April 27, 1981
When litigation results in a money award and the attorney asserts a lien on the award, the check is issued jointly and severally and a dispute exists as to the amount of attorney fee entitlement of the attorney the attorney must promptly disburse to the client that portion which undisputedly belongs to the client. The attorney may retain that portion of the funds set aside for attorney fee over which there exists no dispute.
As to any portion of the funds that are claimed as attorney fee and are disputed by the client, the attorney must maintain same in an escrow or trust account until the dispute is resolved.
References: DR 9-102 (A)(2) and (B)(4), DR 5-103 (A)(1) and (2).
Attorney A is retained by B to litigate a civil matter that ultimately results in a money award. A asserts a attorney's lien of the award and the check is issued jointly to A and B. B Disputes A's fee. The fee claimed by A constitutes one-third of the total award. The questions presented are:
- Assuming that an acceptable escrow agent can be found, is A ethically bound to release the lien on the client's portion and allow the one-third claimed to be held in escrow until the dispute is resolved?
- Does the answer differ if both A and B agree to submit the fee dispute to the Attorney Grievance Commission?
DR 9-102(A)(2) and (B)(4) states:
"(A) All funds of clients paid to a lawyer or law firm, other than advances for costs and expenses, shall be deposited in one or more identifiable bank accounts maintained in the state in which the law office is situated and no funds belonging to their lawyer or law firm shall be deposited therein except as follows:
"(2) Funds belonging in part to a client and in part presently or potentially to the lawyer or law firm must be deposited therein, but t of the lawyer or law firm to receive it is disputed by the client, in which event the disputed portion shall not be withdrawn until the dispute is finally resolved.
"(B) 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."
DR 5-103(A) (1) and (2) Avoiding Acquisition of Interest in Litigation states:
"(A) A lawyer shall not acquire a proprietary interest in the cause of action or subject matter of litigation he or she is conducting for a client except that the lawyer may:
"(1) Acquire a lien granted by law to secure his/her fee or expenses.
"(2) Contact with a client for a reasonable contingent fee in a civil case."
It appears clear that DR 9-102 (B)(4) requires that the attorney pay the client those funds which are in the attorney's possession, the 66 2/3% of the recovery, which are unquestionably the funds belonging to the client.
The facts do not reveal the extent to which there is a contest over the remaining funds. Presumably, the client agrees that the attorney is entitled to some portion of the remaining 33 1/3 % of the funds as a fee.
As to that portion of the remaining funds over which there is no dispute of the entitlement of the attorney to same as a fee, the attorney may retain that portion as his oh own. It is only as to that portion of the 33 1/3% of claimed as a fee which is in dispute that there remains an obligation on the attorney to treat in some specialized manner until that dispute is resolved.
It would seem that the proper disposition for the portion of the funds in dispute would be to place those funds in an escrow or trust account and maintain those funds in such an account until the dispute is resolved. [See Cleveland B.A. Opinion 79; page 433 1975 Supplement, Digest of Bar Association ethics Opinions No. 9687]
There is no ethical duty to submit a fee dispute between an attorney and the attorney's client to arbitration by a Bar Association but the practice is desirable and should encouraged. [Los Angeles County Bar association Opinion 309, March 20, 1969; 1975 Supplement, Digest of Bar Association Ethics Opinions page 79 No. 7664.]
The choice of remedies to resolve the dispute has no bearing on how the funds in dispute are to be maintained during the dispute.