Georgia Ethics Opinion

State of Georgia

Comments

The Georgia ethics committee in various opinions has rendered guidance to attorneys that litigation funding is ethical where client confidences and attorney independent judgment are maintained. They also advise that interest charges can be passed to a client upon full disclosure and written consent.

Excerpts from

FORMAL ADVISORY OPINION NO. 05-5 Approved And Issued On February 13, 2007 Pursuant To Bar Rule 4-403 By Order Of The Supreme Court Of Georgia Thereby Replacing FAO No. 92-1 “new” Supreme Court Docket No. S06U0798 QUESTION PRESENTED: 1) Ethical propriety of a law firm obtaining a loan to cover advances to clients for litigation expenses;    2) Ethical considerations applicable to payment of interest charged on loan obtained by law firm to cover advances to clients for litigation expenses. Some portion of the interest costs incurred in this arrangement would be charged to the client.  The contingent fee contract would specify the client’s obligations to pay reasonable expenses and interest fees incurred in this arrangement. The first issue is whether it is ethically permissible for lawyers to borrow funds for the purpose of advancing reasonable expenses on their clients’ behalf.  If so, we must then determine the propriety of charging clients interest to defray part of the expense of the loan. Although the client may remain “responsible for all or a portion of these expenses,” decisions regarding the appropriate actions to be taken to deal with such liability are entirely within the discretion of the lawyers.  Since this discretion has always existed, the fact that the lawyers have originally borrowed the money instead of advancing it out-of-pocket would seem to be irrelevant, and the arrangement is thus not impermissible. In Advisory Opinion No. 45 (March 15, 1985, as amended November 15, 1985), the State Disciplinary Board held that a lawyer may ethically charge interest on clients’ overdue bills “without a prior specific agreement with a client if notice is given to the client in advance that interest will be charged on fee bills which become delinquent after a stated period of time, but not less than 30 days.”  Thus, the Board found no general impropriety in charging interest on overdue bills. There is no apparent reason why advanced expenses for which a client may be responsible under a contingent fee agreement (whether they are billed to the client or deducted from a recovery) should be treated any differently. Thus, we find no ethical impropriety in charging lawful interest on such amounts advanced on the client’s behalf.

Please reference your local state ethics rules.

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