MARYLAND STATE BAR ASSOCIATION, INC.
COMMITTEE ON ETHICS
ETHICS DOCKET NO. 2000-30
Lawyer’s Obligation Where a Dispute Exists as To the Disposition of Settlement Proceeds between Client and Subrogation Demand
You state that you have settled a personal injury case on behalf of a client and that certain proceeds are in your escrow account to cover a claim advanced by a health care provider for subrogation which is disputed by your client. You have requested that the Committee advise you whether the filing of an interpleader action would be consistent with your obligation to safeguard property as required under Rule 1.15. While the Committee ordinarily does not address questions of law, it is of the opinion that an attorney in possession of property which is the subject of a dispute may file an interpleader action consistent with the obligations of Rule 1.15.
Rule 1.15 is entitled "Safekeeping Property." That rule provides as follows:
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(a) A lawyer shall hold property of clients or third persons that is in a lawyer's possession in connection with a representation separate from the lawyer's own property. Funds shall be kept in a separate account maintained pursuant to Subtitle BU of the Maryland Rules. Other property shall be identified as such and appropriately safeguarded. Complete records of such account funds and of other property shall be kept by the lawyer and shall be preserved for a period of five years after termination of the representation.
(b) Upon receiving funds or other property in which a client or third person has an interest, a lawyer shall promptly notify the client or third person. Except as stated in this Rule or otherwise permitted by law or by agreement with the client, a lawyer shall promptly deliver to the client or third person any funds or other property that the client or third person is entitled to receive and, upon request by the client or third person, shall promptly render a full accounting regarding such property.
(c) When in the course of representation a lawyer is in possession of property in which both the lawyer and another person claim interests, the property shall be kept separate by the lawyer until there is an accounting and severance of their interests. If a dispute arises concerning their respective interests, the portion in dispute shall be kept separate by the lawyer until the dispute is resolved."
While Rule 1.15 does not expressly address the subject of disputes between clients and third parties regarding entitlement to funds held by an attorney, the obvious import of the Rule requires an attorney to safeguard disputed property pending a resolution of entitlement to them. In that regard, one of the comments to Rule 1.15 states that an attorney should not unilaterally assume to arbitrate a dispute between the client and a third party.
Your inquiry is whether an attorney may ethically obtain a resolution with respect to the disputed funds by filing an interpleader action. The Committee's view is that the filing of an interpleader action is entirely consistent with an attorney's obligations under Rule 1.15. See Ethics Docket 92-4 which suggested the use of the courts to resolve a dispute regarding entitlement to property.
An action of interpleader is governed by Maryland Rule 2-214 and offers an opportunity for all parties to advance respective claims with respect to disputed property. It provides a proceeding for a judicial determination of adverse claims by rival claimants to property held by a third party as a stakeholder. Accordingly, the Committee recognizes that filing an action of interpleader, which may be accomplished by payment or tender into court of the disputed property, is consistent with an attorney's obligations under Rule 1.15.