When Is It OK for a Non-Client to Pay the Fees?
Such an arrangement raises logistical questions, but also presents a dilemma about decision-making and strategy.
Several times each year a client tells me that someone else is going to be paying the fees. Sometimes it’s a family matter: the client is going through a messy divorce, and her mother or sister (or new partner) has agreed to cover the fees. In other situations there’s a corporation or an insurance company that has a legal duty to indemnify the client, and they’ve agreed to pay the fees upfront rather than reimburse the client, who probably can’t afford to pay the fees directly. In other instances there’s an investor who is lending the client some money, and who prefers to pay the fees.
Each of these situations involves an intersecting set of practical and ethical consideration:
- Paying the fees presumptively makes that person a client. When that is not the arrangement, it’s crucial that the terms be confirmed in writing by both parties, the client and the non-client. The client is the one who should sign the fee agreement, and the bill should be sent to the client. It is fine if you provide the non-client with a copy of the bill, and it’s fine to cash a check from the non-client, but all your communication should be with the client.
- Allowing a non-client to pay the fees generally doesn’t absolve the client of legal responsibility for payment, unless that is also made clear in a written agreement. In personal matters you would rarely release the client from the obligation to pay the fees, but you might do so in matters involving corporate indemnification or insurance coverage.
- An offer by a non-client to pay the fees doesn’t mean they are legally obligated to do so. And conversely, the legal obligation to pay the fees doesn’t mean the client can afford to do so. Remember, it’s up to your client to follow through with a friend or relative who has offered to cover the costs of litigation. Stay attuned to this dynamic, so you can avoid the nasty situation where you aren’t getting paid because the non-client has waffled on a prior commitment.
- Watch out for blatant ethical prohibitions. If there’s a dispute between an employee and her employer, the employee shouldn’t be paying you out of the company’s accounts. The same goes for a dispute between co-owners of property: one owner can’t tap the joint property account to pay your fees. Other situations are more ambiguous; for example, when a new partner wants to pay for the divorce fees of the client. Whenever there’s a likelihood of a problem, I insist that the client pay the fees—and if someone else wants to make them a gift later on, that’s between them.
Dilemma: When the Non-Client Gets Involved in Strategy
These are the mechanical and logistical aspects of the arrangement, and so long as you keep track of who everyone is, and document your agreement and bills accordingly, you will be fine. The more problematic issues are those that involve decision-making and strategy. Here’s the set-up: your client has limited funds, but really wants to pursue a case or is in desperate straits and needs serious legal help. There’s someone else out there who offers to pay the fees, but may have his or her own opinion on how to handle the matter. On the one hand you aren’t supposed to take directions from a non-client. On the other hand, if the non-client isn’t inclined to pay the fees beyond a certain point, and you aren’t up for taking on the matter pro bono, the client has a real problem. For this reason, the non-client ends up having a major role in the decision-making.
There is really only one way to address this dilemma, which is to keep a clear focus on whose problem this is: the client’s. It is totally fine to include the paying non-client in the conversations (being mindful of the lack of attorney-client confidentiality issue), and to be open about the predicament. I recently counseled a woman in a divorce whose brother has agreed to cover the fees, but he wants to understand the issues so he can evaluate the scope of his generosity. With the client’s consent we had a conference call, and I explained the legal issues in ways that didn’t raise any serious confidentiality risks. I then left it to the two of them to discuss the dynamics, and asked my client to report back to me on the results of their conversation. As the matter unfolds, I will discuss the questions about strategy just with my client, and she and I can openly address the strain between her financial goals and her financial constraints. She is the one who will need to tell me what she’s decided to do—even if the limits set by her brother are a major factor in her decision-making.
Frederick Hertz, an attorney and mediator based in Oakland, has managed his practice for more than 25 years.
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