November 27, 2018

ABA issues new guidance on helping clients who use third-party assistance to pay legal fees

CHICAGO, Nov. 27, 2018 — The American Bar Association Standing Committee on Ethics and Professional Responsibility released today Formal Opinion 484, which outlines the model rules that lawyers should be alert to when referring clients to fee-financing companies or brokers to pay their legal fees.

With some clients needing assistance to pay their legal fees for either civil or criminal matters, the new formal opinion addresses a half-dozen scenarios in which lawyers assist their clients with third-party financing through traditional lenders, such as a bank, or a loan financing company. In each case, Formal Opinion 484 notes that lawyers may participate in these arrangements but should comply with specific model rules to ensure communication and transparency and avoid any conflict of interest.

When a lawyer has an interest in the financing firm, Formal Opinion 484 adds that Model Rule 1.8, which elaborates on conflict of interest rules, also requires the lawyer to ensure that the “terms and transaction are fair and reasonable to the client” and the financial relationship is fully disclosed.

In helping clients with financing, the opinion underscores the importance for lawyers to know these specific ABA Model Rules of Professional Conduct:

  • Model Rule 1.2(c) Scope of Representation and Allocation of Authority Between Client and Lawyer
  • Model Rule 1.4(d) Communications
  • Model Rule 1.5 (a) and (b) Fees
  • Model Rule 1.6 Confidentiality of Information
  • Model Rule 1.7 (a) and (b) Conflict of Interest: Current Clients
  • Model Rule 1.9(a) Duties to Former Clients

The ABA Standing Committee on Ethics and Professional Responsibility periodically issues ethics opinions to guide lawyers, courts and the public in interpreting and applying ABA model ethics rules to specific issues of legal practice, client-lawyer relationships and judicial behavior. Formal Opinion 484 and other ABA ethics opinions are available on the ABA Center for Professional Responsibility website.

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