Ethics Opinion No. 326
May an attorney employed by a publicly funded organization, who is representing indigent clients sentenced to death, contribute personal funds to a client’s prison account, when no compensation from the client will ever be received by the attorney?
An attorney who is a full-time employee of a publicly funded criminal defense organization may contribute personal funds, as a gift and not as a loan, to the prison account of an indigent client sentenced to death, where there is neither expectation of repayment nor any actual compensation received from the client by the attorney in any form.
I. FACTUAL BACKGROUND
1. This inquiry was posed by an attorney who is a full-time salaried public defender employed by a governmental agency. The essence of the inquiry is whether such an attorney can ethically contribute personal funds to the prison accounts of prisoner clients who are sentenced to death.
2. Such prisoners face some financial obligations to be paid from their official prison accounts for such things as medical services, certain clothing such as underwear and shoes, and postage. In some cases the prisoners do not have family support; furthermore, they are prohibited as a class from the nominal income-producing opportunities available to other prisoners in the system.
3. Under the terms of their employment the public defender attorneys are prohibited from receiving repayment from the prisoners, and are further prohibited from engaging in the private practice of law. Under these circumstances, there is no expectation of repayment from the prisoner, nor reasonable possibility of otherwise obtaining compensation, either direct or indirect, from some further or later representation of the prisoner.
4. These contributions would be gifts, as opposed to loans for living expenses, or advances for litigation costs. The funds would be contributed directly to the prison accounts, to be utilized to offset non-litigation related prison expenses of the prisoners.
5. Rule 1.8 of the Oklahoma Rules of Professional Conduct (“RPC”)1 prohibits certain transactions which might create a conflict of interest between the lawyer and a client. The relevant portions of RPC 1.8 are as follows:
(a) A lawyer shall not enter into a business transaction with a client or knowingly acquire an ownership, possessory, security or other pecuniary interest adverse to a client unless:
- The transaction and terms on which the lawyer acquires the interest are fair and reasonable to the client and are fully disclosed and transmitted in writing to the client in a manner that can be reasonably understood by the client;
- The client is advised in writing of the desirability of seeking and is given a reasonable opportunity to seek the advice of independent legal counsel on the transaction; and
- The client gives informed consent, in a writing signed by the client, to the essential terms of the transaction and the lawyer’s role in the transaction, including whether the lawyer is representing the client in the transaction.
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(e) 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; and
- a lawyer representing an indigent client may pay court costs and expenses of litigation on behalf of the client.
6. If the money advanced to the indigent client was made with some expectation of repayment, the transaction could be considered a business transaction falling within the ambit of RPC 1.8(a) requiring written disclosure to the client. However, with or without written disclosure, the Oklahoma Supreme Court has consistently held that advancing or loaning funds to a client for living expenses is prohibited under the provisions of RPC 1.8 (e). See State ex rel. Okla. Bar Ass’n v. Smolen, 2000 OK 95, 17 P.3d 456; State ex rel. Okla. Bar Ass’n v. Smolen, 1992 OK 116, 837 P.2d 894; State ex rel. Okla. Bar Ass’n v. Boettcher, 1990 OK 92, 798 P.2d 1077.2
7. The primary concern is with RPC 1.8(e) which prohibits a lawyer from providing financial assistance to a client in connection with pending or contemplated litigation. This rule is “based on the common-law prohibitions against practice of champerty and maintenance.” State ex rel. Okla. Bar Ass’n v. Smolen, 2000 OK 95, ¶ 15, 17 P.3d at 462. The Smolen court observed that the undesirable aspects of champerty and maintenance which RPC 1.8(e) intends to prohibit are:
(1) Clients selecting a lawyer based upon improper factors, i.e. by the enticement of financial aid.
(2) Conflicts of interest, including compromising a lawyer’s independent judgment in the case and creating the potentially conflicting roles of lawyer and creditor.
8. The Black’s Law Dictionary definition of champerty is “a bargain by a stranger with a party to a suit, by which such third person undertakes to carry on the litigation at his own cost and risk, in consideration of receiving, if successful, a part of the proceeds or subject sought to be recovered.” Black’s Law Dictionary, 209 (5th ed. 1979). Maintenance is an “officious intermeddling in a suit which in no way belongs to one, by maintaining or assisting either party, with money or otherwise, to prosecute or defend it”. Id. at 860.
9. The prohibition of RPC 1.8(e) is against providing financial assistance “in connection with pending or contemplated litigation.” The gifts contemplated in this instance are not “in connection with” pending litigation. Though it could be argued that the loans for living expenses in the reported cases were not “connected to” pending litigation any more than the contemplated gifts here, in fact the loans in those cases were made by attorneys3 representing the client in cases in which there was prospective financial recovery, and in which there was a promise or understanding for repayment of the loan, often from the proceeds of the litigation. The Court has been clear that such loans, even in nominal amounts, are prohibited under RPC 1.8. For example, in State ex rel. Okla. Bar Ass’n v. Carpenter, 1993 OK 86, 863 P.2d 1123, the attorney made small individual loans to different clients with repayment to come from the proceeds of the case. The Supreme Court found these to be prohibited transactions.
10. Under the facts here the champerty and maintenance risks identified by the Smolen opinion are not present. Nominal monetary gifts by a public defender to a death row inmate for prison system expenses offer no possibility of a share of the proceeds of any pending action, nor is such a gift related to “officious intermeddling” to enable the inmate to prosecute or defend a pending action. The client’s choice of a public defender is dictated by his or her indigent circumstances, and not by expectation of financial assistance.
11. It is the expectation of repayment which gives rise to the conflict of interest concern, creating the risk that the lawyer might encourage the bird in hand of a settlement offer over the two birds which might be available at trial. Here, as there is no expectation of repayment, there is no concern of a conflict of interest.
12. Accepting the Smolen premise that RPC 1.8(e) is intended to prohibit the evils of champerty and maintenance, the making of nominal monetary gifts to indigent death row inmates by salaried governmental public defenders simply does not present the opportunity to unduly influence a client’s choice of lawyer, to create a conflict for the lawyer as both lawyer for and creditor of the client, to maintain otherwise unmeritorious litigation, or to promote a third party’s litigation with expectation of profit or gain. These gifts, under the facts of this particular situation, are purely humanitarian offers of assistance with no expectation of return, to persons with no means of financially reciprocating.
13. This rationale however would not extend to attorneys in private practice, including attorneys who may be participants in Oklahoma Indigent Defense System contracts, since such attorneys also may maintain private practices in which they could represent their indigent clients in other capacities.
14. As limited by the factual situation here, the ethical issues involved in the usual case of attorney advances or loans to a client for living expenses do not arise. The nature of the attorney’s full-time employment by a publicly funded criminal defense organization, the nature of the assistance as a gift without expectation of repayment, the nature of the representation as capital criminal defense with no prospect of monetary recovery, and the very nature of the client as a death row inmate without alternative available resources, all independently and collectively negate the champerty and maintenance risk factors present in other cases of attorney humanitarian loans to clients.
1. The Oklahoma Rules of Professional Conduct have been amended by order of the Oklahoma Supreme Court, to be effective January 1, 2008. Rule 1.8 as set out herein is the amended rule.
2. Boettcher was decided under the predecessor of RPC 1.8 (e), Disciplinary Rule 5-103(B) which then provided:
(B) While representing a client in connection with contemplated or pending litigation, a lawyer shall not advance or guarantee financial assistance to his client, except that a lawyer may advance or guarantee the expenses of litigation, including court costs, expenses of investigation, expenses of medical examination, and costs of obtaining and presenting evidence, provided the client remains ultimately liable for such expenses.
3. Or in the case of Boettcher, by an affiliated but separate loan company created primarily for the purpose of lending money to clients of the firm.