Can the bar or a lawyers' association set up a revolving fund to lend money to needy personal injury plaintiffs during their cases?

Plain-English summary

A member raised the possibility of The Florida Bar, the Academy of Florida Trial Lawyers, or a similar group providing a revolving fund to lend money to needy plaintiffs with meritorious personal injury claims, to meet medical and living costs while awaiting collection. He noted that counsel could not advance funds because of a champerty problem, that claimants could not borrow on their claims, and that they were thus at the mercy of small loan companies charging high interest. He also suggested third parties might lend the client money on being satisfied recovery was certain.

The committee recorded several members' competing views rather than a single holding. One member thought increased ability to finance claims would tend to create litigation, which a literal application of the champerty principle would make improper, but observed that defendants and their insurers capitalize on a claimant's economic need to force low settlements, and concluded that with adequate regulation and safeguards by the Bar, more good than bad would result. Another member thought the Bar should in no way approve the projects, since it should not do by indirection what it cannot do directly and the plan might be misunderstood and lead to improper practices; another thought such a plan would not be ethical. Another member observed that no case is certain of recovery, and that any attorney forced to contribute to a Bar fund would have an interest in the litigation and a conflicting interest violating Canon 6, also Canon 10, and possibly Canon 28 against stirring up litigation, and that if a lawyer must follow Canon 42 on expenses, a bar association should not violate the same canon. That member added that a claimant has the right to borrow from whomever will lend to him.

Currency note

This opinion was issued in 1962, before The Florida Bar's adoption of the 2006 revisions to the Rules of Professional Conduct. The opinion applied former Canons 6, 10, 28, and 42 of the Canons of Professional Ethics; advancing financial assistance to clients and conflicts of interest are now addressed by Rules 4-1.8 (including the limits on financial assistance and acquiring an interest in litigation) and 4-1.7 of the Rules Regulating The Florida Bar (Model Rules 1.8 and 1.7). The rules on advancing litigation costs and humanitarian assistance have changed substantially since 1962. Treat this page as historical context, not current guidance. Verify against the current rules before relying on any specific requirement mentioned here.

Common questions

Q: Did the committee approve a bar-run loan fund for plaintiffs?

A: No. It did not reach a consensus. Members set out competing positions, ranging from one who thought more good than bad would result under adequate Bar regulation to others who thought the plan should not be approved or would not be ethical.

Q: What ethical concerns did the members raise?

A: That financing plaintiffs could tend toward champerty, that an attorney forced to contribute to the fund would have a conflicting interest in the litigation under Canons 6 and 10, possibly Canon 28 on stirring up litigation, and that the Bar should not violate the Canon 42 expense rule a lawyer must follow.

Q: Did the committee say anything in favor of claimants borrowing money?

A: One member noted that a claimant has the right to borrow from whomever he wants and from whomever will lend to him.

Background and rules framework

The opinion discussed former Canons 6, 10, 28, and 42 of the Canons of Professional Ethics, addressing conflicting interests, a lawyer's interest in litigation, stirring up litigation, and advancing expenses. The advancing of financial assistance to clients and conflicts of interest are now addressed by Rules 4-1.8 and 4-1.7 of the Rules Regulating The Florida Bar (Model Rules 1.8 and 1.7). The committee presented the issue as unresolved, recording members' divergent views.

Citations and references

Rules of Professional Conduct:

• Canons 6, 10, 28, 42 [Canons of Professional Ethics; see current Rules 4-1.8, 4-1.7]

See also

No sibling opinions yet indexed.

Source

• Landing page: https://www.floridabar.org/etopinions/etopinion-61-29/
• Original PDF: https://www-media.floridabar.org/uploads/2017/04/FL-Bar-Ethics-Op-61-29-1.pdf

Original opinion text

Reproduced from the official source for research purposes. The linked source is authoritative.

FLORIDA BAR ETHICS OPINION
OPINION 61-29
January 10, 1962
Advisory ethics opinions are not binding.
As to the ethical propriety of the Bar or a lawyer's association providing a revolving fund to be used for loans to needy plaintiffs, to enable them to bear the cost of litigation until recovery can be had, the following issues are raised:

1. The increased ability of plaintiffs to finance themselves would tend to create litigation, which could be construed as champerty.
2. If a lawyer must follow Canon 42 relating to expenses, logic indicates a bar association should not violate the same canon.
3. There never would be a case in which the plaintiff was certain to obtain recovery.
4. Any attorney forced to contribute to such a fund would therefore have an interest in the litigation and be subject to conflicting interests.
   Canons: 6, 10, 28, 42
   Chairman Holcomb stated the opinion of the committee:
   A member of The Florida Bar has in mind the possibility of The Florida Bar, the Academy of Florida Trial Lawyers or some other similar group providing a revolving fund to be used in loans to needy plaintiffs having meritorious personal injury claims to enable them to meet their many medical and living costs while awaiting collection on their claims. He points out that many persons with small cash reserves are unable to finance themselves; that their counsel cannot advance funds because of a champerty problem; that they cannot borrow on their claim even though it is apparently clear cut and there is adequate insurance coverage; thus placing the claimant at the mercy of borrowing from a small loan company at exorbitant rates of interest.
   He also suggests that it might be possible for the lawyer to seek third parties to lend the client money upon being satisfied the claim was one on which recovery was certain and that he would be repaid out of any judgment or settlement. He points out the social problem involved and asks if there is an ethical problem involved and asks for suggestions.
   One Committee member thinks that the increased ability of persons having claims for personal injuries to finance themselves would tend to create litigation which would otherwise be settled because of the economic pressure. A literal application of the principle that anything tending to promote litigation tends toward champerty would suggest the impropriety of such a proposal. But against this is the fact that defendants, and particularly insurers of defendants, capitalize upon the economic need of the claimant to obtain settlements at less than the real value of the claim. One of the major factors leading to the adoption of workmen's compensation laws has been the deliberate delay of employers in making settlement to force injured employees to accept unreasonably low settlements. Such a plan could not be adopted without adequate regulation and safeguard by The Florida Bar. More good than bad would result from such a plan.
   Another member thinks we should in no way approve any of the projects mentioned. We should not do by indirection what we cannot do directly. There is a substantial possibility that any such plan might be misunderstood and lead to improper practices. Another member thinks such a plan would not be ethical.
   Another member suggests that there never would be a case in which the plaintiff was certain to obtain a recovery. If such a fund were to be set up by the Bar, any attorney forced to contribute thereto would have an interest in the litigation and be subject to conflicting interests, violating Canon 6, also Canon 10, and also possibly Canon 28 against stirring up litigation. If a lawyer must follow Canon 42 relating to expenses, a bar association should not violate the same canon. Likewise, the question arises as to loans to needy defendants, possibly uninsured, and burdened with the defense of an unjust claim. Certainly a claimant has the right to borrow from whomever he wants and from whomever will loan to him.