Louisiana Supreme Court - 400 Royal St., New Orleans, LA 70130 | Tel: 504-310-2300 Hon. Bernette J. Johnson. Chief Justice.  John Tarlton Olivier., Clerk of Court.  Sandra A. Vujnovich. Judicial Administrator
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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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