Opinion 1181

[Formerly published as Published Informal Opinion 88-4. All Informal Opinions are consolidated in this database.]

Question:
May a lawyer properly advance funds to a client in anticipation of receipt of funds from the Department of Labor and Industries when the lawyer is reasonably certain that the industrial insurance claim will be, but has not yet been, approved by the Department?

Answer:
No. Such advances are not authorized by RPC 1.8(e), which prohibits a lawyer from acquiring a proprietary interest in a cause of action. Depending upon the circumstances, such an advance may also be a business transaction with a client that does not meet the requirements of RPC 1.8(a). However, if the claim had been approved but the funds were not yet received, such an advance made in compliance with RPC 1.8(a) would be permitted because there would be no pending litigation in connection with those funds.

Discussion:
An inquiry has been made to the Rules of Professional Conduct Committee asking whether it is proper for a lawyer representing clients in making industrial insurance claims against the Department of Labor and Industries to make advances to clients, in anticipation of receipt of funds from the Department in situations where the lawyer is almost certain that the claim will be approved by the Department. Such claims are subject to review by the Department, and an adverse decision may be appealed to the Board of Industrial Insurance Appeals pursuant to RCW 51.52.050.

Rule 1.8 of the Rules of Professional Conduct provides in part:
A lawyer who is representing a client in a matter . . .
(e) shall not, while representing a client in connection with contemplated or pending litigation, advance or guarantee financial assistance to his or her client, except that a lawyer may advance or guarantee the expenses of litigation, including court costs, expenses of investigation, expenses of medical examination, and costs of obtaining and presenting evidence, provided that the client remains ultimately liable for such expenses.

Subsection (e), although phrased in terms of a prohibition of financial assistance, is in substance a grant of permission to the lawyer to advance or guarantee limited financial assistance with expenses incurred in connection with contemplated or pending litigation. In this sense, subsection (e) is an exception to subsection (a), which limits the right of a lawyer to enter into a business transaction with a client, and subsection (e), which prohibits a lawyer from acquiring a proprietary interest in a cause of action or subject matter of litigation, except for a lien or contingent-fee arrangement. subsection (e) enables a lawyer to advance or guarantee expenses of contemplated or pending litigation without being concerned with the business transaction restrictions set out in subsection (a), the proprietary interest prohibitions of subsection (j), or common-law maintenance—furnishing another with funds to carry on litigation.

Thus in the context of an L & I claim, a lawyer could advance fees to a doctor to obtain a medical examination necessary to support a client`s claim, because such an advance is permitted by RPC 1.8(e) as an expense of litigation. What the lawyer cannot do is make an advance for some other purpose not related to the expense of litigation.

After an L & I claim is approved, however, a lawyer may properly make an advance to a client against the funds to be paid by the Department on the claim, because there would be no litigation contemplated or pending in relation to those funds. Such an advance would have to be made in full compliance with the requirements of RPC 1.8(a), including the requirements of written disclosure and client consent.