The State Bar seeks public comment on Proposed Formal Opinion Interim No. 14-0002 (Alternative Litigation Funding)
Deadline: January 14, 2020
The State Bar Standing Committee on Professional Responsibility and Conduct (COPRAC) is charged with the task of issuing advisory opinions on the ethical propriety of hypothetical attorney conduct. In accordance with State Bar policy and procedure, the Committee shall publish proposed formal opinions for public comment (See, State Bar Board of Trustee Resolutions July 1979 and December 2004. See also, Board of Trustee Resolution November 2016).
On May 10, 2018, the California Supreme Court issued an order approving 69 new Rules of Professional Conduct, which will go into effect on November 1, 2018. Information about the new rules is available at the State Bar website. Proposed Formal Opinion Interim No. 14-0002 interprets the new Rules of Professional Conduct.
Proposed Formal Opinion Interim No. 14‑0002 considers: What ethical obligations arise when a lawyer represents a client whose case is being funded by a third-party litigation funder?
The opinion interprets rules 1.1, 1.4, 1.6. 1.7. and 1.8.6 of the Rules of Professional Conduct of the State Bar of California; and Business and Professions Code sections 6068(a) and 6106.
The opinion digest states: Two types of third-party litigation funding have emerged over the last several years: consumer litigation funding, which provides funds to a plaintiff with personal injury claims, typically for personal use rather than to fund their case, and commercial litigation funding, which typically involves advancing significant amounts to the plaintiff to pay litigation expenses or otherwise. Both types of funding are nonrecourse. This opinion addresses the ethical issues that arise for lawyers whose clients enter into such funding arrangements. The principal ethical issues are maintaining independent professional judgment and complying with the lawyer’s duty of confidentiality. If the lawyer has a material interest in the client obtaining funding, the lawyer must disclose that interest and seek the client’s informed written consent prior to advising on the subject. In commercial funding arrangements, the funding agreement will likely be negotiated. If the client asks the lawyer to represent him or her in such negotiations, the lawyer should consider whether he has the experience or learning required as well as whether the lawyer has any personal interest that creates a conflict. If so, the lawyer must address those by a written disclosure that describes the relevant circumstances and material risks and then obtain the client’s written consent. If the funder seeks client confidential information, the lawyer must advise the client of the risks of disclosure and obtain the client’s informed consent to disclose confidential information to the funder. The lawyer should also take appropriate steps to limit the risks to the client that the disclosure of such information will effect a waiver of attorney-client privilege or work product protection which may include having the funder sign a nondisclosure agreement, appropriate labeling of shared materials as confidential or taking other steps to maintain the confidentiality of the shared materials.
At its September 6, 2019 meeting and in accordance with its Rules of Procedure, the State Bar Standing Committee on Professional Responsibility and Conduct tentatively approved Proposed Formal Opinion Interim No. 14-0002 for a 90-day public comment distribution.
Proposed Formal Opinion Interim No. 14-0002
State Bar Standing Committee on Professional Responsibility and Conduct
January 14, 2020
Office of Professional Competence
State Bar of California
180 Howard St.
San Francisco, CA 94105