MARYLAND STATE BAR ASSOCIATION, INC.
COMMITTEE ON ETHICS
ETHICS DOCKET NO. 2000-41
Successor Counsel’s Obligations to Prior Counsel in Contingent Fee Matter
The Ethics Committee of the Maryland State Bar Association has received your inquiry dated April 11, 2000, in which you set forth the following facts.
You represent Attorney A, who was retained by Client to pursue a damage claim arising out of a motor vehicle accident. Attorney A thereafter filed suit. After receiving an offer from defendant's insurance carrier, Client, who had not expressed any dissatisfaction with Attorney A, nevertheless sought a second opinion from Attorney B. Thereafter, Attorney B contacted Attorney A to advise that Attorney B was now representing the client. Attorney B demanded and received from Attorney A the file materials, although Attorney A never received from the client a letter of discharge; nor was a line filed in the pending litigation striking Attorney A's appearance and entering that of Attorney B. Attorney A thereafter wrote to both Attorney B and counsel for the defendant ("Defense Counsel"), claiming a lien on any proceeds based on the offer that had been received during Attorney A's representation and for approximately $600 in costs expended by Attorney A. The case was subsequently settled by Attorney B, but both Attorney B as well as Defense Counsel have refused to answer Attorney A's request for information as to the amount of the settlement. You indicate that Attorney A has rejected an offer by Attorney B to pay $750 for work performed and costs incurred. You also indicate that you have spoken with Client, who claims not to know the details of the settlement and further claims not to have received any proceeds from the settlement, since all of the proceeds were supposedly used to pay medical bills.
Based on the foregoing facts, you have raised several questions concerning the conduct of both Defense Counsel and Attorney B, and whether you and/or Attorney A have any obligation to report any ethical violations to the Attorney Grievance Commission.
Your first question is whether Defense Counsel has violated Rule 1.15(b) and/or (c) by refusing to divulge to Attorney A the amount of the settlement. Rules 1.15(b) and (c), discussed in more detail below, do not apply to Defense Counsel, who owes no duty to Attorney A to divulge the amount of the settlement. Although one might question Defense Counsel's judgment in settling the case with Attorney B while Attorney A is the attorney of record in the pending litigation, that does not amount to any ethical violation. Because Defense Counsel has committed no ethical violation, your second inquiry, which is whether you and/or Attorney A have any obligation to report Defense Counsel to the Attorney Grievance Commission, is moot.
Your next inquiry is whether Attorney B has violated Rule 1.15(b) and/or (c) by refusing to divulge to Attorney A the amount of the settlement and by further refusing to hold separately the disputed fee until the dispute is resolved.
Rule 1.15(b) provides, in pertinent part, that "[u]pon receiving funds…in which a client or third person has an interest, a lawyer shall promptly notify the client or third person…and, upon request by the client or third person, shall promptly render a full accounting… ."
Rule 1.15(c) provides, in pertinent part, that "[w]hen 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."
Based on the facts set forth in your inquiry, Attorney B was placed on notice by Attorney A before the case settled that Attorney A was claiming a lien on any settlement. Although attorneys in Maryland may assert under appropriate circumstances a retaining lien on documents, there is no right to assert an attorney's lien on money. Nevertheless, your asserted lien, while not technically correct, did put Attorney B on notice that you were claiming an interest in any settlement proceeds coming into the hands of Attorney B. Accordingly, the Committee believes, based on the facts set forth in your inquiry, that Attorney B should advise you as to the amount of the settlement and to whom the proceeds have been distributed, all pursuant to Rule 1.15(b). Furthermore, based on the facts presented, the Committee believes that Attorney B should have retained in Attorney B's trust account sufficient funds from the settlement until such time as the dispute is resolved concerning Attorney A's claim for fees and reimbursement of costs.
Your final question is whether you and/or Attorney A have an obligation to report any violation of Rule 1.15(b) and/or (c) by Attorney B to the Attorney Grievance Commission. Rule 8.3(a) provides that "[a] lawyer having knowledge that another lawyer has committed a violation of the Rules of Professional Conduct that raises a substantial question as to that lawyer's honesty, trustworthiness or fitness as a lawyer in other respects, shall inform the appropriate professional authority."
This Committee has never opined as to whether an attorney, based on facts set forth in an inquiry, has an obligation to report an ethical violation to the Attorney Grievance Commission because that decision must be made by the attorney based on the standards set forth in Rule 8.4(c). Some guidance with respect to the reportability standards can be found in the Comment to Rule 8.3, which notes that not every violation of the Rules triggers the reporting obligation, that the Rule limits the reporting obligation to those offenses that a self-regulating profession must vigorously endeavor to prevent, that a measure of judgment is therefore required, and that the term "substantial" refers to the seriousness of the possible offense. Accordingly, you and Attorney A each must decide for yourselves whether Attorney B's conduct must be reported to the Attorney Grievance Commission.
It is important to make clear that this Committee accepts as true the facts set forth in your inquiry. This Committee does not act as a fact finder, nor does this Committee have any investigative powers. As a result, there may be additional facts or disputed facts of which we are unaware and which could impact on the Committee's opinion concerning Attorney B's conduct, and, similarly, which could impact on whether you and/or Attorney A must report Attorney B's conduct to the Attorney Grievance Commission.