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In re: K.A.H. (11/27/98), 967 P 2d 91
Notice: This opinion is subject to correction before publication in
the Pacific Reporter. Readers are requested to bring errors to the attention of
the Clerk of the Appellate Courts, 303 K Street, Anchorage, Alaska 99501, phone
(907) 264-0608, fax (907) 264-0878.
THE SUPREME COURT OF THE STATE OF ALASKA
IN THE MATTER OF )
THE MINOR CHILD ) Supreme Court No. S-7761
)
) Superior Court Nos.
K.A.H., ) 3KO-93-45/55 PR
)
d.o.b. 9/21/85 ) O P I N I O N
)
______________________________) [No. 5049 - November 27, 1998]
Appeal from the Superior Court of the State of
Alaska, Third Judicial District, Kodiak,
Joan M. Woodward, Judge.
Appearances: Gerald W. Markham, Kodiak, for
Appellant. Robert H. Wagstaff, Anchorage, Richard D. Hailey,
President, Association of Trial Lawyers of America, and Jeffrey R.
White, Associate General Counsel, Association of Trial Lawyers of
America, Washington, D.C., for Amicus Curiae the Association of
Trial Lawyers of America. Stephen J. Van Goor, Bar Counsel, Alaska
Bar Association, Anchorage, for Amicus Curiae Alaska Bar
Association.
Before: Matthews, Chief Justice, Compton,
Eastaugh, Fabe, and Bryner, Justices.
FABE, Justice.
I. INTRODUCTION
Alaska Rule of Professional Conduct 1.8(e) prohibits
lawyers from providing clients with financial assistance other than
court costs and expenses of litigation. Gerald W. Markham, counsel
in a wrongful death suit, advanced his client funds for living
expenses and, following settlement of the case, sought
reimbursement from the settlement funds. The superior court denied
this request. Markham appeals, arguing that the loans were
permissible under Rule 1.8(e), or, if not permissible, that the
rule unconstitutionally denies or infringes upon access to the
courts. Because we conclude that Rule 1.8(e) prohibits lawyers
from advancing living expenses to clients and does not
unconstitutionally interfere with court access, we affirm.
II. FACTS AND PROCEEDINGS
In 1993 P.K.H. was killed while working as a seaman on a
commercial crabbing vessel in the Bering Sea. He left as his sole
heir K.A.H., who was seven years old at the time. S.H., K.A.H.'s
mother and P.K.H.'s former wife, was appointed as the personal
representative of P.K.H.'s estate.
S.H., represented by Gerald W. Markham, filed a wrongful
death action against P.K.H.'s employer under the federal Jones Act.
[Fn. 1] By 1994 S.H.'s financial situation was bleak. Markham
arranged for an accountant, Andy Lundquist, to loan several hundred
dollars to S.H. over the course of six months on the condition that
S.H. and Markham would repay Lundquist from the proceeds of the
wrongful death suit. Despite the loans, S.H. and her two daughters
were evicted from their residence and, according to Markham, were
living in their car in the summer of 1994. After a brief move to
Wisconsin to live with S.H.'s father, S.H. was advised by counsel
that all hopes for pre-litigation settlement negotiations in the
wrongful death case had ended and that S.H.'s presence in Alaska
was needed to locate P.K.H.'s wage records and photographs, and to
give her deposition. S.H. asked one of Markham's associates to
loan her money for airfare from Wisconsin and rent for an apartment
in Kodiak. The associate wired S.H. $5,025.
At some point in 1995, S.H. again sought a loan from
Markham to "get her by." Markham asked Lundquist to make the loan,
and Lundquist wrote a check for $1,000 to S.H. from Markham's
account. Additionally, during the course of his representation,
Markham advanced small amounts of money to S.H. for items such as
"cigarettes and cosmetics." In sum, it appears that Markham's
advances to S.H. and loans guaranteed by him totaled over $6,000:
$5,025 in connection with S.H.'s return from Wisconsin, over $1,000
to defray ordinary costs of living, and several hundred dollars
loaned by Lundquist and guaranteed by Markham.
The wrongful death suit was eventually settled in 1995
for $665,000. At a January 1996 hearing, the standing master
approved Markham's one-third contingency fee of $216,692.63 and
litigation costs of $15,012.10. But the court refused to allow use
of settlement funds to reimburse Markham for the loans made to S.H.
Markham moved for reconsideration, arguing that advances for living
expenses should be allowed under Rule 1.8(e). In February 1996 the
standing master recommended granting Markham an additional $3,050
to reimburse him for costs. This amount represented the cost of
airfare to fly S.H. and her daughters back from Wisconsin and other
costs of litigation. Markham continued to argue that he was
entitled to be reimbursed for the remainder of the loans. The
court approved the standing master's recommendation and noted that
counsel "should ask the Supreme Court to reexamine Professional
Conduct Rule 1.8 if he finds it inappropriate. The court will not
consider a challenge to the rule absent an adversary proceeding."
Markham appeals the court's refusal to allow his reimbursement for
his advances of living expenses to S.H.
Because there is no appellee in this matter, we asked the
Alaska Bar Association to file an amicus curiae brief in response
to Markham's arguments. The Association of Trial Lawyers of
America (ATLA) also filed an amicus curiae brief. We thank them
both for their valuable assistance.
III. DISCUSSION
A. Alaska Rule of Professional Conduct 1.8(e)
1. Standard of review
The superior court concluded that Rule 1.8(e) prevented
it from allowing Markham's reimbursement for humanitarian loans to
S.H. Whether Rule 1.8(e) prohibits such loans presents a question
of law. We review questions of law de novo. [Fn. 2] "Our duty is
to adopt the rule of law that is most persuasive in light of
precedent, reason, and policy."[Fn. 3]
2. Rule 1.8(e) prohibits advances for living expenses.
We must first decide whether Markham's advances to S.H.
for living expenses were permissible under Alaska Rule of
Professional Conduct 1.8(e). Interpretation of Rule 1.8(e)
presents a question of first impression in Alaska. Markham asserts
that the rule does not forbid an attorney from making loans for
living expenses to a client after the attorney has been retained.
The Alaska Bar Association responds that the plain language of Rule
1.8(e) expressly prohibits a lawyer from providing financial
assistance to a client other than court costs and expenses of
litigation.
The Model Rules of Professional Conduct were adopted by
the American Bar Association in 1983. [Fn. 4] We promulgated the
Alaska Rules of Professional Conduct in 1993, rescinding the Code
of Professional Responsibility in its entirety. [Fn. 5] The Alaska
rules adopt Model Rule 1.8(e) verbatim. Rule 1.8(e) states that a
lawyer may not provide financial assistance to a client in
connection with litigation other than to advance court costs and
litigation expenses:
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.[ [Fn. 6]]
The rule's language unambiguously forbids lawyers from
advancing living expenses to clients. The overwhelming weight of
authority on the subject supports this view. The Annotated Model
Rules state unequivocally that "[t]he most common violation under
Rule 1.8 and its Model Code counterpart occurs when a lawyer
advances living expenses to a client while litigation is pending."
[Fn. 7] As The Law of Lawyering recounts, the American Bar
Association House of Delegates rejected a proposed final draft of
the model rules that would have allowed lawyers to advance clients
funds for living expenses under Rule 1.8(e), and such advances
"were once again prohibited altogether."[Fn. 8] And Modern Legal
Ethics explains that the rules "implicitly but clearly"prohibit
loans for living expenses, even in cases involving especially needy
clients:
The most common instance in which a lawyer
might be asked by a client for assistance is an instance in which
the prohibition rather clearly applies. That is when personal
injury clients, both injured and possibly made impecunious by the
defendants' tortious conduct, are unable to survive prolonged
litigation without financial assistance. Defendants, aware of the
economic pressure burdening unaided plaintiffs, have every economic
incentive to prolong the litigation with frivolous motions and
discovery. At least on their face, both the Code and the Model
Rules prohibit assistance no matter how needful the client. And so
have gone most of the decisions under the Code.[ [Fn. 9]]
Accordant with this position, the vast majority of courts
interpreting Rule 1.8(e) and its precursor have concluded that
lawyers are prohibited from advancing living expenses to clients.
[Fn. 10] Although the Supreme Courts of Louisiana and Florida have
reached the opposite conclusion, [Fn. 11] courts in other states
have not adopted their reasoning, [Fn. 12] and we find their
analysis unpersuasive.
In consideration of the rule's clear ban on lawyers
providing financial assistance to clients in connection with
litigation, except in the circumstances set forth in subsections
(1) and (2), and in light of the virtual consensus among courts and
commentators, we hold that Rule 1.8(e) does not permit lawyers to
advance living expenses to clients.
3. Rule 1.8(e) does not unconstitutionally deny or
impede access to the courts.
Markham next argues that Rule 1.8(e) unconstitutionally
denies or interferes with a plaintiff's access to the courts to
enforce federal rights under the Jones Act. In support of this
argument, ATLA contends that the rule imposes financial hardship on
plaintiffs that forces them to settle disputes rather than endure
the potentially prolonged litigation process.
We recognized the general right of access to civil courts
in Bush v. Reid. [Fn. 13] In that case, based on due process and
equal protection concerns, we invalidated a statute that precluded
a person on parole from bringing a civil action. [Fn. 14] Our
analysis relied on Boddie v. Connecticut, [Fn. 15] in which the
United States Supreme Court held that indigents could not be
deprived of access to divorce courts by the imposition of filing
fees that they were unable to pay. [Fn. 16] We again considered
the right of access to the civil courts in Patrick v. Lynden
Transport, Inc. [Fn. 17] At issue was a statute requiring out-of-
state plaintiffs to post a security bond for anticipated costs and
attorney's fees as a condition of maintaining a suit in Alaska.
[Fn. 18] The "effect of the statute [was] to discriminate between
those nonresidents who can afford to post a bond for costs and
attorney fees and those nonresidents who cannot, as well as to
discriminate between nonresidents and residents generally."[Fn.
19] We concluded that the statute violated equal protection
because it unreasonably restricted access to the courts. [Fn. 20]
These cases are distinguishable from the case at hand.
First, as we noted in Patrick, the holding in Boddie is narrow [Fn.
21] -- the decision turned on the fundamental nature of marriage
and the state's monopoly on the means for obtaining a divorce. [Fn.
22] In a later decision, "the Court clarified that a
constitutional requirement to waive court fees in civil cases is
the exception, not the general rule."[Fn. 23] The Supreme Court
has further explained that it has "consistently set apart from the
mine run of cases those involving state controls or intrusions on
family relationships."[Fn. 24] No such fundamental family concern
is at stake in this case.
Second, whereas Bush, Boddie, and Patrick involved direct
impediments to court access, this case does not. The statute in
Bush flatly prohibited parolees from filing suit. The statutes in
Boddie and Patrick imposed court fees that denied indigent
plaintiffs access to the courts. Such fees have been characterized
as "insurmountable barrier[s] to filing suit."[Fn. 25] By
contrast, nothing in Rule 1.8(e) expressly prohibits potential
plaintiffs from filing suit or requires plaintiffs to pay for court
access. Indeed, Rule 1.8(e)(2) expressly permits a lawyer to pay
the court costs and litigation expenses of indigent clients,
presumably so that they will not be denied access to the courts due
to their indigency. This provision squarely addresses the concerns
expressed in the Bush and Patrick cases.
Markham and ATLA also rely on Brotherhood of Railroad
Trainmen v. Virginia. [Fn. 26] Trainmen is inapposite, however,
because it dealt with First Amendment associational rights, which
are not at issue here. In Trainmen, a union had a practice of
advising injured members and their families to obtain legal advice
before settling their claims. [Fn. 27] The union also recommended
particular lawyers to handle their cases. [Fn. 28] As a result,
legal employment was channeled to lawyers approved by the union.
[Fn. 29] The state bar association obtained an injunction to bar
this practice. [Fn. 30] The Supreme Court ruled in favor of the
union, concluding that its activities were protected by the First
Amendment right of association. [Fn. 31] The Court explained that
the state could neither interfere with these associational rights
nor infringe upon the right to be fairly represented by counsel:
A State could not, by invoking the power to
regulate the professional conduct of attorneys, infringe in any way
the right of individuals and the public to be fairly represented in
lawsuits authorized by Congress to effectuate a basic public
interest. Laymen cannot be expected to know how to protect their
rights when dealing with practiced and carefully counseled
adversaries, and for them to associate together to help one another
to preserve and enforce rights granted them under federal laws
cannot be condemned as a threat to legal ethics. The State can no
more keep these workers from using their cooperative plan to advise
one another than it could use more direct means to bar them from
resorting to the courts to vindicate their legal rights. The right
to petition the courts cannot be so handicapped.[ [Fn. 32]]
Several years later, in United Transportation Union v. State Bar of
Michigan, [Fn. 33] the Court commented on its Trainmen decision,
stating that "[w]e held in that case that the First Amendment
guarantees of free speech, petition, and assembly give railroad
workers the right to cooperate in helping and advising one another
in asserting their rights under [federal law]."[Fn. 34] The Court
explained that the issue in Trainmen and related cases was "the
basic right to group legal action,"and the First Amendment
protection of "collective activity undertaken to obtain meaningful
access to the courts."[Fn. 35] Rule 1.8(e) does not interfere
with such rights. Furthermore, the rule does not bar plaintiffs
from "resorting to the courts to vindicate their legal rights."
[Fn. 36] To the contrary, as discussed above, Rule 1.8(e)(2)
ensures that the courts are open to indigent plaintiffs.
We further note that neither Markham nor ATLA points to
a single case in which a court has held that Rule 1.8(e) is
unconstitutional, and our research uncovers none. Although Markham
refers to Louisiana State Bar Association v. Edwins, [Fn. 37] the
Edwins court did not hold that the ban on advances for living
expenses was unconstitutional. Rather, the Edwins court merely
expressed some doubt as to the constitutionality of such rules.
[Fn. 38] Notably, the court referred to the Louisiana
Constitution's express guarantee of "access to courts."[Fn. 39]
We conclude that Rule 1.8(e)'s ban on lawyers advancing living
expenses to clients is not unconstitutional.
4. Policy arguments
Markham and ATLA advance several policy arguments in
favor of permitting lawyers to advance living expenses to clients.
Foremost, they claim that the practice assures that indigent
clients can withstand pressure to settle their claims prematurely.
[Fn. 40] They further suggest that the concerns about allowing
lawyers to make such loans can be addressed through less
restrictive means than a blanket prohibition. To this end, they
observe that several jurisdictions have modified their rules to
allow for advances for living expenses in certain circumstances.
[Fn. 41]
The Bar Association concedes that the prohibition may not
be justified and that modification of the rule may be in order:
[B]ar counsel is persuaded by a review of
disciplinary cases in other jurisdictions and the professional
conduct rules in the seven sister jurisdictions identified by ATLA
[that have modified the rule to allow advances for living expenses]
that these rationales or justifications are subject to good faith
debate among reasonable lawyers and that serious consideration
should be given to a review and revision of ARPC 1.8(e) to permit
such assistance under certain circumstances.
The Bar Association nonetheless contends that this appeal is not
the appropriate vehicle for modifying Rule 1.8(e) on policy
grounds. Instead, it argues that "there is an established
procedure for promulgation and adoption of these rules which should
not be ignored simply because both parties do not like the present
rule." We agree.
Under the Alaska Bar Association Bylaws, the Rules of
Professional Conduct Committee is "responsible for reviewing
suggested amendments to the [Alaska Rules of Professional Conduct]
and making recommendations for amendments to the Board of
Governors."[Fn. 42] While we express no opinion as to the merits
of the policy arguments surrounding Rule 1.8(e), we note that
members of the bar are free to suggest rule changes to the Rules of
Professional Conduct Committee as the first step towards amending
the rules. We see no reason to vary from this process in this
case.
B. Alaska Civil Rule 90.2
Apart from his concerns about Rule 1.8(e), Markham also
argues briefly that a lawyer who has been approached by a child's
guardian to represent the child's interests in a personal injury
case is entitled to court approval of a proposed contingent fee and
cost agreement before agreeing to undertake the representation.
Under this proposal, a lawyer could "respectfully disagree"with
the fee approved by the court and decline the representation.
Markham further seeks clarification of Rule 90.2, [Fn. 43] which he
alleges is "defective because it provides no standards."
These arguments are undeveloped and Markham's brief
"leave[s] most of the reasons supporting an improvement in ARCP
90.2 procedures and standards for the members of this Court to
suggest and debate." We see no reason to usurp counsel's role.
Because the argument is not adequately briefed, we deem it waived.
[Fn. 44]
C. Attorney's Fees
Finally, in the last paragraph of his opening brief,
Markham seeks attorney's fees:
The Superior Court should be further
instructed to award SH her reasonable attorney's fees for the
excess effort incurred by her counsel in securing the approval of
these loans under the guidelines of ARCP 82, or on a public
interest basis. This award should be entered against the party
this court feels was the real party in interest in the judgment
below.
In his reply brief, Markham further explains that "[t]his court
should simply declare which organization (court or Bar?) was
responsible for this rule and assess fees accordingly."
We decline to award attorney's fees. Given that we
reject Markham's claims for reimbursement under Rule 1.8(e), he is
not the prevailing party within the meaning of Alaska Civil Rule
82. [Fn. 45] Moreover, Markham offers no reason to confer upon him
the status of public interest litigant, and in our view he does not
qualify as one. [Fn. 46]
IV. CONCLUSION
Because we conclude that Alaska Rule of Professional
Conduct 1.8(e) prohibits lawyers from advancing funds for living
expenses to clients and that the rule does not unconstitutionally
deny or infringe upon access to the courts, we AFFIRM the decision
of the superior court.
FOOTNOTES
Footnote 1:
46 U.S.C. sec. 688 (1975 & Supp. 1998).
Footnote 2:
See Guin v. Ha, 591 P.2d 1281, 1284 n.6 (Alaska 1979).
Footnote 3:
Id.
Footnote 4:
See American Bar Association, Annotated Model Rules of
Professional Conduct vii (3d ed. 1996) (Annotated Model Rules).
Footnote 5:
Alaska Supreme Court Order No. 1123 (April 14, 1993).
Footnote 6:
Alaska R. Prof. Conduct 1.8(e).
Footnote 7:
Annotated Model Rules, supra, at 130.
Footnote 8:
1 Geoffrey C. Hazard, Jr. & W. William Hodes, The Law of
Lawyering sec. 1.8:602, at 275 (2d ed. 1996 Supp.).
Footnote 9:
Charles W. Wolfram, Modern Legal Ethics sec. 9.2.3, at 509
(1986).
Footnote 10:
See Annotated Model Rules, supra, at 130-31 (compiling cases);
see also Mississippi Bar v. Attorney HH, 671 So. 2d 1293, 1296-98
(Miss. 1995) (stating that the majority of courts have found that
advancing living expenses "is violative of the Rules of
Professional Conduct,"and analyzing cases from Kentucky, Virginia,
Oregon, South Carolina, and Arizona).
Footnote 11:
See Florida Bar v. Taylor, 648 So. 2d 1190, 1192 (Fla. 1994);
Louisiana State Bar Ass'n v. Edwins [Fn. 47], 329 So. 2d 437, 445
(La. 1976).
Footnote 12:
See Michael R. Koval, Note, Living Expenses, Litigation
Expenses, and Lending Money to Clients, 7 Geo. J. Legal Ethics
1117, 1133 (1994) (stating that "[t]he Edwins court . . . stands
virtually alone in its interpretation of DR5-103(B)"); see also
Sims v. Selvage, 499 So. 2d 325, 328 n.1 (La. App. 1986) (noting
that the Edwins interpretation "has created problems within the
profession that override any benefit to the client,"and suggesting
reconsideration of whether lawyers should be allowed to advance
living expenses to clients).
Footnote 13:
516 P.2d 1215, 1219-21 (Alaska 1973).
Footnote 14:
See id. at 1220-21.
Footnote 15:
401 U.S. 371 (1971).
Footnote 16:
See id. at 382-83.
Footnote 17:
765 P.2d 1375 (Alaska 1988).
Footnote 18:
See id. at 1376.
Footnote 19:
Id. at 1377.
Footnote 20:
See id. at 1380.
Footnote 21:
See id. at 1378. As the Boddie Court explained:
[W]e wish to re-emphasize that we go no
further than necessary to dispose of the case before us . . . . We
do not decide that access for all individuals to the courts is a
right that is, in all circumstances, guaranteed by the Due Process
Clause of the Fourteenth Amendment so that its exercise may not be
placed beyond the reach of any individual, for, as we have already
noted, in the case before us this right is the exclusive
precondition to the adjustment of a fundamental human relationship
[marriage].
401 U.S. at 382-83.
Footnote 22:
See 401 U.S. at 374.
Footnote 23:
M.L.B. v. S.L.J., 117 S. Ct. 555, 563 (1996) (commenting upon
United States v. Kras, 409 U.S. 434 (1973)).
Footnote 24:
Id. at 563-64.
Footnote 25:
Roller v. Gunn, 107 F.3d 227, 232 n.1 (4th Cir. 1997).
Footnote 26:
377 U.S. 1 (1964).
Footnote 27:
See id. at 5.
Footnote 28:
See id.
Footnote 29:
See id.
Footnote 30:
See id. at 2.
Footnote 31:
See id. at 8.
Footnote 32:
Id. at 7 (citations omitted).
Footnote 33:
401 U.S. 576 (1971).
Footnote 34:
Id. at 578-79.
Footnote 35:
Id. at 585.
Footnote 36:
Trainmen, 377 U.S. at 7.
Footnote 37:
329 So. 2d 437 (La. 1976).
Footnote 38:
See id.
Footnote 39:
Id.
Footnote 40:
See William R. Strelow, Loans to Clients for Living Expenses,
55 Cal. L. Rev. 1419, 1431 (1967) ("[T]here is a substantial
likelihood that a destitute claimant will be compelled to abandon
his claim or settle it for a trifling amount unless he can obtain
financial assistance."); Koval, supra, at 1118 ("There are several
good reasons why a lawyer should be able to lend a client money for
living expenses. First, and most importantly, sometimes a client
simply will not be able to pursue a claim if he cannot meet his
basic living expenses. He may be forced to settle for a smaller
amount than he deserves."); Dawn S. Garrett, Comment, Lending a
Helping Hand: Professional Responsibility and Attorney-Client
Financing Prohibitions, 16 U. Dayton L. Rev. 221, 246 (1990) ("The
purpose of the prohibition is to prevent oppression in the legal
system by the wealthy. This purpose will be frustrated if an
impoverished client can be forced by means of financial hardship to
accept the inadequate settlement offer of a wealthier opponent who
can afford to wait out the delays of litigation.").
Footnote 41:
See Alabama Rule of Professional Conduct 1.8(e)(3); California
Rule of Professional Conduct 4-210(A)(1) & (2); District of
Columbia Rule of Professional Conduct 1.8(d)(2); Minnesota Rule of
Professional Conduct 1.8(e)(3); Montana Rule of Professional
Conduct 1.8(e)(3); North Dakota Rule of Professional Conduct
1.8(e)(3); Texas Disciplinary Rule of Professional Conduct
1.08(d)(1); Disciplinary Rule 5-102(B) of the Vermont Code of
Professional Responsibility.
Footnote 42:
Alaska Bar Bylaws, article VII, section 1(a)(9).
Footnote 43:
Rule 90.2 provides in relevant part:
(a) Approval of Settlement of Claims on
Behalf of Minors.
(1) Approval. A parent or guardian of a
minor who has a claim against another person has the power to
execute a full release or a covenant not to sue, or to execute a
stipulation for entry of judgment on such claim. However, before
such a document is effective, it must be approved by the court upon
the filing of a petition or motion.
. . . .
(3) Attorneys' Fees and Costs. The court
shall approve any attorneys' fees and costs that are to be paid
from the settlement proceeds when the minor claimant is represented
by counsel.
Footnote 44:
See Adamson v. University of Alaska, 819 P.2d 886, 889 n.3
(Alaska 1991).
Footnote 45:
Rule 82 provides in pertinent part:
(a) Allowance to Prevailing Party. Except as
otherwise provided by law or agreed to by the parties, the
prevailing party in a civil case shall be awarded attorney's fees
calculated under this rule.
Footnote 46:
See, e.g., Valley Hosp. Ass'n v. Mat-Su Coalition for Choice,
948 P.2d 963, 972 n.21 (Alaska 1997) (stating criteria for public
interest litigant status).
Footnote 47:
329 So. 2d 437 (La. 1976).
