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The Florida Bar has withdrawn a proposed legal ethics opinion that would have given attorneys a green light to help clients obtain cash advances from litigation funding companies while awaiting the resolution of lawsuits. The Bar’s professional ethics committee took the unexpected action last Friday after the Daily Business Review reported that the Florida Department of Banking and Finance is investigating whether litigation funding companies are charging interest rates that exceed the state’s rate ceiling. The committee, meeting during the Bar’s midyear conference at the Hyatt Regency Hotel in Miami, initially killed the proposed advisory opinion, which it had approved last June. Then, after entreaties from an Ocala attorney who operates a litigation funding company, it revived the opinion and tabled the issue, forming a subcommittee to study the issue further. Litigation funding companies, which have spread across the country in the last several years and recently entered the Florida market, advance money to plaintiffs and their attorneys, mostly in personal injury cases, to cover personal, medical and legal costs. These companies provide “nonrecourse” loans, on which they recover the principal and interest only if the plaintiff wins a judgment or settlement. Such companies have raised the ire of some attorneys and regulators due to the high interest rates they charge — in some cases 20 percent a month. The Department of Banking and Finance is looking into whether the rates charged by these companies violate the state’s anti-usury law. Florida caps interest rates on loans at 18 percent annually. Those who charge higher rates face civil or criminal enforcement action. Last June, the committee voted 19-9 in favor of a proposed opinion making it ethically acceptable for an attorney, with the informed consent of a client, to provide information about the client’s case to a litigation funding company. The opinion also would have allowed an attorney to sign a letter assuring the funding company that the advance money would be repaid if the client’s suit was successful. In its original ethics opinion, the committee sidestepped the issue of whether litigation funding violates anti-usury law. But Gainesville attorney Steven Bagen asked the committee to reconsider the opinion, based on his experience with a litigation funding company that proposed to charge his client more than 200 percent interest. Last week, committee members expressed discomfort about supporting potentially illegal loan practices, citing the Review article. “We’re talking about companies that provide loans with usurious interest rates to a lawyers’ client,” said Gary Lesser, a West Palm Beach lawyer who is on the committee and voted against the proposed opinion. “It’s a situation a lawyer simply should not be in.” Al J. Cone, an Ocala, Fla., personal injury attorney who operates Advance Settlement Funding, which advances plaintiffs money at an interest rate of 7.5 percent a month, admitted to the committee that some funding companies charge excessive interest rates. But he argued that such rates are not usurious under state law because repayment is contingent on the client winning the case. He cited Florida appellate and federal district court rulings that he said supported his view. He also argued that companies like his are needed because many plaintiffs who file meritorious lawsuits against big corporations and insurers have pressing expenses and can’t afford drawn-out legal battles. Attorneys are prohibited from lending money directly to their clients. “Overwhelmingly, courts have found the service we provide permissible if done the right way,” Cone said. In response to his argument, the ethics committee revived the defeated ethics opinion, tabled it, and formed a subcommittee to study the matter. The committee includes Lesser, assistant state attorney Emmett Abdoney of Tampa, Miami solo attorney Frank Taddeo and Jason Korn, an associate in the 191-attorney Naples firm Cummings & Lockwood.

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