1 N.J.L. 1921
                                        December 14, 1992

                                        132 N.J.L.J. 978
                                        December 14, 1992
                                                    

OPINION 670

Sale or Pledge of
Final JUA Judgements

    The JUA freeze has generated a series of inquiries related to the sale or pledge of final judgements, both as to the client component and the counsel fee component. See Opinion 663, 131 N.J.L.J. 856, 1 N.J.L. 1043 (July 13, 1992). The three specific inquiries brought to this Committee are:

    (1)    Whether an attorney and client can sell the entire JUA settlement to an independent factor at a discounted price.

    (2)    Subsumed in the first question is the second question: Whether an attorney can advise a client to accept an immediate discounted cash payment for a judgement, in view of the attorney's thus benefitting from immediate payment.

    (3)    Whether an attorney can use the counsel fee portion of the judgement as security for a loan or line of credit.

    For the purposes of these inquiries, we assume that the strictures of RPC 1.8(j) consistent with Opinion 663, supra, have been met, namely, the litigation has been fully and finally concluded with the litigant's and attorney's fees components of the judgment established and agreed upon by both client and counsel. We must further assume that consistent with an attorney's duty to keep a client completely and accurately informed, the client has been advised of the JUA freeze and, insofar as current knowledge permits, of its consequences. See Matter of Stein, 97 N.J. 550 (1984). Finally, we assume that the proposed factor is totally independent of counsel so as not to violate RPC 1.7 and RPC 1.8(a).
    As to the first and second inquiries, we find no impropriety in advising a client of the possibility of factoring a judgement meeting all of these criteria. In so doing, the attorney should first satisfy himself or herself as to all currently available alternatives and the reasonableness of the proposed discounts under each alternative and present those alternatives to the client, together with the alternatives of receiving full payment when the freeze is lifted and of seeking a hardship exemption in conformity with the freeze, if such an exemption is viable. The client should also be advised that the acceptance of a discounted sum in return for the judgement will result in the attorney's being paid immediately as well (as is true, we note, with any settlement). The decision as to which option to pursue rests with the client. In order to avoid misunderstanding, it is always advisable to describe the options and secure the written acknowledgment of the client's choice in writing.
    The answer to the third inquiry, whether an uncollected fee can be used for collateral for a loan or line of credit is clear: This is a business decision between borrower and lender and as such, is not governed by ethical consideration, unless utilizing the uncollected fee for collateral will hinder the viability of the client's selling the underlying judgment for discounted value. If utilization of the fees for collateral in any way impairs the ability of the client to sell the judgment, the interests of the client must be considered paramount.