Informal Opinion Number: 20030022

Rules: 4-8.4
Maintaining the Integrity of the Profession
Summary: loan to attorney to fund litigation expenses

QUESTION: Attorney’s firm proposes to borrow money from a non-lawyer for the purpose of funding expenses in mass tort litigation. The loan will be on a non-recourse basis. The firm’s duty to repay would be based on successful prosecution of the cases as a whole, but not on the recovery of any individual case.
ANSWER: Generally, it is permissible for the law firm to borrow money from a third party to fund litigation. However, it is not permissible for the repayment of the loan to be based on the outcome of the lawsuit. An attorney cannot engage in conduct that would amount to champerty or maintenance.

The elements of champerty are “(1) an agreement by one with no interest in a lawsuit of another (2) to support or maintain the litigation at his own expense (3) in exchange for a part of the litigated matter in the event of a successful conclusion of the cause.” [Schnabel v. Taft Broadcasting Company, Inc.], 525 S.W.2d 819, 825 (Mo. App. W.D. 1975). Maintenance of litigation requires proof that a non-party to a suit maintains or assists either party, with money or otherwise, in prosecuting or defending the suit. Id. at 823.

[Macke Laundry Serv. Ltd. v. Jetz Serv.], 931 S.W.2d 166 (Mo. App. W.D. 1996).

Informal Opinions are ethics advisory opinions issued by the Office of Legal Ethics Counsel to members of the Bar about Rule 4 (Rules of Professional Conduct), Rule 5 (Complaints and Proceedings Thereon), and Rule 6 (Fees to Practice Law) pursuant to Missouri Supreme Court Rule 5.30(c). Written summaries of select Informal Opinions are published for informational purposes as determined by the Advisory Committee of the Supreme Court of Missouri pursuant to Rule 5.30(c). Informal opinion summaries are advisory in nature and are not binding. These opinions are published as an educational service and do not constitute legal advice.

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