Hello everyone and welcome to this Ethics Alert which will discuss the Florida Bar Professional Ethics Committee’s recent (October 19, 2018) proposed Ethics Advisory Opinion 18-2, which states that lawyers can charge clients a reasonable and lawful rate of interest on advanced costs. The Notice in the 11/15/18 Florida Bar News with the proposed opinion is here: https://www.floridabar.org/news/tfb-news/?durl=%2Fdivcom%2Fjn%2Fjnnews01.nsf%2F8c9f13012b96736985256aa900624829%2F42e6a9582cd941f6852583320068815f
According to the proposed opinion: “The inquirer advances costs in personal injury cases. The inquirer’s contract provides that repayment of the costs is contingent upon obtaining a recovery in a client’s cases. The inquirer proposes to secure a non-recourse loan from an outside funding company to cover costs in personal injury cases. Interest on the loan would be owed to the funding company only if there is a recovery. The inquirer asks whether it is ethical to charge the client for the interest on the loan if there is a recovery and whether the interest may exceed 18.5% with the client’s written consent.”
After citing numerous other ethics opinions and cases in and outside of Florida, the opinion concludes that “the inquirer may charge a reasonable, lawful rate of interest on contingent costs with the client’s informed consent in writing.”
“Regarding the inquirer’s second question, the lawyer can only charge a lawful rate of interest and the amount must be reasonable. See, Rules 4-1.5(a) and 4-1.8(a), Rules Regulating the Florida Bar. Although the question of whether an interest rate in excess of 18.5% is lawful is outside the committee’s purview, the committee is of the opinion that it is an unreasonable rate of interest because the inquirer should be able to find a lower rate of interest. It is therefore impermissible for the inquirer to charge the client the proposed rate.”
“In summary, a lawyer may charge a lawful rate of interest on an advance of contingent costs from the time the costs are incurred by the lawyer provided the rate of interest is lawful, reasonable, in the best interest of the client, is disclosed to the client in writing at the earliest opportunity, and the client gives informed consent in writing.”
According to the November 15, 2018 Bar News Notice, “The (professional ethics) committee will consider any comments received at a meeting to be held in conjunction with the bar’s Winter Meeting. Comments must contain the proposed advisory opinion number and clearly state the issues for the committee to consider. A written argument may be included explaining why the Florida Bar member believes the committee’s opinion is either correct or incorrect and may contain citations to relevant authorities. Comments should be submitted to Elizabeth Clark Tarbert, Ethics Counsel, The Florida Bar, 651 E. Jefferson Street, Tallahassee 32399-2300, and must be postmarked no later than 30 days from the date of this publication.”
Bottom line: This proposed Florida Bar opinion concludes that Florida lawyers may charge clients interest on advanced costs; however, the interest charged must be reasonable and not exceed the lawful rate of interest.
Disclaimer: this Ethics Alert is not an advertisement, does not contain any legal advice, and does not create an attorney/client relationship and the comments herein should not be relied upon by anyone who reads it.
Joseph A. Corsmeier, Esquire
Law Office of Joseph A. Corsmeier, P.A.
29605 U.S. Highway 19, N., Suite 150
Clearwater, Florida 33761
Office (727) 799-1688
Fax (727) 799-1670