Opinion ID: 2203401
Heading Depth: 1
Heading Rank: 2

Heading: Use of a Contingent Fee as Security

Text: At Dillon's suggestion, both loans he received from complainant were secured by the contingent fee he anticipated receiving as a result of his representation of her in the wrongful death action. The referee concluded that this transaction violated DR 5-103(A)(2), as interpreted by Ethical Consideration 5-7. Dillon contends, however, that if the contingent fee arrangement itself was permissible, use of the contingent fee as security does not change its permissibility under DR 5-103. We reject Dillon's interpretation of DR 5-103(A)(2). That rule provides, in relevant part, that the only proprietary interest in the action that a lawyer may acquire is a contract with the client for a reasonable contingent fee, a limitation intended to avoid [t]he possibility of an adverse effect upon the exercise of free judgment by a lawyer on behalf of his client during litigation   . EC 5-7, MCPR. Using this contingent fee as security for a personal loan from a client is in effect acquiring a greater proprietary interest than permitted by DR 5-103, and such an interest clearly may have an adverse effect on the lawyer's exercise of free judgment on the client's behalf. It is therefore beyond the scope of what is permitted by DR 5-103. As an additional consideration, use of such security makes it difficult for a client subsequently to change attorneys without jeopardizing the security. Accordingly, we adopt the referee's conclusion that Dillon violated DR 5-103(A)(2), MCPR.