Board sets out advance funding guidelines.

After months of debate, the Bar Board of Governors has adopted a proposed ethics opinion on advance funding schemes, including telling lawyers that the Bar doesn't like those financial arrangements.

The board made two changes -- one of them technical -- to a draft opinion proposed by the Board Review Committee on Professional Ethics and then approved it during its March 15 meeting in Tallahassee. Board members also said the Bar should explore various means, either in the courts or the legislature, to regulate or ban advance funding deals.

"What we've been trying to do here is generate some ethical guidance for attorneys with clients who approach them with an advance funding proposition," said BROPE Chair Richard Tanner. "What we tried to do is focus our thinking to come up with an ethical opinion that is consistent with the sense of this body."

The board has been grappling since last fall over what to tell lawyers whose clients ask them about advance funding contracts -- defined as third parties that seek to loan the clients money in exchange for part of the expected winnings in the case. Interest rates are typically high, sometimes 100 to 200 percent or more.

Some board members have argued the Bar should have nothing to do with the practice. Others have said although the loans may be repugnant it is ultimately the decision of clients -- who may be in desperate financial straits -- whether to take the loans.

An intermediate appellate court in Ohio has ruled that the transactions are loans (some industry representatives have said they are buying part of the winnings, not making a loan, since there is no repayment unless there is a recovery) and the interest rates usurious. But that has been appealed to the Ohio Supreme Court, which has accepted the case.

The approved opinion says that whether the loans are legal is outside the scope of an ethics opinion, but that if the loans are held to be illegal, then the attorney may not participate in any way.

While the committee's draft said that attorneys could tell clients about the funding companies and supply company names to clients, the board added language to that section saying: "The Florida Bar discourages the use of non-recourse advance funding companies."

That language was added at the suggestion of board member Chobee Ebbets. He criticized the original draft as tacitly involving lawyers in the loans. "When it says a lawyer may advise a client about the existence of the companies and may provide the names of the company, you're in the game," Ebbets said. "These are never in the best interest of the client. It's an inherent conflict. I cannot agree with it as long as we are any part of the process."

He did support the draft after the language was added.

Other parts of the opinion provided that the attorney must carefully discuss the pros and cons with the client of any advance funding loan, including problems that can arise. The attorney may not cosign the loan, guarantee the transaction, or issue a letter of credit to the lending company, although the attorney may honor an assignment executed by the client. At the client's request, the attorney may provide information about the case to the company, but must discuss with the client implications of that action including the possible loss of confidentiality on otherwise confidential matters.

If the client decides to share the information anyway, the attorney is not obligated to "provide work product material, such as the attorney's personal notes," the opinion says. A final version of the opinion, Ethics Opinion 00-3, is on the Bar's Web site, www.FLABAR.org.

Board member Steve Chaykin, a member of the BRCPE, said even if all members weren't happy with the opinion, it was important for the board to take some action because of the growth of the advance funding industry.

"The argument against this opinion is we'd rather give no opinion and give no advice than engage in the process and perhaps help the client," he said.

"I think we need to pass this because our constituents are asking for advice," board member Ervin Gonzalez said. "This particular ethics opinion, is giving great advice on what they can do at this time."

He added; though, that he agreed with a call by President-elect Tod Aronovitz for the Bar to do more to prevent clients from being harmed by advance funding schemes.

"These companies are in the business of charging huge fees to unsophisticated people," said Aronovitz, who opposed the opinion before it was amended. "There are ways that we can encourage our courts to rule on this, and that's what should be done."

He also said the board should explore a way to "support meaningful consumer-oriented legislation" during next year's legislative session.