Opinion 87-3
(May 1987)

By letter dated January 27, 1987, you have asked for an opinion from the Professional Guidance Committee as to whether you might enter into an arrangement with a debt collection service whereby you would received 75 percent of the debt collection service's 50 percent contingent fee on all debts collected which required your services as an attorney.

Since the principal in the debt collection service is not a lawyer, it is the opinion of the Committee that the arrangement you have described would violate DR 3-102(A). DR 3-102(A) is in no way ambiguous:

A lawyer or law firm shall not share legal fees with a non-lawyer ....

(Emphasis supplied).

In addition, Pennsylvania Rule of Civil Procedure 204, entitled Payments to Persons in Connection with Litigation, would seem to clearly prohibit the proposed arrangement:

No attorney shall promise to pay or shall, directly or indirectly, make payment or sanction the payment of any compensation, gratuity, money or thing of value to any person in connection with any case in addition to the compensation agreed upon or customarily or reasonably charged for services actually rendered by such person. The amount of compensation shall not depend or be determined, directly or indirectly by the outcome of the case.

(Emphasis supplied).

The Committee also notes the limitations contained in DR 2-103(B) prohibiting a lawyer from compensating or giving anything of value to a person or organization to recommend or secure his employment by a client; and, DR 5-107(B) forbidding a lawyer from permitting one who pays him to render legal services for another - in this instance, a creditor - to direct or regulate his professional judgment in rendering such service.

To the extent you might be regarded, or might regard yourself, as having been hired by the debt collection service the Committee is also concerned about the potential for violation of DR 3-101(A) which states that A lawyer shall not aid a nonlawyer in the unauthorized practice of law. In this connection, it is worth noting that the weight of authority across the United States appears to favor the proposition that a collection agency cannot interpose itself between a creditor and an attorney seeking to collect his claim without engaging in the unauthorized practice of law. See generally Annotation, 27 A.L.R. 3d 1152.

Finally, we feel constrained to point out the existence of a criminal statute, 18 Pa. C.S.A. ยง7331(c) and (e), which states, in pertinent part:
(c) Furnishing legal services - It unlawful for a collection agency to furnish, or offer to furnish legal services, directly or indirectly, or to offer to render or furnish such services within or without this Commonwealth. The forwarding of a claim by a collection agency to an attorney at law, for the purpose of collection, shall not constitute furnishing legal service for the purposes of this subsection....

(e) Running for attorneys. - It is unlawful for a collection agency to solicit employment for any attorney at law, whether practicing in this Commonwealth or elsewhere, or to receive from or divide with any such attorney at law any portion of any fee received by such attorney at law....

(Emphasis supplied).

The Committee believes there may be ways in which a relationship with the debt collection service could be structured so as to avoid impropriety. For example, an arrangement where you are compensated directly by the creditor could be appropriate so long as the fee, whether contingent or otherwise, was not shared with a non-lawyer. Similarly, the creditor could compensate the debt collection agency for its services. Structuring the arrangement so as to avoid the combined payment to you and the debt collection agency should achieve the desired result, yet avoid the pitfalls identified in this opinion.

Our response is based upon the relationship between you and the collection agency as you have described it in your letter of inquiry. Were you to represent the creditor in actuality, not just nominally, and were the agency to have acted as an agent for the creditor, then your arrangement would be one in which you received a contingent fee and remitted the net recovery to the creditor's agent. The Committee feels this might avoid the difficulties discussed elsewhere in this opinion.

   

The Philadelphia Bar Association's Professional Guidance Committee provides, upon request, advice for lawyers facing or anticipating facing ethical dilemmas. Advice is based on the consideration of the facts of the particular inquirer's situation and the Rules of Professional Conduct as promulgated by the Supreme Court of Pennsylvania. The Committee's opinions are advisory only and are based upon the facts set forth. The opinions are not binding upon the Disciplinary Board of the Supreme Court of Pennsylvania or any other Court. They carry only such weight as an appropriate reviewing authority may choose to give it.