Ethics Hotline & Opinions

ETHICS DOCKET NO. 2000-28

MARYLAND STATE BAR ASSOCIATION, INC.

COMMITTEE ON ETHICS

ETHICS DOCKET NO. 2000-28

Conflict of Interest: Collection of Legal Fees in Litigation

 In your inquiry you state that you are in-house counsel for a company which is the parent corporation of numerous subsidiary companies, all of which are engaged in related businesses. In a follow-up telephone conversation you provided additional information relating to your inquiry.  

You state that, among other things, you sometimes represent the subsidiary companies in collection matters with respect to lease and rental agreements. (Some collection cases are referred to outside counsel.) The agreements usually provide for attorney's fees and other legal expenses for any lawsuit arising from a breach of the agreement. In those matters which you act as attorney for the subsidiary you ask if the company can use for and collect attorney's fees provided for in the agreements. The subsidiary companies are not billed directly for your services but are assessed management fees based partly on your services.  

The Committee has previously considered a similar question in Ethics Docket 94-3. That opinion related to in-house attorneys for collection agencies owned by non-lawyers. We cited Mortgage Investors of Washington v. Citizens Bank and Trust Company of Maryland, 278 Md. 505 (1976), which states that an agreement to pay an attorney's fee is a contract of indemnification, limiting the amount for which the debtor is responsible to the expense actually incurred by the creditor. Your situation is somewhat different. However, as we stated in Ethics Docket 94-3, whether and under what circumstances may a sum provided for in a contract or other instrument as attorney's fees be collected is essentially a legal matter. There is nothing in the Rules of Professional Responsibility which would preclude the subsidiary company from recovering attorney's fees in those cases where you act as its attorney.

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