"Litigation Expenses" -- Who Is Responsible for Them,
and When May the Responsibility be Shifted?
By Sean T. O'Neil

In the ABA Model Rules of Lawyer Conduct, Rule 1.8(e) generally forbids attorneys from giving a client financial assistance in litigation. The Rule makes an exception for court costs and the "expenses of litigation," and states that as between the attorney and the client, the advanced costs and expenses ultimately are the client's responsibility. However, the Rule also provides that indigent clients are not obliged to repay the attorney for the advanced costs and expenses.

Attorneys who practice plaintiff's personal injury law regularly address their clients' medical expenses. What if the client needs surgery but is unable to pay for it? If the plaintiff and his attorney agree that the surgery cost is a "litigation expense," may the attorney advance the cost? In Ethics Opinion 2000-3 (March 31, 2000), the Ethics Committee of the State Bar of South Dakota confronted this issue. The Bar opined that while Rule 1.8(e) allows an attorney's payment of "expenses of litigation" on a client's behalf, such expenses do not include payment for the client's surgery. The Bar stated that "expenses of litigation" include only expenses that are necessary to prosecute the action, and the surgery at issue was not necessary to such prosecution. Regarding the agreement to call the surgical cost a "litigation expense," the Bar said that the attorney and the client could not agree that a payment is "something other than what it is." The Bar cited similar opinions issued in Arizona, Illinois and Rhode Island.

Plaintiff's personal injury attorneys also frequently incur expenses for consultants and expert witnesses. Imagine that a personal injury plaintiff retains an attorney, and under that retainer, the attorney hires a liability consultant. The consultant later advises the attorney that the case lacks merit. If the attorney then withdraws from representation, and tells the consultant to stop working, who is responsible for the consultant's fee? May the attorney properly pass the fee along to the client? In Ethics Opinion 2000-1 (March 31, 2000), the State Bar of South Dakota again referred to Rule 1.8(e), and determined that unless the attorney and consultant agreed that the attorney would not be responsible for the consultant's fees, those fees remain the attorney's responsibility. The Bar also emphasized that Rule 8.4(d) prohibits an attorney's conduct that is "prejudicial to the administration of justice," and that attorneys would create such prejudice if they failed to pay the fees of the consultants they engage.

ALPS Comment -- These two ethics opinions reinforce sound practices regarding litigation expenses. If an attorney wants her client to be responsible for expert or consultant fees, she should memorialize such responsibility in two places: (1) the retainer agreement between the attorney and her client; and (2) the attorney's engagement letter to or agreement with the consultant or expert. Further, "litigation expenses" include only those costs necessary to prosecute the lawsuit. Thus, an attorney may not pay her client's direct medical expense or other non-legal bill, and then try to justify such payment simply by using the label "litigation expense."

Attorneys who adhere to the guidance offered by these Ethics Opinions will help avoid future financial disputes with their clients, which in turn will help avoid malpractice claims.