State of Maryland
Ethics Docket 98-23
Charging Client for the Cost of Bank Loan for Advances and/or Charging Interest on Advances for Use of Attorney’s Funds. In your letter you state that your standard contingent fee agreement provides that the client assumes a non-contingent responsibility for the court costs and expenses of litigation incurred on the client’s behalf. Such costs and expenses are advanced by you, and they are funded by utilizing your bank line of credit or from your own funds. You ask the following questions:
1. Is it permissible to charge the client for the interest paid to the bank to make the advances?
2. Is it permissible to charge the client reasonable interest on the advances made from your own funds?
Rule 1.5(c) of the Rules of Professional Conduct requires that a contingent fee agreement be in writing and that it explain the basis for the fee and for what costs and expenses the client will be responsible. A lawyer may not charge the client more than the actual payments made by the lawyer on the client’s behalf for advances which the client has agreed in writing to pay. ABA Formal Ethics Opinion 93-379 (1993). A client may be charged for additional expenses above and beyond the actual cost of a disbursement item, provided such additional costs are actually incurred and this was initially disclosed and agreed to in writing by the client. Whether you may charge your clients for any additional actual costs incurred above the cost of the disbursements themselves depends on whether that was agreed to by the client in writing. It is permissible to charge a client interest on unpaid and/or disbursements only when it is disclosed and agreed to in writing by the client to pay interest on an overdue account. ABA Formal Ethics Opinion 338 (1974); Maryland Ethics Opinions 94-24 (1994), 92-12 (1992), 83-32 (1983) and 77-48 (1977). Whether you may charge interest on advances depends on whether the client agreed in writing to be billed currently for the advances and to pay reasonable interest on the amounts overdue.
Maryland Opinion 2001-12 (3/29/01) ?The most recent of five relevant opinions of the Maryland Bar Association on lawsuit funding. Maryland Opinion 00-45 (12/12/00) The second of five relevant opinions on lawsuit funding by the Maryland Bar Association. Maryland Opinion 94-45 (8/15/94) The third of five relevant opinions on lawsuit funding by the Maryland Bar Association. Maryland Opinion 92-25 (10/30/91)The fourth of five relevant opinions on lawsuit funding by the Maryland Bar Association. Maryland Opinion 89-15 (10/25/88) The fifth of five relevant opinions on lawsuit funding by the Maryland Bar Association.
Ethics opinion not available online.