Can an Ohio law firm settle its suit against a former client for less than the litigation expenses the client owes?

Plain-English summary

The Board addressed whether a law firm could settle a collection suit against a former client for litigation expenses for less than the amount owed. DR 5-103(B) permitted a lawyer to advance or guarantee the expenses of litigation provided the client remained ultimately liable for them, which the Board read to imply corollary agreements: the firm to advance the expenses and the client to remain liable for reimbursement.

The Board reasoned that the concern behind requiring the client to remain liable is to prevent advancing expenses from becoming an improper financial inducement during the representation. Where the representation has concluded and the parties had agreed at the outset that the client would remain liable, the Board concluded that compromising the amount actually collected, settling for less than is owed, does not violate DR 5-103(B), because the client remained liable as the rule required and the settlement simply resolved the collection dispute.

Currency note

The Ohio Board reports that this opinion was withdrawn by the Board on August 11, 2000, in light of amended DR 5-103(B) effective June 14, 1999. Because it has been withdrawn, it is indexed here as research only and is not current guidance.

This opinion issued in 1994, before Ohio's adoption of the Ohio Rules of Professional Conduct, which superseded the former Code of Professional Responsibility effective February 1, 2007. Treat this page as historical context, not current guidance. Verify against the current Ohio Rules of Professional Conduct before relying on any specific rule mentioned here.

Common questions

Q: Could a firm settle its expense suit against a former client for less than owed?

A: Under the opinion, yes, without violating DR 5-103(B), provided the representation was concluded and there was an agreement at the outset that the client would remain liable for reimbursing the advanced litigation expenses.

Q: Why did the timing of the representation matter?

A: The Board emphasized that the representation had to be concluded. DR 5-103(B)'s requirement that the client remain ultimately liable guards against advancing expenses operating as an improper inducement during the representation; once the matter is over, compromising the collected amount does not offend the rule.

Q: Did the client still have to be liable for the expenses?

A: Yes. The arrangement depended on an upfront agreement that the client would remain liable for the litigation expenses; the settlement compromised the amount actually collected, not the client's underlying liability.

Background and rules framework

The opinion interprets former Ohio Code of Professional Responsibility DR 5-103(B), which permitted a lawyer to advance or guarantee the expenses of litigation provided the client remained ultimately liable. The Board read the rule to imply an agreement to advance and a corollary agreement that the client would reimburse.

Citations and references

Rules of Professional Conduct:

• Former Ohio Code of Professional Responsibility DR 5-103(B)

Other opinions cited:

• Ohio Bd. of Comm'rs on Grievances and Discipline, Op. 87-001 (1987): advancing litigation expenses and reimbursement

See also

• Ohio BPC Op. 1994-008: Splitting a Contingency Fee With a Non-Lawyer Investigator
• Ohio BPC Op. 1993-003: Confessing Judgment Under a Cognovit-Note Warrant of Attorney

Source

• Landing page: https://ohioadvop.org/advisory-opinion-index/
• Original PDF: https://www.ohioadvop.org/wp-content/uploads/2017/04/Op-94-005.pdf

Original opinion text

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

The Supreme Court of Ohio
BOARD OF COMMISSIONERS ON GRIEVANCES AND DISCIPLINE
41 SOUTH HIGH STREET-SUITE 3370, COLUMBUS, OH 43215-6105
(614) 644-5800 FAX: (614) 644-5804

OFFICE OF SECRETARY

OPINION 94-5
Issued April 15, 1994

[Withdrawn by Board on Aug. 11, 2000 due to amended DR 5-103(B), eff. Jun. 14, 1999]

[Not current-subsequent rule amendments to DR 5-103(B), eff. Jun. 14, 1999.]

SYLLABUS: A law firm may settle a law suit against a former client for expenses of litigation for
an amount less than the expenses actually owed the law firm without violating Disciplinary Rule 5-
103 (B), provided the representation of the client is concluded and there existed at the outset of
representation an agreement that the client would remain liable for reimbursing the expenses of
litigation advanced by the law firm.

OPINION: The question presented is whether it is proper for a law firm to settle a law suit against
a former client for expenses of litigation for an amount less than the expenses actually owed the
law firm.

Under Disciplinary Rule 5-103 (B) of the Ohio Code of Professional Responsibility, a lawyer may
advance or guarantee the expenses of litigation provided the client remains liable for such
expenses.

DR 5-103 (B) While representing a client in connection with contemplated or
pending litigation, a lawyer shall not advance or guarantee financial assistance to his
client, except that a lawyer may advance or guarantee the expenses of litigation,
including court costs, expenses of investigation, expenses of medical examination,
and costs of obtaining and presenting evidence, provided the client remains
ultimately liable for such expenses.

Implicit within the rule are corollary agreements. A law firm agrees to advance or guarantee the
expenses of litigation. A client agrees to remain liable for reimbursing the expenses of litigation.
Yet, whether a client upholds the agreement may be unpredictable.

When a client fails to reimburse the expenses of litigation, a law firm is faced with the dilemma of
how to seek reimbursement. In Opinion 87-001 (1987), addressing the issue of advancing expenses
of litigation and reimbursement following an unsuccessful outcome to a client's suit, this Board
advised

that "[t]o what degree the lawyer attempts to seek reimbursement from his or her clients is a legal
or business decision for the individual lawyer to make." Ohio SupCt, Bd of Comm’rs on
Grievances and Discipline, Op. 87-001 (1987). Some firms may attempt collection through the
firm's own efforts. Other firms may use collection agencies See e.g., Bar Ass'n of Nassau County,
Op. 93-5 (1993). Other firms may file a civil suit against a former client.

As to the issue presented, a law firm's decision to settle a law suit against a former client for
expenses of litigation when the settlement is for an amount less than the expenses actually owed the
law firm is a legal or business decision for a law firm to make. However, such decision must be in
keeping with Disciplinary Rule 5-103 (B). The rule's requirement that a client remain ultimately
liable for expenses is a protection for the client. This protection is necessary at the outset of
litigation, when a lawyer's professional judgment on behalf of a client may be affected by a
proprietary interest in the litigation. In contrast, after the conclusion of representation, a lawyer's
independent judgment has already been exercised on behalf of the client. A decision made after the
conclusion of representation and litigation as to reimbursement of expenses does not result in a
propriety interest affecting the lawyer's judgment on behalf of a client.

In conclusion, the Board advises that a law firm may settle a law suit against a former client for
expenses of litigation for an amount less than the expenses actually owed the law firm without
violating Disciplinary Rule 5-103 (B), provided the representation of the client is concluded and
there existed at the outset of representation an agreement that the client would remain liable for
reimbursing the expenses of litigation advanced by the law firm.

Advisory Opinions of the Board of Commissioners on Grievances and Discipline are
informal, nonbinding opinions in response to prospective or hypothetical questions regarding
the application of the Supreme Court Rules for the Government of the Bar of Ohio, the
Supreme Court Rules for the Government of the Judiciary, the Code of Professional
Responsibility, the Code of Judicial Conduct, and the Attorney's Oath of Office.