The Kentucky Bar Association considered third party litigation financing in its ethics opinion KBA E-432 on March 20, 2011. In it they answered four questions:

1. May a lawyer assist a client in obtaining funds to cover the client’s personal expenses during the pendency of an action?

2. If a lawyer assists a client in obtaining funds from a lender, what are the lawyer’s ethical responsibilities?

3. May a lawyer charge a client for facilitating the financial transaction?

4. If there is a recovery and funds are delivered to the lawyer for disbursement, is the lawyer ethically obligated to honor the client’s agreement to repay the lender from the funds recovered?

First, the committee agreed that a lawyer could help a client obtain third party financing. The lawyer could not directly give the client funds, but he or she could suggest financing companies. The Committee goes on to say that the lawyer should make it perfectly clear any risks or disadvantages that could occur with this type of lending. The lawyer may not endorse any particular lending company and may not engage in any practice that the lawyer knows to be illegal.

Second, the Committee explained that the lawyer’s sole ethical duty is to the client. The lawyer shall not allow the lender to control the representation of the client or interfere with lawyer’s professional judgment. The lawyer may provide the lending company with factual information, such as an accident report or medical records, only if the client gives his or her consent. The Committee recommends this consent be in writing. The Committee also states that the lawyer cannot be part of the lending company or provide assistance indirectly through the lending company.

Third, should the lawyer decide that fee is warranted for facilitating the financial arrangement he or she may do so within reason. The lawyer must explain the fee in detail to client and put the amendment to the original contingent-fee agreement in writing.

Fourth, the Committee states that a lawyer should not enter into an agreement with the lender promising to protect the lender’s interest in any recovery. To do so would make the lawyer a party to the financial transaction, which could cause a conflict of interest.

If you or your clients are in need of pre-settlement funding in Kentucky, please call Great Bay Capital at 1-843-342-6848! We will help you today so you can get what you deserve tomorrow.

 

 

 
Set your Twitter account name in your settings to use the TwitterBar Section.
PageLines