Commonwealth of Pennsylvania Ethics Opinions

Ethics Opinion 2003-15

1. It is ethical for an attorney to borrow funds from a third party funding company to cover litigation expenses, or to fund his law practice. However, in this case the Ethics Opinion requires that " ..the costs [be] repaid, plus additional fees, only if the case were successfully concluded and funds were derived by the attorney." Moreover, "[i]f there is a recovery, the only claim by the Funding Company is against the attorney and the attorney´s bank account (after distribution of all recoveries from the attorney´s escrow account) and not against the client or the client´s recovery." The funding company has no private right of action and no claim against the client.

2. The Opinion further holds that : "[t]here will be no alteration of the fee arrangement between the attorney and client based upon the existence of a funding agreement between the attorney and the Funding Company." Therefore, for safety´s sake, CFS should recommend to borrowing attorneys in Pennsylvania that they include in their retainer forms a clause covering both the borrowing of funds to cover litigation expenses, and the client´s acceptance of the fact that he/she is chargeable (out of the settlement) with the interest on such a loan insofar as it applies to the client´s case.

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