MARYLAND STATE BAR ASSOCIATION, INC.
COMMITTEE ON ETHICS
ETHICS DOCKET NO. 2008-06
Advance of Funds to Client for Medical Expenses
The Ethics Committee of the Maryland State Bar Association has received your inquiry dated November 28, 2007, and responds as follows:
Your inquiry was not clear as to whether you are seeking an opinion about a prior situation or whether you are seeking guidance prospectively. Furthermore, because you are admitted to practice in Maryland as well as the District of Columbia, and the fact that you referenced certain conversations with a representative of Bar Counsel for D.C. Office of Bar Counsel, it was not clear whether you are seeking advice with respect to litigation matters in the District of Columbia or in Maryland. Based on a conversation with a member of this Committee, this Committee understands that you are seeking an opinion concerning potential prospective matters pertaining to litigation pending in Maryland tribunals and not those in the District of Columbia. Accordingly, pursuant to Rule 8.5(b)(1) of the Maryland Lawyers’ Rules of Professional Conduct, those Rules apply to your inquiry because it would involve conduct in connection with a matter pending before a tribunal in Maryland.
Your inquiry essentially is whether an attorney, in a pending litigation matter, may advance personal funds as a loan to a client for medical expenses (as distinct from medical expert fees) arguably related to the incident giving rise to the pending litigation. We understand from your inquiry that there would be no agreement to advance such funds for medical expenses in contemplation of bringing the litigation, but that the desire to do so would be prompted by the need of the client as a result of circumstances which occur during the pendency of the litigation. Finally, your inquiry raises the issues as to whether such advances, if permitted, would be consistent with the Rules of Professional Conduct if handled through the attorney’s escrow/trust account in order to impress upon the client that the advances are truly loans for which the client would be responsible for repayment regardless of the outcome of the pending litigation.
Based on Rule 1.8(e) of the Rules of Professional Conduct and the Maryland cases discussed below, this Committee believes that such advances for medical treatment are not permitted. Therefore, it is a moot point as to whether such advances should be made through the attorney’s trust account rather than your personal account.
Rule 1.8(e) of the Rules of Professional Conduct states:
(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 Attorney Grievance Comm’n. v. Kandel, 317 Md. 274 (1989), the Court of Appeals construed former Code of Professional Responsibility DR 5-103(B), which was the predecessor to Rule 1.8(e), the differences being (i) that Rule 1.8(e)(1) eliminated the earlier requirement that “the client remain ultimately liable for such expenses,” and (ii) that there was no counterpart in the Code for Rule 1.8(e)(2). Both DR 5-103(B) and Rule 1.8(e) use the wording “financial assistance,” “client,” and “in connection with pending or contemplated litigation.” The Court of Appeals held that the advancement of funds by the attorney for the client’s medical treatment, transportation to a medical office for treatment, and maintenance or repair costs for the client’s automobile violated DR 5-103(B) because they were in connection with pending litigation but “were not necessary expenses of litigation.” Id. at 2801. The Court of Appeals explained the underlying rationale of the Rule as being
directed at avoiding the acquisition of an interest in litigation through financial assistance to a client. An important public policy interest is to avoid unfair competition among lawyers on the basis of their expenditures to clients. Clients should not be influenced to seek representation based on the ease with which monies can be obtained, in the form of advancements, from certain law firms or attorneys.
Id. at 281. Notwithstanding the conclusion that the attorney in question “was not motivated by self-interest or personal gain in making the advancements to his client,” the Court of Appeals nevertheless sanctioned the attorney with a public reprimand. Id. at 282.
In Attorney Grievance Comm’n. v. Eisenstein, 333 Md. 464 (1994), the Court of Appeals applied the same rationale to Rule 1.8(e), citing Kandel, Harris, and Engerman, all of which had construed DR 5-103(B). The Court of Appeals held that, notwithstanding a long-standing personal relationship between the attorney and the client, the attorney violated Rule 1.8(e) by advancing funds to the client for non-litigation related living expenses. Id. at 485-86. Indeed, the Court of Appeals cited Connecticut Informal Op. 90-3 for the proposition that “Rule 1.8(e) contains exceptions for court costs and expenses of litigation, but not for humanitarian acts.”2 Id. at 486, n. 13 (emphasis added). Eisenstein was followed in Attorney Grievance Comm’n. v. Pennington, 355 Md. 61, 76-77 (1999)(loans to litigation client for personal use violated Rule 1.8(e), rejecting argument that such loans were not in context of litigation and did not run afoul of policy prohibiting stirring up litigation).
The Committee also refers you to its previous opinions which can be accessed at www.msba.org 3. We trust that the foregoing is responsive to your inquiry, and we thank you for taking the time to seek an opinion of the Committee.
1 Kandel cites with approval three prior Maryland cases which similarly found violations of DR 5-103(B) for lawyers’ advances of monies “unrelated to the expenses of litigation.” 317 Md. at 281. See Attorney Grievance Comm’n. v. Harris, 310 Md. 197, 214 (1987)(home purchase deposit and settlement costs, car, and video machine advanced before suit filed but at a time attorney and client were going to pursue legal rights); Attorney Grievance Comm’n. v. Engerman, 289 Md. 330, 339-40 (1981)(advances for food and other necessities because lawyer felt sorry for client); and Bar Ass’n. v. Cockrell, 274 Md. 279, 282 (1975)($600 in loans beyond expenses of litigation).
2 The Louisiana case cited in your inquiry in effect adopted a humanitarian exception to DR 5-103(B) in order to provide a needy client better access to the courts to pursue the client’s claims. See Louisiana State Bar Association v. Edwins, 329 So.2d 437 (1976). Such an exception, however, is inconsistent with the holdings in the Maryland cases cited above.
3 This Committee has similarly opined that advances by an attorney to a client in litigation for personal expenses violates Rule 1.8(e). See Ethics Docket Nos. 92-50; 90-43 (client initially paid litigation expenses, then suffered financial problems; violation for attorney to lend client same amount as client had paid since at that point in time money would be for client’s living expenses, even though there would have been no violation if attorney had been the one initially to advance the litigation expenses). In Docket 2001-10, this Committee reviewed the foregoing opinions and Maryland cases and applied the same rationale to prohibit gifts to clients other than as excepted under Rule 1.8(e)(2).
REFERENCES:
Rule 1.8(c)(1) and (2), Md. Rules of Professional Conduct
Rule 8.5(b)(1), Md. Rules of Professional Conduct
DR 5-103(B), Md. Code of Professional Responsibility
Attorney Grievance Commission v. Kandel,
317 Md. 274 (1989)
Attorney Grievance Commission v. Eisenstein,
333 Md. 464 (1994)
Attorney Grievance Commission v. Pennington,
355 Md. 61 (1999)
Attorney Grievance Commission v. Harris,
310 Md. 197 (1987)
Attorney Grievance Commission v. Engerman,
289 Md. 330 (1981)
Bar Association v. Cockrell, 274 Md. 279 (1975)
Louisiana State Bar Ass’n. v. Edwins,
329 So.2d 437 (La. 1976)
Ethics Docket Nos. 2001-10; 92-50; 90-43
ASSIGNED TO: Jay Morstein, Esquire
DATE ASSIGNED: November 29, 2007
DATE DISTRIBUTED: January 17, 2008