New York Ethics Opinion

State of New York

ETHICS OPINION 754-2/25/02

1. It is ethical for an attorney to borrow funds from a third party lender to cover litigation expenses, or to fund his law practice.

2. The interest charged by the lender to a lawyer on the funds borrowed by the lawyer to fund litigation expenses may be passed on to the client as a legitimate litigation expense if certain conditions are met:

A. the client must remain ultimately liable for expenses paid under DR 5-103(b)(1),

B. the lawyer can not have any interest in the lender,

C. client confidentiality cannot be compromised,

D. the terms of the borrowing are disclosed with adequate advance notice to the client,

E. the time after which interest is charged to the client, and the loan interest rate, are both reasonable,

F. the client has consented to the loan in advance of the closing thereof,

G. the client is permitted to avoid paying the interest charges by paying the funded disbursements before the loan is taken, and

H. the disbursements themselves must be fair and appropriate to the case.

See also , Ass´n. of the Bar of the City of New York, Formal Op. 1997-1.

Please reference your local state ethics rules.