Marianne Barth Published in SDCBA’s For the Record
Ethical Issues re: Accepting Payments from a Third Party, Fee Agreements, and Third Party Presence
By Marianne Barth
You recently opened your own law office specializing in family law, and are scheduled to meet with your first client, Winnie, who is interested in having you prepare a prenuptial agreement as to her upcoming marriage to Harry. Winnie’s father, Dan Morebucks, believes that in the event the marriage does not work out, Winnie should be awarded spousal support of $20,000/month, full custody of his anticipated grandchildren, and title to the to-be-purchased family residence. Dan Morebucks, a very wealthy man, will be paying all of Winnie’s legal fees and costs related to the preparation of the prenuptial agreement.
Can you accept fees from Dan Morebucks, and, if so, under what circumstances?
Accepting Payment From a Third Party
An attorney may accept payment from a third party provided there is no interference by the third party with the attorney’s independent professional judgment or the attorney-client relationship. An attorney may not breach his/her duty to preserve client confidences, as required by Business & Professions Code § 6068(e), by disclosing confidential information to a third party. In addition, for an attorney to accept payment from a third party, a client’s informed written consent is required after a full disclosure of the actual and reasonably foreseeable adverse consequence. See Rule of Professional Conduct 3‑310(F)(1)-(3). The purpose of Rule of Professional Conduct 3‑310(F) is to ensure the duty of loyalty will run exclusively to the client, free of any conflict of interest. As a practical matter, the client’s consent should be in a retainer or other written fee agreement.
Requirements for a Fee Agreement
The form and content of attorney fee agreements are regulated by statute. Business & Professions Code §§ 6146, et seq. The purpose of these statutes is to protect the clients and to ensure that fee agreements are fair and understood by the clients. Alderman v. Hamilton(1988) 205 Cal.App.3rd 1033. Business & Professions Code § 6146 requires that clients are informed of and agree to the terms by which their attorneys will be compensated. Leighton v. Forster (2017) 8 Cal.App.5th 467. And, where total expenses will be greater than $1,000, the agreement must be in writing and include the basis of compensation including hourly rates; the general nature of the services; the responsibilities of the attorney and client; and a duplicate conformed copy signed by both the attorney and the client, must be given to the client. In addition, the written agreement must be signed by the client or the client’s representative or guardian.
Your fee agreement and any subsequent monthly billing statements should be sent only to Winnie. While it may come as no surprise that your bills will be paid by Dan Morebucks, your billing statement must be sent directly to Winnie as it is the client who is entitled to review the services provided. If questions arise about those services, it is Winnie who is entitled to inquire about the services provided or the fees related to those services.
Now that you have your fee agreement in place and Dan Morebucks has paid the retainer, Dan Morebucks insists on being present at all of your client meetings with Winnie. Will the communications be privileged if Dan Morebucks attends the meetings with you and Winnie?
Third Party Presence at a Client Meeting
Communications between a lawyer and client made in confidence during the course of the lawyer-client relationship are presumed to be confidential, and the opponent of the claim has the burden to prove the communications are not confidential. Evidence Code §917(a). Confidential communications between client and lawyer means information transmitted between a client and his or her lawyer in the course of that relationship and in confidence by a means which discloses the information to no third persons other than those who are present to further the interests of the client in the consultation or to whom disclosure is reasonably necessary for the transmission of the information or to accomplish the purpose for which the lawyer is consulted.
Dan Morebucks insists on being present when you and Winnie discuss the proposed terms of the prenuptial agreement. Dan Morebucks may have information that may help you as you evaluate the financial issues, however, Dan’s presence at the meetings with you and Winnie may destroy the confidential nature of your communications. You will need to determine whether Dan Morebucks is someone “to whom disclosure is reasonably necessary to accomplish the purpose for which Winnie retained you” or if Dan just someone who has more bucks than common sense.1
As you are starting out in your new law practice, reviewing the Rules of Professional Conduct may prove to be worth “more bucks” than time and effort.
1While beyond the express scope of this article, be aware of the fact the invoices you submit to Winnie constitute a communication with a client, and contain privileged and/or confidential information, including attorney work product. Given that Dan Morebucks will be paying your bills, and may insist upon receiving a copy of the same before agreeing to pay, you should carefully consider what information to include in your invoices.
This article originally appeared in the May 2018 issue of For the Record. It is reposted here with the permission of the San Diego County Bar Association.