The Rules of Professional Responsibility and Legal Finance: A Status Update

Legal finance occurs when strangers fund litigation for profit. Traditionally looked upon with suspicion in the common law, and limited by the doctrines of champerty and maintenance, legal finance is now a thriving part of the American legal landscape. Legal finance has been promoted as a solution to the access-to-justice problems facing working and middle class Americans, as well as a new asset class for Wall Street. At the center of legal finance, however, are lawyers – not the lawyers who write the contracts for the financing – but the lawyers for the cases being financed.Over the past decade, lawyers, courts, and bar committees have grappled with the ethical risks for lawyers whose clients use legal finance. This Article reviews how the law of lawyering – and especially the rules of professional responsibility – apply to the most common forms of legal finance. It tests the relevant rules, reviews the caselaw, and evaluates the ethics opinions which address lawyers whose clients use legal finance. The Article provides a complete review of the current landscape facing lawyers and it offers guidance for how the law of lawyering should approach “lawyer-directed” legal finance, where lawyers finance their clients’ matters by selling contingent interests in their unearned fees. The Article provides a comprehensive guide for lawyers seeking to respond ethically to the rapidly growing market for legal finance