Can a lawyer agree with a client, in a retainer or otherwise, that the client will pay any Rule 11 or Part 130 sanctions imposed on the lawyer?

Plain-English summary

Responding to the rising use of litigation sanctions under Federal Rule of Civil Procedure 11 (and Rule 26(g)), 28 U.S.C. 1927, the courts' inherent powers, and New York's Part 130 of the Rules of the Chief Administrator, the committee addressed whether a lawyer may agree to shift sanctions imposed on the lawyer to the client. It concluded that such an agreement, whether made before or after sanctions are imposed, violates several ethical prohibitions and is improper.

The committee first explained that sanctions are imposed on a lawyer only where the court finds the lawyer violated the standards expected of a member of the bar. Drawing on the federal case law interpreting Rule 11, it noted that sanctions fall on a party alone where the client misled the lawyer but the lawyer still had an objectively reasonable basis to sign; otherwise the lawyer is charged with knowing the wrongfulness of the conduct. So when sanctions are imposed on a lawyer, they rest at least in part on the lawyer's own conduct, even if only a failure to prevent the client's wrongful acts.

The committee then reasoned that conduct violating Rule 11 or Part 130 likely also violates the Code: DR 7-102(A)(1) and (2) bar a lawyer from taking actions that merely harass or injure or that assert positions unwarranted by law, duties imposed on lawyers themselves. Shifting the consequences of these personal duties to the client would undermine the lawyer's incentive to fulfill them. While DR 6-102 (which bars a lawyer from limiting liability to a client for the lawyer's own malpractice) is not directly implicated, because it concerns liability to the client rather than to third parties and sanctions may not be malpractice, the committee found it expressed by analogy the principle that a lawyer should not enter an agreement diminishing the lawyer's professional responsibility. The committee added that shifting sanctions would also appear to frustrate the deterrent and disciplinary purposes of Rule 11 and Part 130, quoting Judge Weinstein's observation in Eastway Construction that allowing a client to reimburse the lawyer would interfere with the court's effort to maintain discipline, while noting it does not opine on questions of law.

Currency note

This opinion was issued in 1989, before New York replaced the Code of Professional Responsibility (the Disciplinary Rules cited here) with the New York Rules of Professional Conduct, effective April 1, 2009. Limiting a lawyer's liability to a client is now addressed by Rule 1.8(h), and meritorious-claims and candor duties by Rules 3.1 and 3.3; New York's Part 130 sanctions rule and Federal Rule 11 have themselves been amended since 1989. Subsequent rule amendments or later opinions may have changed the analysis. Treat this page as historical context, not current guidance. Verify against current rules before relying on any specific rule, deadline, or requirement mentioned here.

Common questions

Q: Can a retainer say the client will pay any sanctions imposed on the lawyer?

A: The committee concluded no; an agreement to shift sanctions from lawyer to client made before sanctions are imposed is improper.

Q: What about agreeing to it after the court has already sanctioned the lawyer?

A: The committee concluded that is equally improper; the impropriety does not depend on whether the agreement precedes or follows the sanction.

Q: Why is shifting sanctions to the client a problem?

A: The committee concluded that sanctions on a lawyer reflect the lawyer's own responsibility, and shifting them would undermine the lawyer's incentive to meet ethical duties and would frustrate the deterrent and disciplinary purposes of the sanctions rules.

Q: Does DR 6-102 directly bar such an agreement?

A: The committee concluded DR 6-102 is not directly implicated, since it concerns limiting liability to the client for malpractice rather than liability for sanctions payable to third parties, but it expresses by analogy the principle against agreements that diminish a lawyer's professional responsibility.

Background and rules framework

The opinion applied New York Code DR 7-102(A)(1) and (2) (barring harassing actions and positions unwarranted by law) and DR 6-102 (limiting liability to a client), informed by EC 7-4 and EC 7-5, against the backdrop of Federal Rule of Civil Procedure 11 and New York's Part 130 sanctions provisions. These correspond to ABA Model Rule 3.1 (meritorious claims and contentions) and Model Rule 1.8(h) (limiting liability to a client).

Citations and references

Rules of Professional Conduct:

• New York Code DR 7-102(A)(1)-(2), DR 6-102; EC 7-4, EC 7-5 (applied in the opinion)
• MR 3.1 (meritorious claims and contentions); MR 1.8(h) (limiting liability to a client)

Statutes and rules:

• Fed. R. Civ. P. 11 and 26(g); 28 U.S.C. 1927; N.Y. Rules of the Chief Administrator, Part 130

Cases:

• Pavelic & LeFlore v. Marvel Entertainment Group, 493 U.S. 120 (1989), Rule 11's nondelegable personal responsibility
• Eastway Construction Corp. v. City of New York, 637 F. Supp. 558 (E.D.N.Y. 1986), client reimbursement of a sanctioned lawyer should be prohibited
• Calloway v. Marvel Enterprises Group, 854 F.2d 1452 (2d Cir. 1988), allocation of Rule 11 sanctions between lawyer and client

See also

• NYC Bar Formal Op. 1988-7: Mortgage on a Client's Property to Secure a Fee
• NYC Bar Formal Op. 1989-1: A Client's Interception of an Adversary's Privileged Communications

Source

• Landing page: https://www.nycbar.org/reports/formal-opinion-1989-3/