FLORIDA BAR ETHICS OPINION
October 21, 2016
Advisory ethics opinions are not binding.
A personal injury lawyer may “forgive” repayment of advanced costs from a client’s recovery
where there has been no agreement for the inquirer to be unconditionally responsible for the
costs at the outset of representation, the cost “forgiveness” occurs after settlement, and the
inquirer will receive no fees for the representation. The lawyer must be mindful of third party
interests in the settlement funds and the lawyer’s obligation of candor to third parties.
4-1.8(e), 4-4.1, 4-8.4(c), 5-1.1(f)
96-1; Michigan Ethics Opinion RI-14
A member of The Florida Bar has requested an advisory ethics opinion. The operative
facts as presented in the inquiring lawyer’s letter are as follows.
The inquirer represents a client in a negligence case. Subsequent to stating a cause of
action, an appellate decision changed the law, which eliminated the cause of action. The parties
then reached a settlement. The total of the client’s outstanding medical bills and costs are nearly
double the amount of the settlement. The inquirer advanced the litigation costs on behalf of the
client, to be repaid by the client contingent on the outcome of the matter. The settlement exceeds
the amount of costs advanced by the inquirer by a small amount. The inquirer, who is not taking
a fee, would like to reduce the amount of costs owed to the inquirer by the client so that the
client may receive some of the settlement after resolving outstanding medical liens and
The inquirer asks whether the inquirer may reduce the amount of the costs that the client
owes the inquirer in light of Florida Ethics Opinion 96-1, which states that a lawyer cannot agree
to be unconditionally responsible to pay for a client’s litigation costs.
Rule 4-1.8(e), Rules Regulating the Florida Bar, is the rule regarding financial assistance
to clients. The rule states:
Financial Assistance to Client. A lawyer shall not provide
financial assistance to a client in connection with pending or contemplated
litigation, except that:
(1) a lawyer may advance court costs and expenses of litigation, the
repayment of which may be contingent on the outcome of the matter; and
(2) a lawyer representing an indigent client may pay court costs and
expenses of litigation on behalf of the client.
Rule 4-1.8 (e)(1) permits a lawyer to advance court costs and expenses of litigation
provided the client repays the advances if there is a recovery. The exception under Rule 4-1.8
(e)(2) permits a lawyer to pay an indigent client’s court costs and litigation expenses without any
reimbursement requirement. As the facts indicate, the inquirer’s client is not indigent.
The comment to the rule elaborates and explains the reasons for the prohibition against
Lawyers may not subsidize lawsuits or administrative proceedings brought
on behalf of their clients, including making or guaranteeing loans to their clients
for living expenses, because to do so would encourage clients to pursue lawsuits
that might not otherwise be brought and because such assistance gives lawyers too
great a financial stake in the litigation. These dangers do not warrant a
prohibition on a lawyer advancing a client court costs and litigation expenses,
including the expenses of diagnostic medical examination used for litigation
purposes and the reasonable costs of obtaining and presenting evidence, because
these advances are virtually indistinguishable from contingent fees and help
ensure access to the courts. Similarly, an exception allowing lawyers representing
indigent clients to pay court costs and litigation expenses regardless of whether
these funds will be repaid is warranted.
Michigan Ethics Opinion RI-14 (1989) provides additional background regarding the
origin of the prohibition against financial assistance:
MRPC 1.8 (e) is the result of the common law rules against champerty and
maintenance. Champerty is an investment in the cause of action of another by
purchasing a percentage of any recovery. Maintenance is another form of
investment by providing living or other expenses to finance litigation. When a
lawyer has a financial stake in the outcome of a client’s lawsuit, there is a
legitimate concern that the lawyer’s undivided loyalty to the client may be
compromised in an effort to protect the lawyer’s personal financial investment in
the outcome. Also financial support to a client could interfere with settlement
efforts, by enabling the client to prolong the dispute.
Florida Ethics Opinion 96-1 addresses the issue of financial assistance to clients. The
opinion considered a factual situation where a lawyer agreed to be responsible for costs in
representing a state agency, regardless of whether there was a recovery. The Committee cited to
Rule 4-1.8(e) and stated with respect to the proposed contract:
This rule prohibits an attorney from providing financial assistance to a
client in connection with pending or contemplated litigation. The rule, however,
contains an exception permitting the attorney to advance court costs and expenses
of litigation on behalf of a non-indigent client, the repayment of which may be
contingent on the outcome of the matter. See, e.g., Florida Ethics Opinion 72-27;
Iowa Opinion 93-2; Mississippi Opinion 225; North Carolina Opinion 124.
Although this exception permits attorney and client to agree that the client’s
repayment of advanced costs and expenses will be contingent on the outcome of
the matter, it clearly contemplates that such repayment will be made if a sufficient
recovery is obtained. In contrast, the inquiring attorney proposes an outright
payment of costs for a non-indigent client, rather than an advancement.
The concerns raised by Rule 4-1.8(e) are that of the common law doctrines
of champerty and maintenance, as well as the conflict of interest created when an
attorney has a personal economic interest in the outcome of the matter. The
committee recognizes that the concerns underlying the rule may be minimized
when the client is a state agency, but is constrained to apply the rule as it is
written. Accordingly, the committee concludes that, under the plain language of
Rule 4-1.8(e), it would be ethically impermissible for the inquiring attorney to
unconditionally be responsible for all costs and expenses as provided in the
Nothing in the opinion, or in any subsequent opinion from the committee on the subject,
defines “sufficient recovery.”
The committee is of the opinion that the inquirer’s proposal is permissible under the
specific circumstances presented. The committee is of the opinion that the prohibition against a
lawyer providing financial assistance to a litigation client expressed by Rule 4-1.8(e) and Florida
Ethics Opinion 96-1 is inapplicable to the inquirer’s circumstances. The committee believes that
both the rule and opinion were intended to prohibit agreements made at the outset of
representation for the lawyer to be unconditionally responsible for costs of litigation.
Even assuming the general prohibition against financial assistance is applicable to these
circumstances, the committee is of the opinion that the underlying basis for the rule, the common
law concerns of champerty and maintenance, does not appear to be present with the inquirer’s
facts. The inquirer proposes to forgo reimbursement of advanced costs at the end of the matter.
The inquirer’s decision at the end of representation to “forgive” some of the advanced costs did
not affect the inquirer’s independent professional judgment during the representation, including
giving advice on settlement. The committee is of the opinion that in particular, there is no effect
on the inquirer’s judgment where the inquirer will not take any fees for the representation.
The committee also is of the opinion that the inquirer’s proposal is permissible under
these circumstances because, under the facts presented, the settlement is insufficient to cover the
client’s medical bills and costs associated with the representation. Thus, the committee is of the
opinion that the exception allowing a lawyer to advance costs of litigation and make those
advanced costs “contingent on the outcome of the matter” would permit the inquirer to reduce
the amount of the costs the inquirer seeks to be reimbursed from the recovery, as the recovery is
insufficient to cover all medical bills and litigation costs. The inquirer’s decision to not seek
reimbursement from the client for some of the costs that the inquirer has advanced on behalf of
the client is thus contingent on the outcome of this matter: that the settlement does not cover the
total amount of the client’s medical bills and the costs advanced by the inquirer.
The committee cautions the inquirer to be mindful of the inquirer’s obligations to third
parties to whom the inquirer owes a legal duty and who have an interest in the settlement funds
held in trust by the inquirer under Rule 5-1.1(f) and the comment, and the inquirer’s general
obligation of candor expressed in Rules 4-4.1 and 4-8.4(c).
In summary, the committee is of the opinion that the inquirer’s proposal not to seek
reimbursement for some of the costs the inquirer has advanced on behalf of the client is
permissible under these specific circumstances: where there has been no agreement for the
inquirer to be unconditionally responsible for the costs at the outset of representation, the cost
“forgiveness” occurs after settlement, and the inquirer will receive no fees for the representation.
The committee believes that the rule’s prohibition is inapplicable because there was no
agreement at the outset of representation for the inquirer to be responsible for the costs, and the
committee believes that application of the exception to Rule 4-1.8(e) leads to the same result, as
the recovery is insufficient to cover all medical bills and litigation costs and the repayment of the
costs is therefore “contingent on the outcome of the matter” under the rule.