The inquiry is whether it is permissible under the Pennsylvania Rules of Professional Conduct (the "Rules") for an attorney to provide substantive information about a personal injury client's claim to a third-party lender which is considering providing funds to the client during the pendency of the personal injury case. Repayment of the funds would be contingent upon the successful resolution of the client's case, i.e., the loan would be repaid only if the client secured a recovery. The lender would compensate the lawyer for the time spent in providing the information about the strengths and weaknesses of the client's case (and periodic updates) on an hourly basis, with a maximum aggregate fee of $250. As indicated below, assuming full disclosure to the client of the advantages and disadvantages of this transaction to the client including, in particular, the risk of waiver of the attorney-client privilege (and the potential ramifications thereof), as well as the attorney's financial interest in the additional fee from the lender, the contemplated transaction does not violate the current Rules.
As an initial matter, the Committee directs the inquirer's attention to Rule 1.6 which addresses issues relating to confidentiality of client information. This Rule, and the related concerns about the attorney-client privilege, presents the most serious ethical concern prompted by this inquiry. The importance of consultation with the client about the possible risk of loss of not only client confidentiality but also of the attorney-client privilege as a result of supplying assessment-type information to the potential lender cannot be underestimated. The inquirer is well advised to document carefully the client's assent to the disclosure and, even then, to make it clear to the lender that the disclosures will be restricted as much as possible--perhaps even limited to only that information which would be discoverable without intrusion upon the privilege.
Rule 1.7(b), which prohibits a lawyer from representing a client if that representation may be materially limited by another client's interests (i.e., if the lender is considered to be a client of the lawyer's for this limited purpose) or the lawyer's own interests, requires the attorney to disclose to the client any benefit that he/she may receive from the contemplated transaction. Thus, if the attorney is to receive a fee from the lender (however modest), this is a benefit to the attorney that must be adequately disclosed to the client. Additionally if on a regular basis, the attorney provides legal services or conducts business with the loan company, this fact should be disclosed pursuant to Rules 1.7 and 1.8. To the extent this arrangement may be considered to be one involving the lawyer's multiple representation of the personal injury client and the lender, both clients must be fully informed of the scope of the lawyer's responsibilities to the other client, as well as how they may conflict with each other (i.e., the impact on the personal injury client's right to confidentiality), and waivers of the potential conflicts should be secured.
Rule 1.8(b) ("A lawyer shall not use information relating to representation of a client to the disadvantage of the client unless the client consents after consultation") requires that the driving force and apparent result of this transaction be to place the client in an arguably better position than he/she would be without the loan arrangement for which the lawyer's compensated input is a requisite. Any advantage to the attorney from such an arrangement must be secondary, and fully disclosed.
If the lender is not considered to be a client of the attorney for a limited purpose (thus triggering the Rule 1.7 analysis above), Rule 1.8(f) would require full disclosure to and knowledgeable consent of the client in order for the lender to pay the attorney for the services rendered in providing the loan to the client.
In view of the fact that the lawyer will be supplying information that a lender intends to use in evaluating whether to make a loan to the lawyer's client, the lawyer's liability risks to both the lender and the borrower are unmistakable. From an ethical standpoint, the Committee notes the lawyer's Rule 4.1 obligations to refrain from making false statements of fact or law.
The Committee also notes, in conjunction with Rule 1.8(f), the possible role of Rule 5.4(c) and the importance of a lawyer maintaining his or her professional independence in representing the personal injury client.
In closing, the Committee brings the inquirer's attention to its recently issued Opinion 99-4 which addresses a somewhat similar tri-partite financial arrangement undertaken in connection with a client's pending personal injury claim.