Inquiry is made as to the propriety of an attorney loaning funds to the adverse party and whether a contingent fee may be charged in a child support matter.
The attorney represents a woman in an action to recover past due child support from her ex-husband. The ex-husband does not have the funds available to pay the child support. Therefore, the attorney offered to loan the ex-husband the funds so he can pay the attorney's client the past due child support. The attorney has a one-third contingent fee arrangement with his client.
The arrangement proposed by the attorney is clearly improper. DR 5-103(A) prohibits an attorney from acquiring a propriety interest in the subject matter of litigation he is conducting. In this case, the subject matter of the litigation is past due child support. By providing the means to pay the child support, the attorney is obtaining a proprietary interest in the subject matter of the litigation.
DR 5-103(B) prohibits an attorney from advancing or guaranteeing financial assistance to his client except in certain specified instances. The purpose of the loan would be to enable the exhusband to pay the past due child support. In a roundabout way, the attorney is providing financial assistance to his own client. Such a circumvention of the disciplinary rules is prohibited.
Furthermore, an attorney loaning money to an adverse party creates an appearance of impropriety. As the preamble to the Code of Professional Responsibility points out, lawyers, as guardians of the law, play a vital role in the preservation of society. By virtue of this position, a lawyer is held to higher standards of competency and integrity than a non-lawyer. Therefore, an attorney should avoid any actions that may cast suspicion on his integrity or motives. The loan arrangement proposed by the attorney would undermine society's respect and confidence in the attorney and the legal profession as a whole.
Also at issue is whether the attorney may charge a contingent fee to collect the past due child support. The board opined in Formal Ethics Opinion 94-F-134 that it is against public policy to charge a contingent fee in a child support case because that is money earmarked for the child's welfare.
The Court of Appeals in the recent case Hall v. Davis, Carter v. Carter 19 TAM 41-7 (Tenn. App., M.S., Cantrell, 1994) ruled there is no per se prohibition against a contingency fee in an action to collect child support arrearages. Contingent fees are appropriate where the child is no longer a minor and/or the recovery is for reimbursement of the custodial parent rather than the present needs of the child. However, the Court of Appeals went on to state that if the recovery is for the present needs of the child, a contingent fee is improper. The child should not be deprived of support by the deduction of fees for its recovery.
The Board of Professional Responsibility agrees with the Court of Appeals reasoning in the Hall v. Davis opinion. Formal Ethics Opinion 94-F-134 is modified to conform with the ruling in that opinion.
This 9th day of December, 1994.
Herman Morris, Jr.
James M. Glasgow, Jr.
Walker T. Tipton
APPROVED AND ADOPTED BY THE BOARD