IN THE MATTER OF RULE 1.8 (e) , RULES OF PROFESSIONAL CONDUCT ORDER 

Within the last eight months, this Court has had occasion to 

consider and to act upon two applications for extraordinary relief 

under Rule 17, M.R.App.P., filed by an attorney for the purpose of 

allowing the attorney for an injured plaintiff to co-sign a bank 

loan made to the client for the payment of basic living expenses 

during the pendency of the case under circumstances where the 

attorney demonstrated that the client was suffering extreme 

financial distress attributable to the client's injuries. 

In each case the attorney sought an opinion of the State Bar 

Ethics Committee that by co-signing a bank loan to the client under 

the circumstances, the attorney would not be in violation of Rule 

1.8 (e) of the Rules of Professional Conduct. That Rule, in 

pertinent part, provides: 

A lawyer shall not provide financial assistance to a 

client in connection with pending or contemplated 

litigation, except that: (1) a lawyer may advance court 

costs and expenses of litigation, the repayment of which 

may be contingent on the outcome of the matter; and (2) 

a lawyer representing an indigent client may pay court 

costs and expenses of litigation on behalf of the client. 

The Ethics Committee took the position that it was not 

appropriate to render an opinion on the attorney's request beyond 

the Committee's interpretation of the Rule provided in Ethics 

Opinion 860723. In that opinion, the Committee answered in the 
negative the following question: "May an attorney borrow money in 

their firm name and then advance the loan proceeds to their clients 

during the pendency of the client's lawsuit or guarantee a loan 

which is made to the client during the pendency of a claim or 

litigation?" The Committee also subsequently indicated in 

correspondence with the attorney that it had 'wrestled with the 

issue of financial assistance to clients and recognizes that its 

current rule requires additional discussion. . .[and that the 

Committee] . . . would like the opportunity to review Montana's 

rule 1.8, in conjunction with the Montana Supreme Court and 

Montana's bar, to consider the need, if any, for revision." 

In connection with one of Rule 17 applications considered by 

this Court, (Cause No. 95-423). Professor David J. Patterson filed 

a brief amicus curiae, suggesting that Rule 1.8(e) should be 

revised in the manner hereinafter set forth. Patterson is a member 

of and special counsel for the Montana Bar Ethics Committee (having 

recused himself from any participation at the Committee in the 

particular case then at issue); he serves a liaison to the 

Commission on Practice; he teaches professional ethics to students 

at the University of Montana Law School; and he presents professional ethics seminars to attorneys. In that same case, the Ethics 

Committee took the position that the relief requested by the 

attorney in his Rule 17 application, if granted, would violate Rule 

1.8. 

In light of the facts and circumstances of the two Rule 17 

applications filed in this Court; on the basis of the authority, 
reasoning and argument set forth in Professor Pattersonls brief 

amicus curiae; and on the basis of the Ethics Committee's opinion 

860723 and its willingness to revisit Rule 1.8, we, likewise, 

conclude that it is appropriate to consider revisions to Rule 

1.8 (e) and to adopt a process that will enable this Court, the 

Ethics Committee, the Bar and other interested persons to adequately gauge and to intelligently comment upon the extent of the need 

for and the propriety and desirability of allowing attorneys to 

provide limited financial assistance to their clients during 

litigation under certain defined circumstances. 

We believe that proposing an amended version of Rule 1.8 (e) 

for comment by the Ethics Committee, the Bar and other interested 

persons in conjunction with a relatively short trial period during 

which this Court will entertain applications on a cases-by-case 

basis under Rule 17, using the criteria set forth in a proposed 

amended Rule, will best and most expeditiously accomplish those 

objectives while at the same time, and in the context of an actual 

set of criteria, provide this Court, the Ethics Committee, the Bar 

and interested persons with experience and data as to the propriety 

and desirability of and the extent of the need for revisions to 

Rule 1.8 (e) . 

Accordingly, pursuant to the authority granted this Court by 

Article 11, Section 2(3), of the Montana Constitution, 

IT IS ORDERED: 

1. That Rule 1.8 (e) of the Rules of Professional Conduct is 

temporarily suspended, pending further order of this Court, 
provided, however, that during the period of such suspension, a 

lawyer may not provide financial assistance to a client or make or 

guarantee a loan to a client in connection with pending or 

contemplated litigation that the lawyer is conducting for the 

client except as follows: 

a) Without further order of this Court, the lawyer may advance 

court costs and expenses of litigation, the repayment of which may 

be contingent on the outcome of the matter and the lawyer representing an indigent client may pay court costs and expenses of 

litigation on behalf of the client; and 

b) On a case-by-case basis, on good cause shown by application under Rule 17 M.R.App.P., and only on further order of this 

Court, the lawyer may make or guarantee a loan to the client on 

fair terms, the repayment of which to the lawyer may be contingent 

on the outcome of the matter, provided that the lawyer's application to this Court demonstrates that: (i) the loan is needed to 

enable the client to withstand delay in litigation that otherwise 

might unjustly induce the client to settle or dismiss a case 

because of financial hardship rather than on the merits; (ii) the 

loan is used only for basic living expenses; (iii) the client faces 

demonstrable financial hardship that relates to, and arises out of, 

the injuries and claims for which the lawyer is representing the 

client; and (iv) the lawyer has not promised, offered, or advertised the loan before being retained by the client; 

2. That after the expiration of the comment period referred 

to herein and upon further order of this Court, Rule 1.8 (e) be 
amended as follows: 

A lawyer may not make or guarantee a loan to a 

client in connection with pending or contemplated 

litigation that the lawyer is conducting for the client, 

except that the lawyer may: 

(1) make or guarantee a loan covering court costs 

and expenses of litigation, the repayment of which to the 

lawyer may be contingent on the outcome of the matter; 

and 

(2) make or guarantee a loan on fair terms, the 

repayment of which to the lawyer may be contingent on the 

outcome of the matter, if: (i) the loan is needed to 

enable the client to withstand delay in litigation that 

otherwise might unjustly induce the client to settle or 

dismiss a case because of financial hardship rather than 

on the merits; (ii) the loan is used only for basic 

living expenses; (iii) the client faces demonstrable 

financial hardship that relates to, and arises out of, 

the injuries and claims for which the lawyer is representing the client; and (iv) the lawyer does not promise, 

offer, or advertise the loan before being retained by the 

client; and 

3. That the Bench and Bar of this State and any other 

interested persons or entities are granted 150 days from the date 

of this order in which to prepare, file and serve written comments, 

suggestions or criticisms regarding any portion of the proposed 

amended Rule and whether, and if so to what extent, 5 37-61-408, 

MCA, may be implicated by the proposed amendments to the Rule. We 

specifically invite comments, suggestions and criticisms from the 

Ethics Committee, and we reserve the possibility of ordering oral 

argument on the proposed amendments to the Rule after the comment 

period has expired; and 

4. That the Clerk of this Court is directed to prepare and 

mail copies of this Order to each Clerk of the District Court of 

this State for examination by any interested person, to the Ethics 
Committee .and to the State Bar of Montana with the request that a 

copy of this Order be published in the January 1996 issue of 

the Montana Lawyer. 

Dated this day of November. 1995.