Can a law firm convert its contingent-fee security interest in a client's real property into an ownership interest while the judgment is on appeal?

Plain-English summary

The inquiry concerned a law firm proposing to convert a one-third contingency-fee security interest in real property into an ownership interest, in conjunction with the firm's client, while a defendant is appealing the underlying judgment. The inquiry also asked whether that might allow a defendant to remove the firm as attorney by making it a witness if the appeal succeeds.

The committee concluded that the described transaction may be undertaken without necessarily being in violation of the rules, but that care should be taken to comply with RPC 1.8(a) for each transaction, as well as RPC 1.5(c). It added that RPC 1.8(j) would be of concern if the property involved were the subject of the underlying litigation. On the witness question, the committee stated that whether RPC 3.7 may create a problem depends on how the business venture is structured, and that to more fully answer that question would involve providing legal advice beyond the scope of the committee's role.

Currency note

This opinion was issued in 1998, before the Washington State Bar Association's adoption of the 2006 revisions to the Rules of Professional Conduct. 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 Treat this page as historical context, not current guidance.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. Washington's RPC 1.5(c), 1.8(a), and 3.7 correspond to ABA Model Rules 1.5(c) (contingent fees), 1.8(a) (business transactions with a client), and 3.7 (lawyer as witness). The cited RPC 1.8(j) (acquiring a proprietary interest in the subject of litigation) corresponds to the rule now numbered ABA Model Rule 1.8(i).

Common questions

Q: Can a firm turn its contingent-fee security interest in property into an ownership interest?

A: The committee concluded the transaction may be undertaken without necessarily violating the rules, provided the lawyer complies with RPC 1.8(a) for each transaction and with RPC 1.5(c).

Q: Does it matter that the property is tied up in a pending appeal?

A: The committee stated RPC 1.8(j) would be of concern if the property involved were the subject of the underlying litigation.

Q: Could converting the interest make the lawyer a witness under RPC 3.7?

A: The committee said that depends on how the business venture is structured, and that answering more fully would involve legal advice beyond the committee's role.

Background and rules framework

The opinion applied Washington RPC 1.8(a) (business transactions with a client), RPC 1.5(c) (contingent fees), RPC 1.8(j) (acquiring a proprietary interest in the subject of litigation), and RPC 3.7 (lawyer as witness), corresponding to ABA Model Rules 1.8(a), 1.5(c), the rule now numbered 1.8(i), and 3.7. The committee made the permissibility turn on compliance with the business-transaction and contingent-fee safeguards, flagged the proprietary-interest rule if the property was the litigation's subject, and declined to resolve the witness question as fact-dependent.

Citations and references

Rules of Professional Conduct:

• ABA Model Rule 1.5 (fees; contingent fees in writing); Washington RPC 1.5(c)
• ABA Model Rule 1.8(a) (business transactions with a client); Washington RPC 1.8(a)
• ABA Model Rule 1.8(i) (proprietary interest in the subject of litigation); Washington RPC 1.8(j)
• ABA Model Rule 3.7 (lawyer as witness); Washington RPC 3.7

See also

• WA Ethics Op. 1003: Lawyer as Witness, Continued Role
• WA Ethics Op. 1815: Contingent Fee in a Divorce Appeal
• WA Ethics Op. 1812: Referral Fee After a Conflict

Source

• Landing page: https://ao.wsba.org/print.aspx?ID=1011

Original opinion text

Reproduced from the official source for research purposes. The linked source is authoritative.

Advisory Opinion: 1818
Year Issued: 1998
RPC(s): RPC 1.5(c); 1.8(a); 1.8(j); 3.7
Subject: Conflict of interest; lawyer converting a security interest in real property for a fee into an ownership interest, while an appeal regarding the property is pending

The Committee researched and reviewed your inquiry concerning a lawyer converting a security interest in real property for a fee into an ownership interest, while an appeal regarding the property is pending and determined the following:

The RPC Committee has considered whether a law firm may convert a one-third contingency fee security interest in real property into an ownership interest in conjunction with the law firm's client while a defendant is appealing the underlying judgment and whether that might allow a defendant to remove a law firm as an attorney from a case as a witness in the event the appeal is successful.

The Committee is of the opinion that the transaction you described may be undertaken without necessarily being in violation of the rules, but care should be taken to comply with RPC 1.8(a) for each transaction, as well as RPC 1.5(c). RPC 1.8(j) would be of concern if the property involved were the subject of the underlying litigation.

Whether RPC 3.7 may create a problem for you as a potential witness depends on how the business venture is structured, and to more fully answer that question would involve providing legal advice which is beyond the scope of this Committee's role.