MARYLAND STATE BAR ASSOCIATION, INC.
COMMITTEE ON ETHICS
ETHICS DOCKET NO. 2000-37
Contingency Fee: Client borrows funds over attorney’s objection while matter pending
You have advised the Committee that a client of yours responded to a written advertisement wherein the advertiser was an entity that provided funding to clients involved in personal injury cases in advance of settlement or litigation. You further indicated that the company would be charging interest at a rate of 15 percent per month and that your client was interested in borrowing from the company. You have advised your client not to borrow said funds.
Your inquiry asks whether or not you commit any ethical violation as a result of your client's involvement in such an arrangement.
The Committee on Ethics has addressed the issue of dealing with companies that loan plaintiffs money prior to settlement or litigation in Ethics Docket 91-31 and 92-25. These opinions dealt with the attorney's obligation in his or her communiction with such companies as well as the attorney's obligation to exercise independent professional judgment in any dealings with such companies. A reading of these prior opinions would indicate that there is no violation, per se, of the Rules of Professional Conduct inherent in such an arrangement. The legality of specific contracts, however, should be viewed in light of the prohibitions against champerty, maintenance and barratry.
An attorney does have an obligation to fully advise his or her client the ramifications of disclosing information to a third party. The Committee has expressed concern that an attorney must exercise his independent professional judgment in rendering "candid advice to a client on matters relating to the representation." See Rule 2.1 in the Maryland Rules of Professional Conduct. The attorney also has an obligation to make certain that the client is aware of the effect of any fee agreement with the attorney as it might relate to a loan assignment. Finally, while not authorized to opine on legal issues, the Committee has concerns about what appears to be a usurious rate of interest that is being requested by the advertising entity.
In summary the Committee believes that you will not have breached any ethical obligation in continuing to represent a client who may avail themselves to such a service provided you address the concerns set forth above.