Can a lawyer advance litigation costs and agree that the client only repays them if the case is won?

Plain-English summary

The committee was asked whether a lawyer may advance funds to defray certain costs of litigation on the understanding that the client's reimbursement would be contingent on the outcome of the suit. It answered the question in the negative.

The committee anchored its analysis in EC 5-8 and DR 5-103(B). EC 5-8 recognizes that a lawyer's advancing or guaranteeing of litigation costs may be the only way a client can enforce a cause of action, but states that ultimate liability for those costs must rest with the client. DR 5-103(B) permits a lawyer to advance or guarantee the expenses of litigation, including court costs, investigation, medical examinations, and the costs of obtaining and presenting evidence, but only provided the client remains ultimately liable for them.

The committee explained that underlying these provisions is a general proscription against a lawyer acquiring a financial interest in the outcome of a client's cause of action, subject only to the limited room for ethically appropriate contingent fee arrangements (EC 2-20, EC 5-7, DR 2-106, DR 5-101(A)). Quoting EC 5-7, the committee noted that a reasonable contingent fee is permissible in civil cases because it may be the only means by which a layman can obtain the lawyer of his choice, but that a lawyer's acquiring a proprietary interest in the cause is otherwise undesirable because of the possible adverse effect on the lawyer's free judgment.

The committee drew the long-recognized distinction between a contingent fee, which is permitted, and contingent litigation expenses, which are not. It reasoned that if lawyers were permitted to finance their clients' causes, it would tend to generate unmeritorious suits and obscure the elemental difference between the roles of lawyer and client. For those reasons, the arrangement proposed was improper.

Currency note

This opinion was issued in 1977, before New York replaced the Code of Professional Responsibility with the Rules of Professional Conduct in 2009 (financial assistance to clients and advancement of litigation expenses are now governed by Rule 1.8(e), and fees by Rule 1.5). 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 Treat this page as historical context, not current guidance.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, deadline, or requirement mentioned here.

Common questions

Q: Can a lawyer pay litigation costs up front for a client?

A: Under this opinion, yes. The committee read EC 5-8 and DR 5-103(B) to permit a lawyer to advance or guarantee court costs, investigation, medical exams, and the costs of obtaining and presenting evidence.

Q: Can the lawyer agree the client only repays those costs if the case is won?

A: No. The committee held the client must remain ultimately liable for the expenses regardless of outcome; making repayment contingent on winning is improper under DR 5-103(B).

Q: Why does the opinion treat a contingent fee differently from contingent costs?

A: The committee explained that a contingent fee is a permitted way for a client to afford counsel, but financing a client's litigation expenses on a win-or-no-pay basis would give the lawyer a proprietary stake that tends to generate unmeritorious suits and blur the lawyer-client roles.

Background and rules framework

The opinion applies the Code's contingent-fee and financial-assistance provisions: EC 5-7 and EC 5-8 (the lawyer's financial interest in the cause), DR 2-106 (fees), DR 5-101(A) (the lawyer's own interests), and DR 5-103(B) (advancing litigation expenses with the client ultimately liable). The current Model Rule analogue is Rule 1.8(e) (advancing court costs and litigation expenses), alongside Rule 1.5 (fees). The opinion's holding reflects the New York rule as it stood in 1977.

Citations and references

Rules of Professional Conduct:

• MR 1.8 (current client conflicts; financial assistance to a client)
• MR 1.5 (fees)
• NY EC 2-20, EC 5-7, EC 5-8; DR 2-106, DR 5-101(A), DR 5-103(B)

Statutes:

• Judiciary Law section 474 (compensation of attorneys)

Other opinions cited:

• N.Y. State 390 (1975); N.Y. State 288 (1975); N.Y. State 37a (1968)
• N.Y. City 658 (1944); N.Y. City 282 (1933); N.Y. City 175 (1931): contingent litigation expenses improper

See also

• NY State Bar Op. 744: Passing litigation costs to clients
• NY State Bar Op. 653: Client liability for litigation expenses on withdrawal
• NY State Bar Op. 1044: Advancing a client's transportation costs as a litigation expense
• NY State Bar Op. 1051: Taking a contingent fee from a litigation-funding advance

Source

• Landing page: https://nysba.org/opinion-464/