The Florida Bar

Ethics Opinion

Opinion 18-2

FLORIDA BAR ETHICS OPINION
OPINION 18-2
October 19, 2018
Advisory ethics opinions are not binding.
A lawyer may charge a lawful rate of interest on an advance of contingent costs from the
time the costs are incurred by the lawyer provided the rate of interest is lawful, reasonable, in the
best interest of the client, is disclosed to the client in writing at the earliest opportunity, and the
client gives informed consent in writing.
RPC:
Opinions:

Case:

4-1.5, 4-1.6, 4-1.7(a)(2), 4-1.8(a), 4-1.8(e)
86-2; Georgia Ethics Opinion 05-5 (2/13/07); Illinois Ethics Opinion 87-10
(1988); Kentucky Ethics Opinion E-420; Los Angeles County Bar Formal Ethics
Opinion 497 (California 1999); New Jersey Ethics Opinion 603 (1987); Ohio
Ethics Opinion 2001-3 (6/7/01); West Virginia Ethics Opinion LEO 2016-01
(2016)
The Florida Bar v. Fields, 482 So.2d 1354 (Fla. 1986).

The inquirer advances costs in personal injury cases. The inquirer’s contract provides
that repayment of the costs is contingent upon obtaining a recovery in a client’s cases. The
inquirer proposes to secure a non-recourse loan from an outside funding company to cover costs
in personal injury cases. Interest on the loan would be owed to the funding company only if
there is a recovery. The inquirer asks whether it is ethical to charge the client for the interest on
the loan if there is a recovery and whether the interest may exceed 18.5% with the client’s
written consent.
Rule 4-1.8(e), Rules Regulating The Florida Bar, states that:
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;
This rule permits an attorney to loan a client the costs and expenses connected to
litigation and condition repayment of the costs on obtaining a recovery in a case.
Under Florida Ethics Opinion 86-2, the committee opined that lawyers may charge a
lawful rate of interest on liquidated fees and costs either by prior written agreement or with
reasonable notice. Florida Opinion 86-2 states:
The Committee finds no basis for distinguishing between fees and costs advances
for the purpose of charging interest. Accordingly, the Committee concludes that
the Code of Professional Responsibility [Rules Regulating The Florida Bar] does
not prohibit an attorney from charging a lawful rate of interest on liquidated fees
and costs, either as provided in advance by written agreement or, in the absence of

a written agreement, upon reasonable notice. It is the committee’s view that 60
days would constitute reasonable notice.
In determining the appropriate and lawful rate of interest to be charged, attorneys
must adhere to the guidelines provided in The Florida Bar v. Fields, 482 So.2d
1354 (Fla. 1986).
In Ethics Opinion 86-2, the committee concluded that a lawyer may charge interest on
costs only if they are liquidated, but did not define “liquidated.” The committee is of the opinion
that costs are liquidated when the cost is incurred and therefore known. Because a cost is
liquidated when incurred, a lawyer may, but is not required to, charge interest on costs advanced
to the client from the time the cost is incurred by the lawyer.
Ethics committees in other states have considered the issue of charging interest on costs
advanced on behalf of a client concluding that a lawyer may charge interest on advanced costs if
the client agrees in advance to the accruing of interest. See Georgia Ethics Opinion 05-5
(2/13/07)(attorney may obtain loan from bank to advance costs for client and may charge lawful
interest to client for advancing costs, but fee contract must indicate whether client is liable for
costs even if no recovery and the maximum rate of interest that will be charged, and the closing
statement must indicate the interest paid by the client); Illinois Ethics Opinion 87-10
(1988)(lawyer may charge interest on overdue fees and on advanced costs, but must give client
advance notice before interest accrues); Los Angeles County Bar Formal Ethics Opinion 497
(California 1999) (attorneys may charge interest on advanced costs if the clients agree in writing
in the initial fee contract and the interest rate is lawful); New Jersey Ethics Opinion 603
(1987)(lawyer may obtain loan from bank to advance litigation costs to client in contingent fee
case and may charge the client the interest on the loan if the client agrees in advance); Ohio
Ethics Opinion 2001-3 (6/7/01)(attorney may obtain loan from bank to advance litigation costs to
client and may charge client the fees/costs of loan if the loan is not secured with client’s
settlement or judgement; terms of loan, including interest rate, are reasonable; and the client is
informed and consents at the outset in the fee agreement); West Virginia Ethics Opinion LEO
2016-01 (2016)(a lawyer may obtain a third party loan to advance cost and expenses in a
contingent fee case and may be deducted from the client’s recovery with informed consent by
written agreement if the actual costs and interest are reasonable; however, the loan cannot be
secured with the client’s settlement or judgement).
The committee agrees with these opinions and concludes that the inquirer may charge a
reasonable, lawful rate of interest on contingent costs with the client’s informed consent in
writing. The preamble to chapter 4 of the Rules Regulating The Florida Bar states:
“Informed consent’ denotes the agreement by a person to a proposed course of
conduct after the lawyer has communicated adequate information and explanation
about the material risks of and reasonably available alternatives to the proposed
course of conduct.”
The inquirer may charge interest on contingent costs only if the inquirer discloses the rate
of interest to the client at the earliest opportunity, usually at the execution of a written fee
agreement, and obtains the client’s informed consent in writing. See Rule 4-1.8(a), Rules

Regulating The Florida Bar; Kentucky Op E-420 (once the advancement takes the form of a
loan with interest, it takes on the characteristics of a business transaction and is subject to the
mandates of Rule 1.8(a) which include that the charges to the client are reasonable in amount,
that they do not exceed those paid by the lawyer, and that the lawyer does not have an interest in
the financial institution that would violate conflicts rules); Illinois State Bar Association Opinion
87-10 (agreement providing for the charging of interest on expenses should be placed in writing
prior to the accrual of any such interest and at the earliest opportunity, usually being the
execution of a written fee agreement/contract); Ohio Board of Commissioners on Grievances and
Discipline Opinion 2001-3 (2001)(the client must have a “reasonable opportunity to seek the
advice of independent counsel” and must “consent in writing”).
The committee is of the opinion that a lawyer can charge a client interest whether the
costs are advanced from a funding company or other financial institution specific to a client’s
case, a general line of credit available to the lawyer’s firm from a financial institution, or from
the firm’s own operating account. If taking out a loan, the lawyer can only recover the interest
actually charged to the lawyer by the lender, subject to the limitations below.
Regarding the inquirer’s second question, the lawyer can only charge a lawful rate of
interest and the amount must be reasonable. See, Rules 4-1.5(a) and 4-1.8(a), Rules Regulating
the Florida Bar. Although the question of whether an interest rate in excess of 18.5% is lawful is
outside the committee’s purview, the committee is of the opinion that it is an unreasonable rate
of interest because the inquirer should be able to find a lower rate of interest. It is therefore
impermissible for the inquirer to charge the client the proposed rate.
Finally, a lawyer must always act in a client’s interests and must not allow the lawyer’s
personal interest to interfere with the lawyer’s representation of the client. Rule 4-1.7(a)(2),
Rules Regulating The Florida Bar. Therefore, the inquirer must consider whether the inquirer’s
use of a particular funding company is in the client’s interest. If the company charges a higher
rate of interest than the inquirer may be able to obtain at another institution, such as a bank, it
may not be in the client’s interest for the inquirer to use that funding company even if the
company is charging a lawful rate of interest. The inquirer must not allow the inquirer’s
convenience to interfere with what is best for the client. Additionally, any disclosure by the
inquirer of information about a specific client’s matter must comply with Rule Regulating The
Florida Bar 4-1.6.
In summary, a lawyer may charge a lawful rate of interest on an advance of contingent
costs from the time the costs are incurred by the lawyer provided the rate of interest is lawful,
reasonable, in the best interest of the client, is disclosed to the client in writing at the earliest
opportunity, and the client gives informed consent in writing.