In Kentucky, may a lawyer lend a client money for financial assistance other than the expenses of litigation?

Plain-English summary

The Committee was asked whether, during a representation, a lawyer may lend a client money for financial assistance other than the expenses of litigation. It answered no. The opinion observed that advancing or lending money to a client for medical and living expenses, to be repaid from litigation proceeds, may seem humanitarian, but was punishable at common law as criminal maintenance and champerty. Although those crimes have been "defanged," the principle that a lawyer should not acquire an interest in the litigation carried forward into DR 5-103(B) and now Rule 1.8(e).

Quoting Charles Wolfram's Modern Legal Ethics, the opinion stated that both the Code and the Model Rules (and the Kentucky Rules) implicitly but clearly prohibit a lawyer from making any other financial assistance available to a client, with an exception only for the "expenses of litigation." The Committee acknowledged that a few jurisdictions (citing D.C., Minnesota, and Texas variants) have amended Rule 1.8 to allow some living-expense advances, on the theory that poor clients may need help to sustain litigation, while critics warn that dropping the rule invites bidding for clients and investment in causes of action. A majority of the Committee was persuaded that the Kentucky rule was well understood and generally accepted, and that any change should come by amendment to Rule 1.8(e), not by opinion.

Currency note

This opinion was issued in 1995, before Kentucky's adoption of the 2002 Ethics 2000 revisions to the Rules of Professional Conduct (SCR 3.130). The Kentucky Bar Association notes the rules are amended periodically and that lawyers should consult the current version before relying on this opinion. Treat this page as historical context, not current guidance. Verify against the current rules before relying on any specific rule, deadline, or requirement mentioned here.

Common questions

Q: Could a lawyer lend a client money for living or medical expenses during the case?

A: No. The opinion concluded Rule 1.8(e) permits only advances for the expenses of litigation, so other financial assistance is prohibited.

Q: Why did the opinion treat this as prohibited?

A: Per the opinion, the rule descends from the common-law bar on maintenance and champerty and the principle that a lawyer should not acquire an interest in the client's litigation, carried into DR 5-103(B) and Rule 1.8(e).

Q: Did the opinion note that other states allow such advances?

A: Yes. It observed that D.C., Minnesota, and Texas have amended Rule 1.8 to permit some advances, but concluded any similar change in Kentucky should come by rule amendment rather than ethics opinion.

Background and rules framework

The opinion interprets KRPC 1.8(e) (financial assistance to a client; Model Rule 1.8(e)), reading it to permit only advances for litigation expenses and to bar other loans, consistent with the predecessor DR 5-103(B).

Citations and references

Rules of Professional Conduct:

• MR 1.8(e) / KRPC 1.8(e) (financial assistance to a client limited to litigation expenses)

Cases:

• Kentucky Bar Association v. Mills, 808 S.W.2d 804 (Ky. 1991)

Other opinions cited:

• KBA E-51 (1971): prior opinion on financial assistance to clients
• Model Code DR 5-103(A) and EC 5-8; Charles Wolfram, Modern Legal Ethics (1986)

See also

• KBA Ethics Op. E-368: Insurer Set-Fee Defense Contracts and Litigation Expenses
• KBA Ethics Op. E-394: Paying Experts and Litigation-Support Providers
• KBA Ethics Op. E-383: Duty to Pay Third-Party Providers From Client Funds

Source

• Landing page: https://kybar.org/For-Members/Rules-Ethics-Information/Ethics-Opinions
• Original PDF: https://kybar.org/Portals/0/Admin/Ethics%20Opinions/KBA_E-375.pdf

Original opinion text

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

KENTUCKY BAR ASSOCIATION
Ethics Opinion KBA E-375
Issued: March 1995

The Rules of Professional Conduct are amended periodically. Lawyers should consult the
current version of the rules and comments, SCR 3.130 (available at
http://www.kybar.org), before relying on this opinion.

Question:

During the course of the representation, may a lawyer loan money to his or her
client for financial assistance other than the expenses of litigation.

Answer:

No.

References:

Rule 1.8(e); Model Code DR 5-103(A) and EC 5-8; KBA E-51 (1971); selected
state versions of ABA Rule 1.8(e); Charles Wolfram, Modern Legal Ethics (St.
Paul: West, 1986); KBA v. Mills, 808 S.W.2d 804 1991.
OPINION

Advancing or lending money to the client for medical and living expenses, to be repaid
from the proceeds of the litigation, may seem to some a decent and humanitarian thing to do.
However, this was punishable at common law as criminal maintenance and champerty. These
old crimes have been "defanged", but the notion that the lawyer should not acquire an interest in
the litigation was carried forward in DR 5-103(B) and now in Rule 1.8(e). See Wolfram at pp.
489-490, 507-509. "Both the Code and the Model Rules [and the Kentucky Rules] - implicitly
but clearly - prohibit a lawyer from making any other financial assistance available to a client."
Id at 509. The answer to the question is still "no." The Rule makes an exception for the
"expenses of litigation."
A few jurisdictions have amended Rule 1.8 to allow for some advances along these lines,
which would be prohibited by the Model Rule and by Kentucky Rule 1.8(e). See, e.g., District
of Columbia Rule 1.8(d)(2); Minnesota Rule 1.8(e)(3); Texas Rule 1.08(d). The thought behind
these amendments is obvious. The argument is that poor clients may need help to sustain the
burden of litigation, and litigation delay that otherwise favors their opponent. Critics contend
that dropping the time-honored rule will invite bidding by lawyers for clients, and investment in
the cause of action.
A majority of the Committee is persuaded that the Rule is, for the most part, well
understood, and generally accepted. See KBA E-51 (1971). Any change should come by way of
an amendment to Rule 1.8(e).

Note to Reader
This ethics opinion has been formally adopted by the Board of Governors of the Kentucky
Bar Association under the provisions of Kentucky Supreme Court Rule 3.530 (or its predecessor
rule). The Rule provides that formal opinions are advisory only.