State of Georgia

Formal Advisory Opinion No. 92-1

1. It is ethical for a lawyer to borrow funds from a third party lending company to fund litigation. However, attorneys are generally discouraged from having an interest (beyond their fees) in the outcome of the litigation or lending money to their clients directly.

Fees, interest and expenses associated with the loan may be passed on to the client as appropriate expenses of litigation. However, the client must be notified in his or her contract with the attorney that he or she will be ultimately liable for the expenses. Nevertheless, it is always the attorney, not the client, who is ultimately liable to the funding company for repayment the loan. The funding company cannot breach attorney-client confidentiality and has no recourse directly against the client. This provision does not prohibit the securing of the loan through the borrowing attorneys fee on the case. In addition, interest and fees of the loan may be passed to the client only if the following two criteria enunciated in Formal Advisory Opinion No. 92-1are met :

"(1) the client is notified in the contingent fee contract of the maximum rate of interest the lawyer will or may charge on such advances"; and

"(2) the written statement given to the client upon conclusion of the matter reflects the interest charged on the expenses advanced in the matter." The goal is to assure the client is informed of all possible charges and fees that can ultimately affect his or her recovery in a case.

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