Costs and Financial Assistance

Costs and Financial Assistance

Model Rule 1.8(e) forbids a lawyer to provide financial assistance to a client in connection with pending or contemplated litigation, and it lists a few exceptions.¹ The rule is easy to blur with Rule 1.8(i), because both concern a lawyer's money and a client's lawsuit. They ask different questions. Rule 1.8(i) asks whether the lawyer has acquired ownership of the claim or of the thing in dispute. Rule 1.8(e) asks whether the lawyer is providing the client financial assistance. A lawyer can pay for a case without owning any of it, and a lawyer can own part of a case without giving the client a dollar. This section turns on the line between paying for the case and owning part of it.

The principal exception sits where the two rules meet. Rule 1.8(e)(1) lets a lawyer advance court costs and expenses of litigation, and it adds that repayment may be contingent on the outcome of the matter.² Costs and expenses are what the lawsuit itself consumes: a filing fee, a deposition transcript, an expert's fee. A client with a sound claim and no cash could not bring it without that money, so the exception removes a barrier to access, as the contingent fee does. The contingent-repayment clause is the part that surprises students. If the client loses, the lawyer absorbs the expense and recovers the outlay only through a win, which looks like the stake in the outcome that Rule 1.8(i) condemns.

The lawyer's right under this exception is a right to be reimbursed a sum of money. The client keeps title to the entire claim and to whatever it produces. The lawyer is a creditor whose debt may be forgiven if the case is lost, and a creditor is not a co-owner. The Rules already accept that a lawyer's pay may turn on the result, because Rule 1.8(i)(2) permits a reasonable contingent fee in a civil case.³ A contingent right to repayment of expenses stands where a contingent fee stands: it ties the lawyer's recovery to the result without giving the lawyer a share of what is being fought over.

The exception covers the money advanced and the form of repayment. It ends when the lawyer asks for something more than reimbursement.

Money spent on the client's life rather than on the client's lawsuit falls outside the cost-advance exception altogether.

Financial help binds a client to a lawyer in ways the client may not see. A client who depends on the lawyer's money for rent has a reason to hesitate before discharging the lawyer or rejecting the lawyer's settlement advice, and a lawyer who has supplied that money has a reason to protect the investment by keeping the litigation going. The independent judgment that the lawyer owes the client is the interest at risk, as in the discussion of champerty above. Advancing costs is allowed because it lets a valid claim go forward and leaves the lawyer with a debt rather than ownership of the claim. A gift for rent does neither of those things.

Client consent does not cure a violation, for the same reason it does not cure a violation of Rule 1.8(i). The rule's exceptions are three: advancing costs, an indigent client's costs, and modest gifts to a pro bono indigent client.⁵ The client's agreement is not among them. A client in need accepts offered help readily, so a consent requirement would screen out almost nothing. A flat bar replaces a safeguard that would seldom operate with one that always does.

The indigent-client provisions are narrow. A lawyer representing an indigent client may pay court costs and expenses of litigation on the client's behalf.⁶ The text speaks of paying those costs, where the general exception speaks of advancing them. A lawyer representing an indigent client pro bono, directly or through a nonprofit legal services or public interest organization or a law school clinical or pro bono program, may provide modest gifts for food, rent, transportation, medicine, and other basic living expenses, subject to conditions the rule attaches.⁷ The gift provision requires an indigent client, free representation, and a modest gift for a basic need. The lawyer in the rent-and-groceries scene has none of those features, so the exception does not help.

Steps two and three divide the cost-advance cases. Paying for the case is permitted, and taking part of the claim as the price is not.