Opinion #92. Representation of Client in Which Lawyer Has Limited Partnership Interest

Issued by the Professional Ethics Commission

Date Issued: December 22, 1988

Question

A law firm that has a limited partnership interest in its client (a partnership) inquires if Maine Bar Rule 3.7(c) prohibits the law firm from representing that client as a plaintiff in litigation, the outcome of which would impact the value of that interest positively. The law firm’s limited partnership interest in the client is a less than two percent interest.

Opinion

The law firm has informed the Commission that it has independently satisfied itself that it has complied with the requirements of Rules 3.6(i) and 3.4(f). The question presented therefore concerns only the applicability of Rule 3.7(c). The implications of the provisions of Rules 3.6(i) and 3.4(f) as well as the implications of the provisions of 31 M.R.S.A. §154 are beyond the scope of this advisory opinion. Rule 3.7(c) provides:

(c) Interest in Litigation. A lawyer shall not acquire a proprietary interest in the cause of action or subject matter of litigation he is conducting for a client, except that he may:

(1) Assert a lien granted by law against the proceeds of such action or litigation to secure his fee or expenses. This paragraph does not authorize an attorney to assert a lien on a client’s file in order to secure payment of his fee. The assertion of such a lien (if any exists) is improper; and

(2) Contract with a client for a reasonable contingent fee as provided in Rule 8.

While the particular circumstances of this or any other specific case will be determinative, the Commission generally construes Rule 3.7(c) in the context of the question presented as follows. It seems clear that under certain circumstances, a lawyer’s acquisition of an interest in his client would come within the scope of Rule 3.7(c). For example, if a lawyer, with a view towards contemplated litigation on behalf of his client were to acquire an interest in the client for the purpose of benefitting from the enhanced value of that interest as the result of that litigation, the provisions of Rule 3.7(c) would be implicated. On the other hand, the Commission believes that Rule 3.7(c) does not extend so broadly as to prohibit a lawyer who has an interest in his client from representing that client in litigation provided the lawyer’s interest was acquired for reasons independent of and apart from any consideration of litigation which might thereafter be contemplated.

While the Commission believes that the latter situation is beyond the scope of Rule 3.7(c), the Commission underscores the necessity in that situation for scrupulous compliance with the “full disclosure” and “informed written consent of the client” requirements of Rule 3.4(f).


Enduring Ethics Opinion