The Chicago Daily Law Bulletin carried an important story about a disciplinary case in which an attorney was censured. While several other issues were discussed in the opinion and in the Law Bulletin article, the facts and the holding about litigation finance are of general interest. Litigation finance is an exploding industry. Litigation funders will often provide non-recourse financing for a case. The financing shifts the risk that used to be borne by contingent fee lawyers to the funder, and the financing can be used to pay the lawyers or costs of the litigation while the case pends. Litigation funding can be especially useful in large cases involving intellectual property infringement, professional malpractice, shareholder disputes, LLC-member litigation, and other big business lawsuits. It can level the playing field by allowing small firms the resources to compete with the big firms.

The attorney at issue was accused of conflict of interest by referring a client to his father for litigation loans. When the client failed to pay the loans, one of the lawyer’s partners represented his father in the collection lawsuit against the now-former client. The Attorney Registration and Disciplinary Commission panel found that the attorney violated Rule 1.7(b) of the Illinois Rules of Professional Conduct, which prohibits lawyers from representing clients if the representation may be limited by the lawyer’s responsibilities to another client or person. Rules 1.8(d), 1.9(a), and 1.9(c)(1) were not violated. These rules forbid guaranteeing financial aid to a client, representing someone else against a former client in related matter, and use of information obtained from a client to the client’s disadvantage.

The case will now go to the Illinois Supreme Court for final determination. In re Mark Edward McNabola, No. 6189613. For a copy of the case or to consult about questions of legal malpractice, conflict of interest, or litigation finance, contact Thomas Patterson at tpatterson@pattersonlawfirm.com.