Providing Financial Assistance to a Client: How Far is too Far?
By Gina Hendryx, OBAEthics Counsel

It is not uncommon during the course of litigation for a client, especially one with a pending injury claim, to ask for financial assistance from his or her attorney. The request may be for an “advance,” “loan” or "guarantee.” Regardless of the form, Rule 1.8(e) of the Oklahoma Rules of Professional Conduct (ORPC)1 states that “A lawyer shall not provide financial assistance to a client in connection with pending or contemplated litigation, except that a lawyer may advance court costs and expenses of litigation, the repayment of which may be contingent on the outcome of the matter.”

The rent is due, I can’t work, and my weekly disability check will be here Monday. Can you “advance” me $l00 and take it out of my check? Advancing living expenses to a client is prohibited in Oklahoma. In State ex rel. Oklahoma Bar Ass’n v. Smolen, 2000 OK 95, the respondent was disciplined for loaning money for such purposes. Respondent argued that he advanced the funds only after the attorney/client relationship was established with repayment to be made from benefits which had already been awarded, and that the loan was for “humanitarian purposes” and interest free. The court declined to make an ad hoc exception to Rule 1.8(e), citing the potential ethical problems which can arise from a lawyer advancing clients’ money for living expenses and the explicit language of the rule.

I cannot get to my medical appointments because my car is wrecked and I have no money for a rental. And, if I can find a way to my appointment, I have no money to pay the doctor. I know I need medical treatment to enhance my case so can you "loan” me money to cover these expenses? The exception for "costs” and "expenses” encompasses most of the generally accepted charges directly associated with litigation. Costs include filing fees, fees for service of process and other disbursements that are taxable and included in the judgment. Sellers v. Johnson, 719 P.2d 476, 479 (Okla Ct.App 1986). Expenses of litigation have been interpreted to include investigation costs, expenses of medical examinations and the costs of obtaining and presenting evidence. Fees for legitimate travel related to litigation have been held to be expenses of litigation. However, other jurisdictions have held the advancement of funds for transportation to a medical office for treatment or for payment of treatment to be improper.

My case has settled and the check should be here in about 30 days. My bank has agreed to loan me money against my settlement, but I need a “guarantee” of payment from my lawyer. The rule prohibits an attorney from “making” a loan to a client and likewise prohibits the “guaranteeing” of the same. The attorney, subject to attorney/client confidence considerations, may confirm the pendency of a settlement and recognize any lawfully obtained liens or encumbrances. However, it is improper to be a “guarantor” or “co-sign” on behalf of a client.

In the past, clients were ultimately liable for all advanced court costs and expenses of litigation. The current rule allows repayment to be contingent upon the outcome of the litigation O.R.P.C. 1.8(e). The contingent fee agreement must be in writing and must state whether the client is responsible for reimbursement of costs and expenses. ORPC 1.5(c).

The majority of jurisdictions prohibit providing financial assistance to clients with the exceptions of court costs and litigation expenses. The rules are designed to prevent lawyers from enticing clients with the promise of monetary advances and to the inevitable conflict when lawyer becomes both creditor and counselor. The rules also protect lawyers from others who might be more willing and/or able to loan money to clients and from clients’ requests for assistance.

1. Okla. Stat. Tit. 5, ch. 1 app. 3-A (1991).