Board warns about advance funding Senior Editor After an Ohio appellate court found an advance funding arrangement was both a loan and usurious, a Bar Board of Governors committee wants more time to study a proposed ethics opinion on advance funding in personal injury cases.But both the board and the Board Review Committee on Professional Ethics took action to let lawyers know about the Ohio case if Bar members become involved in third-party loans to their clients.Board members, at their November 30 meeting, discussed whether they should advise Bar members to avoid any participation in such loans. But they finally voted to accept the BRCPE recommendation to allow it to continue studying the issue – in light of the Ohio decision – until the board’s February 1 meeting.In the meantime, the committee recommended telling inquiring lawyers about the Ohio case as well as the pending Proposed Advisory Opinion 00-3, already adopted by the Professional Ethics Committee and pending on appeal at the board.That opinion says lawyers may tell clients about advanced funding companies, which offer loans to personal injury clients in return for part of the hoped-for winnings in the case. It also says lawyers may tell clients the names of specific companies, but may not issue a letter of protection to the advance funding company, although they can honor such a letter executed by the client.The BRCPE had recommended approving the opinion, with a change allowing lawyers to issue letters of protection. The board considered the issue at its October meeting, but tabled the issue to do more research, and in the meantime the Ohio court acted.“I think it ought to give us some pause before we go any further,” said BRCPE Chair Richard Tanner of the Ohio ruling. “What your committee is suggesting to you is that we sit tight, temporarily.”In the meantime, he said, the Bar’s ethics staff will tell inquiring lawyers “there is now an Ohio appellate court opinion finding these advance funding loans improper and we’re not in a position to offer advice at the moment.”Bar Ethics Counsel Elizabeth Tarbert said she planned to tell inquiring lawyers “about the Ohio case and tell them we can’t tell them if this is a legal transaction. If this is a grey area, which it now appears to be, we would tell them they could be at risk [if they participated in the loan].”She said lawyers would also be told about the PAO and its prohibition against issuing a letter of protection, and also that the opinion is still pending before the board.Board members expressed several concerns. Some continued to have reservations about the advance funding area, citing the high interest – as much as 200 percent or more – on the transactions. Some worried that lawyers acting in good faith might participate in the loans and then possibly face Bar disciplinary actions if PAO 00-3 eventually holds they are improper. Others said the Bar shouldn’t be involved in the area, even if the practice is distasteful, if the loans are legal in Florida.“I think we can’t go to the extent that we think this is usurious and we don’t think they should be doing this, because we are on real thin ice,” said board member Jesse Diner. “The red flags are up. I think that’s the best we can do.”“I also don’t think we should be prosecuting any lawyer who calls and gets information from the Bar and based on that information decides to go further,” he added.“If it’s not illegal in Florida, it’s really not our position to say it is,” said board and BRCPE member Louis Kwall. “It is a grey area. While we agree for the most part we don’t like it being done, if it’s not unlawful, we shouldn’t be telling our lawyers not to engage in it. What we’re saying is we’re not absolutely sure what the outcome is going to be. It [the Ohio case] will be brought to lawyers’ attention and you can make up your own mind.”Board member Jennifer Coberly said it’s important for the Bar to get a position because if advance funding arrangements are found to be usurious, there can be criminal as well as civil and disciplinary consequences for lawyers. But, she added, “Until we make up our minds, we shouldn’t be prosecuting people in the interim who do it.”Tanner emphasized that the BRCPE is working as quickly as it can on the issue and expects to make a recommendation at the board’s February 1 meeting in Tampa.“The BRCPE is not walking away from this. We are stepping back to see if we can make a more appropriate decision,” he said.Added Bar President Terry Russell, “I sense a certain degree of urgency here to deal with this issue.”The Ohio decision came from the state’s Ninth District Court of Appeals in a unanimous opinion from a three-judge panel. The ruling was issued October 31.The case involved a Nevada-based advance funding company and its Ohio subsidiary that together gave an Ohio woman, who was trying to collect uninsured motorist damages from an insurance company, a total of $7,000. The contracts call for a repayment, depending on when the case settled and repayment was made, of not less than 280 percent on most of the transaction and not less than 180 percent on the remainder. The actual repayment amount was $16,800 if repaid in 12 months, $22,200 if repaid in 18 months, and $27,600 if repaid in 24 months. The woman’s attorney advised her against entering into the contracts.The underlying case eventually settled for $100,000.The woman then filed suit arguing the companies committed unfair and deceptive loan practices, and further that because the arrangements violated Ohio law, no repayment was necessary. The two advance funding companies replied that the arrangements were “contingent” financing and not loans and thus the contracts were legal.The trial court ruled the advance funding was a loan that violated the state’s usury laws because there was little likelihood the companies wouldn’t be repaid. It ordered the woman to repay the loans at 8 percent interest.The appellate court agreed the deal constituted an usurious loan. But it also found the companies violated Ohio law by not being licensed to make small loans and hence under that state’s law no repayment was required.The opinion noted that the owner of the Ohio company carefully evaluated the case before making the loans, including conducting a database search of similar cases. Further, about the time the first installment of the loan was made, the insurance company made a settlement offer and had raised that offer by the time the second installment was made.“The evidence presented at trial demonstrated that the contracts were loans because no real probability existed that non-payment would occur,” the opinion said. “The trial court’s judgment that the contracts are loans is supported by competent and credible evidence.”The case is Rancman v. Interim Settlement Funding Corp. , case no. 20523, 2001WL 13339487 (Ohio App. 9 Dist.). An Internet link to the opinion, in WordPerfect or Microsoft Word formats, is at http://www.sconet.state.oh.us/District_Courts/AllListing/List.asp?DCN=9. December 15, 2001 Gary Blankenship Senior Editor Regular News Board warns about advance funding
Clonmel Rower Daire Lynch has come second in the men’s senior single sculls at national championships.He was second only to Olympic silver medalist, Skibbereen rower Paul O’DonovanDaire finished his race in 7 minutes 6.269 seconds.