Matrimonial Fees - Reimbursing Client
90 N.J.L.J. 849
December 28, 1967
Appointed by the New Jersey Supreme Court
Matrimonial Fees - Reimbursing Client
We have been asked to advise whether the practice of fee charging posed in the following two questions, is ethical:
Can a lawyer charge and collect a fee from a client in a matrimonial matter and then reimburse the client when an order is entered against the defendant and the lawyer collects the fee from the defendant.
Assuming that the litigants have not entered into a collusive bargain, tainting the matrimonial matter, and that the facts pertaining to the fee arrangement have been made known to the court upon application for the counsel fee, pursuant to R. 4:55-7(a), we perceive nothing unethical in a lawyer reimbursing his client in this manner.
Counsel fees allowed in a matrimonial action are to enable the wife to prosecute or defend. Iovino v. Iovino, 58 N.J. Super. 138 (App. Div. 1959). Such "fees are, as a general rule, awarded to litigants and not to counsel themselves. The purpose of allowing counsel fees is to reimburse or indemnify the party for some of the openness of the litigation," In re Katz Estate, 40 N.J. Super. 106 (Ch. Div. 1956). The allowance is considered a purely personal right of the wife, Sutphen v. Sutphen, 102 N.J. Eq. 203 (Ch. 1928). It would seem that the fee belongs to the party litigant although in practice it is normally paid to the attorney. Thus, in the question under consideration, when the court entered an order against the defendant for the payment of a counsel fee, it belonged to the plaintiff, not the plaintiff's attorney.
The last sentence of R. 4:55-7(a) reading as follows:
The application for the allowance shall state how much has been paid to or received by the attorney for his legal services, including the amount, if any, received by him from pendente lite allowances, and what arrangements, if any, have been made for the payment of a fee to him in the future.
was added by amendment adopted on August 13, 1964 and, according to the author of 2A New Jersey Practice (Waltzinger Rev. ed.), 1967 Pocket Parts, pages 30-31, "The purpose of the amendment is to enable the Court to know what fee arrangements the attorney has made with his client (see R. 4:98-4(c)) and to further enable the client to know whether the Court considered the fee allowed by it as full compensation for the services rendered. The purpose is to attempt to eliminate complaints by clients who charge their attorney is receiving double compensation." This aspect of the allowance of counsel fees in a matrimonial matter was carefully reviewed in the recent case of Morrison v. Morrison, 93 N.J. Super. 96 (Ch. Div. 1966), which concerned an application for attorney's fees and costs in a child custody case. In that case the plaintiff's attorney was paid $1,000 on account of his fee plus $105.20, on account of disbursements, by the plaintiff's father. The court concluded that the plaintiff's attorney was entitled to a total counsel fee of $1,750 plus the costs of the action to be taxed, which costs should include the $105.20 of actual disbursements made, saying:
Under the circumstances, defendant will be required to pay the counsel fee and costs awarded to plaintiff. Plaintiff will be required to pay therefrom, to her attorney the sum of $750 for his services in this court--in addition to the $1,000 he has already received --plus that amount of the taxed costs which exceeds the $105.20 already paid to such attorney.
The court further said:
Moreover, the amendment of R.R. 4:55-7(a) on August 13, 1964, which requires the applicant for counsel fees in a matrimonial matter to state how much she has paid or agreed to pay to her attorney for legal services, was intended to give the court latitude to determine whether the awarded counsel fee should belong to the attorney or should be reimbursed to the party in such an action... .
The inquirer expresses the belief that the practice is unethical and violates portions of the Canons of Professional Ethics, Canons 28, 29, 32, 34, 35 and 38. We think not. The fixing,
collecting and dividing of fees have been the subject matter of a number of opinions and decisions by many committees on professional
ethics throughout the country but each case must be judged by the facts peculiar to it. The recent publication by Wise, Legal Ethics 132 (1966) states:
There are a number of situations in which a lawyer may properly be paid, or, by law or court order, must be paid, by another than the client. In all of these situations the lawyer must retain the full amount, except that in some instances where sanctioned by law, or the court, the lawyer may pay over to the client enough to reimburse the client for expenses actually incurred in the matter. Each such situation must depend on its own facts and care should be taken that there is a proper legal basis for the payment of part of any legal fee to a layman.
See also Drinker, Legal Ethics 181 (1953).
A wife in a matrimonial action retains a lawyer on the following basis: The wife signs a note with a relative for a sum of money, for example $1,500. With this money she pays the attorney his fee of $1,500. The attorney then obtains an order in which the husband is ordered to pay a $1,500 counsel fee. As the husband pays the attorney under the order, the attorney endorses the checks to the wife, who then endorses the checks to the relative.
The foregoing inquiry is basically the same as Question 1. The only difference is the method of reimbursement and the interjection of a relative as the person lending the litigant money to pay the fee but this is not a substantive change. Thus, assuming the absence of collusion on the part of the litigants and full disclosure of the fee arrangement when application is made to the court for allowance of counsel fees our answer is the same as our answer to Question 1. The attorney, however, should have nothing to do with arranging the loan for the payment of his fee and we suggest that it would be advisable for the order to provide to whom the counsel fee or any portion thereof is to be paid and, if payments are to be made to the client, the order should indicate that it is a reimbursement for the fee or portion thereof already paid.