Legal Ethics Opinion No. 1441

Acquiring an Interest in Client's Matter--Conflict of Interest:
Attorney Making Loans to Finance Company Which Makes Loans to Attorney's Personal Injury Clients

You have presented a hypothetical situation in which an attorney
(A), who represents personal injury plaintiffs, occasionally
refers clients to Corporation X (X) which is a Virginia
corporation engaged in extending credit to injured persons while
they are awaiting resolution of their tort claims to recover
damages for their injuries.  The credit line is evidenced by a
personal note from the plaintiff secured by an assignment of the
proceeds from the claim and is due and payable in full at the
time of settlement.  The plaintiff's attorney does not guarantee,
nor obligate himself or his firm in any way, for repayment of the
credit extended to his client, but he is obligated, however, to
acknowledge the assignment and disburse to X the funds to repay
the note from the proceeds of the settlement.  You have
additionally indicated that plaintiff's attorney may be asked to
oversee the execution by his client of the credit documents from
X. Attorney A also furnishes information to X relative to the
claim, with his client's authorization, which information later
becomes the basis for the credit determination.  Attorney A
receives no fee or other compensation from X for these 
services, nor will he either provide any legal advice or services
to X or have any input into X's decision with regard to the
establishment of the credit limit.

A desires to lend money to X and you have indicated that no
portion of those funds being loaned to X by A will be earmarked
for A's clients, nor will A have any influence upon X's decision
as to how any of the funds are utilized.  Furthermore, none of
X's receivables from A's clients will be assigned to A as
security for his loan nor will A receive any corporate stock or
other form of ownership interest in X.   You indicate that the
only benefit from the loan which A will receive is the payment of
interest which will be equal to that which X would pay to any
other lender under similar circumstances.  Finally, A will not be
a member of X's board of directors or advisory board.  Finally,
you indicate that all such exclusions from any direct or indirect
management, control, or influence over the operations and
business decisions of X will also extend to A's family, other
relatives, and members and employees of his firm.   

You have asked the committee to opine whether, under the facts of
the inquiry, it would be proper for A to make such a loan to X
and whether such a loan to X made by A's spouse or A's employees
would be proper as to A.

The appropriate and controlling Disciplinary Rules related to
your inquiry are DR 5-l03(A) which mandates that a lawyer shall
not acquire a proprietary interest in the cause of action or
subject matter of litigation he is conducting for a client; DR
5-103(B), which provides that a lawyer representing a client in
contemplated or pending litigation shall not advance or guarantee
financial assistance to his client, except that the lawyer may
advance or guarantee the expenses of litigation, provided the
client remains ultimately liable for such expenses; and DR
5-l0l(A), which precludes a lawyer from accepting employment,
absent the consent of his client after full disclosure, if the
exercise of his professional judgment on behalf of his client may
be affected by his own financial, business, property, or personal
interests.

The committee has previously opined that an attorney may persuade
a finance company to loan funds to the attorney's personal injury
client and may honor the finance company's lien on the client's
settlement proceeds, as long as the attorney did not guarantee or
cosign the loan.  See LEO #ll55.  The committee has also opined
that where an attorney has persuaded a finance company to loan
funds to the attorney's personal injury client, it is not
improper for the attorney to receive completed but unsigned loan
documents, supervise his client's execution of the documents, and
then return the documents to the finance company. See LEO #1379.  

The committee believes that A's loan to X is thus a means by
which A has provided indirectly what he may not provide directly,
i.e., financial assistance to his client in connection with
litigation.  Furthermore, the  committee views such an
arrangement as a means by which A has also acquired indirectly
what he may not acquire directly, i.e., an interest in the
client's litigation matter.  Thus, the committee is of the
opinion that, despite the controls you propose, it would be
improper and violative of Disciplinary Rules 5-l03(A) and (B) and
5-l0l(A) for 
A, his spouse or employee, to make a loan to X Corporation unless
X agrees to make no loans to A's clients during A's
representations of those individuals or entities.

Committee Opinion
January 6, 1992