Your spam blocker usually takes care of this stuff, but somehow one gets through. It’s from a company called You Settle/We Buy, Inc. (YS/WB). They’re in the business of paying cash for assignments of structured settlements.
Structured settlements have become a common way of resolving injury cases. There are sometimes advantages for the client to take part of a settlement in cash (primarily to pay attorney fees and bills currently due) and part in periodic future payments, usually through an annuity purchased by the defendant’s insurer. The client’s right to sell the annuity for cash varies, but it is sometimes allowed. With the popularity of structured settlements, a cottage industry has grown up of businesses willing to purchase annuities at a discount for cash. YS/WB is one of them. Pricing an annuity is not simple, and it depends on the terms of the structured settlement. Life expectancy comes into play, and the presence or absence of minimum payment guarantees will affect pricing.
So, getting back to the e-mail on your computer screen, here’s the pitch:
Act now! Attorneys and paralegals can earn BIG BUCKS with a single phone call!!! YS/WB pays a minimum $1,000 referral fee when we acquire your clients’ annuities. Actual payment up to $10,000 based on the size and terms of the annuity. Just provide the introduction to your clients by registering your referral prospects–a simple, 30-second process. The payment is made to you for each introduction that results in our purchase of a structured settlement.
Let’s think through the legal ethics questions this poses. The case is over, so we’re dealing with a former client, not a current client. Normally, the duties of a lawyer to a former client revolve around maintaining confidentiality, not the concept of loyalty. Still, there are some residual loyalty concerns to be considered.
Should the lawyer be able to even disclose to YS/WB the names and contact information of clients from whom she has obtained structured settlements? This is a client confidentiality question. With respect to current clients, Rule of Professional Conduct 1.6 tells us that all information relating to the representation of a client is presumptively confidential unless it has to be disclosed to carry out the representation. Rule 1.9(c)(2) says that the confidentiality rules for current clients also apply to former clients. With regard to a former client, obviously no revelation is needed to carry out the representation because the case is over. Is the client’s name and address “information relating to the representation?” The law of attorney-client privilege normally holds that client identity is not privileged, but that’s an evidentiary concept. Here, we’re talking about an ethics rule, and the duty to maintain client confidences as an ethical proposition is much broader. Most clients would answer the question, “Would you mind if I blabbed your name all over town as my client without your knowledge or consent?” with a resounding NO.
And let’s not forget Rule 1.9(c)(1). It states that a lawyer shall not “use information relating to the representation to the disadvantage of the former client except … when the information has become generally known.” Injury settlements often include confidentiality clauses, but even without one, an injury settlement is rarely generally known. There is no public record of the settlement if it happens pre-suit. If a lawsuit is filed, the public record will generally reflect only that the case was settled, not the terms of the settlement.
Is it to the client’s disadvantage that her lawyer obtains a finder’s fee under these circumstances? In a direct sense—maybe, maybe not. The client might get the same price for the annuity whether the lawyer is paid a finder’s fee or not. But how do we know that the price offered by the purchaser will not incorporate the cost of paying the finder’s fee to the lawyer? After all, the annuity purchaser has two choices, eat the cost of the finder’s fee out of its profit or pass the cost of the finder’s fee on to the client in the form of a lower price.
Indirectly, there has to be a cost to clients of the finder’s fee payments. In a rational economic universe, the cost of paying finder’s fees to lawyers will inevitably be priced into the purchaser’s cost of doing business–meaning purchase prices offered will have to be lower than they would be without finder’s fees.
Let’s get away from a narrow economic analysis and talk broader concepts for a while. A key theme of the Rules of Professional Conduct is the insulation of lawyers from outside influences that risk compromising their duties to their clients. It is clearly present in the rules governing conflicts of interest. See, Rule 1.7(a)(2). We see it in the rules forbidding lawyers from being influenced by money payments from non-clients or restricting their own proprietary interests in clients causes. See, e.g., Rule 18(f) and (i). These are rules that protect current clients, but the broader point is that a lawyer’s ethical duties should not be influenced by outside financial temptations. And who’s to say that the lawyer’s advice to a current client about the pros and cons of taking a structured settlement wouldn’t be influenced in some subtle way by the possibility of a large finder’s fee reaped in the future after turning the client’s name over to the YS/WB’s of the world?
Should clients with structured settlements sell them for cash? That’s a difficult decision, and it depends on many considerations, including whether there have been changes in the client’s life that might require more money now and less in the future. Often, the sale of a structured settlement is not a transaction that is to the client’s economic advantage. Lawyers should not tie themselves financially to outcomes that might not benefit their former clients.
Should lawyers make information available to former clients who may perceive a need to cash out a structured settlement? Yes. Should lawyers make themselves available to assist the former (and possibly, once again, current) clients to make the right decision? Yes, again. Should lawyers take a secret piece of the action by accepting finder’s fees for giving out their clients’ names and addresses? I think you know my answer.