Ethics Opinion Articles - NC State Bar Journal

A Kinder, Gentler Bar

By Suzanne Lever

It is the end of the month. Your personal injury client calls you to tell you that he, his wife, and their infant child are about to be evicted from their home. The client requests a small loan to pay the rent for the month. The client's case, which is a good one, is close to settlement. Surely there can be nothing wrong with advancing your client a short-term loan to keep his family from being evicted, right? Wrong. It is a violation of Rule 1.8(e) of the Rules of Professional Conduct for a lawyer to make or guarantee a loan to a client for living expenses. See Rule 1.8, comment [10].

The Ethics Committee is considering an amendment to Rule 1.8, which would allow a lawyer to provide financial assistance to indigent clients. Currently, Rule 1.8(e) provides that a lawyer shall not provide financial assistance to a client in connection with pending or contemplated litigation, except that a lawyer may advance court costs and expenses of litigation, the repayment of which may be contingent on the outcome of the matter; and a lawyer representing an indigent client may pay court costs and expenses of litigation on behalf of the client. The prohibition is based on the common law actions of champerty and maintenance and is designed to avoid giving the lawyer too great an interest in the representation.
The proposed amendment provides that a lawyer representing an indigent client may provide financial assistance for essential needs such as food, housing, and utilities, as long as there is no obligation to repay and there was no representation to the client prior to the legal representation that such financial assistance would be provided. A proposed amendment to comment [10] to Rule 1.8 explains that the exception is only warranted where an indigent client is in dire financial circumstances and unable to pay for essential needs such as housing, utilities, or food. An additional proposed amendment to the comment adds that it is not a violation of Rule 1.8 to provide holiday gifts or money for holiday gifts for an indigent client or the children of an indigent client if there is no obligation or expectation of repayment.
A handful of states already have similar provisions in their rules. Alabama allows a lawyer to advance or guarantee "emergency financial assistance." In the District of Columbia, a lawyer may provide financial assistance which is "reasonably necessary" to permit the client to institute or maintain the litigation or administrative proceedings. In Mississippi, a lawyer may advance "reasonable and necessary medical expenses" and "reasonable and necessary living expenses." A lawyer licensed in Texas may advance or guarantee court costs, expenses of litigation or administrative proceedings, and "reasonably necessary medical and living expenses." In Minnesota, Montana, and North Dakota, a lawyer may guarantee a loan "reasonably needed to enable the client to withstand delay in litigation that would otherwise put substantial pressure on the client to settle a case because of financial hardship rather than on the merits."

Lawyers have expressed concern that the approval of this amendment will result in an unfair advantage to large firms with deep pockets. The fear is that clients will learn which law firms have a reputation for providing financial assistance to their clients and will select their lawyer based on that factor. In addition to concerns about such "word of mouth" dissemination of this information, lawyers are also concerned that firms will use the fact that they offer financial assistance as a marketing tool to attract clients—although this would clearly be prohibited by the amended rule. At a time when competition for clients is especially fierce, the expression of such concerns is not surprising. On the other hand, the economic conditions making the competition for clients so intense also seem to beg for the approval of this, or a similar, amendment.

What do you think? Does the proposed amendment promote humanitarian efforts by members of the bar to help clients truly in need, or does it encourage self-serving tactics by lawyers to entice clients, and perhaps indenture them, through the lure of guaranteed financial assistance? The proposed amendment has been sent to an ethics subcommittee for further consideration. The State Bar welcomes your comments regarding proposed amendments to the rules. If you are interested in commenting on the proposed amendment, please send a written response to Suzanne Lever, The North Carolina State Bar, PO Box 25908, Raleigh, NC 27611, slever@ncbar.gov.

Suzanne Lever is assistant ethics counsel at the State Bar.

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