#2004-05/01 Non-Recourse Lawsuit Financing

Ethics Committee Advisory Opinion #2004-05/01

By the NHBA Ethics Committee
This opinion was submitted for publication to the NHBA Board of Governors at its April 2005 meeting.

ABSTRACT:

Participating in non-recourse lawsuit financing is not per se unethical, but many potential issues exist. An attorney contemplating involvement in such programs must be very cautious in determining that such involvement is in the client’s best interests and in advising his or her client whether to engage in such financing.

ANNOTATIONS:

Although participation by an attorney with the client in lawsuit financing programs is not unethical per se, attorneys are encouraged to exercise substantial caution in involving clients in such programs and participating with them to obtain such funding.

Before participating in any non-recourse lawsuit financing program, the lawyer must be absolutely convinced that it is in the client’s best interests and that the client can clearly articulate how and why such interests are so well-served.

Lawyers must discuss all aspects of such financing with the client, including available alternatives, the costs and impacts of such financing, the ramifications on a potential recovery and other important considerations.

Information provided to the non-recourse lawsuit funding source or broker could be voluntarily or involuntarily disclosed to the disadvantage of the client. Likewise, there is a possible waiver of the attorney-client privilege through the disclosure of information about the case to the third party broker or financing source seeking to extend such financing.

If non-recourse lawsuit financing is used for the payment of a lawyer’s fees and costs, it may well be cast as a business transaction between an attorney and client. NHRPC 1.8(a) not only requires full disclosure and informed consent by the client and substantial certainty that participation in such financing is in the best interests of the client, but also requires counsel to afford the client a reasonable opportunity to seek review by independent counsel, a written consent and overall fairness – when viewed from the client’s eyes at the time that such financing is sought.

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