Ethics Opinions

Opinion No. 78-12

December 1978

Summary: A lawyer specializing in creditor's rights and collections generally may not recommend that one client take an assignment of another client's claim against a third party in settlement of the second client's debt to the first client.
Facts: Attorney A specializes in creditor's rights and collections. A is retained by X to collect a debt from Y. Subsequently, Z approaches A and asks him to collect a debt from X. A has the following inquiry:
If X is willing to "assign" the claim he has hired me to collect to Z in payment for the debt owed to X, may I continue to handle X's claim against Y? Or, vice versa, may I continue to handle Z's claim against X, if X will assign the monies I collect for him to Z? It would seem to me that by assigning his (X's) claim to Z, I no longer represent X anymore, and there should be no conflict.
The claims are apparently unrelated.

Discussion: DR 5-105(A) provides that "[a] lawyer shall decline proffered employment if the exercise of his independent professional judgment in behalf of a client will be or is likely to be adversely affected by the acceptance of the proffered employment, except to the extent permitted under DR 5-105(C)." (Emphasis added.) Subsection (C) permits multiple representation "... if it is obvious that he can adequately represent the interest of each and if each consents to the representation after full disclosure of the possible effect of such representation on the exercise of his independent professional judgment on behalf of each." (Emphasis added.)
Thus, the mere fact that the clients consent after full disclosure is not in itself sufficient for multiple representation. The rule requires (1) A's independent judgment will not be and is "likely" not to be "adversely affected," and (2) it must be "obvious" that A can "adequately represent" each.
The committee does not agree that by assigning the claim A no longer represents that creditor. The facts do not indicate whether it is in the best interest of both clients that one take an assignment of the other's claim. There could be many circumstances in which it would be better for Z to sue X directly. To the extent that A advises X to "assign" his claim against Y to Z, A is representing two adverse interests simultaneously in a situation where it is not "obvious" from the facts stated that A can exercise independent judgment and can "adequately" represent both. The committee believes that, in general, A cannot advise both the clients as to assignments of the claims involved. Of course, the controversy could be resolved by the clients themselves, independently.
The facts stated do not permit a universal rule governing assignment of unrelated claims among debtors and creditors. The committee believes that there could be rare circumstances, depending, for example, upon the amount of the claim, the merits of the claim, the lack of available cash by X and the solvency of Y where, after full disclosure and consent, it would not be inappropriate for A to recommend that Z take an assignment of X's claim against Y.

Permission to publish granted by the Board of Delegates on November 1, 1978. As stated in the Rules of the Committee on Professional Ethics, this advice is that of a committee without official governmental status.