Following is the 33rd post in a series from Parker Law Group about recent changes to the California Bar Association (CBA)’s Rules of Professional Conduct (RPC). This rule is found in Chapter 1 – “Lawyer-Client Relationship,” focusing on the payment of a current or prospective client’s personal or business expenses. The Rule of Professional Conduct, as revised, is as follows:
Rule 1.8.5 Payment of Personal or Business Expenses Incurred by or for a Client
(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.
Rule 1.8.5 of CBA’s new version of the RPC, as set forth above, has been slightly expanded from the previous RPC (Rule 4-210). Subdivision (A) in the previous RPC has been split into two parts in the new Rule 1.8.5 – subdivision (a) and subdivision (b)’s introductory phrase. Another difference appears in (b)(2). “After employment, …” has been changed to “after the lawyer is retained by the client.” Sub-subdivision (b)(2) also lists provisions not included in the previous rule, warning that the lawyer must comply with rules 1.7(b), 1.7(c), and 1.8.1 before making the loan or agreeing to do so.
Also new in Rule 1.8.5 is the verbiage found in subdivision (c), defining “costs” as described in (b)(3) and (b)(4). The last subdivision – (d) – has been simplified, listing only one rule (Rule 1.8.9) that will not be limited by Rule 1.8.5. (Rule 1.8.9 was formerly Rule 4-300.) The other rules formerly mentioned as not being limited were 3-300 (now Rule 1.8.1) and 3-310 (now split between Rules 1.7, 1.8.6, 1.8.7, and 1.9).
The American Bar Association (ABA)’s RPC addresses this topic in three short paragraphs, in Rule 1.8(e)(1)-(2). Simplified, it says a lawyer “shall not provide financial assistance to a client in connection with pending or contemplated litigation …,” which is then followed by two exceptions. Those exceptions are (1) if the financial assistance is an advance on court costs, to be repaid on a contingency basis, and (2) if the client is indigent, with no means of paying his or her own court costs and expenses.
Benefit: Generally speaking, the new rule clarifies the conditions a lawyer must follow before loaning or otherwise assisting a client financially. This clarification can protect a new or potential client from possible misunderstandings with their attorney regarding fees owed for representation in their matter.
The information provided herein is informational only and should not be construed as legal advice or as an agreement for representation. This is not an advertisement. If you have an issue or dispute with your attorney, or are seeking advice with respect to your obligations, you should consult with an experienced attorney. Parker Law Group is a full-service litigation and transactional law firm. Mr. Parker has represented clients in professional malfeasance disputes for over 22 years. If you would like to schedule an initial consultation with Mr. Parker or his team, you can reach them at (916) 996-0400 or at email@example.com. (An email to the law firm requesting a consultation does not create an attorney-client relationship or any agreement for representation by the firm.)
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