Can a lawyer refer a personal injury client to a non-recourse litigation funding company and share case information with it?

Plain-English summary

The committee received numerous inquiries about non-recourse advance funding: companies offering personal-injury clients money for personal expenses (unrelated to litigation costs and fees) in exchange for an assignment of part of the case proceeds. The attorneys asked whether they could give clients information about such companies, provide case information to the companies, and issue letters of protection. The opinion treats whether any particular funding arrangement complies with applicable statutes as a legal question outside an ethics opinion, and stresses that if a transaction is illegal the attorney must not participate and must advise the client of its illegal nature (Rule 4-1.2(d)); nothing in the opinion endorses advance funding companies.

Reviewing its prior opinions (a lawyer cannot personally or indirectly loan litigation clients money, and should not become part of the loan process or represent that a claim is meritorious) and the Florida Supreme Court's rejection of a proposed rule change in The Florida Bar re Amendments to Rule 4-1.8(e), the committee surveys other states (Arizona, New York, Philadelphia, South Carolina, Ohio, Virginia) that generally permit a lawyer to give a client information about funding companies and to honor an assignment, with the client's informed consent and without the lawyer taking an interest or compensation. The committee concludes there are only limited circumstances where providing such information serves the client's best interest, and then only after the lawyer discusses whether the transaction's costs outweigh the benefits and the other problems that can arise. After that discussion the lawyer may give the client the names of funding companies, but may not recommend the client's matter to a funder or initiate contact, may not co-sign or guarantee the transaction, may not let the funder direct the litigation or influence the lawyer's independent judgment, and may not have any ownership interest in or receive compensation from the funder for referrals.

On information sharing, the opinion holds the lawyer may provide factual case information to a funder at the client's request only after advising the client about the effects of disclosure (including possible waiver of attorney-client and work-product privileges) and obtaining informed consent under Rule 4-1.6; the lawyer need not provide work product such as personal notes, may provide documents like medical records and accident reports if the client requests, need not bear copying costs, and may not give the funder an opinion on the value or likely success of the claim (Rule 4-1.7). Finally, the lawyer may honor the client's valid written assignment of a portion of the recovery, but may not issue a letter of protection to the funder signed by the lawyer.

In practice

Under the Florida rules as they stood at the time of this 2002 opinion, the opinion permits only a narrow, client-driven role for the lawyer around litigation funding. Per the opinion, the lawyer may name funding companies after a candid cost-benefit discussion, may pass factual case information to a funder with the client's informed consent, and may honor a valid written assignment of part of the recovery. The opinion draws hard lines elsewhere: no recommending the case or initiating contact, no co-signing or guaranteeing, no ownership interest or referral compensation, no letting the funder steer the case, no opinion to the funder on the claim's worth, and no lawyer-signed letter of protection.

Common questions

Q: Can I tell my injured client about companies that advance money against the case?

A: Per the opinion, only in the limited circumstances where it serves the client's best interest, and only after discussing whether the transaction's costs outweigh the benefits; the lawyer may then provide names but may not recommend the matter to a funder or initiate contact.

Q: Can I send the funding company information about the case?

A: The opinion concludes the lawyer may provide factual information at the client's request only after advising the client about the effects of disclosure (including possible privilege waiver) and obtaining informed consent under Rule 4-1.6, and may not give the funder an opinion on the claim's value or likelihood of success.

Q: Can I honor an assignment or sign a letter of protection for the funder?

A: The opinion holds the lawyer may honor the client's valid written assignment of part of the recovery, but may not issue a letter of protection to the funding company signed by the lawyer.

Q: Can I take a referral fee or an interest in the funding company?

A: No. Per the opinion, the lawyer may not have any ownership interest in the funder or receive any compensation or other value from it in exchange for referring clients, and may not co-sign or guarantee the transaction.

Background and rules framework

The opinion interprets Rule 4-1.6 (confidentiality, Model Rule 1.6), Rule 4-1.7 (conflict of interest, Model Rule 1.7), and Rule 4-1.8(e) (financial assistance to a client in connection with litigation, Model Rule 1.8(e)) of the Rules Regulating The Florida Bar, against the backdrop of the Florida Supreme Court's decision on Rule 4-1.8(e).

Citations and references

Rules of Professional Conduct:

• Model Rule 1.6 / Fla. Rule 4-1.6 (confidentiality of information)
• Model Rule 1.7 / Fla. Rule 4-1.7 (conflict of interest)
• Model Rule 1.8 / Fla. Rule 4-1.8(e) (financial assistance to a client)

Cases:

• The Florida Bar re Amendments to Rules Regulating The Florida Bar Rule 4-1.8(e), 635 So. 2d 968 (Fla. 1994), rejecting a proposed rule allowing lawyer involvement in client financing

Other opinions cited:

• Fla. Ethics Ops. 65-39, 68-15, 70-8, 75-24, 92-6
• Arizona Op. 91-22; New York State Bar Op. 666; Philadelphia Op. 91-9; South Carolina Ops. 94-04, 92-06, 91-15; Ohio Op. 94-11; Virginia Op. 115

See also

• Florida Bar Op. 02-4: Third-Party Claims on Settlement Funds
• Florida Bar Op. 18-2: Interest on Advanced Contingent Costs
• Florida Bar Op. 16-1: Forgiving a Client's Advanced Costs

Source

• Landing page: https://www.floridabar.org/etopinions/etopinion-00-3/
• Original PDF: https://www-media.floridabar.org/uploads/2017/04/FL-Bar-Ethics-Op-00-3.pdf

Original opinion text

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

FLORIDA BAR ETHICS OPINION
OPINION 00-3
March 15, 2002
Advisory ethics opinions are not binding.
An attorney may provide a client with information about companies that offer non-
recourse advance funding and other financial assistance in exchange for an interest in the
proceeds of the client’s case if it is in the client’s interests. The attorney may provide factual
information about the case to the funding company with the informed consent of the client.
Although the attorney may honor the client’s valid written assignment of a portion of the
recovery to the funding company, the attorney may not issue a letter of protection to the funding
company.
Note: This opinion was approved by The Florida Bar Board of Governors on March 15,
2002.
RPC: 4-1.6, 4-1.7, 4-1.8(e)
OPINIONS: 65-39, 68-15, 70-8, 75-24, 92-6, Arizona Ethics Opinion 91-22, New York State
Bar Opinion 666, Philadelphia Bar Association Opinion 91-9, South Carolina
Ethics Opinion 94-04, South Carolina Ethics Opinion 92-06, South Carolina
Ethics Opinion 91-15, Ohio Ethics Opinion 94-11, Virginia Ethics Opinion 115
CASES: The Florida Bar re Amendments to Rules Regulating The Florida Bar Rule --
4-1.8(e), 635 So.2d 968 (Fla. 1994)
The Committee has recently received numerous inquiries regarding various proposals to
assist personal injury clients in obtaining non-recourse advance funding for the clients’ personal
expenses unrelated to the costs and attorneys’ fees in the litigation pending recovery in their
cases. The inquiring attorneys have received communications from funding companies offering
to provide funds to personal injury clients in exchange for an assignment of part of the proceeds
of the clients’ cases. The attorneys specifically would like to know if they are permitted to
provide the clients with information about the funding companies, provide information about the
clients’ cases to the funding companies, and provide the funding companies with letters of
protection.
Whether a particular arrangement between the client and a funding company complies
with applicable statutes is a legal question, outside the scope of an ethics opinion. The
Committee therefore makes no comment on the legality of these transactions. See, e.g., Kraft v.
Mason, 668 So.2d 679 (Fla. 1996). But see, Rancman v. Interim Settlement Funding Corp., 2001
WL 1339487 (Ohio 2001). If the transactions are illegal, an attorney must not participate in the
transaction in any way. If a client requests information about or assistance with obtaining the
funding, the attorney should advise the client about the illegal nature of the transaction and must
not participate in or assist the client with the transaction. Rule 4-1.2(d).
This opinion discusses appropriate conduct of attorneys regarding advance funding
companies assuming that the transactions offered by the companies are legal. Nothing in the

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opinion should be viewed as endorsing advance funding companies or the use of advance
funding companies in any way by The Florida Bar.
This Committee has previously indicated that attorneys cannot personally loan money to
clients in connection with pending litigation. Florida Ethics Opinion 65-39. The Committee has
also advised that an attorney may not indirectly loan funds to clients in connection with pending
litigation through a nonprofit corporation funded by attorney contributions. Florida Ethics
Opinion 68-15.
Regarding loans from third parties to personal injury clients, this Committee has
previously stated that “a lawyer may suggest to a client where the client may try to obtain
financial help for individual needs. . ., but the lawyer should not become part of the loan
process.” Florida Ethics Opinion 75-24. The Committee stated that “[w]here the lawyer initiates
the loan by recommending his client to the loan company, it seems to us that he is inherently
representing to the loan company that the client’s claim is meritorious.” Id. The Committee
cited to this opinion in Florida Ethics Opinion 92-6, which states that it is impermissible for an
attorney to become involved in a financing agreement which required the attorney to become a
trustee to benefit the company providing the loan to the attorney’s client. The Committee
additionally noted that “an attorney who routinely refers clients to a loan company and actively
participates in the loan transactions would be providing financial assistance to those clients,”
albeit indirectly. Florida Ethics Opinion 92-6. When presented with the proposal at issue in
opinion 92-6 in the form of a petition for a rule change, the Supreme Court of Florida stated that:
The Bar argues that the proposed amendment will result in inevitable conflicts of
interest among lawyer, client, and lending institution, as well as discouraging
settlements. We agree. . . . . We find that the rule amendment LRM proposes
would violate both subsections of rule 4-1.8, thus creating possible conflicts of
interest. This Court has disciplined members of the Bar for advancing funds or
assisting others to do so. The Fla. Bar v. Hastings, 523 So. 2d 571 (Fla. 1988);
The Fla. Bar v. Wooten, 452 So 2d 547 (Fla. 1984); The Fla. Bar v. Dawson, 318
So. 2d 385 (Fla.), cert. denied, 423 U.S. 995, 96 S. Ct. 422, 46 L. Ed. 369 (1975).
Lawyers should not be encouraged or allowed to do indirectly what they cannot
do directly. The majority of states likewise prohibit this conduct. We therefore
reject LRM’s proposed rule amendment.
The Florida Bar re Amendments to Rules Regulating The Florida Bar -- Rule 4-1.8(e),
635 So.2d 968 (Fla. 1994). The Committee has not addressed whether an attorney could honor a
letter of protection to a funding company, and has not elaborated on our advice in Opinion 75-24
as to the extent to which an attorney may “try to obtain financial help” for clients without
becoming involved in the process of obtaining financial assistance. The Committee now
undertakes to answer these questions.
The majority of states who have examined these issues have determined that it is
permissible for an attorney to provide a client with information about funding companies. See,
e.g., Arizona Ethics Opinion 91-22 (attorney may refer personal injury client to funding
company, but may not reveal information to the company without the client’s consent, may not
co-sign or guarantee the transaction, and may not tell the company that the lien is valid and

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enforceable if in the attorney’s opinion it is not); New York State Bar Association Opinion 666
(attorney may refer client to funding company which then takes a lien on the recovery, may
provide information to the company only with informed consent of the client, but may not have
an ownership interest in the company or receive any compensation from the company for the
referral); Philadelphia Bar Association Opinion 91-9 (attorney may refer personal injury client to
funding company which takes a lien on the recovery, but may not have an ownership interest in
the company or receive any compensation from the company, must maintain independent
professional judgment, and must have informed client consent to disclose information to the
company); South Carolina Ethics Opinion 94-04 (if the transaction is not illegal, an attorney may
tell a personal injury client about funding companies at the client’s request or if it is in the
client’s interest, but should advise the client of the benefits and detriments of the transaction,
should inform the client and company in writing that the client controls the litigation; the
attorney may also pay the settlement proceeds to the company under a valid assignment); South
Carolina Ethics Opinion 92-06 (an attorney may refer personal injury clients to a funding
company and may honor the assignment of a portion of the claim to the company); South
Carolina Ethics Opinion 91-15 (attorney may refer personal injury clients to a funding company
in which the attorney has no interest, and may honor the assignment to the company as long as
the client consents); Ohio Ethics Opinion 94-11 (attorney may not refer a client to a funding
company which requires the attorney to give a percentage of the legal fee to the company, but
may refer a client to a funding company if such an arrangement is not required, it is in the
client’s best interest, and the arrangement does not cause the attorney to violate the rules of
professional conduct; the attorney should advise the client on alternative methods of obtaining
assistance such as low interest credit cards, bank loans or personal loans from the client’s family
or friends); Virginia Ethics Opinion 115 (an attorney may request that a funding company
provide a personal injury client with funding when other lending sources have declined to assist
the client and may honor the company’s lien on the recovery, but the attorney may not guarantee
or co-sign the loan). The majority of states have concluded that providing information to a
funding company at the client’s request is permissible, with the informed consent of the client.
They also conclude that an attorney may honor a client’s assignment of a portion of the recovery
to the funding company.
The Florida Bar discourages the use of non-recourse advance funding companies. The
terms of the funding agreements offered to clients may not serve the client’s best interests in
many instances. The Committee continues to have concerns, as discussed in Opinion 92-6, of
the problems that can arise when a client obtains financial assistance from a third party, such as
the client’s lack of incentive to cooperate. This Committee can conceive of only limited
circumstances under which it would be in a client’s best interests for an attorney to provide
clients with information about funding companies that offer non-recourse advance funding or
other financial assistance to clients in exchange for an assignment of an interest in the case.
Under these limited circumstances an attorney may advise a client that such companies exist only
if the attorney also discusses with the client whether the costs of the transaction outweigh the
benefits of receiving the funds immediately and the other potential problems that can arise. Only
after this discussion may a lawyer provide the names of advance funding companies to clients.
The attorney shall not recommend the client’s matter to the funding company nor initiate
contact with the funding company on a client’s behalf. Florida Ethics Opinion 75-24. The
attorney shall not co-sign or otherwise guarantee the financial transaction. Florida Ethics

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Opinion 70-8. The attorney also shall not allow the funding company to direct the litigation,
interfere with the attorney-client relationship, or otherwise influence the attorney’s independent
professional judgment. The attorney shall not have any ownership interest in the funding
company or receive any compensation or other value from the funding company in exchange for
referring clients.
The attorney may provide information to a funding company about the case at the client’s
request. Before providing the company with such information, the attorney must advise the
client about the effects of the disclosure, including whether any privileges such as attorney-client
and work product may be waived if the information is disclosed to the funding company, and
obtain the client’s informed consent. Rule 4-1.6. If the client, after consultation, requests that
the attorney provide the funding company with confidential information, the attorney is not
obligated to provide work product material, such as the attorney’s personal notes. However, the
attorney may provide copies of documents such as medical records and accident reports if the
client requests. The attorney is not obligated to bear the costs of copying the documents.
Additionally, the attorney shall not provide the funding company with an opinion regarding the
worth of the client’s claim or the likelihood of success. Rule 4-1.7, Florida Ethics Opinion
75-24.
Finally, the attorney may, at the client’s request, honor a client’s valid, written
assignment of a portion of the recovery to the funding company. The attorney may not,
however, provide a letter of protection to the funding company signed by the attorney.
In conclusion, an attorney may, under the circumstances set forth above, provide a client
with information about companies that offer non-recourse advance funding and other financial
assistance in exchange for an interest in the proceeds of the client’s case. The attorney may
provide factual information about the case to the funding company with the informed consent of
the client. Although the attorney may honor the client’s valid written assignment of a portion of
the recovery to the funding company, the attorney may not issue a letter of protection to the
funding company.