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FINAL RECOMMENDATIONS
OF THE SUPREME COURT COMMITTEE TO STUDY FINANCIAL ASSISTANCE
TO CLIENTS
When the Supreme Court of Louisiana granted writs in the case
of Chittenden v. State
Farm Mutual Automobile Insurance Co., et al., 2000-0414,
(La. 6/16/00), 763 So.2d 610, the Court noted in a footnote
that “[a] committee is to be appointed to study the
revision of Rule 1.8(e) of the Rules of Professional Conduct,
regarding financial assistance to a client.” After the
Court rendered judgment in Chittenden, 2000-0414 (La. 5/15/01),
788 So.2d 1140, the Court appointed a Committee “to
study and make recommendations concerning possible amendments
to the Rules of Professional Conduct concerning financial
assistance to clients.”
The Supreme Court Committee to Study Financial Assistance
to Clients consists of the following members:
Justice Catherine D. Kimball, Chair
Justice Jeannette T. Knoll
Kim M. Boyle
Richard C. Broussard
John W. deGravelles
Elizabeth Erny Foote
E. Phelps Gay
T. Haller Jackson, III
Lawrence S. Kullman
J. Burton LeBlanc, IV
Christine Lipsey
Frank L. Maraist
Jacques A. Massey
Charles B. Plattsmier
Gary L. Ryan
Dominick Scandurro, Jr.
Richard C. Stanley
Phillip A. Wittmann
The Committee completed its work and submitted its proposed
rule changes to the Court. The Committee has recommended that
the Supreme Court retain the humanitarian rule originally
enunciated in the case of LSBA v. Edwins, 329 So.2d 437 (La.
1976), which allows lawyers to provide limited financial assistance
to clients in necessitous circumstances. The Committee proposal
places a number of parameters and restraints on such assistance.
The Court has decided to place the proposed rule changes on
its website in order to allow interested persons to comment.
Persons interested in commenting on the Final Recommendations
of the Supreme Court Committee to Study Financial Assistance
to Clients may forward written comments to:
Tim Averill
Deputy Judicial Administrator/General Counsel
Office of the Judicial Administrator
Supreme Court of Louisiana
1555 Poydras St., Suite 1540
New Orleans, LA 70112-3701
or via e-mail to:
comments@lasc.org
Comments should be forwarded no later than Tuesday, January
21, 2003.
Please be advised that any comments which are forwarded
constitute matters of public record and are subject to public
inspection.
PROPOSED RULE CHANGE
Rule 1.4(c) {New}
“A lawyer who provides any form of financial assistance
to a client during the course of a representation shall, prior
to providing such financial assistance, inform the client
in writing of the terms and conditions under which such financial
assistance is made, including but not limited to, repayment
obligations, the imposition and rate of interest or other
charges, and the scope and limitations imposed upon lawyers
providing financial assistance as set forth in Rule 1.8(e).”
PROPOSED RULE CHANGE
Rule 1.5(c) {Amended}
“... A contingent fee agreement shall be in writing.
A copy or duplicate original of the executed agreement
shall be given to the client at the time of execution of the
agreement. The contingency fee agreement shall state
the method by which the fee is to be determined, including
the percentage or percentages that shall accrue to the lawyer
in the event of settlement, trial or appeal litigation and
other expenses to be deducted from the recovery, and whether
such expenses are to be deducted before or after the contingent
fee is calculated.”
PROPOSED RULE CHANGE
Rule 1.8(e)(1) {Amended}
“A lawyer may advance court costs and expenses of litigation,
the repayment of which may be contingent on the outcome of
the matter, provided that the expenses were reasonably incurred.
Court costs and expenses of litigation include, but
are not necessarily limited to, filing fees; deposition costs;
expert witness fees; transcript costs; witness fees; copy
costs; photographic, electronic, or digital evidence production;
investigation fees; related travel expenses; litigation related
medical expenses; and any other case specific expenses directly
related to the representation undertaken.
An advance of court costs or litigation expenses by the lawyer
from the funds of the lawyer shall not bear interest, fees
or charges of any nature. Where the lawyer obtains or facilitates
a loan, the proceeds of which are to be used to advance court
costs or litigation expenses, no interest or fees incurred
on such loans may be passed on to the client unless: a) the
client consents in writing, and b) the interest charged together
with fees does not exceed the lesser of the actual costs of
borrowing or the maximum interest rate permitted by these
rules.
Nothing in this rule shall require client consent in those
matters after a court has certified a class under applicable
state or federal law; provided, however, that the court must
have accepted and exercised responsibility for making the
determination that interest and fees are owed, and that the
amount of interest and fees chargeable to the client is fair
and reasonable considering the facts and circumstances presented.”
PROPOSED RULE CHANGES
Rule 1.8(e)(2) {New}
“Overhead costs of a lawyer’s practice
which are those not incurred by the lawyer solely for the
purposes of a particular representation, shall not be passed
on to a client. Overhead costs include, but are not necessarily
limited to, office rent, utility costs, ordinary postage charges,
charges for local telephone service, office supplies, fixed
asset expenses and ordinary secretarial and staff services.
With the informed consent of the client, the lawyer may charge
as recoverable costs such items as computer legal research
charges, long distance telephone expenses, and outside courier
service charges, incurred solely for the purposes of the representation
undertaken for that client, provided they are charged at the
lawyer’s actual, invoiced costs for these expenses.
Paralegal services shall be considered as professional services
and not an overhead cost.”
PROPOSED RULE CHANGE
Rule 1.8(e)(3) {New}
“In addition to costs of court and expenses
of litigation, a lawyer may provide financial assistance to
a client who is in necessitous circumstances, subject however
to the following restrictions:
(i) Upon reasonable inquiry, the lawyer must determine
that the client’s necessitous circumstances, without
minimal financial assistance, would adversely affect the
client’s ability to initiate and/or maintain the
cause for which the lawyer’s services were engaged.
(ii) The advance or loan guarantee, or the offer thereof,
shall not be used as an inducement by the lawyer, or anyone
acting on the lawyer’s behalf, to securing employment.
(iii) Neither the lawyer nor anyone acting on the lawyer’s
behalf may offer to make advances or loan guarantees prior
to being hired by a client, and the lawyer shall not publicize
nor advertise a willingness to make advances or loan guarantees
to clients.
(iv) Financial assistance under this rule may provide
but shall not exceed that minimum sum necessary to meet
the client’s, the client’s spouse’s,
and/or dependents’ documented obligations for food,
shelter, utilities, insurance, non-litigation related
medical care and treatment, transportation, education,
or other documented expenses necessary for subsistence.
(v) Any financial assistance provided directly from the
funds of the lawyer to a client shall not bear interest,
fees or charges of any nature.
(vi) Financial assistance provided by a lawyer to a client
may be made using loans obtained from financial institutions
in which the lawyer has no ownership, control and/or security
interest; provided, however, that this prohibition shall
not apply to publicly traded financial institutions where
the lawyer’s ownership, control and/or security
interest is less than 10%. Where the lawyer uses such
loans to provide financial assistance to a client, the
interest charges together with any fees or other charges
attendant to such loans shall not exceed the actual charge
by the third party lender or three percentage points above
the prime rate of interest as reported by the Federal
Reserve Board on January 15th of each year in which the
loan is outstanding, whichever is less. The total of interest,
fees, and charges, that exceeds the maximum permitted
under these rules shall be borne solely by the lawyer,
and shall not be passed on to the client. The lawyer may
not guarantee or provide security for a loan in favor
of a client where the loan provisions obligate or may
obligate the client for interest, fees, and charges, which,
when totaled, would exceed the maximum interest provided
by these rules.
(vii) Any portion of financial assistance provided by
a lawyer to a client which is in excess of the sums allowed
by these rules shall not be recoverable from the client
by the lawyer.
(viii) In every instance where the client has been provided
financial assistance by the lawyer, the full text of this
rule shall be provided to the client at the time of execution
of any settlement documents, approval of any disbursement
sheet as provided for in Rule 1.5, or upon submission
of a bill for the lawyers services.”
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