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Ethics Opinions from the Bar Association of San Francisco

INFORMAL OPINION 1973-16

An attorney whose client is out of the country and cannot be reached may post and guarantee a fidelity bond on his behalf in pending litigation despite his acquisition of an interest potentially adverse to the client in view of the exigencies of protecting the client's immediate interest.

QUESTION:

May an attorney, whose client is out of the country and cannot be reached, post and guarantee a fidelity bond on behalf of the client?

OPINION:

He may. Two separate ethical considerations are involved: (1) whether the cost of posting the bond may properly be paid by the attorney; and (2) whether the attorney's guarantee of the bond would constitute an acquisition of an interest adverse to the client.

With respect to the first consideration, Rule 3a of the California Rules of Professional Conduct prohibits the payment or agreement to pay by an attorney of "medical, hospital or nursing bills or other personal expenses incurred by or for a client," but specifically provides,

"This rule shall not prohibit a member: (3) from advancing the costs of prosecuting or defending a claim or action. Such costs within the meaning of this subparagraph (3) include all taxable costs or disbursements, costs of investigation and costs of obtaining and presenting evidence."

DR 5-103(B) of the American Bar Association's Code of Professional Responsibility similarly provides:

"While representing a client in connection with contemplated or pending litigation a lawyer shall not advance or guarantee financial assistance to his client, except that a lawyer may advance or guarantee the expenses of litigation, including court costs, expenses of investigation, expenses of medical examination, and costs of obtaining and presenting evidence provided the client remains ultimately liable for such expenses."

Ethical consideration EC 5-8 of the Code of Professional Responsibility states:

"A financial interest in the outcome of litigation results if monetary advances are made by the lawyer to his client. Although this assistance generally is not encouraged, there are instances when it is not improper to make loans to a client--for example, the advancing or guaranteeing of payment of the costs and expenses of litigation by a lawyer may be the only way a client can enforce his cause of action,9 but the ultimate liability for such costs and expenses must be that of the client."

Footnote 9 after the word "action" is a citation to Rule 3a of the California Rules of Professional Conduct.

Based on the foregoing, nothing appears to prohibit the attorney from advancing the necessary costs of posting the bond on the ground that they represent costs or expenses of prosecuting or defending a claim or action, for which the client should be held ultimately liable.

As for the second ethical consideration, DR 5-103(A) provides:

"A lawyer shall not acquire a proprietary interest in the cause of action or subject matter of the litigation he is conducting for a client. . . . "

EC 5-2 & 3 also provide that after accepting employment, a lawyer should carefully refrain from acquiring a property right or assuming a position that would tend to make his judgment less protective of the interests of the client or which would adversely affect his professional judgment in the representation of his client. Rule 4 of the California Rules of Professional Conduct similarly states, "A member of the State Bar shall not acquire an interest adverse to a client".

On the other hand, a lawyer also has a duty to represent his client zealously and to exercise independent professional judgment on behalf of the client. Canons 5 and 7 of the American Bar Association Code of Professional Responsibility. In the exercise of his professional judgment on those decisions which are for his determination in the handling of a legal matter, a lawyer should always act in a manner consistent with the best interests of his client. EC 7-9 of the A.B.A. Code of Professional Responsibility. in areas of legal representation not affecting the merits of the cause, the subject matter of the action or substantially prejudicing the rights of a client, a lawyer is entitled to make decisions on his own. EC 7-7 of the A.B.A. Code of Professional Responsibility. 6 Cal. Jur.2d Rev., Attorneys at Law, §67.

If the fidelity bond is required to be posted by statute due to the nature of the cause of action or the particular facts of the case, then any likely adverse affect on the lawyer's representation of the client due to his personal guarantee of the bond would be outweighed by his duty to safeguard the interests of his client. Also, if the bond is required by statute the attorney's personal guarantee in the absence of his client would appear similar to a guarantee of possible expenses of litigation.

Assuming that the posting of the fidelity bond is discretionary and that the decision to do so should normally be made by the client, in the absence of the client to make the decision, the attorney's responsibility to exercise his independent judgment to safeguard the interests of his client would appear paramount to any likely adverse affect on his representation of the client should he determine that the posting and guarantee of the bond is in the best interest of his client.

All opinions of the Committee are subject to the following disclaimer:
Opinions rendered by the Ethics Committee are an uncompensated service of The Bar Association of San Francisco. Opinions are advisory only, and no liability whatsoever is assumed by the Committee or The Bar Association of San Francisco in rendering such opinions, and the opinions are relied upon at the risk of the user thereof. Opinions of the Committee are not binding in any manner upon the State Bar of California, the Board of Governors, any disciplinary committee, The Bar Association of San Francisco, or the individual members of the Ethics Committee.

In using these opinions you should be aware that subsequent judicial opinions and revised rules of professional conduct may have dealt with the areas covered by these ethics opinions.

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