LEO: Acquiring An Interest in Client's Matter  LE Op. 1269


Acquiring An Interest in Client's Matter - Business Transactions

Between Attorney and Client - Personal Interest: Attorney Making

Loans to Client.


October 3, 1989


You have advised that you represent an injured client whose medical bills

have been paid by his insurance carrier, but who has not been able to earn

significant income to meet his living expenses. You further indicate that

the client has no other source of income pending disposition on his claim.

Your client will probably lose an additional six weeks of income during

surgery and recuperation. You indicate that you have arranged for a third

party to loan your client up to $7,000 at 12% interest, under the terms of

which loan the lender will be designated as a beneficiary under your

client's life insurance policy and the client agreed to have any remaining

outstanding debt act as a lien on any recovery made on the personal injury

matter. Finally, you advise that the loan will not be contingent on any

recovery but will remain the personal obligation of the client regardless

of the outcome of the cause of action.


You have inquired as to the propriety of the terms of the loan as

outlined and have further inquired as to the propriety of your loaning a

client money pursuant to the same terms.


With regard to your first question, the Committee believes that prior

LE Op. 1155 is dispositive of the issue.


With regard to your second question, the appropriate and controlling

disciplinary rules are DR:5-103(A) and DR:5-104(A). Under DR:5-103(A

), a lawyer shall not acquire a proprietary interest in the cause of

action or subject matter of litigation he is conducting for a client. A

lawyer may, however, acquire a lien granted by law to secure his fee or

expenses; and may contract with the client for a reasonable contingent fee

in a civil case. Under DR:5-104(A), a lawyer may not enter into a

business transaction with a client if they have differing interests

therein and if the client expects the lawyer to (continue to) exercise his

professional judgment therein for the protection of the client, unless the

client has consented after full disclosure and provided that the

transaction is not unconscionable, unfair or inequitable when made.


The Committee is of the opinion that loans made to clients for assistance

with living expenses during the course of litigation constitute the

lawyer's entering into employment and a business transaction that would

allow his professional judgment to be affected by his own financial

interest; thus such conduct would be improper and violative of both DR:5-

103(A) and DR:5-104(A). The rule against a lawyer acquiring an interest

in a client's litigation is based on concerns about compromised loyalty to

the client in pursuing a result which should be in only the client's best

interests. The lawyer's acquisition of a personal interest in the outcome

of the litigation may result in the lawyer's independent judgment on

behalf of his client becoming clouded by his interest in recouping his own



In addition to the prohibition against a lawyer acquiring a proprietary

interest in the litigation through the making of a loan to a client, the

Committee is of the opinion that such a loan would create an improper

adverse relationship between the lawyer as creditor and the client as

debtor. The client's consent as described in DR:5-104(A), which, in

other circumstances, might cure the conflict, would not suffice to

alleviate the impropriety created by the violation of DR:5-103(A).


Committee Opinion October 3, 1989




See also LE Op. 1343.