fees? Such a situation would seem to put the attorney in an inherently conflicting position, at odds with the economic interests of the school which is paying the attorney’s fees and which otherwise stands to gain economically if the child is placed in its school, to be contrasted against what is said to be in the bests interests of the child. While it may be prudent for the attorney to withdraw from the engagement at that time to avoid contentions that he or she was less than zealous in the attorney’s legal advocacy, consistent with this Committee’s Opinion 98-13 (1998), this Committee is not now prepared to require a per se disqualification under these circumstances. “Of paramount importance is the lawyer’s ability to represent the interest of the client irrespective of the source of payment of the lawyer’s fees.” See Opinion 0 1-05 (2001). If the attorney and client are satisfied that the attorney can represent the interests of the client fully, withdrawal is not mandated. If, however, the lawyer believes that his or her ability to exercise independent professional judgment, and to effectively represent the best interests of the client, will be or reasonably may be adversely affected by the lawyer’s financial interest in a continuing relationship with the payer school, the attorney must withdraw from the representation. We caution that since the possibility of these conflicting interests are reasonably foreseeable at the inception of the representation, it would behoove the attorney to consider with the client in advance the prejudice the client might otherwise occasion as a result of the timing of a subsequent withdrawal.
In conclusion, for the reasons set forth above, this Committee is of the view that the inquiring attorney may be paid to represent clients by the soliciting school provided there is compliance with all of the following: (i) full disclosure of the nature and extent of the relationship, financially and otherwise, between the attorney and the soliciting school is given by the attorney to the client, (ii) the client consents, under the standard enunciated in DR 5-1 05(C), to payment of the attorney’s fees by the soliciting school; (iii) nothing of value is given by the attorney to the soliciting school; (iv) the attorney exercises independent professional judgment and does not permit the soliciting/payer school to effect, direct or regulate his or her professional judgment; and (v) the attorney maintains the clients’ confidences in accord with DR4-101.
[Approved by the Executive Committee on October 22, 2002; approved by the Full Committee, subject to Executive Committee editing, on October 30, 2002]