Can a California lawyer advance the costs of a lawsuit for a client who probably cannot repay them, when the lawyer is unlikely to sue the client to collect?

Currency note

This opinion was issued in 1976, before the State Bar of California's adoption of the November 1, 2018 revisions to the Rules of Professional Conduct. The opinion interprets former California Rule 5-104(A)(3) (advancing the costs of litigation) and ABA Code DR 5-103(B) and EC 5-8, the predecessors to current California Rule 1.8.7 and Model Rule 1.8(e). Subsequent rule amendments or later opinions may have changed the analysis. Treat this page as historical context, not current guidance. Verify against current rules before relying on any specific rule or requirement mentioned here.

Disclaimer: This is an advisory ethics opinion. Advisory opinions are not binding; they interpret the State Bar of California's rules of professional conduct and are persuasive authority. This summary is for research purposes only and is not legal advice. Verify current rules before acting on any specific guidance.

About this page: The plain-English summary and Q&A below were written by Ezel based on the official opinion. The opinion text is reproduced at the bottom; the official source (linked) controls.

View original opinion

Plain-English summary

The committee was asked about the propriety of advancing the costs of prosecuting a lawsuit where the attorney believed there was a substantial likelihood the client would not repay the costs absent a recovery, and where the attorney would be unlikely to sue the client to collect, given the low likelihood of recovery and a reluctance to sue a client. The committee concluded it is ethically proper to advance costs in that situation, provided the client remains ultimately responsible for the costs advanced and is aware of that responsibility.

It explained that former Rule 5-104 generally prohibits a lawyer from paying a client's personal or business expenses, but subparagraph (A)(3) expressly permits advancing the reasonable costs of prosecuting or defending a claim or otherwise protecting the client's interests. The committee read the concept of "advancing" costs to include the requirement that the client be ultimately responsible for repayment, citing ABA EC 5-8 and DR 5-103(B) and several L.A. County Bar opinions. Compliance therefore requires that the client be obligated to repay the advanced costs and be informed of that liability.

The committee added that nothing in the rule required the attorney to evaluate the client's prospective ability to pay if the suit was unsuccessful, or to decide in advance whether or under what circumstances he would be willing to sue the client to collect. It declined to follow contrary opinions from other states, such as Michigan State Bar Ethics Opinion No. 66, and noted in a footnote that the inquiry did not involve costs advanced in a class action, on which it expressed no opinion.

Common questions

Q: Can a California lawyer pay litigation costs up front for a client who probably cannot pay them back?

A: Yes, under this opinion, so long as the client remains ultimately responsible for the costs and is told of that obligation. The committee read former Rule 5-104(A)(3) to permit advancing reasonable litigation costs on that condition.

Q: Does the lawyer have to check whether the client could actually repay?

A: No. The committee said nothing in the rule required the attorney to evaluate the client's prospective ability to pay if the lawsuit was unsuccessful.

Q: Does the lawyer have to decide up front whether he would sue the client to collect?

A: No. The committee said the rule did not require any initial decision by the attorney about whether, or under what circumstances, he would be willing to sue the client for unpaid advanced costs.

Background and rules framework

The opinion interprets former California Rule 5-104, which generally barred a lawyer from paying a client's personal or business expenses but, in subparagraph (A)(3), permitted advancing the reasonable costs of litigation or of providing legal services. The committee read the permission together with the requirement of ultimate client responsibility drawn from ABA Code EC 5-8 and DR 5-103(B). The rule is the predecessor to current California Rule 1.8.7 and Model Rule 1.8(e) on financial assistance to a client in connection with litigation.

Citations and references

Rules of Professional Conduct:

• Former California Rule 5-104 and Rule 5-104(A)(3)
• ABA Code of Professional Responsibility, EC 5-8 and DR 5-103(B)
• Current analogs: Model Rule 1.8(e) / California Rule 1.8.7

Other opinions cited:

• L.A. County Bar Assn. Committee on Legal Ethics Opinions Nos. 76 (1934), 106 (1936), and 149 (1944)
• Michigan State Bar Ethics Opinion No. 66 (declined to follow)

See also

• CA Ethics Op. 1975-34: Splitting Probate Fees After Dissolution

Source

• Landing page: https://www.calbar.ca.gov/legal-professionals/ethics-compliance-practice-resources/ethics/ethics-opinions
• Original opinion: https://www.calbar.org/ethics/Opinions/1976-38.htm

Original opinion text

Reproduced from the official source for research purposes. The linked source is authoritative.

THE STATE BAR OF CALIFORNIA
STANDING COMMITTEE ON PROFESSIONAL RESPONSIBILITY AND CONDUCT
FORMAL OPINION NO. 1976-38

ISSUE:

May an attorney ethically advance costs of litigation on behalf of a client?

DIGEST:

It is ethically proper to advance litigation costs for a client who may be unable to repay them, provided that the client remains ultimately responsible for repayment.

AUTHORITIES INTERPRETED:

Rule 5-104(A)(3) of the Rules of Professional Conduct of the State Bar.

American Bar Association Code of Professional Responsibility, Disciplinary Rule 5-103(B).

DISCUSSION

The Committee has been requested to give its opinion of the ethical propriety of advancing on behalf of a client the costs of prosecuting a lawsuit where the attorney believes that there is a substantial likelihood that the client will not repay such costs absent a recovery in the action. The requesting attorney posits a situation in which, absent a recovery in the action, he would be unlikely to sue the client for such costs, "given the low likelihood of recovery and because of [the attorney's] reluctance to sue a client."1

The Committee is of the opinion that it is ethically proper to advance costs in such a situation, provided that the client remains ultimately responsible for the costs advanced and that the client is aware of this responsibility.

Rule 5-104 of the Rules of Professional Conduct generally prohibits payments by attorneys of the personal or business expenses of clients. However, in subparagraph (A)(3) of rule 5-104, it is specifically provided that the rule does not prohibit an attorney:

"From advancing the costs of prosecuting or defending a claim or action or otherwise protecting or promoting the client's interests. Such costs within the meaning of this subparagraph (3) shall be limited to all reasonable expenses of litigation or reasonable expenses in preparation for litigation or in providing any legal services to the client."

Included within the concept of "advancing" costs is the requirement that the client be ultimately responsible for the payment of such costs. (See, for example, opns. Nos. 76 (1934), 106 (1936), and 149 (1944) of the Committee on Legal Ethics of the L. A. Co. Bar Assn.; ABA Code of Prof. Responsibility, EC 5-8 and DR 5-103(B).)

Compliance with the existing rule 5-104 of the Rules of Professional Conduct, therefore, involves, as an essential element, that the client is obligated to repay the advanced costs and the client must be informed of his liability to reimburse his attorney.

Nothing in the rule, however, requires the attorney to attempt to evaluate his client's prospective ability to pay such costs in the event that the lawsuit involved is unsuccessful. Nor does the rule require any initial decision by the attorney as to whether, or under what circumstances, he would be willing to sue his client for such costs, should the client fail to pay them.

The Committee does not regard opinions to the contrary from committees in other states, such as Michigan State Bar Ethics opinion No. 66, as persuasive.

This opinion is issued by the Standing Committee on Professional Responsibility and Conduct of The State Bar of California. It is advisory only. It is not binding upon the courts, The State Bar of California, its Board of Governors, any persons or tribunals charged with regulatory responsibilities, or any member of the State Bar.

1 This inquiry does not involve costs advanced in a class action and, accordingly, the Committee expressed no opinion on that subject.