Compensation From One Other Than Your Client, The Bank of Mom and Dad and Others, Beware

By David Wolf Law Office of David A. Wolf

The California Rules of Professional Conduct (CRPC) generally prohibit representation of adverse interests without a conflict waiver. Subparagraph (F) of CRPC 3-310 imposes disclosure and consent requirements when attorneys are compensated by someone other than the attorney’s client. (For California law governing legal services agreements see Business & Professions Code sections 6146-6148.)

The basic requirements of CPRC 3-310(F) regarding compensation from third parties seem straight forward, but they will be modified slightly when and if proposed CRPC 1.8.6 becomes effective. Under current CRPC 3-310(F), an attorney must not permit a non-client who is paying for the legal services to interfere with the attorney’s independent professional judgment or the relationship between the attorney and client. At the same time, the attorney must maintain his or her duty of confidentiality under California State Bar Act and CRPC 3-100. (Bus. & Prof. C. §6068(e))

CRPC 3-300(F) specifically states:

A member shall not accept compensation for representing a client from one other than the client unless: (1) There is no interference with the member’s independence of professional judgment or with the client-lawyer relationship; and (2) Information relating to representation of the client is protected as required by Business and Professions Code section 6068, subdivision (e); and (3) The member obtains the client’s informed written consent, provided that no disclosure or consent is required if: (a) such nondisclosure is otherwise authorized by law; or (b) the member is rendering legal services on behalf of any public agency which provides legal services to other public agencies or the public.

Proposed CRPC 1.8.6 states:

A lawyer shall not enter into an agreement for, charge, or accept compensation for representing a client from one other than the client unless: (a) the client gives informed written consent at or before the time the lawyer has entered into the agreement for, charged, or accepted compensation from one other than the client, or as soon thereafter as is reasonably practicable, provided that no disclosure or consent is required if the lawyer: (i) is rendering legal services on behalf of a public agency that provides legal services to other public agencies or the public; or (ii) is rendering services through a nonprofit organization; (b) there is no interference with the lawyer’s independence of professional judgment or with the lawyer-client relationship; and (c) information protected by Rule 1.6 [Confidentiality of Information] and Business and Professions Code section 6068(e) is protected.

The existing and proposed rules require disclosure and written consent of the client. Proposed CRPC 1.8.6 adds “rendering services through a non-profit organization” to the subsection that obviates the need for disclosure and consent in that context. The comment in subparagraph (F) of 3-310 also states that the rule is not intended to “abrogate existing relationships between insurers and insureds whereby the insurer has the contractual right to unilaterally select counsel for the insured, where there is no conflict of interest[,]” citing San Diego Navy Federal Credit Union v. Cumis Insurance Society (1984) 162 Cal.App.3d 358.) Proposed CRPC 1.8.6 preserves the comment and reference to Cumis.

The proposed rules become operative when approved by the California Supreme Court after submission by the State Bar.

About the Author:
David Wolf is a former chair and current member of BASF’s Legal Ethics Committee.