Court Opinion

ID: 4761875
Source: CourtListenerOpinion
Date Created: 2021-08-12 17:57:09.047527+00
Date Added: 2024-06-11T08:09:03.309942
License: Public Domain

Schindler, J.
¶39 (concurring) — Because the limited case law interpreting RPC 1.8(a) addresses application of the rule only to current clients, I agree with the conclusion that RPC 1.8(a) does not apply. But I write separately to urge the Supreme Court to address whether RPC 1.8(a) should apply to a security interest acquired during the negotiation of the initial fee agreement. While the court has not addressed the application of RPC 1.8(a) to the acquisition of a security interest during negotiation of a fee agreement, recent Washington State Bar Association (WSBA) Advisory Opinion 2209, “Lawyer Taking Security Interest in Client Property” (2012), states that best practice would include compliance with the requirements of RPC 1.8(a) in those circumstances.
*227¶40 In WSBA Advisory Opinion 2209, the WSBA Rules of Professional Conduct Committee (Committee) recognizes RPC 1.8(a) applies only to current clients but notes that the Supreme Court has not squarely addressed whether RPC 1.8(a) applies to the negotiation of a security interest as part of the initial fee agreement. Based on authority from other jurisdictions and American Bar Association (ABA) Formal Opinion 02-427, “Contractual Security Interest Obtained by a Lawyer to Secure Payment of a Fee” (2002), the Committee states that best practice would include compliance with the requirements of RPC 1.8(a) when acquiring a security interest, such as a lien, during the negotiation of the initial fee agreement. WSBA Advisory Op. 2209.
¶41 WSBA Advisory Opinion 2209 states, in pertinent part:
The negotiation of the terms of the initial fee agreement is not generally considered a “business transaction” with a client. This is because at the time of the negotiation of the initial- fee agreement, the attorney-client relationship is not yet formed. Thus the attorney does not owe the same duty to a prospective client as she would to an existing client. Additionally, the prospective client can walk away from the transaction. On the other hand, any subsequent modification of the fee agreement is generally considered a business transaction. See Comment [1] to RPC 1.8 (“[RPC 1.8] does not apply to ordinary fee arrangements between client and lawyer, which are governed by Rule 1.5, although its requirements must be met when the lawyer accepts an interest in the client’s business or other nonmonetary property as payment of all or part of a fee.”).
However, there is some authority from other jurisdictions that RPC 1.8(a) applies even to security interests acquired during the negotiation of the initial fee agreement. See ABA Formal Opinion 02-427. Thus, it is the Committee’s opinion that the best practice would include compliance with RPC 1.8(a).
Under RPC 1.8(i), an attorney may accept a contractual security interest in a client’s real property. Washington courts *228have not squarely addressed the application of RPC 1.8(a) to the acceptance of a security interest during the initial negotiation of the fee agreement, but the careful attorney would comply with its provisions. If the security interest is created pursuant to a modified fee agreement, the attorney must comply with RPC 1.8(a).[23]
(First and second alterations in original.)
¶42 ABA Formal Opinion 02-427 states that “[a] lawyer who acquires a contractual security interest in a client’s property to secure payment of fees earned or to be earned must comply with [ABA] Model Rule 1.8(a).”24 ABA Formal Opinion 02-427 also states that transactions to secure a fee are “regarded in most state and local bar opinions and court decisions as . . . business transaction[s]” subject to the disclosure requirements of ABA Model Rule 1.8(a).25
¶43 Here, the agreement provides, in pertinent part:
5. Lien. Defoor hereby grants RLG a lien for the total amount of the past fees and costs for which she is obligated ($775,000), plus the amount of additional fees and costs incurred by or on *229behalf of Defoor pursuant to this Agreement. This lien shall apply and be enforceable against any recovery by Defoor in the Litigation and any assets of Defoor, whether awarded in the Litigation, obtained in settlement, or otherwise. Any payment and/or transfer of property to Defoor or for Defoor’s benefit in the Litigation shall be paid or given, as the case may be, to RLG in trust for Defoor, and RLG may use said funds or property to discharge, in whole or in part, any amounts due to RLG under this Agreement or the Promissory Note.[26]
¶44 RPC 1.8(i) prohibits a lawyer from acquiring a lien “to secure the lawyer’s fee or expenses.” RPC 1.8(i)(l).27 Comment 16 to RPC 1.8 states that where “a lawyer acquires by contract a security interest in property other than that recovered through the lawyer’s efforts in the litigation, such an acquisition is a business or financial transaction with a client and is governed by the requirements of paragraph (a).” RPC 1.8(a) requires a lawyer to meet strict requirements before entering into a business transaction with a client or acquiring “an ownership, possessory, security or other pecuniary interest adverse to a client.”
¶45 If RPC 1.8(a) applied to the Agreement, there is no question that the disclosure requirements were not met.28 *230A fee agreement that violates RPC 1.8(a) is against public policy and unenforceable. Valley/50th Ave., LLC v. Stewart, 159 Wn.2d 736, 743, 153 P.3d 186 (2007).
Review denied at 179 Wn.2d 1011 (2014).

 See also WSBA Advisory Op. 2178, “Client signing judgment for estimated attorney’s fees in dissolution case” (2008) (A lawyer violates RPC 1.8(a) by obtaining a stipulated judgment to secure anticipated fees in advance of undertaking representation. The Committee “question[ed] whether it would be proper under any circumstances to obtain a negotiable promissory note for a sum certain from a prospective client prior to work being performed or fees being earned.”); WSBA Advisory Op. 1044, “Conflict of interest; receipt of deed of trust to secure future fees” (1986) (Where a law firm “received a deed of trust and promissory note to secure legal fees for future representation,” the law firm was required to comply with RPC 1.8(a) “if [the deed and note] were a security interest.” (emphasis added)).

 (Emphasis added.)

 ABA Formal Opinion 02-427 states, in pertinent part:
Considerations in Securing a Fee Obligation
Most state and local bar opinions and court decisions have looked to [ABA] Model Rule 1.8(a) when considering this issue. That rule applies to business transactions with clients. Although a fee agreement with a client is not generally considered to constitute a business transaction, the transaction with a client to secure a fee is itself regarded in most state and local bar opinions and court decisions as a business transaction. The [ABA] Committee [on Ethics and Professional Responsibility] agrees.
(Footnotes omitted.)

 (Emphasis added.)

 RPC 1.8(i) states:
A lawyer shall not acquire a proprietary interest in the cause of action or subject matter of litigation the lawyer is conducting for a client, except that the lawyer may:
(1) acquire a lien authorized 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.

 RLG did not establish:
(1) there was no undue influence; (2) he or she gave the client exactly the same information or advice as would have been given by a disinterested attorney; and (3) the client would have received no greater benefit had he or she dealt with a stranger.
In re Disciplinary Proceeding Against McGlothlen, 99 Wn.2d 515, 525, 663 P.2d 1330 (1983).