OBA Ethics Counsel
Ethics Opinion No. 122
Adopted September 24, 1936
The Board of Governors is in receipt of the following inquiry:
"Would it be ethical for an attorney to agree with an indigent client, who he believes has a meritorious cause of action, to advance the funds necessary to pay the expenses of the institution and prosecution of a civil action on a contingent fee basis, said advancements to be first deducted from the gross amount recovered, either by judgment or compromise, the net amount then to be divided equally between the client and said attorney?"
Rule 44 of the Rules of Professional Conduct provides:
"A lawyer may not properly agree with a client that the lawyer shall pay or bear the expense of litigation; he may in good faith advance expenses as a matter of convenience, but subject to reimbursement."
This rule, as stated in Advisory Opinion No. 57, (Vol. 1, Adv.Op. p. 111), contemplates definite reimbursement by the client. See also Willhoit v. Prairie Oil & Gas Company, 166 Okl. 108, 26 P.2d 406, and Opinion No. 20 of the A. B. A. Committee on Professional Ethics. Lacking the element of definite reimbursement, it is not proper for a member of the bar to "advance" money for, nor to pay, the expenses of litigation.
A mere agreement on the part of a client to reimburse the member of the bar does not cure the situation where it is quite apparent that he cannot reimburse the member of the bar and that, in all reasonable probability he will not be able to. To so hold would be pure sophistry.
While in some jurisdictions, the strict rules against champerty and maintenance have been relaxed so as to permit of contingent fees, yet in no jurisdictions have they been relaxed so far as to permit a member of the bar to finance litigation. An agreement to reimburse a member of the bar out of the proceeds of the litigation, if the same is successful, does not alter the situation. Long has been recognized the impropriety of a member of the bar speculating financially in the outcome of litigation.
The fact that the client is unable to meet the costs and expenses of the proposed suit is an unfortunate circumstance for which a member of the bar has neither legal nor moral responsibility. To state that the moral quality of an act is affected by the economic status of either party is the product of a type of loose thinking which is fallacious in the extreme. So it is, that the act of a member of the bar in furnishing funds for the prosecution of a lawsuit is the act condemned and that condemnation cannot reasonably be affected by the ability or the lack thereof of the proposed client to furnish them for himself. To permit the circumstance of indigence to work a modification of the rule would, without doubt, open the door to the abuses which the rules against champerty and maintenance have sought to close.
It is concluded that the inquiry should be, and it is, answered in the negative.