IN THE MATTER OF RULE 1.8 (e),
RULES OF PROFESSIONAL CONDUCT                         O R D E R


     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 profes-
sional 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 adequate-
ly 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 repre-
senting 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 applica-
tion 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 applica-
tion 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 adver-
tised 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 repre-
     senting 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 1 9 9 6   issue of
the Montana Lawyer.
     Dated this       day of November. 1995.
