Lawyers should be allowed to help provide “basic financial assistance to indigent clients — such as money for groceries, clothes or medical supplies,” the New York City Bar Association said last week in a letter to the state’s courts. In light of the urgent need caused by the corona virus pandemic, the group is seeking to fast-track an already-pending proposal to amend New York’s ethics rules, which generally bar providing financial assistance to clients in connection with pending or contemplated litigation.
An unlevel playing field
Model Rule 1.8(e) has only limited exceptions: lawyers can advance court costs and expenses in contingent fee cases; and they can pay “court costs and expenses of litigation” on behalf of indigent clients. But as New York’s version of the rule currently provides, they can’t advance or guarantee other financial assistance to litigation clients.
A rationale for the rule is that if lawyers “subsidize lawsuits” by making loans to clients for living expenses, it “would encourage clients to pursue lawsuits that might not otherwise be brought.” See id. cmt. . This ignores an obvious power and resource imbalance. As Prof. Roy Simon points out in his treatise, Simon’s New York Rules of Professional Conduct Annotated, “[a]rguably, financial assistance by lawyers to litigants would level the playing field … especially where a relatively wealthy individual or a successful corporate defendant opposes a relatively impoverished plaintiff.”
One commentator has pegged the origins of the rule to the Star Chamber Act of 1487 and the Statute of Liveries of 1504 “which were intended to prevent wealthy landowners from bankrolling legal claims of their serfs as a means to gain more land and power for themselves.”
The corona virus pandemic, which has wreaked havoc in New York, with more than 159,000 cases reported in New York City as of Thursday, obviously brings the subject of financial assistance to clients to the fore. The stay-at-home order in New York, as elsewhere, has resulted in wide-ranging economic devastation and huge job losses
In its letter, the bar association described the proposal for a humanitarian exception to Rule 1.8(e), which would permit lawyers representing indigent clients on a pro bono basis, as well as lawyers working for legal service providers, public interest offices, and law school clinics, to provide financial assistance to indigent clients under limited circumstances.
For example, permitted activities under the humanitarian exception could include: “a pro bono lawyer helping a client pay for groceries or essential living supplies; a non-profit law office establishing a client assistance fund to allocate resources based on need; and a law school clinic leveraging its resources to provide assistance to a client who may be struggling to meet basic living expenses.”
Under the proposal, lawyers would not be allowed to offer financial assistance as an inducement to continue the pro bono representation or allowed to advertise the availability of financial assistance.
The New York State Bar Association has already approved the proposal and in January had sent it to the courts for their consideration.
Client assistance in other states
Although New York’s current version of Rule 1.8(e) tracks the Model Rule fairly closely, other jurisdictions have taken other more expansive approaches. The District of Columbia’s Rule 1.8(d)(2), for example, allows lawyers to extend financial assistance provided that it is “reasonably necessary to permit the client to institute or maintain the litigation or administrative proceeding.”
Other states that permit client financial assistance over and above court costs and litigation expenses under their versions of Rule 1.8(e)include Louisiana; Minnesota (may guarantee loan “reasonably needed to enable the client to withstand delay in litigation that would otherwise put substantial pressure on the client to settle a case because of financial hardship rather than on the merits”); Mississippi; Montana and North Dakota.
Stay tuned for action on this front in the Empire State. As the bar association wrote, “Especially now, lawyers should not be limited in their ability to provide assistance to clients who are struggling to make ends meet.”