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State Bar & Bar Associations,
Law Practice,
Ethics/Professional Responsibility

May 8, 2020

Allowing financial assistance to clients for humanitarian purposes

The always forward-thinking New York City Bar Association has urged adoption of a humanitarian exception to its ethics rules to permit its members to contribute items of necessity such as food and rent assistance to poor client situations. Other lawyers have indicated a desire to assist by contributing to community businesses serving low-income residents in their communities.

Turk marco web

A. Marco Turk

Emeritus Professor, CSU Dominguez Hills

Email: amt4adr@gmail.com

Marc is professor and director emeritus of the negotiation, conflict resolution and peacebuilding program at CSU Dominguez Hills; adjunct professor of law, Straus Institute for Dispute Resolution, Pepperdine University School of Law; and a consultant on legal ethics.

The always forward-thinking New York City Bar Association has urged adoption of a humanitarian exception to its ethics rules to permit its members to contribute items of necessity such as food and rent assistance to poor client situations. Other lawyers have indicated a desire to assist by contributing to community businesses serving low-income residents in their communities.

These possibilities were raised in response to the COVID-19 pandemic engulfing New York. However, the concern indicated potential disciplinary proceedings by the bar association because, under its ethics rules, lawyers may not contribute money to litigation clients.

The purpose would be for enactment of such an exception to the bar’s current Rule of Professional Conduct 1.8(e), which prevents lawyers, firms and legal service organizations from providing a method to render assistance covering the “cost of basic living expenses, like groceries, clothes and medical supplies” during this emergency. The exception would extend beyond the current approval to provide financial assistance such as court costs and litigation expenses for pro bono clients.

Reportedly, such a rule change had been recommended as far back as March 2018, without further action. However, under the present dire circumstances created by COVID-19, the New York State Bar Association has indicated “strong support” so long as lawyers are not permitted to advertise such assistance for the purpose of continued representation of clients.

Apparently dating back to Jan. 31 of this year, the bar association indicated its approval, leaving only the New York Administrative Board of the Court to give its blessing. This seems to be “waiting in the wings.”

Other jurisdictions have dealt with this issue earlier, most following the provision of the American Bar Association’s Rule 1.8 (e), which provides: “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; and (2) a lawyer representing an indigent client may pay court costs and expenses of litigation on behalf of the client.”

For example, the Professional Ethics Committee of the Connecticut Bar (Informal Opinion 2011-10 Approved November 16, 2011) makes it clear the association shares the majority view there is no humanitarian exception to the prohibition against a lawyer providing financial assistance to a client. See Rule 1.8(e) Comments.

It seems most jurisdictions do not find any implicit “humanitarian” exception for helping needy clients. There appear to be only two jurisdictions in which the respective state supreme courts have found a “humanitarian exception” to be implicit. These are Louisiana, where, even under the judicially created humanitarian exception, a “gift” of living expenses made to a client would be improper within the state rule; and Florida, where a payment of living expenses is permitted as an “act of humanitarianism” as long as there is no agreement or expectation for repayment.

Reportedly, the Louisiana approach has been adopted by amendment to the rules in Minnesota, North Dakota, Montana, California, Mississippi, Alabama, and the District of Columbia to explicitly permit emergency financial assistance. However, in each of these states, the respective amended rule permits the providing of “loans” for living expenses under certain conditions.

This suggests virtually all states, apart from Florida, prohibit financial assistance in the form of gifts to clients for living expenses. There is no distinction drawn in ABA Rule 1.8(e) between loans and gifts, and both are prohibited as providing financial assistance in connection with pending litigation.

The California Rule 1.8.5 , Payment of Personal or Business Expenses Incurred by or for a Client, provides:

“(a) A lawyer shall not directly or indirectly pay or agree to pay, guarantee, or represent that the lawyer or lawyer’s law firm* will pay the personal or business expenses of a prospective or existing client.

“(b) Notwithstanding paragraph (a), a lawyer may:

“(1) pay or agree to pay such expenses to third persons,* from funds collected or to be collected for the client as a result of the representation, with the consent of the client.

“(2) after the lawyer is retained by the client, agree to lend money to the client based on the client’s written* promise to repay the loan, provided the lawyer complies with rules 1.7(b), 1.7(c), and 1.8.1 before making the loan or agreeing to do so;

“(3) advance the costs of prosecuting or defending a claim or action, or of otherwise protecting or promoting the client’s interests, the repayment of which may be contingent on the outcome of the matter; and

“(4) pay the costs of prosecuting or defending a claim or action, or of otherwise protecting or promoting the interests of an indigent person* in a matter in which the lawyer represents the client.

“(c) “Costs” within the meaning of paragraphs (b)(3) and (b)(4) are not limited to those costs that are taxable or recoverable under any applicable statute or rule of court but may include any reasonable* expenses of litigation, including court costs, and reasonable* expenses in preparing for litigation or in providing other legal services to the client. (d) Nothing in this rule shall be deemed to limit the application of rule 1.8.9.”

As far back as February 2015, Karen Rubin, in an article on this aspect of ethics titled, “The Law for Lawyers Today” (Thompson Hine), cautioned: “If you’re thinking of giving money to a client — think again.” This still seems to be the prevalent thinking in the field. Perhaps even indirectly providing the reasoning behind the reported failure of the New York Administrative Board of the Court to respond to the entreaty of the New York City Bar Association regarding the humanitarian exception.

Apparently, there are many who discount empathy for a client’s financial woes under any circumstances, even the rampant raging of COVID-19. If the assistance does not fit within the definition of (1) advancing litigation expenses and court costs subject to repayment (e.g., contingent fee cases); and, payment of litigation expenses and court costs on behalf of indigent clients, there will continue to be an ethical violation.

Old rules die hard, even in times of a gigantic pandemic causing more deaths than even the Vietnam War! 

#357610

Ben Armistead

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