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Ethics Opinion

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CI-623

April 3, 1981

SYLLABUS

    It is improper for a lawyer to condition the release of client files which pertain to pending litigation and are currently within the lawyer's possession, upon immediate payment of the costs advanced on behalf of the client when the facts suggest no gross imposition by the client 9, i.e., failure to pay is due to inability to pay and not unjustified deliberate refusal).

    References: DR 2-110(A)(2), DR 9-102(B)(4); Kysor Industrial Corp. v. DM Liquidating Co., 11 Mich App 438, 161 NW 2d 452 (1968); Ambrose v. Detroit Edison, Co., 65 Mich App 484, 237 NW 2d 520 (1975).

TEXT

You entered into a contingent fee contract to represent a client in connection with a claim for damages following a personal injury. After spending $1,000 in "out-of-pocket" expenses on behalf of the client, you were contacted by another lawyer who informed you that the client requests that he/she complete the processing of the claim. The lawyer has asked for your file on the case. While you are willing to sign substitution of attorneys, you wish to be repaid for your expenses before releasing the file. The other lawyer has stated that his/her office is unable to pay the expenses "up front."

An opinion has been requested outlining a lawyer's rights and obligations in connection with the file in the lawyer's possession and in connection with the $1,000 in expenses that the lawyer has advanced the client.

Michigan recognizes the right of a lawyer to retain possession of all documents, money or other property of a client coming into the lawyer's hands during the course of the lawyer's professional employment, until a general balance due the lawyer for professional services is paid. Kysor Industrial Corp. v. DM Liquidating Co., 11 Mich App 438, 161 NW 2d 452 (1968). This retaining lien is subject to the control of the court for the protection of the client and third parties.

Assuming that you were not discharged by your client for cause, you have a legal right to assert a lawyer's retaining lien on the file in your possession until your expenses are paid. However, this legal right is not absolute but subject to ethical considerations.

"Mere existence of a legal right does not entitle a lawyer to stand on that if ethical considerations require that he/she forego it. For instance EC 2-12 exhorts lawyers to forego a legal right to '. . . sue a client for a fee unless necessary to prevent fraud or gross imposition by the client.'" ABA Informal Opinion 1461.

While no provision of the Michigan Code of Professional Responsibility directly requires a lawyer to forego his or her legal right to impose a attorney's lien on client papers, several code sections suggest that the lawyer has an obligation to return all such papers to the client. DR 9-102(B)(4) states:

    "A lawyer shall:

      "(4) Promptly pay or deliver to the client as requested by a client the funds, securities, or other properties in the possession of the lawyer which the client is entitled to receive. Emphasis added.

    DR 2-110(A)(2) states:

      "(2) . . . a lawyer shall not withdraw from employment until he/she has taken reasonable steps to avoid foreseeable prejudice to the rights of his or her client, including giving notice to the client, allowing time or employment of other counsel, delivering to the client all papers and property to which the client is entitled, and complying with applicable laws and rules." Emphasis added.

While the Rule speaks with particular reference to voluntary withdrawal of an attorney, the obligations of a lawyer to his or her client which the Rule outlines would seem equally applicable in cases of discharge of the attorney.

In Informal Opinion 1461, the ABA considered whether it was improper for an attorney to impose a lien on an agreement, modifying a court order regarding property and child visitation rights, which the lawyer had negotiated for the client.

While the factual situation presented in the opinion differs from the present inquiry, the discussion of the standard that a lawyer should use to decide whether to impose a lien is relevant. The opinion requires the lawyer to evaluate his or her interests against the interests of the client and of others who would be substantially and adversely affected by assertion of the lien. It suggests several factors that the lawyer should consider in making this evaluation.

    "The lawyer should take into account . . . whether imposition of the retaining lien would prejudice important rights or interests of the client or of other parties, whether failure to impose the lien would result in fraud or gross imposition by the client, and whether there are less stringent means by which the matter can be resolved or by which the amount owing can be secured."

Given the fact that a claim is now pending in the Circuit Court, retention of papers will clearly prejudice the rights of the client. Even if the client, through the new attorney, is able to reproduce the information contained in your file, the time and expense involved may well delay the litigation and adversely affect the client's rights.

In addition, it appears that the client's failure to pay is due to lack of financial resources. ABA Informal Opinion 1461 states:

    "Assertion of the lien would be ethically justified when the client is financially able but deliberately refuses to pay a fee that was clearly agreed upon and is due, since this conduct would constitute gross imposition by the client." However, "The lawyer should forego the lien if he/she knew of the client's financial inability at the beginning."

The provisions of your contingent fee contract which provided for the advancement by your firm of costs to the client are clear evidence of our belief of the client's lack of financial resources and your knowledge of this fact from the beginning. Given your acceptance of this original contractual arrangement, it would be inappropriate for you to maintain that failure to pay is an unjustified deliberate refusal and constitutes fraud or gross imposition upon your firm by the client.

Moreover, there does exists a less stringent means by which you may seek satisfaction of your claim for expenses. In addition to retaining liens, Michigan recognizes the equitable right of an attorney to have fees and costs due for services in a suit secured to the lawyer out of the judgment or recovery in that particular suit. Kysor, supra. Such a charging lien would allow you to recover the expenses which you have paid out, as well as compensation for the reasonable value of services rendered from the first dollars recovered by your former client out of the pending litigation. Ambrose v. Detroit Edison Co., 65 Mich App 484, 237 NW 2d 520 (1975).

Consideration of the guidelines set forth in Informal Opinion 1461 coupled with the obligations imposed by DR 9-102(B)(4) and DR 2-110(A)(2) lead me to conclude that it would be improper for you under the facts of this case to condition the release of your file upon the immediate payment of the costs advanced on behalf of the client.

 
     

 

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