Ethics Opinions

ETHICS OPINION NO. 225
OF THE MISSISSIPPI BAR

RENDERED Monday, April 10, 1995

CONFLICT OF INTEREST-An attorney may not enter into an agreement to provide legal services for a non-indigent party on an annual fee basis if the court costs and expenses are to be absorbed by the attorney who submits the low bid.

The Ethics Committee of The Mississippi Bar has been requested to render an opinion as to the following factual situation presented in the request for an Informal Advisory Opinion:

A national client engaged in manufacturing has asked this office to submit a "bid" for the rendering of legal services and payment of litigation expenses on an annual basis for defending products liability actions. The bid would be based on historical data of the cost of payment of legal fees and litigation expenses over the past three years. The bid would cover both cases presently pending as well as new suits filed during the contract period. The proposed contract would provide that it would be the obligation of the successful bidder to pay as they occur, with certain exceptions, all expenses of litigation such as expert witness fees, deposition costs, cost of case specific testing (up to $10,000.00), etc. If the amount included in the bid was not sufficient to defray all such litigation expenses, then the firm would have to pay these out of its own pocket.

The question posed and addressed by this Committee is whether an attorney may submit a bid for rendering legal services and payment of litigation expenses on an annual basis, with the caveat that if the bid is not sufficient to defray all such litigation expenses, that the firm will have to pay those expenses out of its own pocket.

This question was addressed by The Mississippi Bar in Opinion Number 136 rendered on September 11, 1987; from which the following excerpt is taken: The Mississippi Rules of Professional Conduct, Rule 1.8(e) (1987), states: A lawyer shall not provide financial assistance to a client in connection with pending or contemplated litigation, except that:

(1) A lawyer can 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 clients may pay court costs and expenses of litigation on behalf of the client.

It is clear from a reading of Rule 1.8(e) that attorneys are prohibited from providing financial assistance to clients or in maintaining a pecuniary interest in litigation with a client. From that general principle, the framers of Rule 1.8(e) carved two exceptions, both dealing with the issue of court costs and expenses of litigation, drawing a distinction between payment of such costs while representing an indigent and non-indigent client.

While representing non-indigent clients, sub part 1 of Section e of Rule 1.8 allows an attorney to " . . . advance court costs and expenses of litigation, the repayment of which may be contingent on the outcome of the matter." Advance, by definition, represents a loan or providing credit with the expectations of repayment. See. Black's Law Dictionary 71 Rev.5th Ed. 1979). Thus, in the representation on non-indigent clients, an attorney may provide financial assistance to a client by advancing court costs and expenses of litigation and may further condition the repayment of the amounts paid by the attorney on the success of the litigation. The language contained in sub part 1, however, does not sanction an attorney's payment of court costs and expenses on behalf of a non-indigent client without some agreement as to the reimbursement of those court costs and expenses.

Clearly, it is permissible for an attorney representing a non-indigent client (such as the hypothetical client in question) to advance costs and expenses of litigation, if the client agrees to repay those expenses and costs at the conclusion of the litigation. To do otherwise is not permissible under Rule 1.8(e).

As to Rule 1.7(b), the Mississippi Rules of Professional Conduct also addresses the question wherein it is stated that:

A lawyer shall not represent a client if the representation of that client may be materially limited by the lawyer's responsibilities to another client or to a third person, or by the lawyer's own interests, unless the lawyer reasonably believes:

(1) the representation will not be adversely affected; and

(2) the client has given knowing and informed consent after consultation. The consultation shall include explanation of

the implications of the representation and the advantages and risks involved.

This Committee is of the opinion that a "lawyer's own interest" is affected and could be limited if he submitted a low bid and was required to either incur substantial expenses that would have to be paid out of his own pocket, or forego taking essential action on the part of his client to avoid those costs.

The Committee recognizes that Rule 1.1 of the Mississippi Rules of Professional Conduct sets forth:

A lawyer shall provide competent representation to a client. Competent representation requires the legal knowledge, skill, thoroughness and preparation reasonably necessary for the representation.

The Committee also recognizes that Rule 1.3 requires that the lawyer shall act "with reasonable diligence and promptness in representing a client," irrespective of the effect of a low bid on a matter which requires substantially more time and effort than anticipated. Nevertheless, any concern raised by the limitations of Rule 1.7(b) is moot since Rule 1.8(e) is dispositive of the issue raised and clearly prohibits any attorney from entering into an agreement to provide legal services for a non-indigent party on an annual fee basis if the court costs and expenses are to be absorbed by the attorney who submits a low bid.