Ethics Advisory Opinion 14-03

Utah State Bar
Ethics Advisory Opinion Committee

Opinion Number 14-03

Issued April 22, 2014


1.         Do the Utah Rules of Professional Conduct prohibit referral agreements between two attorneys that require one of the attorneys (the “Referring Attorney”) to refer to the other (the “Receiving Attorney”) all clients that have a certain specified type of products liability claim?


2.         The Committee concludes that an agreement between two attorneys which requires the Referring Attorney to refer to the Receiving Attorney all clients that have a certain specified type of claim may likely violate various provisions of the Utah Rules of Professional Conduct (the “Rules”).


3.         The Referring Attorney, licensed to practice in the State of Utah, and the Receiving Attorney, licensed to practice elsewhere, enter into an agreement governed by Utah law (the “Agreement”) to jointly pursue certain kinds of products liability claims (the “Claims”) of individuals located in the State of Utah.  The Agreement provides in relevant part:

  1. Referring Attorney will generate the cases by placing advertising and/or arranging for medical testing and diagnosis of prospective clients and would be entitled to reimbursement from the Receiving Attorney for the costs of doing so.
  2. In return for the Receiving Attorney’s agreement to pay those expenses, the Referring Attorney would be required to exclusively refer to the Receiving Attorney all clients having such Claims who contact the Referring Attorney.  The Referring Attorney would not be allowed to represent such clients himself or to refer such clients to any other attorney.
  3. The Referring Attorney will place advertising, accept incoming calls from potential clients, obtain medical records from potential clients, arrange for medical testing, and perform certain other related tasks, before turning the clients over to Receiving Attorney for further action.
  4. The Receiving Attorney will decide in his sole discretion the venue, jurisdiction, timing, counts, and content of complaints or petitions, joinder of plaintiffs and/or defendants, and any other strategic issues relating to the Claims.
  5. The Referring Attorney will ask clients to sign new fee agreements directly with the Receiving Attorney, identifying the Receiving Attorney as the clients’ attorney, will inform the clients of the division of fees between the two attorneys, and will inform the clients of any other matters deemed by either attorney to be required by the Rules of Professional Conduct.
  6. The Referring Attorney will not be required to perform any services except those specified in the Agreement or required by the Utah Rules or by any other ethical rules governing the Claims or any resulting cases.
  7. The Receiving Attorney will pay the Referring Attorney specified portions of the fees recovered by the Receiving Attorney for the clients on their Claims.



4.         The fee sharing agreement between the two attorneys is governed by Rule 1.5, which provides that there may be a division of fees between lawyers in different firms, but on the following condition:

(e)(1) the division is in proportion to the services performed by each lawyer or each lawyer assumes joint responsibility for the representation;

(e)(2) the client agrees to the arrangement, including the share each lawyer will receive, and the agreement is confirmed in writing; and

(e)(3) the total fee is reasonable.

Ethics Advisory Opinion 14-01

Utah State Bar
Ethics Advisory Opinion Committee 

Opinion Number 14-01

 Issued January 15, 2014


1.         Under what conditions is it appropriate for a personal injury lawyer to “outsource the calculation, verification and resolution of alleged health insurance liens and subrogation/reimbursement claims” and pass the outsourced resolution fee to the client as a “cost.”  There are two questions posed to the committee.  First, can the lawyer appropriately outsource the lien resolution?  Second, is the treatment of the lien resolution fee appropriately treated a “cost” to the client?


2.         It is ethical for a personal injury lawyer to engage the services of a lien resolution company that can provide expert advice or to associate with a law firm providing this service.

3.         If properly disclosed in the retention agreement, fee resolution services may be included as “costs” to the client provided the resolution services are professional services equivalent to accountants or appraisers.

4.         If the services provided constitute the practice of law, the personal injury lawyer and the lien resolution company must comply with the fee splitting requirements of Rule 1.5(c) and (d).  Then, the lawyer cannot treat the lien resolution fee as a cost to the client. If the services constitute the practice of law, it may be proper for a lien resolution company to collect a contingency fee.


5.         The federal or state government pays many, if not most, seriously injured plaintiffs’ medical bills through Medicaid[1] or Medicare.[2]  Insurers, industrial unions and other private third-party payers have subrogation rights to monies collected from solvent third parties.  Finally, in Utah, Utah Code Annotated 38-7-1 et seq provides for hospital liens on judgments, settlements or compromise in certain accident cases.[3]

6.         In straightforward simple cases, little difficulty arises.  However, in order to settle complicated injury cases, plaintiff’s counsel must account for these liens. This may require substantial expertise. Counsel must ascertain the correct amount payable for each lien.[4]  The assistance of experts in lien resolution advances the laudable goal of fair resolution to both the client and the lien holder.

7.         In recent years, third party entities have held themselves out as “Lien Resolution” companies.  The services offered are often a significant value enhancement for the client.  Many plaintiffs’ personal injury lawyers might lack the necessary competence in reading medical bills for the purpose of attributing costs to the plaintiff’s general health as opposed to the accident.

8.         The issue of whether such services should be treated as “costs” or as “attorney’s fees” depends upon the factual nature of the work performed.  One company describes its services as addressing “Medicare conditional payments, Medicaid, Tricare[5], Veterans Affairs, FEHBA[6], ERISA[7], Private Insurance and Hospital/Provider lien claims.”[8] The services offered include reporting to the appropriate government agency, calculation of the amounts due, verification of the accuracy of the lien, and final resolution of the claim.  This firm charges a flat fee for simple Medicaid/Medicare resolution.  It charges a contingency fee based upon percentage of saving in cases that are more complex.

9.         Other lien resolution companies describe their staff as medical billing specialists, nurses and attorneys familiar with federal law beyond the knowledge possessed by the ordinary plaintiff’s personal injury lawyer. They claim that their services include a determination of the personal injury lawyer’s affirmative obligation to notify healthcare plans.  They “will assess the healthcare plans’ rights of recovery and audit the reimbursement claims to ‘carve out’ items unrelated to injury/settlement.”  They will then pursue administrative remedies, such as damage allocation, waiver and compromises to ensure the appropriate ‘net recovery’ for the claimant.  If the claim is not resolved administratively and goes to adjudication, they provide legal authority and support for the personal injury attorney in dealing with the agency.  Those companies charge a flat fee based upon the amount of the total settlement or verdict.    They characterize their service as providing the personal injury lawyer with sufficient facts and familiarity with the law.  This allows the personal injury lawyer the ability to negotiate liens on equal terms with the lienholder’s lawyer.  In essence, they believe that they are providing expert advice coupled with specialized legal resources for the personal injury attorney.

Ethics Advisory Opinion No. 12-03


Opinion No. 12-03
Issued December 13, 2012


1. May a community association management company profit from legal work performed by the company’s in-house attorney?


2. A community association management company’s profiting from legal work performed by the company’s in-house attorney constitutes the improper sharing of fees with a non-lawyer in violation of Utah Rule of Professional Conduct 5.4(a).[1]


3. An attorney is employed as in-house counsel for a community association management company. Although the company does not profit from the legal work the attorney performs, the company believes that other community association management companies routinely profit from the legal work performed by their respective in-house attorneys. Specifically, these companies collect a fee from their clients for legal services at a rate that is higher than the cost the companies incur in employing their corporate attorneys. The issue addressed in this Opinion stems from this practice.


4. Rule 5.4(a) of the Utah Rules of Professional Conduct, “Professional Independence of a Lawyer,” sets out the basic principle that applies to the issue presented. It reads in relevant part: “[a] lawyer or law firm shall not share legal fees with a nonlawyer . . . .”

5. As its title suggests, the purpose of Rule 5.4 is to protect the professional independence of lawyers and prevent problems that might otherwise occur when non-lawyers, such as corporate employers, assume positions of authority in business arrangements with lawyers. See ABA Comm. on Prof’l Ethics & Responsibility, Formal Op. 392 (1995) [hereafter ABA Op.].

6. These arrangements cause particular concern because non-lawyers are not bound by the ethical mandates regarding independence, conflicts of interest, confidentiality, fees, and other important provisions that govern lawyers’ conduct. See id. Without these constraints, non-lawyers are free to pursue their own interests, which may be disadvantageous and detrimental to their clients’ best interests. See Emmons, Williams, Mires & Leech v. State Bar, 86 Cal.Rptr. 367, 372 (1970) (“[F]ee splitting between lawyer and layman . . . poses the possibility of control by the lay person, interested in his own profit, rather than the client’s fate . . . .”).

7. For example, in the situation presented to the Committee, some community association management companies have been establishing and charging clients fees for legal services provided by in-house counsel. Although the Committee has not been presented with any evidence suggesting that these fees are excessive, there is nothing to prevent these companies from setting unreasonable rates—something an attorney could not do under Utah Rule of Professional Conduct 1.5. This causes special concern because these companies are, by their nature, highly motivated by profits and concerned with the “bottom line.” SeeABA Op.

8. Rule 5.4(a) eliminates this and other problems by preventing non-lawyer employers from viewing and using their legal departments as profit centers. This conclusion is significantly bolstered by the opinions of several other ethics committees who have considered this issue. Indeed, there appears to be a consensus that non-lawyer employers may not profit from the legal work performed by their in-house or corporate attorneys. See e.g., Va. State Bar Standing Comm. on Legal Ethics, Op. 1838 (2007) (“[C]orporate counsel cannot be used to generate profits for an employer, as that would be considered fee splitting with a non-lawyer and a violation of Rule 5.4(a).”); State Bar of Ariz. Comm. on the Rules of Prof’l Conduct, Op. 99-12 (1999) (“A lawyer employed by an architectural firm may not provide legal services to the firm’s clients, where the firm pays the attorney a salary but charges the clients an hourly rate for the lawyer’s services, because of . . . impermissible fee-sharing with non-lawyers.”); ABA Comm. on Prof’l Ethics & Responsibility, Formal Op. 392 (1995) (“If a corporate in-house lawyer provides services to third persons for a fee, the lawyer violates Model Rule 5.4(a) if the lawyer turns over to the corporation any portion of the fee beyond the cost to the corporation of the services provided.”); Tex. Prof’l Ethics Comm., Op. 490 (1993) (“A lawyer who is a salaried employee of a bank may not under the Texas Disciplinary Rules of Professional Conduct participate in the preparation of loan application documents for bank customers if the bank charges the customers a specific fee for the lawyer’s services with respect to the loan application documents.”); Ala. State Bar Office of Gen. Counsel, Op. 1992-13 (1992) (“A fee-splitting problem under Rule 5.4 exists only when a non-lawyer agency makes a profit from the rendition of legal services by one of its salaried lawyers.”); Ill. State Bar Ass’n, Op. 90-20 (1991) (“In this case, the consumer-client would pay the institution for the preparation of the trust. The institution would then keep a portion of that fee and provide payment to the attorney. This sharing of legal fees violates Rule 5.4(a).”); N.Y. State Bar Ass’n Comm. on Prof’l Ethics, Op. 618 (1991) (“[T]he evil arises only when a lay agency earns a profit from the rendition of legal services by its salaried employee.”); Phila. Bar Ass’n Prof’l Guidance Comm., Op. 88-26 (1988) (“[E]xtraordinary care must be taken to insure that [an employer] does not receive more compensation from the client for legal services than is paid to the lawyer.”); Mass. Bar Ass’n Ethics Comm., Op. 84-1 (1984) (“[I]t would be unethical fee-splitting for a non-lawyer employer of an attorney to bill a third party more for that attorney’s services than the actual cost of such services to the employer . . . .”); Dallas Bar Ass’n Legal Ethics Comm., Op. 1982-3 (1982) (“An attorney is considered to be sharing legal fees with a nonlawyer or forming a partnership with a nonlawyer for the practice of law if the employing corporation reaps any benefit, reward or profit from the attorney’s provision of legal services to third parties.”).


Ethics Advisory Opinion No. 12-02


Opinion No. 12-02
Issued December 13, 2012


  1. What are the ethical and practical considerations applicable to attorneys representing clients in the state of Utah under flat fee or fixed fee agreements (hereinafter referred to as “flat fee agreements”)?


      1. The permissibility of flat fee agreements in Utah is well established, subject always to the requirements of the Utah Rules of Professional Conduct. Utah lawyers may use such agreements under circumstances that ensure that clients will not be charged an unreasonable fee, as prohibited by Rule 1.5, and that client funds will not be comingled with the attorney’s funds as prohibited by Rule 1.15. Whether a flat fee arrangement complies with these rules depends heavily on an analysis of the applicable facts and circumstances. Except in rare circumstances where a fee may reasonably be earned upon receipt, as described in this opinion, fee agreements should not describe such fees as “non-refundable,” as such fees are always subject to refund in the event they are or become unreasonable under the particular facts of the case. Representation that a flat fee is nonrefundable is deceptive and violates Rule 8.4.


      1. Recent cases on the permissibility of flat fee agreements under the Utah Rules of Professional Conduct implicate several questions regarding the permissibility of such, as well as practical considerations faced by lawyers using such agreements. Such questions are addressed below.


      1. What fee agreements are relevant to this opinion?
      1. The term “flat fee” and “flat fee agreement” are used in this opinion to refer generally to fee agreements wherein the client agrees at the inception of a matter to pay a fixed sum to the attorney in exchange for which the attorney agrees to perform a particular scope of work. Flat fees are essentially a species of advance payment retainers, wherein the client provides the attorney with payment at the beginning of the relationship in exchange for work to be performed later. Examples of flat fees include a criminal defense attorney that agrees to handle the defense of a misdemeanor case through trial for a fixed sum, a commercial litigator that agrees with a corporate client to conduct all aspects of the discovery phase of a particular case for a specified sum or a transactional or patent attorney that agrees to create and file specific documents or handle certain aspects of a transaction for a fixed sum.
      2. Clients pursuing flat fee agreements often do so in order to avoid the negative consequences of the billable hour or to obtain representation where paying for legal services by the hour is not feasible. Hourly clients are generally required to make regular monthly or quarterly payments to the attorney, which may be undesirable or impossible for some clients. Attorneys paid by the hour are not rewarded for performing their work as efficiently as possible, which may increase costs. Corporate clients often use flat fee agreements to ensure that legal fees do not exceed pre-budgeted amounts. Certain types of collection or criminal defense cases raise the specter that any funds held by the client or in the attorney’s trust account may be subject to seizure by the client’s creditors or forfeiture by government officials, and thus become unavailable to compensate the attorney. Each of these concerns may be appropriately addressed by flat fee agreements.
      3. (more…)

      Ethics Advisory Opinion No. 07-01

      Issued March 9, 2007
      1. Issue:
      May a lawyer purchase the exclusive right to referrals generated from the membership base of an organization whose members from time to time may have need of the legal services offered by that lawyer?

      2. Opinion: The proposed arrangement, which contemplates the exclusive funneling of referrals to one lawyer or firm, is not permitted, as it violates Rule 7.2(b), which prohibits a lawyer from giving anything of value to a person for recommending the lawyer’s services. The fact that the recommendation is made by an organization does not change the outcome here.
      3. Facts: A Utah for-profit organization provides an array of services to its members, including assistance in finding legal representation for its members for various circumstances, including immigration, criminal defense and personal injury following an automobile accident. This organization has solicited a Utah law firm to purchase the exclusive right to receive referrals generated by its membership base, for members who need legal consultation following an automobile accident.
      4. Analysis: Rule 7.2(b) of the Utah Rules of Professional Conduct sets out the basic rule that applies to the issue presented:
      (b) A lawyer shall not give anything of value to a person for recommending the lawyer’s services; except that a lawyer may:
      (1) pay the reasonable costs of advertisements or communications permitted by this Rule;
      (2) pay the usual charges of a legal service plan or a lawyer referral service;
      (3) pay for a law practice in accordance with Rule 1.17; or
      (4) divide a fee with another lawyer as permitted by Rule 1.5(e).1
      This fundamental rule is elaborated upon by Comment [5] to the Rule, which further states: “Lawyers are not permitted to pay others for channeling professional work.”2 Under the plain language of this Rule and the explanatory comment, a lawyer would be prohibited from purchasing exclusive referral rights from the organization, because that would constitute paying another person for recommending the lawyer’s services.3
      5. Rule 7.2(b) contains several exceptions to this blanket prohibition. Subsection 7.2(b)(2) permits a lawyer to “pay the usual charges of a legal service plan or lawyer referral service.” This provision of the Utah Rules of Professional Conduct differs from the American Bar Association Model Rule, which permits a lawyer to pay the usual charges of a legal service plan or a “not-for-profit or qualified” lawyer referral service.4 It would be inappropriate to conclude, however, that the difference between the Utah Rule and the ABA Model Rule was intended to permit a lawyer to avoid the prohibition of Rule 7.2(b) through the use of an organization that is not, in fact, a “lawyer referral service” in even the most colloquial sense of the term.
      6. Comment [6] to Rule 7.2 defines a lawyer referral service as “an organization that holds itself out to the public to provide referrals to lawyers with appropriate experience in the subject matter of the representation.” At a minimum, Rule 7.2(b)(2) requires that the lawyer referral service be available to the public and that it provide referrals to multiple lawyers and law firms, not to a single lawyer or a single law firm.

      Ethics Advisory Opinion No. 02-03

      (Issued February 27, 2002)
      1 Issue:
      What are the ethical obligations of an insurance defense lawyer with respect to insurance company guidelines and flat-fee arrangements?

      2 Opinion: An insurance defense lawyer’s agreement to abide by insurance company guidelines or to perform insurance defense work for a flat fee is not per se unethical. The ethical implications of insurance company guidelines must be evaluated on a case by case basis. An insurance defense lawyer must not permit compliance with guidelines and other directives of an insurer relating to the lawyer’s services to impair materially the lawyer’s independent professional judgment in representing an insured. If compliance with the guidelines will be inconsistent with the lawyer’s professional obligations, and if the insurer is unwilling to modify the guidelines, the lawyer must not undertake the representation. Flat-fee arrangements for insurance defense cases are unethical if they would induce the lawyer improperly to curtail services for the client or perform them in any way contrary to the client’s interests. Obligations of lawyers under the Utah Rules of Professional Conduct, including the duty zealously to represent the insured, cannot be diminished or modified by agreement.
      Insurance Company Guidelines
      3 Opinion Request Concerning Insurers’ Guidelines. The Ethics Advisory Opinion Committee has received a request for an ethics advisory opinion concerning insurance company guidelines for counsel who are employed to defend litigation brought by a third party against an insured. The requestors state that insurance companies doing business in Utah have incorporated in their defense-counsel retainer agreements certain billing protocols or guidelines governing attorneys’ procedures and payments that raise ethical issues.
      4 Prior Opinions. Although issues pertaining to insurance company guidelines have been the subject of considerable discussion elsewhere,1 they have not been addressed directly by this Committee.2 When ethical concerns about insurance company guidelines have been raised in ethics opinions from other jurisdictions, the opinions are generally consistent with the summary set forth in ABA Opinion No. 01-421:
      A lawyer must not permit compliance with “guidelines” and other directives of an insurer relating to the lawyer’s services to impair materially the lawyer’s independent professional judgment in representing an insured.
      Although most of the ethics opinions on insurance company guidelines take a general approach, a few—while acknowledging that certain guidelines may be appropriate—have taken issue with particular guidelines. For purposes of illustration, portions of selected ethics opinions from other jurisdictions are set forth in Appendix A. We do not intend to imply agreement with the conclusions of these opinions. Rather, we wish to describe more fully the kinds of concerns that have been raised elsewhere, many of which are raised directly in the request before us.
      5 Montana Supreme Court Decision. The Montana Supreme Court has issued an opinion that addresses these topics, but only after having determined that the insured is the sole client of the defense lawyer. Under that structure, the court noted that defense counsel (a) does not have a “blank check” to escalate litigation costs, (b) should consult with the insurer, (c) must charge reasonable fees, and (c) can be held accountable for its work. The Montana court then held that “defense counsel in Montana who submit to the requirement of prior approval [obtaining consent of the insurer prior to taking certain actions] violate their duties under the Rules of Professional Conduct to exercise their independent judgment and to give their undivided loyalty to insureds.”3

      Ethics Advisory Opinion No. 02-09

      Issued September 24, 2002
      1 Issue:
      Is it ethical for an attorney to enter into a contingency-fee agreement, under which all fees, expenses and costs of litigation are unconditionally assumed by the attorney?

      2 Opinion: Within broad limitations, the Utah Rules of Professional Conduct permit an attorney and a client to determine the terms of the lawyer’s compensation, and there is no per se restriction prohibiting the attorney from assuming all litigation costs and expenses under a contingency-fee agreement. Such fee agreements, however, must comply with all other applicable provisions of the Utah Rules of Professional Conduct concerning fees.
      3 Analysis: We have received a request for an opinion as to the propriety of a lawyer’s entering into a contingent-fee agreement with a commercial client on collection matters that contains the following paragraph:
      All fees, expenses and costs, such as filing fees, court disbursements, photocopy costs, telephone expenses, travel, postage, storage, office supplies, and miscellaneous expenses associated with the collection shall be the sole responsibility of the attorney and will not be billed or reimbursed by client.
      The issue requires a determination of whether a fee arrangement of this kind is consistent with Rules1.5, 1.7, and 1.8(e) of the Utah Rules of Professional Conduct (“The Rules”).1
      4 Lawyers are generally free to determine the terms of their representation with their clients, consistent with the Rules. The Ethics Advisory Opinion Committee has recently addressed this issue in Opinion No.02-03, reaching a conclusion that a flat-fee agreement between a defense lawyer and an insurance company is not per se unethical and cautioning:
      A lawyer who enters into any type of flat-fee arrangement with an insurer must use caution to assure that she exercises independent professional judgment on behalf of the insured. This is particularly important in situations where the scope of the case has unexpectedly increased beyond the attorney’s original expectations in agreeing to a fixed fee.2
      6 Our Opinion No.136 also addressed the issue of whether a client’s advance payment, made as a fixed fee or non-refundable retainer, was unethical. The opinion concluded that fixed-fee contracts or non-refundable retainers are not expressly prohibited by Rule1.5. 3
      7 Rule1.5(c) addresses certain requirements related to contingent-fee arrangements, including the requirement that the fee agreement must be in writing, and it must state the method by which the fee is to be determined and how expenses are to be handled.4While Rule1.5(c) anticipates that expenses will be deducted either before or after the contingent fee is calculated, nothing in the rule prohibits the attorney from agreeing to assume those costs and expenses within her contingent fee, or, if no judgment or settlement is obtained, to assume responsibility for those costs and expenses.
      8 As was extensively addressed in Opinion 02-03, a lawyer must ensure that her agreement relating to fees will not require her improperly to curtail services provided to the client that would normally be within the scope of the representation.
      9 Rule 1.7(b) requires a lawyer to decline representation if the representation of the client may be limited, among other things, by the lawyer’s own interest. As we pointed out in Opinion No. 02-03, the economics of any agreement between the lawyer and her client is not the Committee’s business. In the context of our discussion of fee arrangements between lawyers and insurers, we noted:

      Ethics Advisory Opinion No. 01-01

      Issued January 26, 2001
      1 Issue:
      Under the Utah Rules of Professional Conduct, may an attorney representing a client in a divorce case assert a statutory attorney’s lien under Utah Code Ann. § 78-54-41 against property awarded to the client in the divorce settlement?

      2 Discussion: Rule 1.8(a). We first address a threshold question: Does the invocation of a statutory attorney’s lien require the attorney to meet the requirements of Rule 1.8(a) of the Utah Rules of Professional Conduct, which generally governs business transactions between lawyers and their clients?
      3 Pursuant to Rule 1.8(a), a lawyer may not enter into a business transaction with a client or knowingly acquire an ownership, possessory, security or other pecuniary interest adverse to a client unless (1) the transaction and terms of the transaction are fair and reasonable to the client and are fully disclosed and transmitted in writing to the client, (2) the client is given a reasonable opportunity to seek the advice of independent counsel in the transaction, and (3) the client consents in writing to the transaction.
      4 Rule 1.8(j) provides that “[a] lawyer shall not acquire a proprietary interest in the cause of action or subject matter of litigation the lawyer is conducting for a client, except that the lawyer may . . . acquire a lien granted by law to secure the lawyer’s fee or expenses . . . .”1
      5 Utah statute provides for an attorney to be granted an attorney’s lien on the proceeds of a cause of action in which a lawyer represents a client:
      The compensation of an attorney and counselor for services is governed by agreement, express or implied, which is not restrained by law. From the commencement of an action, or the service of an answer containing a counterclaim or at the time that the attorney and client enter into a written or oral employment agreement, the attorney who is so employed has a lien upon the client’s cause of action or counterclaim, which attaches to any settlement, verdict, report, decision, or judgment in the client’s favor and to the proceeds thereof in whosoever2hands they may come, and cannot be affected by any settlement between the parties before or after judgment. Any written employment agreement shall contain a statement that the attorney has a lien upon the client’s cause of action or counterclaim.3
      6 The threshold question is, therefore, whether a lawyer may assert a lien under § 78-51-41 only if she satisfies the conditions of Rule 1.8(a), which govern a “business transaction” with a client and the knowing acquisition of an interest adverse to a client.
      7 We conclude that Rule 1.8(a) is not applicable to the statutory lien situation. It is not reasonable to read this rule so narrowly that a statutory lien becomes a “business transaction” subject to Rule 1.8(a)’s conditions.4The statutory lien in question is a right of public record granted by the Legislature and is not the kind of adverse interest contemplated by Rule 1.8(a). Additionally, statutory attorney liens are specifically authorized by Rule 1.8(j)(1). Therefore, a lawyer does not violate Rule 1.8(a) by entering into a fee agreement with a client and subsequently enforcing that agreement by asserting a claim under § 78-51-41.5

      Ethics Advisory Opinion No. 01-02

      (Issued February 21, 2001)
      1 Issue
      : Does a lawyer violate the Utah Rules of Professional Conduct if he agrees to discount his fees to a client until a referral fee initially charged to the client by a lawyer-referral service is reimbursed to the client?

      2 Opinion: A lawyer who agrees to discount his fees to a referred client in order to permit the client to be reimbursed for the referral fee that the client originally paid to the referral service makes an indirect payment to the referral service and, therefore, violates the prohibition against payment of referral fees on a fee-per-case basis under Utah Rules of Professional Conduct 7.2(c).
      3 Facts: A Utah lawyer referral service charges a referral fee to participating lawyers. It also charges a referral fee to its customers who are referred to lawyers. In order to make its business more appealing to the general public and businesses, the referral service also asks each participating lawyer to discount by 10% the lawyer’s usual fees to a referred client until the client is credited with an amount equal to the referral fee that the client paid to the referral service. Because not all participating lawyers agree to discount their legal fees, the referral service cannot guarantee to its customers that their referral fees will be reimbursed to them through the proposed payment arrangement.
      4 Analysis: Under Utah Rules of Professional Conduct 7.2(c) (2000), “[a] lawyer shall not give anything of value to a person for recommending the lawyer’s services, except that a lawyer may pay the usual charges of a lawyer referral service or other legal service organization, but only as allowed by the provisions of Rule 1.5(e).” The relevant comment to Rule 7.2(c) further explains that the rule restricts the lawyer’s ability to pay referral fees by specifying that the “lawyer is allowed to pay for advertising permitted by this Rule, but otherwise is not permitted to pay another person for channeling professional work on a fee-per-case basis.”
      5 Thus, a Utah lawyer may pay a fee to an organization that provides referrals so long as that fee is not calculated on a per-referral basis. In addition, if the referral organization consists entirely of lawyers, the payment of the referral fee must comply with the limitations imposed by Rule 1.5(e) on the division of fees between lawyers who are not in the same firm.1Based on the facts submitted to the Committee, we assume that the referral service comprises nonlawyers, rather than lawyers and, therefore, do not address the issue as to lawyer-generated referrals.
      6 Under the proposed arrangement, the payment of a referral fee to the referral service is made initially by the client and later may be reimbursed by the participating lawyer by the lawyer’s discount in an amount equal to the referral fee initially paid by the client to the referral service. That arrangement is by nature a payment made on a fee-per-case basis because it cannot occur until the client hires the lawyer upon the referral provided by the referral service. The fact that the participating lawyer does not pay the referral fee directly to the referral service does not avoid the violation of the prohibition against the payment of referral fees on a fee-per-case basis.

      Ethics Advisory Opinion No. 98-05

      (Approved April 17, 1998)
      Is it unethical for a defense attorney to offer a “full satisfaction” settlement, conditioned upon plaintiff’s waiving a claim for attorneys’ fees against a defendant?

      Opinion: It is not unethical for a defense attorney to present an offer of settlement conditioned on waiver of attorneys’ fees. The defense attorney in such a case has an obligation to represent the defendant zealously within the limits of the law.1Moreover, it is the defendant and not the defense attorney who controls settlement offers. The defense attorney in such a case is bound to convey settlement proposals, and to accept settlement offers, as dictated by the client.2
      This answer, however, does not fully address possible ethical issues raised in a situation in which a client is a plaintiff pursuing a claim under which the plaintiff may be able to recover attorneys’ fees for pursuing the cause of action. Such a circumstance could arise, for example, in many civil rights and employment discrimination actions.
      Practitioners representing plaintiffs in such circumstances should be aware of a potential conflict of interest between the plaintiff’s attorney and the client if the plaintiff receives a settlement offer that is conditioned on a waiver or dismissal of the claim for attorneys’ fees. This conflict of interest can arise where the plaintiff’s attorney has pursued the case in anticipation of recovering attorneys’ fees from the defendant at the conclusion of the proceedings.3
      Plaintiffs’ attorneys in such circumstances should be aware that this potential for a conflict of interest can be resolved by full disclosure in advance of this potential problem and the execution of an appropriate attorney-client fee agreement addressing this eventuality. So long as an attorney complies with the requirements of Rule 1.5 regarding fees,4the establishment of fees between lawyer and client and the method by which those fees are to be collected are matters of business and contract between the attorney and the client.
      Attorneys representing plaintiffs in such cases are advised, however, to review carefully the language of Rule 1.2 5regarding the scope of representation of clients-specifically the requirement that a lawyer must abide by a client’s decision to accept or reject an offer of settlement of a legal matter.
      It is not the purpose of this opinion to advise attorneys of all the possible ways to address the issue raised here; it is merely to alert practitioners to this issue. However, it is possible to address the problem by recognizing the issue early in the representation and agreeing with the client in advance concerning how the client will pay the attorney’s fee if attorneys’ fees are not recovered from the defendant. This might be accomplished by an agreement that the attorney would normally be paid on a contingent-fee basis, but alternately on an hourly fee basis if there is no recovery of attorneys’ fees from the defendant.
      It is important to note also what a practitioner cannot do to resolve this problem. It would be unethical for an attorney to contract in advance with a client that the client may not accept or that the attorney may veto a particular offer in settlement of a case. An attorney must convey all offers of settlement to a client, and the client must always have final say whether or not it will be accepted.6This ultimate client authority cannot be contracted away.

      Ethics Advisory Opinion No. 98-13

      (Approved December 4, 1998)
      What are the ethical obligations and considerations that govern a law firm’s acceptance of a financial interest such as stock in a client company in return for performing legal services for that company?

      Opinion: A law firm’s acquisition of a financial interest such as stock ownership in a client, whether the investment is made directly by the law firm or through a blind trust, holding company, investment partnership or other investment vehicle, and whether the interest is acquired in exchange for legal services or whether the client’s primary attorney is involved in investment decisions concerning the client’s stock, is not per se unethical. However, in all such arrangements, counsel must comply with the requirements of Rules 1.5, 1.7(b) and 1.8(a) of the Utah Rules of Professional Conduct.

      Factual background:
      It is reportedly common for a law firm for example, those representing high-tech, start-up companies in California to acquire financial interests in its clients in connection with legal services rendered to those firms. This may take the form of the client company’s payment of common stock to a law firm for its legal services. Payment arrangements might also be structured as formal purchases of the client company’s stock by the law firm, with an agreement that the cash paid for the purchase price be used by the company to pay legal fees charged by the law firm as services are rendered over time.
      There are other variations on this general approach, including the use of mechanisms such as blind trusts, investment partnerships and other vehicles that operate in such a way that the client’s primary attorney is not involved in the firm’s decision on whether to invest in a client.
      Analysis: Utah Rules of Professional Conduct 1.5 provides that a lawyer shall not enter into an agreement for, charge or collect an illegal or clearly excessive fee. A fee is clearly excessive when, after a review of the facts, a lawyer of ordinary prudence would be left with a definite and firm conviction that the fee is in excess of a reasonable fee.
      This Committee has previously issued Opinion 97-05,1in which it reached the conclusion that accepting payment for legal services in a form other than money is not per se unethical. Nothing in the rules requires that payment be in money. The fundamental requirement is that the fee be reasonable.
      We reach the same conclusion with regard to the application of Rule 1.5 to the present question. However, in addition to the factors specifically listed in Rule 1.5 that must be considered to determine the reasonableness of the fee,2the Committee believes that other factors should be considered by the lawyer in determining whether a fee in the form of equity ownership of a client is reasonable. These other factors include: (a) the liquidity of the client’s stock, including whether the client’s stock trades publicly at the time of the fee agreement and, if the stock is not publicly traded, the risk that the client’s stock will not be publicly traded in the future; (b) the present and anticipated value of the client’s stock, including the risks that a proposed patent or trademark may not be granted, that necessary government approvals (such as FDA approvals) may not be received; (c) whether the stock is subject to restrictions after the law firm receives it, and which affect the value of the stock to the lawyer; (d) the quantity of stock owned by the lawyer and whether the lawyer may exercise voting control over the client after receipt of the stock; and (e) any restrictions placed by the lawyer on the consideration paid for the stock. (more…)

      Ethics Advisory Opinion No. 97-05

      (Approved April 25, 1997)
      Issue No. 1: Is it ethical for an attorney to receive payment for legal services other than in money?
      Opinion: The Utah Rules of Professional Conduct permit an attorney to accept payment for legal services in a form other than money. All arrangements for payment of an attorney’s fees, however, must comply with the applicable provisions of the Utah Rules of Professional Conduct concerning fees and the attorney-client relationship.
      Issue No. 2: Is it ethical for an attorney to barter legal services through a barter exchange?

      Opinion: Although an attorney’s bartering of legal services through a barter exchange is not prohibited per se by the Utah Rules of Professional Conduct, such bartering is unethical if the attorney’s conduct or the structure, terms, or conditions of the attorney’s arrangements with the barter exchange violate any of the Utah Rules of Professional Conduct.
      Analysis: The request for this opinion asks generally, without presenting specific facts and circumstances, whether attorneys ethically may receive payment for legal services other than in money, such as through barter exchanges. The request also asks whether Utah Ethics Advisory Opinion No. 50, issued August 25, 1978, is still valid, noting that questions concerning an attorney’s participation in barter exchanges are of continuing interest in Utah.
      Payment of Attorneys’ Fees Other Than in Money. Nothing in the Utah Rules of Professional Conduct requires that an attorney’s fees be paid in money. The fundamental requirement of the Utah Rules of Professional Conduct is that an attorney’s fees must be reasonable.1
      Rule 1.5(b) requires a written communication concerning the basis or rate of an attorney’s fee when the lawyer has not regularly represented the client and it is reasonably foreseeable that total attorneys’ fees to the client will exceed $750.00. A determination of whether the $750.00 threshold will be met in a particular case requires that attorneys’ fees be evaluated in terms of their dollar amount.
      However, Rule 1.5 does not require that payment for legal services be made in money. The following official comment to Rule 1.5 states that an attorney may accept property in payment for fees:
      A lawyer may accept property in payment for services, such as an ownership interest in an enterprise, providing this does not involve acquisition of a proprietary interest in the cause of action or subject matter of the litigation contrary to Rule 1.8(j). However, a fee paid in property instead of money may be subject to special scrutiny because it involves questions concerning both the value of the services and the lawyer’s special knowledge of the value of the property.
      As this comment illustrates, no arrangement for payment of an attorney’s fees, whether in money, property or services, should violate any of the prohibited transaction rules of Rule 1.8. For example, an arrangement for payment of attorneys’ fees that involves the acquisition of a pecuniary interest adverse to a client in violation of Rule 1.8(a) is prohibited. Any arrangement for payment of attorneys’ fees that involves giving the lawyer literary or media rights in violation of Rule 1.8(d) is prohibited. Accepting reimbursement of costs other than in money in a way that provides for an improper advance of costs or expenses could also violate the financial assistance restrictions of Rule 1.8(e).

      Ethics Advisory Opinion No. 97-06

      (Approved May 30, 1997)
      Under the Utah Rules of Professional Conduct, what are the ethical limitations that govern attorneys’ acceptance of clients’ credit cards to pay fees and costs?

      Opinion: Generally, attorneys may accept payment for fees and costs by credit card in the same way that other merchants and service-providers do. This general conclusion is, in part, in conflict with Utah Ethics Advisory Opinion No. 21, which is accordingly overruled.
      Background: In 1975, the Utah Ethics Advisory Opinion Committee issued Opinion No. 21, which placed significant restraints on the acceptance of credit cards by attorneys in payment of fees and cost. That opinion was issued under the then-effective Code of Professional Responsibility, which, among other differences, is at variance with the current Utah Rules of Professional Conduct in the area of attorney advertising. To the extent the world of communicating about attorneys’ services has changed, this Committee has been asked to revisit the issue of attorneys’ acceptance of credit cards under today’s Rules.
      The following specific questions have been asked:
      1. May an attorney accept cash or a check from a client to be held against unearned fees or costs when the attorney knows that the client obtained the funds through the use of a credit card?
      2. May an attorney enter into a retainer agreement with a client under which the client gives the attorney a credit card number and authorizes the attorney to charge the client’s card when fees are earned or costs incurred?
      3. May an attorney suggest to a client that the client use a credit card to pay attorneys’ fees or costs?
      4. May an attorney place a notice on bills sent to clients stating that the attorney accepts credit card payments?
      5. In accepting credit-card payments, must an attorney enter into a bank charge card-attorney agreement similar to the agreement attached to Ethics Advisory Opinion No. 21, issued February 19, 1975?
      Analysis: In 1969 the American Bar Association issued Informal Opinion 1120 which stated that “it is unprofessional for an attorney to subscribe to credit card plans.” That view was reaffirmed in February 1971 by ABA Informal Opinion 1176. However, by 1974 in Formal Opinion 338, the ABA had revisited the issue of attorneys’ accepting credit cards for fee payments in light of the adoption of the ABA Model Code of Professional Responsibility, which had replaced the ABA Canons of Ethics. The ABA reversed course and concluded in Opinion No. 338 that “the Code has overruled Informal Opinion 1176 and that the use of credit cards for the payment of legal expenses and services is permitted under the Code.” However, the opinion went on to list six “considerations” to which a credit card plan was required to conform:
      1. All publicity and advertising relating to a credit card plan shall be subject to the prior approval in writing of the state or local bar committee having jurisdiction of the professional ethics of the attorneys involved.
      2. No directory of any kind shall be printed or published of the names of individual attorney members who subscribe to the credit card plan. (more…)