Under my written collection agreement, I front litigation expenses and get reimbursed from what one suit recovers to cover the costs of prior suits. Is that proper?

Plain-English summary

The inquiring attorney has a written agreement for collection services that allows the attorney to deduct expenses from the funds collected. The attorney explained that expenses were initially paid by the attorney, who was then reimbursed from the funds recovered in one suit to cover the cost of prior suits. The attorney asked whether this conduct was proper under the Rules.

The panel concluded the attorney's actions conform to Rule 1.8(e)(1), which provides that a lawyer shall not provide financial assistance to a client in connection with pending or contemplated litigation, except that a lawyer may advance court costs and expenses of litigation, the repayment of which may be contingent on the outcome of the matter.

The panel added that the actions are consistent with the Rules as long as the expense reimbursements are in accordance with the written contract and the client is fully aware that fees recovered from one suit may cover the costs from prior suits. It further advised that the attorney should maintain adequate records and, on the client's request, render accurate entries of all financial transactions in the ledger books or similar records kept in the regular course of practice, citing Rule 1.15(b).

In practice

Under this opinion, a lawyer operating under a written collection agreement may advance litigation costs and be reimbursed from what one suit recovers, including to cover the costs of prior suits, consistent with Rule 1.8(e)(1)'s allowance for advancing costs with repayment contingent on the outcome. The opinion conditions this on the reimbursements tracking the written contract, the client's full awareness that one suit's recovery may cover prior suits' costs, and the lawyer's maintenance of adequate financial records under Rule 1.15(b).

Common questions

Q: Can I advance litigation expenses and recover them from the client's recovery?

A: Per the opinion, yes; Rule 1.8(e)(1) permits a lawyer to advance court costs and litigation expenses with repayment contingent on the outcome.

Q: Can I use one suit's recovery to cover the costs of prior suits?

A: Per the opinion, yes, as long as the reimbursements follow the written contract and the client is fully aware that recoveries from one suit may cover costs from prior suits.

Q: What records do I need to keep?

A: Per the opinion, the attorney should maintain adequate records and, on the client's request, render accurate entries of all financial transactions in the ledger books or similar records, per Rule 1.15(b).

Background and rules framework

The opinion applies Rhode Island Rule 1.8(e)(1) (advancing court costs and litigation expenses with repayment contingent on the outcome) and Rule 1.15(b) (safekeeping property; recordkeeping), corresponding to the same-numbered Model Rules. The panel found the reimbursement arrangement within Rule 1.8(e)(1) and added the Rule 1.15(b) recordkeeping and client-awareness conditions.

Citations and references

Rules of Professional Conduct:

• MR 1.8(e) (financial assistance to a client; advancing costs)
• MR 1.15 (safekeeping property; recordkeeping)
• RI RPC 1.8(e)(1), 1.15(b)

Statutes:

• None cited.

Cases:

• None cited.

Other opinions cited:

• None cited.

See also

• RI EAP Op. 91-26: Rule 1.8(e) Bars Lending a Personal-Injury Client Money for a Mortgage
• RI EAP Op. 92-45: Advancing Client Funds for Future Costs Must Follow Rule 1.15
• RI EAP Op. 92-02: Contingent Fee for Overdue Support and Client Loans

Currency note

This opinion was issued in early 1993 (Opinion 92-92, issued March 15, 1993), after the Rhode Island Supreme Court adopted the Model Rules of Professional Conduct effective November 15, 1988, and it applies Rules 1.8 and 1.15 as originally adopted. The Rhode Island Supreme Court later revised the Rules of Professional Conduct in 2007 as part of the nationwide Ethics 2000 process, which amended Rule 1.8 (including the advancing-costs provision) and Rule 1.15. 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 mentioned here.

Source

• Landing page: https://www.courts.ri.gov/attorney-resources/Pages/Ethics-Advisory-Panel-default.aspx
• Original PDF: https://www.courts.ri.gov/Opinions/EAP%2092-92.pdf

Original opinion text

Best-effort transcription from a scanned PDF. Minor errors may remain; the linked PDF is authoritative.

ETHICS ADVISORY PANEL
Opinion 92-92, Request #318
Issued March 15, 1993

An attorney seeks Panel advice regarding the following facts. The attorney has a written agreement for collection services that allows the attorney to deduct expenses from the funds collected. The attorney informs the Panel that initially the expenses were paid by the attorney and then the attorney was reimbursed from the funds recovered from one suit to cover the cost of prior suits. The attorney inquired as to whether or not his/her conduct was proper pursuant to the Rules.

The Panel believes that the attorney's actions conform to Rule 1.8(e)(1). That Rule states:

(e) A lawyer shall not provide financial assistance to a client in connection with pending or contemplated litigation, except that:

(1) a lawyer may advance court costs and expenses of litigation, the repayment of which may be contingent on the outcome of the matter;

The attorney's actions are consistent with the Rules of Professional Conduct as long as the expense reimbursements are in accordance with the written contract and the client is fully aware that the fees recovered from one suit may cover the costs from prior suits. The attorney should maintain adequate records and upon the client's requests render "accurate entries of all financial transactions in the ledger books or similar records and in any other books of account kept by them in the regular course of practice...." Rule 1.15(b).