FLORIDA BAR ETHICS OPINION
March 1, 1993
Advisory ethics opinions are not binding.
An attorney’s involvement with a proposed corporation that would loan money to claimants in
personal injury matters would be unethical. Under the proposed plan, in order to ensure
repayment of the loan from the recovery the attorney and the client would sign a trust declaration
by which the attorney would become a trustee for benefit of the loan company.
Note: This opinion was approved by the Board of Governors at its February 1993 meeting.
4-1.7, 4-1.8(e), 4-3.7(a), 4-8.4(a)
The Florida Bar v. McAtee, 601 So.2d 1199 (Fla. 1992)
The inquiring attorney previously received an informal staff opinion concerning the
inquiry presented below. At the inquirer’s request, the Committee reviewed the staff opinion.
Following the Committee’s affirmance of the staff opinion, the inquirer petitioned for Board of
Governors review. The Board approved the result reached in the staff opinion, but directed that
the Committee render an advisory opinion to provide guidance to the practicing bar.
The inquiring attorney states that his client is considering forming a corporation that
would loan money to claimants in personal injury matters. The loans would be made pursuant to
the following arrangement:
(1) In consideration of the proceeds of the loan, the personal injury claimant
would execute and deliver to the lender an interest-bearing promissory note.
(2) In addition to the execution and delivery of the promissory note, the personal
injury claimant would execute a trust declaration by which his or her lawyer
would become a trustee for the benefit of the lender.
(3) The personal injury claimant’s lawyer would sign the trust declaration, thereby
accepting responsibility for repayment to the lender of the loan out of the
proceeds of the personal injury claim.
(4) The personal injury claimant’s lawyer would receive no pecuniary
compensation from any source for his or her service as trustee.
(5) The personal injury claimant’s lawyer would advance none of his or her funds,
either directly or indirectly, to his or her client.
(6) The ownership and management of the lender would be completely
independent of the personal injury claimant’s lawyer.
The inquiring attorney has asked whether the participation of the personal injury
claimant’s lawyer in the proposed financing arrangement would be ethically
permissible. For the reasons expressed below, the Committee is of the opinion
that an attorney’s participation in this financing arrangement would be unethical.
In Opinion 75-24 we concluded that it would be improper for an attorney to participate in
an arrangement in which a lender would agree to make loans to the attorney’s clients for living
expenses on the condition that attorney and client sign an agreement that the loan would be
repaid from the settlement proceeds. Although Opinion 75-24 was decided under the former
Code of Professional Responsibility, for purposes of this inquiry former DR 5-103(B) and
present Rule 4-1.8(e) are substantially similar. Rule 4-1.8(e) provides:
(e) 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.
In reality, an attorney who routinely refers clients to a loan company and actively
participates in the loan transactions would be providing financial assistance to those clients. Such
conduct would be unethical even though the attorney would be providing financial assistance
indirectly rather than directly. An attorney may not violate the Rules of Professional Conduct
through the acts of another. Rule 4-8.4(a). Therefore, if the loan proceeds were used for anything
other than “court costs and expenses of litigation,” the attorney would be acting unethically by
participating in the proposed financing arrangement.
Other practical problems exist. For example, in some cases a client might stand to receive
no cash from a recovery because the client’s entire share of the expected recovery proceeds had
been “advanced” by, and thus was owed to, the loan company. Upon realizing that no cash
would be forthcoming, the client could decide to cease cooperating with the attorney or simply to
forego pursuing the matter. In such a situation, the fact that the client’s share of the expected
recovery already had been received by the client could adversely affect the relationship between
attorney and client. The attorney’s interest would be served by settlement of the case, yet the
client might have little incentive to settle or even to cooperate in pursuing the case.
An attorney’s involvement in the loan process to the extent contemplated by the proposed
arrangement also would raise the issue of the attorney’s duty to arrange for financing on the most
advantageous terms available for the client. Would the attorney be obligated to “shop” the
client’s case to various loan companies in order to obtain the best deal? Must the attorney
counsel the client on how much money the client should borrow?
Additional ethical concerns could arise as a result of the attorney’s participation in the
proposed arrangement. It is apparent that, in the event of a dispute between the client and the
loan company, the attorney would be placed squarely in the middle. A principal purpose
underlying Rule 4-1.8(e) is to prevent unnecessary conflict between attorney and client. In the
view of the Committee, an attorney’s involvement in the proposed financing arrangement would
serve only to increase the likelihood of such conflict. Furthermore, the attorney’s extensive
involvement in the loan process could result in the attorney being ethically precluded from
representing the client in litigation resulting from the dispute—for example, Rule 4-3.7(a) would
prohibit the attorney from representing the client in the litigation if the attorney would be a
necessary witness on the client’s behalf.
Finally, under existing ethics rules a potential conflict of interest would be present if an
attorney acted to protect the lender’s interest by agreeing to act as trustee for benefit of the
lender. See The Florida Bar v. McAtee, 601 So.2d 1199 (Fla. 1992), and Rule 4-1.7. Attorney
McAtee was disciplined for representing a personal injury client while, without that client’s
knowledge or consent, simultaneously representing the medical provider that had filed a notice
of lien against the personal injury client’s recovery. Although such conflicts often can be waived
by the affected clients, it is evident that our statement in Opinion 75-24 seems especially
applicable to the financing arrangement proposed by the inquiring attorney:
Where the lawyer initiates the loan by recommending his client to the loan
company, it seems to us that he is inherently representing to the loan company
that the client’s claim is meritorious. It becomes unclear whether the lawyer is
acting for the client or the loan company.
In closing, it is noted that the Committee’s opinion is directed at the financing
arrangement presented by the inquiring attorney; we have not been asked, nor do we attempt, to
provide an opinion concerning ethically proper use of “letters of protection” in personal injury