Professional Guidance Committee
The inquiring law firm represents an individual who was seriously and permanently injured as a result of a motor vehicle accident. The vehicle which struck the client's vehicle was being pursued by local police in a high-speed police chase. Presently, the law firm represents the client in connection with a lawsuit brought against the fleeing felon, i.e., the criminal, as well as the local police department.
The firm believes that the client would have been eligible to recover certain benefits under the Pennsylvania Crime Victims' Compensation Act, 71 P.S. '180-7. at al., and that the maximum benefits set forth in the Crime Victims Compensation Act are $35,000.00. The firm also believes that the Act provides that in order to be eligible for benefits, claims must be filed within one year, and only for good cause shown will the time be extended to two years. However, the firm failed to make timely application for benefits under the Crime Victims Compensation Act until well after the extended two-year period of time had elapsed. It is the firm's determination that it committed malpractice.
The firm advised the client of the facts and asked him to obtain other counsel to present a claim against the firm. The client did obtain other counsel, and the firm was advised in writing of a claim against it for legal malpractice as a result of failing to timely apply for the benefits under the Crime Victims' Compensation Act.
The Crime Victims' Compensation Act also provides in 71 P.S. '180-7.9(c.2e) that any award made pursuant to this Act shall be reduced by the amount of any payments received or to be received by the claimant as a result of the injury... The law firm believes that case law and guidelines provided by the Crime Victims' Compensation Act indicate that settlements or verdicts received in personal injury lawsuits are subject to this provision, and therefore sums paid pursuant to the Act would have to be repaid from settlement or judgment proceeds.
Accordingly, the firm is contemplating an agreement with the client that in exchange for the law firm settling the client's legal malpractice claim for a present payment of $35,000.00, the client would execute a document providing that those monies paid, in lieu of the Crime Victims' Compensation Act Payments, be repaid to the firm upon successful conclusion of the case by way of settlement or verdict.
The firm has advised the client through his attorney in the legal malpractice action of all of these facts and the client has advised that he still would like the firm to continue to represent him in the personal injury lawsuit. The inquirer asks if such an arrangement would be ethical.
This situation involves several important aspects of the attorney-client relationship, and implicates Pa. Rules of Professional Conduct 1.7(b), 1.8(e), 1.8(h), and most notably Rule 1.8(j).
R.P.C. 1.7(b) states:
(b) a lawyer shall not represent a client if the representation of that client may be materially limited by the lawyer's responsibilities to another client or to a third person, or by the lawyer's own interest, unless:
(1) the lawyer reasonably believes the representation will not be adversely affected; and
(2) the client consents after full disclosure and consultation...
Clearly, the law firm continuing to represent the client in the personal injury case while the client has an open claim against the firm for malpractice poses a conflict of interest. However, it is a waivable conflict, and as the facts indicate the client has waived it with the advice of independent counsel. Assuming the firm reasonably believes that its representation of the client in the personal injury case will not be adversely affected by the malpractice action, this is a valid waiver.
R.P.C. 1.8 (e) states:
(e) A lawyer shall not provide financial assistance to a client in connection with pending or contemplated litigation, except that:
(1) a lawyer may advance court costs and expenses of litigation, the repayment of which may be contingent on the outcome of the matter; and
(2) a lawyer representing an indigent client may pay court costs and expenses of litigation on behalf of the client.
In the situation presented by the inquirer, the payment by the firm to settle the malpractice action should not be viewed as financial assistance to a client, but rather as a payment to settle a malpractice case.
R.P.C. 1.8(h) states:
(h) A lawyer shall not make an agreement prospectively limiting the lawyer's liability to a client for malpractice unless permitted by law and the client is independently represented in making the agreement, nor shall a lawyer settle a claim for such liability with an unrepresented client or former client without first advising that person in writing that independent representation is appropriate in connection therewith.
Here, the facts indicate that the client has been and continues to be fully represented by independent outside counsel regarding asserting and settling the malpractice action. Based on these facts the Committee believes that the law firm has complied with Rule 1.8(h).
R.P.C. 1.8(j) states:
(j) A lawyer shall not acquire a proprietary interest in a cause of action that the lawyer is conducting for a client, except that the lawyer may:
(1) acquire a lien granted by law to secure the lawyer's fee or expenses; and
(2) contract with a client for a reasonable contingent fee in a civil case.
Because the exceptions to Rule 1.8 (j), contained in subparagraphs (1) & (2) do not apply to the present inquiry, the Committee believes that requiring the client to repay the $35,000 out of any settlement or judgment, albeit a requirement by agreement, nevertheless creates a prohibited proprietary interest of the firm in the client's case, and is unethical. The Committee notes however, that it is permissible for the firm to settle the case with the present payment of the $35,000 providing there is no requirement that the money be repaid by the client.
Caveat: The foregoing opinion is advisory only and is based upon the facts as set forth. The opinion is not binding on the Disciplinary Board of the Supreme Court of Pennsylvania or any court. It carries only such weight as an approving reviewing