By Jim Calloway

Some lawyers and I recently were discussing the problems of family law cases in which the parents are paying for a child’s attorney’s fees. It is a very common situation, given the finances of many young married couples. Parents are usually quite willing to pay for attorney’s fees in family law matters to make sure their children and, often, grandchildren are protected. But they also may have other goals. They could be very intent on their child being awarded “full custody.” They could be overly hostile in their attitude toward their child’s spouse since they knew the person was a poor choice from the beginning. But those parents, with their greater life experiences, can also be a calm voice of reason during emotional and turbulent times.

I told the lawyers in our discussion that one way to avoid many of the problems with third-party payment of fees is to have a written agreement signed by the third-party outlining potential problem areas. I ticked off several points that should be covered.

Then I returned to my desk facing a deadline for this Law Practice Tips column for the Oklahoma Bar Journal. I thought maybe for my contribution to the legal profession this month, I should draft such a form. So this column outlines the process, research and considerations in preparing a simple agreement for third-party payment of fees in a family law case. It can be altered and adopted for other types of matters.

But before we move on to the process and result, let’s begin with a disclaimer.

DISCLAIMER — The following form is provided as a courtesy to practicing lawyers. Please use it as a guideline with your own research and experience to supply any needed modifications. Neither the Oklahoma Bar Association nor the drafter of this form warrants its use, and any liability for the use of this form is disclaimed. Please note this should not be considered as any type of official OBA form.

My first point of reference was an Oklahoma Bar Journal article titled “Payments of Fees by a Third Party” by Gina Hendryx, who serves as the OBA’s general counsel. This article was written in 2009 when she was the OBA ethics counsel.

She noted that the Oklahoma Rules of Professional Conduct recognize third-party fee payment and address the potential pitfalls that may arise:

Rule 1.8: Conflicts Of Interest: Current Clients: Specific Rules

(f) A lawyer shall not accept compensation for representing a client from one other than the client unless:

1) the client gives informed consent;

2) there is no interference with the lawyer’s independence of professional judgment or with the client-lawyer relationship; and

3) information relating to representation of a client is protected as required by Rule 1.6.

CONSENT OF THE CLIENT

Informed consent is also defined in the ORPC:

Rule 1.0: Terminology

(e) “Informed Consent” denotes the agreement by a person to a proposed course of conduct after the lawyer has communicated adequate information and explanation about the material risks of and reasonably available alternatives to the proposed course of conduct.

The most simple way, in my view, to both obtain and document the client’s informed consent is to provide a place on the agreement for the client to sign noting that they have read it and consent to it. Ms. Hendryx notes one opinion from another jurisdiction that indicates a lawyer who did not personally meet with the client to explain the fee agreement violated Rule 1.8. This clearly indicates that the best practice is for the lawyer to be personally involved in the execution of this agreement and to discuss it with the client carefully.

This is not just a meaningless exercise. While it is clear that most individuals who need legal services and cannot afford them will jump at the opportunity for a third party to pay, it is important to discuss the risks of these arrangements even when the lawyer has sought to minimize them by using these procedures. One material risk might be the third party refusing to advance additional funds during the representation when there is a disagreement.

INDEPENDENCE OF PROFESSIONAL JUDGMENT

As Ms. Hendryx noted in her article, the Oklahoma Rule of Professional Conduct 1.8(f)(2) and 5.4(c) both mandate that the third-party payer have no control over the client’s representation:

Rule 5.4 Professional Independence of a Lawyer

(c) A lawyer shall not permit a person who recommends, employs, or pays the lawyer to render legal services for another to direct or regulate the lawyer’s professional judgment in rendering such legal services.

This can sometimes be a challenging situation in family law matters, and one case was cited in General Counsel Hendryx’s article where a lawyer was found to have violated the above rules by allowing the client’s mother who was paying the legal fees to veto appealing a custody order.

This is actually another reason why I think getting everyone together with the attorney for a formal signing agreement related to third-party fee payment makes sense. The lawyer can answer general questions that the payer might have about the range of ultimate cost and the like, while also setting the tone that this may well be the only time that the payer gets to have such a conference with the lawyer and client.

There is always at least a certain amount of control involved in these arrangements. After all, if the parent just wanted to pay the child’s attorney’s fees, they can transfer money to the child’s bank account and let the child make payment directly to the lawyer. It is understandable that the parent would at least want to meet the lawyer and understand at least generally what they are paying for.

Clearly, wise parental advice may be very beneficial, particularly for the younger and inexperienced litigant. But the parent will have many opportunities to consult with their child, and it is good to establish ground rules that meetings in the lawyer’s office will be between the lawyer and client only with important decisions being made by the client only, with the advice of the lawyer.

This is why in my form agreement I indicated that once the lawyer has been paid a retainer, any refund will be made only to the client and not the individual who actually paid the money. Any family lawyer who has dealt with these situations very much appreciates the problems that can occur when the payer disagrees with an action and demands “my money back.”

PROTECTING CLIENT CONFIDENCES

The client has to have trust that the lawyer will operate only for the client’s benefit and will keep the client’s confidences and secrets. Sometimes the lawyer will learn of certain facts that are unknown to the parent-payer. Sometimes the existence of these facts will lead to accommodations or settlements that may make no sense to the parent who is not completely informed. While the client may consent to release of information to the payer, this can become a slippery slope when confidential information is concerned.

Generally speaking, it is probably best for the client to be in charge of passing along any status reports and updates to the payer. Then on the rare occasions when it is necessary for the lawyer to verify something directly to the payer, the lawyer can document this with the client in the form of “you are directing me to communicate the following to X.”

There are also complications when the client has moved in to live with the parent. Billing statements can reveal information that was not intended to be communicated — as can correspondence. This should be discussed in detail with the client.

CONCLUSION

Some of these steps may seem to be a bit cumbersome, especially for the veteran family lawyer who has dealt with the situation previously many times. But for most practitioners, it is better to get all of this on the table in advance and to make sure everyone understands the lawyer’s role clearly. There may be a time when this type of payment arrangement should be refused if it prevents the lawyer from providing competent representation and appropriately serving his or
her client.

I recognize that there are other common situations such as the guarantee of future payment of attorney fees on a particular matter that are not covered by this simple agreement. I wanted to keep this one short and sweet, so I just covered the situation where the third-party payer is advancing funds to the client. Obviously some additional language would be required if there is some provision for additional future payments and guarantees. Guarantees must comply
with statutory requirements.

Most lawyers will not be surprised that describing the process used to create the agreement is much longer than the simple language itself.

I have not consulted the OBA Family Law Section Practice Manual or any other form resource in the creation of this document. However, if I get valuable feedback from practicing lawyers, there may be a version 2.0 of this document forthcoming.

Mr. Calloway is OBA Management Assistance Program director. Need a quick answer to a tech problem or help resolving a management dilemma? Contact him at 405-416-7008, 800-522-8065 or jimc@okbar.org. It’s a free member benefit!

This is a template from which lawyers can do their customized agreement. You use any online template or form at your own risk.

Revised June 2022

AGREEMENT FOR A THIRD PARTY TO PAY ATTORNEY FEES

 

Good Lawyer
321 Barrister’s Way
Anytown, Oklahoma 73152

Mr. Good Lawyer (hereinafter referred to as Attorney) understands that ______________ (hereinafter referred to as Payor) wishes to advance funds to Attorney for the benefit and use of _____________, a client or potential client of Attorney (hereinafter referred to as Client). All of the undersigned understand and agree as follows:

1. Payor wishes to advance funds to Attorney to pay legal fees that have been and/or will be incurred in the Attorney’s representation of Client.
2. Payor understands that Attorney will exercise Attorney’s independent judgment in the representation of Client. Payment of Attorney’s fees and/or court costs gives Payer no right to instruct Attorney in how to proceed or to participate in conferences and conversations between Attorney and Client. It is also noted that there is always the possibility that Payor may be subpoenaed to testify in this matter by an opposing party. Discussing strategy or attorney-client confidences when Payor is present may render those communications outside of the attorney-client privilege and admissible in court.
3. Information exchanged between Attorney and Client is protected by attorney-client confidentiality and generally will be not disclosed to third parties, including Payor. Client is free to communicate or to decline to communicate with Payor about matters involved with the representation.
4. Both Attorney and Client appreciate Payor’s role in assisting Client in protecting Client’s rights and interests. It is respectfully suggested that Payor’s most positive role is in supporting Client during this trying time and not in attempting to coach or guide either Attorney or Client with regard to the legal representation.
5. Payor is making either a gift or a loan to Client. Attorney will hold the funds for the use and benefit of Client. In the event there is a refund of any part of funds pre-paid, it will be refunded by a check payable to Client, delivered to Client. Credit/debit card payments will be refunded to the card used for the original payment. This agreement applies not only to funds advanced today, but also to subsequent funds paid to Attorney for the benefit of Client.

I understand and consent to this agreement.

________________________
Payor

I understand and consent to this payment and agreement.

________________________
Client

I acknowledge witnessing Payor and Client execute this agreement.

________________________
Attorney

Originally published in the Oklahoma Bar Journal — October., 2014 — Vol. 85, No. 26