Can a lawyer refer a personal injury client to a company that advances money repaid out of the settlement?
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This page answers the general question as of 2003. Ezel answers yours: whether it's allowed on your facts, under the current rules of professional conduct in your state, with citations.
Plain-English summary
The Committee considered whether an attorney may refer a personal injury client to a company that advances money during the case, with repayment from the settlement. It answered yes, on stated assumptions: the lawyer has no financial interest in or business or personal relationship with the funding company, will not represent either party in the advance, receives no compensation from it, and the advance is itself legal and secured by an assignment of part of the proceeds.
SCR 158(5) bars a lawyer from providing financial assistance to a client in connection with litigation (apart from advancing court costs and expenses), so the lawyer cannot make the advance directly. But the Committee found nothing in the rules barring a referral to an independent third party that makes the advance, aligning Nevada with opinions from California, Arizona, Maryland, Virginia, and Philadelphia that permit such referrals when the lawyer has no interest in the lender and does not guarantee repayment.
The Committee flagged other rules that come into play. Under SCR 156 (confidentiality), the funder will likely want claim information (injuries, liability theories, coverage, medical records), which the lawyer may disclose only with the client's consent after consultation, ideally in writing and after advising the client about possible waiver of privilege. Under SCR 157 (conflicts), so long as the lawyer has no financial or professional relationship with the funder, there is no conflict; the lawyer has merely referred the client to an independent service. Under SCR 151 (competence) and In re Discipline of Laub, the referring lawyer has a duty to reasonably investigate the company to which the client is referred. Finally, the advance is permissible under Nevada law because, while a personal injury claim itself may not be assigned, a plaintiff may assign a portion of the proceeds (Achrem v. Expressway Plaza), and SCR 165 safekeeping duties apply if the lawyer is given notice of a lien.
In practice
The opinion holds that, under the Nevada rules as they stood at the time, a lawyer may refer a personal injury client to an independent litigation-funding company if the lawyer has no financial interest in or relationship with the company, does not guarantee the advance, gets the client's consent before sharing claim information, and reasonably investigates the funder. The lawyer may not make the advance directly, because SCR 158(5) bars financial assistance to a client beyond court costs and litigation expenses.
Common questions
Q: Can a lawyer send a personal injury client to a company that fronts cash against the settlement?
A: Yes. The opinion concluded the referral is proper if the lawyer has no financial interest in or relationship with the company, does not guarantee repayment, and otherwise observes the confidentiality and competence rules.
Q: Can the lawyer make the advance themselves?
A: No. The opinion explained SCR 158(5) bars a lawyer from providing financial assistance to a client in connection with litigation, apart from advancing court costs and litigation expenses.
Q: What does the lawyer have to do before giving the funder information about the case?
A: Per the opinion, the lawyer must obtain the client's consent under SCR 156 before disclosing claim information, preferably in writing and after advising the client about the possible waiver of privilege.
Q: Does the lawyer have to vet the funding company?
A: Yes. The opinion stated that under the duty of competence (SCR 151), and following In re Discipline of Laub, the referring lawyer has a duty to reasonably investigate the entity to which the client is referred.
Background and rules framework
The opinion interprets former SCR 158(5) (financial assistance to a client, now Rule 1.8(e)) and reads the referral against SCR 156 (confidentiality, now Rule 1.6), SCR 157 (conflicts, now Rule 1.7), SCR 151 (competence, now Rule 1.1), and SCR 165 (safekeeping of property, now Rule 1.15), with Nevada law permitting assignment of a portion of tort proceeds.
Citations and references
Rules of Professional Conduct:
- Model Rule 1.8(e) / former Nev. SCR 158(5) (financial assistance to a client)
- Model Rule 1.6 / former Nev. SCR 156 (confidentiality of information)
- Model Rule 1.7 / former Nev. SCR 157 (conflicts of interest)
- Model Rule 1.1 / former Nev. SCR 151 (competence; duty to investigate referrals)
Cases:
- Achrem v. Expressway Plaza Limited Partnership, 112 Nev. 737, 917 P.2d 447 (1996) (a plaintiff may assign a portion of tort proceeds)
Other opinions cited:
- Cal. State Bar Formal Op. 2002-159; Ariz. State Bar Op. 91-22; Phila. Bar Ass'n Guidance Op. 91-9 (permitting referrals to independent lenders)
- Ohio S. Ct. Ethics Op. 2002-2 (caution where the lawyer benefits from the lender relationship)
See also
- NV Ethics Op. 24: a lawyer's referral fee from an investment advisor
- NV Ethics Op. 4: percentage-of-hourly-rate fee arrangement
Source
- Landing page: https://nvbar.org/for-lawyers/ethics-discipline/ethics-opinions/
- Original PDF: https://nvbar.org/wp-content/uploads/opinion_29.pdf
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