Can a lawyer fund an indigent client's litigation expenses on a contingent-fee basis when the client likely cannot repay?

Plain-English summary

The Board of Governors was asked whether an attorney could agree with an indigent client who he believed had a meritorious cause of action to advance the funds needed to institute and prosecute a civil action on a contingent-fee basis, with the advancements first deducted from the gross recovery (by judgment or compromise) and the net then divided equally between client and attorney.

The Board answered in the negative under Rule 44, which provides that a lawyer may not properly agree to pay or bear the expense of litigation but may in good faith advance expenses as a matter of convenience, subject to reimbursement. Relying on its Advisory Opinion No. 57, the Oklahoma Supreme Court's decision in Willhoit v. Prairie Oil & Gas Company, and ABA Opinion 20, the Board read Rule 44 to contemplate definite reimbursement by the client. Lacking that element, it is not proper for a lawyer to advance or pay litigation expenses. The Board reasoned that a client's mere agreement to reimburse does not cure the situation where it is apparent the client cannot and in all reasonable probability will not be able to repay; to hold otherwise would be sophistry. Although some jurisdictions had relaxed the rules against champerty and maintenance to permit contingent fees, none had relaxed them so far as to permit a lawyer to finance litigation, and an agreement to repay out of a successful recovery did not change matters, given the long-recognized impropriety of a lawyer speculating financially in the outcome of litigation. The Board added that the client's inability to meet costs is an unfortunate circumstance for which the lawyer has no legal or moral responsibility, and that allowing indigence to modify the rule would open the door to the abuses the rules against champerty and maintenance exist to close.

Currency note

This opinion was issued in 1936, decades before Oklahoma replaced its original Rules of Professional Conduct (patterned on the ABA Canons of Professional Ethics) with the Oklahoma Rules of Professional Conduct (adopted 1988) and the later Ethics 2000 revisions. The treatment of advancing litigation expenses has changed substantially in modern rules, which permit advancing court costs and expenses of litigation and, for indigent clients, do not require the client to be liable for repayment. Subsequent rule amendments and later opinions 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: Could a lawyer pay an indigent client's litigation expenses if the client agreed to repay from any recovery?

A: No. The opinion held that Rule 44 contemplates definite reimbursement, and a repayment promise the client probably cannot keep does not cure the impropriety of financing the litigation.

Q: Did the client's poverty change the analysis?

A: No. The Board said the lawyer has no legal or moral responsibility for the client's inability to meet costs, and that letting indigence modify the rule would open the door to champerty and maintenance abuses.

Q: Was the contingent-fee structure the problem?

A: No. The opinion noted that even where champerty rules were relaxed to allow contingent fees, none allowed a lawyer to finance litigation; the financing itself was the conduct condemned.

Background and rules framework

The opinion applied Rule 44 of the canon-era Oklahoma Rules of Professional Conduct, governing a lawyer's advancement of litigation expenses, against the backdrop of the common-law rules against champerty and maintenance. It relied on Oklahoma Advisory Opinion No. 57, Willhoit v. Prairie Oil & Gas Company, and ABA Opinion 20. It predates the Model Rules and made no Model Rule citation.

Citations and references

Rules of Professional Conduct:

• Rule 44 (1929 Oklahoma Rules of Professional Conduct): a lawyer may not properly agree to pay or bear the expense of litigation; he may in good faith advance expenses as a matter of convenience, but subject to reimbursement.

Cases:

• Willhoit v. Prairie Oil & Gas Company, 166 Okl. 108, 26 P.2d 406 (Okla. 1933), on advancing litigation expenses.

Other opinions cited:

• Oklahoma Advisory Opinion No. 57 (Vol. 1, Adv. Op. p. 111): Rule 44 contemplates definite reimbursement by the client.
• ABA Committee on Professional Ethics Op. 20.

See also

• Okla. Bar Ethics Op. 115: Fees for parole and pardon representation

Source

• Landing page: https://www.okbar.org/ethics/ethics-opinion-no-122/

Original opinion text

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

Adopted September 24, 1936

The Board of Governors is in receipt of the following inquiry:

"Would it be ethical for an attorney to agree with an indigent client, who he believes has a meritorious cause of action, to advance the funds necessary to pay the expenses of the institution and prosecution of a civil action on a contingent fee basis, said advancements to be first deducted from the gross amount recovered, either by judgment or compromise, the net amount then to be divided equally between the client and said attorney?"

In response:

Rule 44 of the Rules of Professional Conduct provides:

"A lawyer may not properly agree with a client that the lawyer shall pay or bear the expense of litigation; he may in good faith advance expenses as a matter of convenience, but subject to reimbursement."

This rule, as stated in Advisory Opinion No. 57, (Vol. 1, Adv.Op. p. 111), contemplates definite reimbursement by the client. See also Willhoit v. Prairie Oil & Gas Company, 166 Okl. 108, 26 P.2d 406, and Opinion No. 20 of the A. B. A. Committee on Professional Ethics. Lacking the element of definite reimbursement, it is not proper for a member of the bar to "advance" money for, nor to pay, the expenses of litigation.

A mere agreement on the part of a client to reimburse the member of the bar does not cure the situation where it is quite apparent that he cannot reimburse the member of the bar and that, in all reasonable probability he will not be able to. To so hold would be pure sophistry.

While in some jurisdictions, the strict rules against champerty and maintenance have been relaxed so as to permit of contingent fees, yet in no jurisdictions have they been relaxed so far as to permit a member of the bar to finance litigation. An agreement to reimburse a member of the bar out of the proceeds of the litigation, if the same is successful, does not alter the situation. Long has been recognized the impropriety of a member of the bar speculating financially in the outcome of litigation.

The fact that the client is unable to meet the costs and expenses of the proposed suit is an unfortunate circumstance for which a member of the bar has neither legal nor moral responsibility. To state that the moral quality of an act is affected by the economic status of either party is the product of a type of loose thinking which is fallacious in the extreme. So it is, that the act of a member of the bar in furnishing funds for the prosecution of a lawsuit is the act condemned and that condemnation cannot reasonably be affected by the ability or the lack thereof of the proposed client to furnish them for himself. To permit the circumstance of indigence to work a modification of the rule would, without doubt, open the door to the abuses which the rules against champerty and maintenance have sought to close.

It is concluded that the inquiry should be, and it is, answered in the negative.