MARYLAND STATE BAR ASSOCIATION, INC.
COMMITTEE ON ETHICS
ETHICS DOCKET NO. 2001-06
Retainer Funds Paid by Third Party and Termination of Services – Who is entitled to a Refund?
A client (not a minor) signs a Retainer Agreement for representation but the money for the retainer is given by a third-party (in this case the client’s mother). Both the client and his mother are present when the retainer is signed and the mother draws the check on her account, payable to the attorney. At that time, you make it clear that you represent the son and not the mother The money is put in escrow and withdrawn as work is performed and billed. The client and his mother have a falling out. The client’s mother forges the client’s signature to a letter terminating your services and directs you to return any unused funds to the client at the mother’s address. You suspect the letter is a forgery as the signature does not match the client’s signature. A week later, the client telephones your office and confirms that he did not write the letter and states that he does not wish to terminate your services. In the meantime, your client’s mother has retained separate counsel and filed a Motion to Intervene in the custody action that you were retained to represent the client. There is an Ex Parte Hearing scheduled, which the mother’s counsel sends you notice of and which you intend to attend.
You ask the Committee a series of questions based upon your fact pattern. For purposes of responding to your questions, the Committee has made certain assumptions. Those assumptions are as follows:
1. That no representations were made to the mother, either orally or in writing, that she would retain any control over the funds or over your handling of the case.
2. That you are unaware of any written or oral agreements between your client and his mother regarding the escrowed funds.
3. That Rule 1.8(f) has been complied with. Rule 1.8(f) states:
Rule 1.8. Conflict of interest: Prohibited transactions.
(f) A lawyer shall not accept compensation for representing a client from one other than the client unless:
(1) the client consents;
(2) there is no interference with the lawyer’s independence of professional judgment or with the client-lawyer relationship; and
(3) information relating to representation of a client is protected as required by Rule 1.6.
It is the opinion of the Committee that, absent any agreements to the contrary, once the retainer check was made payable to you and deposited in your escrow account as a retainer for your handling the representation, that you were accountable to your client for those funds and not to the client’s mother. The money should be held in your escrow account in accordance with the terms of the Retainer Agreement. You ask whether it would have been better to have the mother make the retainer check payable to your client and have your client endorse it over to you. It is the Committee’s opinion that doing so would not have made a difference in your current situation.
You ask who has the power to demand/authorize the return of any unused funds and specifically whether the client’s mother would have the right to demand the return of the money to her. It is the Committee’s opinion that the only person who could demand the return of any funds would be the client.
You ask who has the power to terminate your services. It is the Committee’s opinion that only your client can terminate your services and that the wishes of your client’s mother are irrelevant.
Lastly, you ask to whom should any refund be made absent any specific direction or agreement by your client. The Committee suggests that in the event it is necessary to issue a refund that you ask your client the manner in which he would like the money refunded and that you hold such funds until receiving direction from your client.
REFERENCES: Rule 1.8(f)