May a nonprofit legal aid society pay the medical-examination expenses of indigent clients with disability benefit claims out of a charitable fund?

Plain-English summary

The Committee was asked whether a not-for-profit legal aid society could pay the expenses of medical examinations for indigent clients pursuing disability benefit claims, using a fund established for that purpose and financed by voluntary charitable contributions. The starting point was DR 5-103(B), which, while representing a client in contemplated or pending litigation, bars a lawyer from advancing or guaranteeing financial assistance except for the expenses of litigation (including court costs, investigation, medical examination, and the costs of obtaining and presenting evidence) and only if the client remains ultimately liable for those expenses.

The Committee explained that the rule exists to keep the lawyer's independent professional judgment unclouded by a personal financial interest in the case (citing Canon 5 and EC 5-2, 5-7, and 5-8), and cross-referenced its own LEI 82-5 on protecting a doctor's fees out of a client's recovery. EC 5-8 recognizes that monetary advances by the lawyer create a financial interest in the outcome, that the practice is generally discouraged, but that advancing or guaranteeing litigation costs may sometimes be the only way a client can enforce a cause of action, provided ultimate liability stays with the client.

The Committee relied on ABA authority. Under former Canon 42, the ABA had found it appropriate for committees, rather than lawyers, to advance costs to indigent servicemen without reimbursement provisions (ABA Formal Opinion 259, Dec. 17, 1943), and the ABA later approved advancement of costs by legal aid societies, stating in ABA Informal Opinion 1361 (June 3, 1976) that there is nothing unethical in a legal aid office advancing such costs and assuming ultimate responsibility when there is no recovery, because it is the society, not its lawyers, that advances the money, and that the society may expend public or charitable funds for these purposes. The ABA had observed that poor clients eligible for free legal services should not be deprived of necessary litigation preparation because they cannot assume out-of-pocket costs.

Because the lawyer himself does not advance the costs and does not stand to profit from the outcome, the Committee found no danger of impairing the lawyer's independent professional judgment. It concluded that legal aid societies may advance medical-examination costs to indigent clients with disability benefit claims so long as: (1) the money comes from an independent fund unrelated to the funds from which the society's lawyers are paid; (2) care is taken so that the society's lawyers do not benefit financially from the outcome of the case; and (3) the client agrees to reimburse the costs if the client later becomes financially able to do so.

Currency note

This opinion was issued in 1983, before West Virginia replaced its Code of Professional Responsibility (the DR, EC, and Canon provisions cited here) with the Rules of Professional Conduct, effective January 1, 1989, and before later rule revisions, including the comprehensive 2015 amendments. 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: Could a legal aid society pay for indigent clients' medical exams in disability cases?

A: Yes, on conditions. The opinion concluded that a legal aid society may advance medical-examination costs for indigent disability claimants where the money comes from an independent fund, the society's lawyers do not benefit financially, and the client agrees to reimburse if later able.

Q: Why was it acceptable for the society to advance costs when the lawyer could not?

A: The opinion reasoned, following ABA Informal Opinion 1361, that it is the legal aid society and not its lawyers that advances the money, so the lawyer's independent professional judgment is not clouded by a personal financial interest, and that the society may use public or charitable funds for the purpose.

Q: What conditions did the Committee attach?

A: The opinion required that the funds come from a source unrelated to the lawyers' pay, that care be taken so the lawyers do not benefit financially from the outcome, and that the client agree to repay the costs if the client becomes financially able in the future.

Background and rules framework

The opinion applied DR 5-103(B) of the Code of Professional Responsibility, which limits a lawyer's advancement of financial assistance to a client to the expenses of litigation with the client ultimately liable, and read it in light of Canon 5 and EC 5-2, 5-7, and 5-8 on preserving independent professional judgment. It treated the question as governed by who advances the funds (the society rather than the lawyer) and whether the lawyer stands to profit from the outcome.

Citations and references

Rules of Professional Conduct (Code of Professional Responsibility, as cited):

• DR 5-103(B) (lawyer may advance only the expenses of litigation, with the client ultimately liable)
• Canon 5 (a lawyer should exercise independent professional judgment on behalf of a client)
• EC 5-2, EC 5-7, EC 5-8 (avoiding a personal financial interest in the outcome; limited exceptions for advancing litigation costs)

Other opinions cited:

• ABA Formal Opinion 259 (Dec. 17, 1943): under former Canon 42, advancement of costs to indigent servicemen by committees rather than lawyers was appropriate
• ABA Informal Opinion 1361 (June 3, 1976): a legal aid society, not its lawyers, may advance and ultimately bear litigation costs without violating DR 5-103(B), using public or charitable funds
• WVSB LEI 82-5: Duties of Lawyers Concerning "Protection" of a Doctor's Fees Out of a Client's Recovery

See also

• WVSB Ethics Op. 2016-01: Third-party loans to advance litigation costs
• WVSB Ethics Op. 2005-02: Legal funding plans
• WVSB Ethics Op. 2017-01: Fact witness compensation

Source

• Landing page: https://wvodc.org/Legal-Ethics-Opinion
• Original PDF: https://storage.googleapis.com/msgsndr/Rgd68xOkcVdteTsBkf6O/media/66a7ea7e447e66f9512f4973.pdf

Original opinion text

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

L.E.I. 83-6

(October 21, 1983)

ADVANCEMENT OF EXPENSES BY A LEGAL AID SOCIETY

The Committee on Legal Ethics has been requested to render an opinion on the following issue: Whether a not-for-profit legal aid society may pay the expenses of medical examinations for indigent clients who have disability benefit claims from a fund established for such purpose and funded by voluntary charitable contributions.

DR 5-103(B) states that, generally, a lawyer may not advance money to his client unless the client agrees to reimburse him:

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.

The clear reason for this rule is to ensure that the lawyer's independent professional judgment remains unclouded by a personal financial interest in the case. (Canon 5: A lawyer should exercise independent professional judgment on behalf of his client.) (See EC 5-2, 5-7 and 5-8; L.E.I. 82-5: Duties of Lawyers Concerning "Protection" of Doctor's Fees Out of Client's Recovery.)

EC 5-8 recognizes that some exceptions can be made:

EC 5-8: A financial interest in the outcome of litigation also results if monetary advances are made by the lawyer to his client. Although this assistance generally is not encouraged, there are instances when it is not improper to make loans to a client. For example, the advancing or guaranteeing of payment of the costs and expenses of litigation by a lawyer may be the only way a client can enforce his cause of action, but the ultimate liability for such costs and expenses must be that of the client.

In an opinion issued under former Canon 42, the American Bar Association noted that advancement by committees, not by lawyers, of costs to indigent servicemen without provisions for reimbursement was appropriate (ABA Formal Opinion 259, December 17, 1943). More recently, the ABA Committee on Ethics and Professional Responsibility has approved of the advancement of costs by legal aid societies in class actions undertaken on behalf of indigents. The Committee, in reply to an inquiry from a legal aid office, stated that:

. . . there is nothing unethical in your office's conduct in advancing such costs in the first instance and assuming the ultimate responsibility for such costs if there is no recovery of costs in the litigation. The Committee does not find a violation of DR 5-103(B) since it is the Legal Aid Society and not the lawyers who advances the monies. The Legal Aid Society may expend public or charitable funds for these purposes.

ABA Informal Opinion 1361 (June 3, 1976).

The Committee noted that "poor clients who are eligible for free legal services should not be deprived of the necessary preparation for litigation . . . because they are unable to assume the ultimate responsibility for out-of-pocket costs." (Ibid.)

As in the exceptions noted above, where the lawyer himself does not advance costs and where the lawyer does not stand to profit from the outcome of the case, the Committee finds that no danger exists of impairment of the lawyer's independent professional judgment. Accordingly, it is in the opinion of the Committee that legal aid societies may advance costs for medical examinations to indigent clients with disability benefit claims so long as: (1) monies for these costs are taken from an independent fund, unrelated to the funds from which the society's lawyers are paid; (2) care is exercised so as to ensure that the society's lawyers do not benefit financially from the outcome of the case; and (3) the client agrees that reimbursement of such costs will be made in the event that the client becomes financially able to do so in the future.