Ethics Hotline & Opinions

ETHICS DOCKET NO. 2016-15

MARYLAND STATE BAR ASSOCIATION, INC.

COMMITTEE ON ETHICS

ETHICS DOCKET NO. 2016-15

What must an attorney do when a client refuses to accept or endorse a settlement check after signing a release, the case concerning the client’s claim has been dismissed, and the client requests that the attorney forgo payment of the attorney’s fee from the settlement proceeds?

 

You state that you settled a case on behalf of a client, negotiated the client’s “medical liens,” and received a check for the settlement proceeds.   You further state that the client previously signed a release relating to the claim; the case related to the client’s claim has been dismissed and the client requested that you forgo receipt of an attorney’s fee from the settlement proceeds.

Finally, you state that the client is a named payee on the settlement check and the client has refused to accept the check, will not endorse the check so that it may be deposited into your attorney trust account, and has not expressly authorized you to accept, endorse or deposit the check on the client’s behalf.

You have requested that the Committee advise you whether, under the above-summarized circumstances, it would be proper for you to accept the check.

The Committee is of the opinion that a dispute clearly exists between you and the client concerning both (a) disposition of the settlement check; and (b) the amount of your fee.

The Committee previously addressed a similar scenario and opined that an attorney in possession of property which is the subject of a dispute may file an interpleader action consistent with the obligations arising under Rule 1.15 of the Maryland Lawyers’ Rules of Professional Conduct (MRPC).  See Ethics Docket No. 2000-30.  There, the Committee recognized that an action of interpleader (a) is governed by Maryland Rule 2-214; (b) offers an opportunity for all parties to advance respective claims with respect to disputed property; (c) provides a proceeding for a judicial determination of adverse claims by rival claimants to property held by a stakeholder; and (d) may be accomplished by the payment or tender into court of the disputed property.

The Committee has previously opined that where a client has refused to negotiate a check and the attorney asserts entitlement to payment of a fee from the check:

  1. MRPC Rule 1.15 allows the attorney to file a civil action to both properly adjudicate the entitlement of all parties to the proceeds from the check and obtain the right to negotiate the check for the purpose of obtaining the fee and distributing the remainder of the proceeds. [See Ethics Docket No. 2004-22 and Ethics Docket No. 2009-01];
  2. Md. Code, Bus. Occ. & Prof. §10-501 provides for an attorney’s charging lien which applies to the proceeds of a settlement that was obtained through the attorney’s legal services, and an attorney may file an attorney-lien action under Maryland Rule 2-652 to protect his or her fee. [See Ethics Docket No. 2009-01];
  3. The Committee expresses no opinion as to what the appropriate civil action may be in a given case, i.e. interpleader; declaratory judgment action, action to enforce lien, etc as the same may be a matter of substantive law and/or legal strategy. [See Ethics Docket No. 2009-01];
  4. MRPC 1.15 requires an attorney to promptly notify a client of the attorney’s receipt of funds to which the client is entitled and also recognizes an attorney’s right to retain disputed funds in escrow. [See Ethics Docket No. 2009-01]; and 
  5. The attorney may be a material witness on the issue of the existence of a binding settlement agreement, is adverse to the client’s interests, may not continue to represent the client’s interests, should advise the client in writing of the need for independent counsel, and should withdraw from any pending matter involving the client. [See Ethics Docket No. 2009-01]

The Committee believes that when read together, our Opinions in Ethics Docket No. 2000-30; Ethics Docket No. 2004-22 and Ethics Docket No. 2009-01 referenced above fully address your inquiry.

Opinions of the Committee may be obtained from the Maryland State Bar Association website:  www.msba.org.

 

DISCLAIMER: Opinions of the Maryland State Bar Association (MSBA) Ethics Committee are an uncompensated service of the MSBA. This Committee’s opinions are not binding on the Maryland Court of Appeals, Maryland Attorney Grievance Commission, MSBA or this Committee. The reader is advised that subsequent judicial opinions, revisions to the rules of professional conduct, and future opinions of this Committee may render the Opinions stated herein outdated. As such, the Committee’s opinions are advisory only and neither the Committee nor the MSBA assumes any liability whatsoever with respect thereto. Accordingly, reliance upon the opinions of this Committee is solely at the risk of the user.