Advise me please: Should a federal trial judge demand to know who is paying the attorney fees?

I have been concerned for a long time about situations where someone or something is paying the attorney fees of a party to a civil or criminal case but the judge doesn’t know it. For present purposes, I am not concerned with (1) standard insurance defense relationships that are set out in detail in insurance policies or (2) criminal cases where a lawyer is appointed by the court and the fees are being paid by the government.

Two examples (none of which are drawn from a particular case) are illustrative:

1.  On the civil side, a corporation employs a highly regarded mid-level sales manager. The manager is alleged to have sexually assaulted an employee of a catering company at a private party.  The corporation has nothing to do with the party. The party was held across the river in another state.  A civil suit is brought by the alleged victim against the mid-level manager in federal court on the basis of diversity. The mid-level manager has no insurance that would cover the claim, and turns to his employer for help.  Perhaps because the fellow is both well-liked and a high producer, the outfit tells the employee not to worry about attorney fees. The company’s outside private counsel enters an appearance for the employee to defend the federal civil suit.

2. On the criminal side, a highway patrol trooper stops a truck supposedly hauling cargo pallets of fertilizer. Arvo, the drug dog, hits on the truck, and way back among the 100 or so pallets of fertilizer is another pallet that looks exactly the same.  However, that pallet contains 50 kilos of cocaine. The driver is charged with a federal drug crime. Perhaps for the love of his nephew who he raised as a young boy, the driver’s uncle engages a local criminal defense lawyer, and wires the lawyer a large retainer with a promise to pay more if needed. The criminal defense lawyer speaks with the driver, tells the defendant of the uncle’s help and then enters her appearance for the defendant in the federal criminal case.

For present purposes, and short of disclosure to the court, I don’t care about what the lawyer must do to comply with ethics rules. Nor do I care about what steps the lawyer takes to formalize things with the client and the party who will pay the fee prior to entering an appearance. Additionally, I am not now concerned with multi-party representation issues and requirements under Federal Rule of Criminal Procedure 44(c).

What I do want to know is this: “As a regular practice (set forth in a local rule or otherwise), should a federal trial judge routinely require that the facts and circumstances of all non-party fee paying arrangements be disclosed to the judge in situations similar to the ones described above?”*  

Truly, I don’t know the answer to my question.  So, I look forward to your help.

RGK

*Feel free to take a shot at proposing a local rule.

25 responses

  1. You have not mentioned any reasons for your concern. Nor why it is a concern for the judge in an adversarial system, absent a motion from parties.

    • Tom,

      Since you are the first to comment, I will use your question to answer similar ones.

      Why am I concerned? What is the context?

      Assume that over the years I have seen ethics complaints (in the District of Nebraska we handle all ethics complaints arising out of federal litigation) and also 2255 motions (federal habeas actions attacking federal convictions) alleging that counsel was being paid by someone else and controlled by someone else other than the client. The insinuation is that counsel in a civil or criminal case did or failed to do something that harmed the client because the real “client” was the guy paying the fee.

      There have also been a few times in criminal cases when, for example, a drug or money courier might show up with retained counsel I know to be very good and very expensive, and the courier turns down a cooperation deal, pleads straight up and goes to the BOP for a very long time. Although I am always inclined to trust counsel, that makes me itch all over.

      If these arrangements were disclosed up front, perhaps we would avoid problems later on. If nothing else, an early disclosure would seem to protect counsel from a later ethics or malpractice claim. Furthermore, and once in a blue moon, we might even protect someone who is being exploited. On the other hand, perhaps I should go back to sleep.

      All the best.

      RGK

  2. Litigation funding/champerty arrangements are sometimes less subject to disclosure, even when a commercial funder is involved, given decisions like Miller v. Caterpillar (ND Ill). Its not clear what the harm of a disclosure requirement would be given the historical concerns about the impact of such arrangements.

  3. I’m with lawyercat – who would disclosure harm? It seems like this inquiry could be linked to a prudential standing question (e.g., real party in interest inquiry) as part of a routine jurisprudence best practice.

    I’m sure there are many reasons that a benefactor would wish to remain anonymous; a company would not necessarily want the press of having an alleged rapist on the payroll, much less be voluntarily fronting his attorney fees, but that is a matter of framing and spin more appropriate to a public relations professional than a court of law (e.g., the company could pose it’s support as a mark of loyalty to the employee and a sincere belief in his innocence, etc. etc.).

    On the other hand, since attorneys are ethically bound to put the interests of their client ahead no matter who is footing the bill it shouldn’t make any difference to the parties who is signing the check, the zeal and direction of the representation should remain the same. The information would therefore carry no probative weight at all and could (potentially) be prejudicial. If a noxious PAC or NGO were paying for the attorney, for example.

  4. Any time a third party pays for representation there is a potential for conflicts of various sorts. But those are ethical issues and issues affecting the relationships among the three parties (client, attorney, payor). None of those will ordinarily involve the court, and none should ordinarily concern the court.

    While it’s simple enough to describe circumstances under which the court should be informed that a third party is paying the fees, and while I can imagine circumstances under which the court should be informed of who that third party is, those are particular circumstances. In the ordinary course of things, I don’t see why it would be any of the court’s business. I can understand a judge being curious. I can’t understand why there’s any reason that the judge is entitled to have that curiosity satisfied – except, again, in particular circumstances.

      • I do understand, I think.

        Many years ago, when I was a pretty new lawyer, I was appointed to represent on appeal one of four men who were charged with a drug offense. One of the others, the only one to be acquitted at their joint trial, paid for my client’s lawyer – a highly respected and I assume high priced fellow. Aside from a not-particularly forceful motion to sever, the lawyer did essentially nothing for his then, my later client.

        I’ve always wondered whether, and my client was absolutely certain that, the lawyer had been paid and instructed to do what he could for the client just as long as it didn’t interfere with the defense of the guy who was footing the bill. If so, of course, that would have been grossly unethical and arguably criminal.

        I lost sight of the case after we lost the appeal. I don’t know whether my client ever filed a 2255 or what might have become of it if he did. Nor do I know if there was an ethics complaint filed or what have become of that. (Though I know the lawyer is still practicing these many years later.)

        But, and here’s the point, what would it have accomplished for the trial judge to have been aware at the time of trial of how that lawyer got paid? Indeed, I suspect that the judge had a pretty good idea (I never asked him, and I don’t know that he’d have told me if I had).

        Again, there are circumstances where the court needs to know that it’s not the defendant paying the freight, and perhaps circumstances where the court might need to know who actually is, those are the exceptions, I think, not the rule. And I don’t see how the court’s knowledge would accomplish anything in the other cases.

        To pick one of your own examples, would the court admonish harder before accepting a plea? Would it try to force a defendant to go to trial because it’s possible she’s being victimized? I think the answer is that those things would be improper. And if they would be, then the information – as a routine matter – shouldn’t be subject to disclosure.

        • Jeff,

          In the criminal context, the information would allow me to appoint standby counsel to advise the defendant separately about the risks and rewards of the relationship with retained counsel, the right to have appointed counsel paid for only by the government and to independently advise the client regarding the risks and rewards of any plea offer. It would also serve to insulate retained counsel from later claims of ineffective assistance of counsel or malpractice.

          But, I get your point. Going too far risks me screwing up a perfectly happy and productive attorney-client relationship.

          All the best.

          RGK

  5. Courts are frequently expected/called upon/cajoled (pick a phrase) to report ethical lapses by the attorneys who appear in their court. So, I think every judge has some interest in who is behind the curtain. But, the only rule that comes to mind is one used by one or two judges in the SD of Texas requiring the parties to name ast the outset of a lawsuit all the persons with an interest in the outcome of the litigation. That might address some of the above concerns, but not all.

    One example I would pose is when mid-level manager is accused of sex harassment by an employee and a lawsuit results. The corporation then pays for manager’s attorney. This situation does indeed present possible conflicts of interest, if manager has some liability. So, if I were judge, I would want to know who is paying for the attorney.

  6. I don’t think there is any question that such information is not privileged so you have the right to do it. The issue is “Should you routinely inquire”? The answer is: “No, unless it is just as palatable to require the attorney’s to file a document at the inception of a representation telling who is paying them and how much”. Where there is concern about ethics or illegality you should make inquiry. I would hate to think that we, as lawyers should be on the same footing as lobbyists who are required to disclose such information.

  7. In criminal defense cases, what would be the reason for disclosing? Especially in the hypothetical you mention – family members pay for fees all the time. Often (not always) the defendant is a “black sheep” of the family and, for that reason, the responsible family members come to their aid. I can’t see why the court would find that relevant (although, disclosing it wouldn’t be prejudicial either). So, I’m asking -why does the court care to know?

  8. It seems to me from reading your responses to the commenters that you have a “gut feeling” about what is right already.

    As a consumer, (speaking hypothetically, of course) if I read a study that says “Artificial colors are great for your health!” I’d want to know if that study was financed by the Artificial Colors Lobby. People always claim to be impartial despite receiving money from someone, whether it’s a bribe or funding, but that is seldom true.

    If someone provides money to see that one side in a case prevails, then they have made themselves a “party to the case” – at least in spirit. The judge should know that.

    • Anna,

      I have reason to doubt my gut! But,you have certainly fixed on the essence of my concern.

      All the best.

      RGK

  9. The question before the court, civil or criminal, is whether the defendant did the thing alleged, and if so, what the sanction should be, and nothing else. Who’s paying for the representation isn’t relevant to that. The court doesn’t need to know who the payer is.

    Even in your later example of the drug courier with representation beyond the skill and cost the courier might otherwise be expected to be able to get, there’s a reason he has that lawyer and a reason he took a fall rather than a plea deal. Standby counsel isn’t going impact that reason in the slightest; the courier’s…welfare…is on taking his own counsel’s “advice.”

    Additionally, the lawyer is the client’s employee, regardless of who’s paying the bill. If he’s not fronting for the client first, and only, naif that I am, that’s an ethics cause against the lawyer, and that’s a separate matter from the one immediately before the court. And, is the frequency of such a thing great enough to warrant the expense, along any dimension, of forcing disclosure?

    Third, a rule requiring disclosure of the payer, like all rules, is just going be gamed, and so it will rapidly become a source of error and of litigation and of distraction from the matter before the court or the appeals process. Again I ask: is the knowing worth the expense?

    If these arrangements were disclosed up front, perhaps we would avoid problems later on.

    What would you do with this information? Toss the counsel? Reject the guilty plea and force a trial?

    Elsewhere in this thread are good arguments for disclosing the fact that somebody other than a litigant is paying for the litigant’s representation, but I see know reason for the court to know who that payer is.

    Eric Hines

  10. Forgot the second part: here’s my shot at a local rule:

    Fill out the following questionnaire, sign it in your own hand, and submit to the clerk together with your initial filing:

    Are you paying, entirely, for your own representation? ____Yes ____No

    Eric Hines

  11. At the risk of posing questions that reveal me to be an idiot: with respect to the civil side, is the idea that by knowing the manager’s employer is footing the bill, that the Court would be more vigilant about any actions or inactions by the attorney that would not be in the client’s best interest (or, more accurately, what the Court sees as the client’s best interest)? Would the Court then be inquiring into the litigation decisions made by counsel? Isn’t that sort of calling attention to the other side that the Court thinks the manger’s lawyer screwed something up?

    • Adam,

      You are no idiot. I agree that the civil side is likely to be less of a problem. But, I still think there is a worry.

      Let’s take the civil hypo in the post with a twist.

      The case goes to trial, the defendant get’s hit with a mega bucks judgment. And, shortly thereafter, his employer fires the defendant. The defendant moves to set aside the judgment claiming that he was fraudulently induced to accept counsel beholden to his former employer AND alleges the former employer paid the plaintiff (the victim) a nuisance amount to avoid being named a defendant.

      Don’t I have an interest in avoiding serial litigation? Don’t I have some responsibility to protect the defendant from becoming “indentured” to the employer? Yada, yada, yada.

      Then, again, maybe I should go back to sleep.

      All the best.

      RGK

  12. ~~State a moral case to a plowman and a professor. The former will decide it as well, and often better than the latter, because he has not been led astray by artificial rules.~~~

    From Jefferson writing a letter to his nephew Peter in 1787 within which letter, is also the moral philosophy nugget:

    ~~~He who made us would have been a pitiful bungler, if he had made the rules of our moral conduct a matter of science. For one man of science, there are thousands who are not. What would have become of them? Man was destined for society.~~~

    I am not of your guild Judge, a plowman, or a professor but itches do need to be scratched.

    Equating or even pondering the potential ownership of a defendant by those providing the resources for her defense (or if I may say sustenance) is a wickedly interesting historical quandary.
    Timeless and relevant in today’s courtroom and beyond…

    I do indeed hope more of your guild chimes in on this post of yours.

    P.S. I know this is the intertubes judge but you seriously have to stop editing your post via the Midwestern Hoyle’s Rule Book. I think in the original text of your post you included the hypothetical criminal defendant making a long date with the BOP for perplexing reasons under the mysterious aide of very competent counsel. I am sure you have good reasons for your edits. But write it like you mean it the first time and if you edit it make a note of it.

  13. Let sleeping dogs lie.

    It’s a valid concern, and one reason a lawyer needs to get his fee up front, it lessens the angst when your client throws the payer under the bus.

    The high majority of these people are well versed in “the game” especially those detained. It would be hard to imagine a client who was ignorant of the incentive to cooperate in this District.

    My biggest concern is i’m hired by 3rd party, client proffers against 3rd party as kingpin. Do the feds go after my fee? Am I in trouble for accepting a fee which was drug proceeds? How much vetting must I do about my fee?

    If a defendant answered “i’m not going to proffer against him because he was nice and paid my lawyer fee” is that a problem? On a couple pleas the AUSA announced they had offered to allow my client to cooperate but he rejected that. Which the Magistrate inquired if that were true. That might alleviate the concern somewhat? On more than a few occassions the decision to plea without cooperating was based the client fearing retribution on the defendant and his family.

    Been in that situation, and felt minor pressure. In the end the losing my law license, probably committing a crime of helping cover the conspiracy, as well whatever moral compass i have – directed my advice. But again – money up front with a non-refundable provision makes it easier on my moral compass to ignore subtle pressures.

    Sorry for rambling. Hope you are well Judge.

  14. Pingback: Need To Know Basis Only | Simple Justice

  15. Pingback: More on whose paying the fees « Hercules and the umpire.

  16. Probably not very effective, but you could add a question to colloquy to the effect of “And are you aware that someone else having hired a lawyer for you or having offered to pay for on does not prevent the court from appointing an attorney for you?”

    Might help now and then when someone doesn’t realize that them having an attorney provided by someone else doesn’t mean they can’t get a federal defender.

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