Obtaining a Confession of Judgment to Secure a Fee
Opinion rules that prior to rendering legal services to a client, a lawyer may not obtain a confession of judgment from a client to secure a fee.
Attorney A charges a flat fee for representation in certain criminal and domestic matters. Prior to rendering legal services, he requires the client to sign a confession of judgment, pursuant to G.S. §1A-1, Rule 68. On occasion, the confession of judgment recites the amount of the flat rate fee Attorney A has quoted to the client and, on occasion the confession of judgment is blank as to the amount. Regardless of the extent of the services actually rendered to the client, if the client fails to pay the fee, Attorney A files the confession of judgment with the clerk of court. If the confession is blank, he fills in the amount of the flat fee quoted to the client.
Attorney A agrees to represent Client X on the defense of a felony. He tells Client X he will represent him for a flat fee of $2000 which Client X must pay by the conclusion of the representation. Prior to rendering services to Client X, Attorney A obtains Client X's signature on a confession of judgment for $2000. Attorney A makes one minor court appearance on behalf of Client X but, before rendering any other services to Client X, the district attorney dismisses the charges on her own initiative due to insufficient evidence. Client X has made no payments to Attorney A. Attorney A files the confession of judgment with clerk of court and proceeds to enforce the judgment. Client X disputes the amount of the fee. Is Attorney A's fee arrangement with Client X ethical?
No, a lawyer may not obtain a confession of judgment from a client prior to the rendering of legal services to the client. CPR 250, which was adopted under the superseded Code of Professional Responsibility, allowed a lawyer to obtain a confession of judgment from a client to secure a fee for services. However, the practice of obtaining a confession of judgment prior to the rendering of legal services to a client violates Rule 2.6 of the current Rules of Professional Conduct. To the extent CPR 250 is inconsistent with this opinion, it is overruled.
The State Bar's fee dispute arbitration program was established in 1993 in order to provide an appropriate and effective vehicle for resolving fee disputes between a client and a lawyer. See "Professionalism Report," NCSB Newsletter, Volume 17, No. 4, pages 8-14. Prior to initiating legal proceedings to collect a disputed fee, a lawyer is required by Rule 2.6(e) of the Rules of Professional Conduct to notify the client of the existence of the State Bar's fee arbitration program and to participate in good faith in nonbinding arbitration of the fee dispute if the client submits a proper request for fee arbitration. Although a client who signed a confession of judgment at the beginning of the representation may subsequently contest the actual amount of the fee, a lawyer holding the confession of judgment appears to have no duty to advise the client of the existence of the fee arbitration program because the filing of a confession of judgment abrogates the need to initiate legal proceedings to collect the fee. Moreover, with a confession of judgment in hand, the lawyer has no motivation to resolve a fee dispute with the client through arbitration because he or she already has a judgment. Attorney A's fee arrangement frustrates the purpose of the State Bar's mandatory fee arbitration program and is, therefore, in violation of Rule 2.6(e).
Attorney A's fee arrangement also violates Rule 2.6(a) which prohibits a lawyer from entering into an agreement for, charging, or collecting an excessive fee. Rule 2.6(b) lists the factors to be taken into consideration in determining whether a fee is reasonable. These factors include the time and labor required to perform the legal services. In the present inquiry, Attorney A performed minimal services and the favorable outcome did not result from the work of Attorney A. Therefore, the $2000 fee for the services is unreasonable. In RPC 158, it is held that Rule 2.6(a) requires a lawyer to refund to the client at the conclusion of the representation any portion of the fee which is clearly excessive. If a confession of judgment is attained prior to the rendering of legal services, it may be used unethically to collect an excessive fee.
Would opinion #1 be different if the confession of judgment was signed by Client X in blank?
Attorney B has rendered legal services to Client Y. Client Y indicates that he does not dispute the fee for the services rendered but he is unable to pay the fee at this time. May Attorney B obtain a confession of judgment from Client Y for the amount of the fee?
Yes, provided Attorney Y explains the confession of judgment to the client. Since Client Y does not dispute the known fee, this arrangement does not undermine the purpose of the fee arbitration program. See Rule 2.6(e).