May a Lawyer Acquire a Proprietary Interest In the Cause of Action
In Texas, as in most states, a lawyer may not acquire a proprietary interest in the cause of action or subject matter of litigation the lawyer is conducting for a client, other than a lien to secure payment of his fee and expenses, and a contingent fee allowed by law.
TEX. DISCIPLINARY R. PROF'L CONDUCT 1.08(h). See RESTATEMENT OF THE LAW GOVERNING LAWYERS 48 (Proposed Final Draft No. 1, 1996).
The proposed final draft of the Restatement of the Law Governing Lawyers explains the reason for this rule:
The justification for the rule . . . is that a lawyer's ownership gives the lawyer an economic basis for claiming to control the prosecution and settlement of the claim and provides an incentive to the lawyer to relegate the client to a subordinate position.
The risk in such an arrangement is greater than it would be with a contingent fee; a contingent fee -- in addition to being limited in most cases to well less than half of the recovery -- is clearly designated as payment for the lawyer's services rendered for the client. RESTATEMENT OF THE LAW GOVERNING LAWYERS 48, cmt. b, at 181 (Proposed Final Draft No. 1, 1996).
The reasons for prohibiting a lawyer from acquiring an interest in his client's claim, other than a contingent fee for services provided, that allows the lawyer to control prosecution of the claim apply as well to non-lawyers.