UPON THE REQUEST OF A MEMBER OF THE SOUTH CAROLINA BAR, THE ETHICS ADVISORY COMMITTEE HAS RENDERED THIS OPINION ON THE ETHICAL PROPRIETY OF THE INQUIRER’S CONTEMPLATED CONDUCT. THIS COMMITTEE HAS NO DISCIPLINARY AUTHORITY. LAWYER DISCIPLINE IS ADMINISTERED SOLELY BY THE SOUTH CAROLINA SUPREME COURT THROUGH ITS COMMISSION ON LAWYER CONDUCT.
Ethics Advisory Opinion 90-40
All facts provided with this inquiry are contained in the text of the questions.
Questions:
1. May an attorney ask for referrals from a doctor and agree to protect the doctor's medical fees (if the referral consents to this, of course) from the results of suit or settlement?
2. May a business not engaged in the practice of law advise customers (or potential customers) that all funds received from sales or rentals are escrowed by the business's attorney?
Summary:
1. An attorney may not exchange assistance in collecting medical fees for referral of client. Rule of Professional Conduct. 7.2(c).
2. An attorney may provide escrow services for a client provided he complies with the requirement of the rules for maintenance of client funds and the arrangement is not misrepresented to the business's customers. Rules of Professional Conduct 1.15 and 4.1.
Opinion:
Question 1. This question implies a quid pro quo with a physician referring patients with potential legal claims to an attorney who in turn guarantees in all instances where there is recovery and the client agrees to pay outstanding medical bills.
Rule 7.2(c) is explicit: A lawyer shall not give anything of value to a person for recommending the lawyer's services,...
Assurances of assistance in the collection of outstanding medical bills are questionably of value and therefore this arrangement is proscribed by the Rules. See also In Re Bloom, 217 S.E. 2d 143 (1975).
However, it is permissible for a lawyer on behalf of a client to assure a physician that their bills will be paid in order to obtain continued treatment for the client or reports necessary to pursue the client's legal claims. The lawyers arrangement with the client should provide for reimbursement by the client for these costs. See ABA Informal Ethics Opinion 664 (1963) and 1084 (1969). The arrangement must be in the interest of an existing client rather than as a reward for soliciting business on behalf of an attorney. Question 2. The second question presented by the inquiry asks whether an attorney can escrow sales proceeds for a client on a regular basis. Nothing in the rules forbids this practice provided the attorney complies with Rule 1.15(b) which sets forth the conditions for an attorney holding funds for a client or third party. These include promptly notifying the client or third party of the deposit of such funds, providing a full accounting of the funds for the client or third party on request and promptly delivering funds to which a client or third party is entitled.
The third requirement of prompt delivery has the potential for placing the attorney in a position of conflict with his client should a dispute arise between the client and a customer about the disposition of funds. The commentary at Rule 1.15 discusses this situation:
"Third parties, such as client's creditors, may have just claims against funds or other property in a lawyer custody. A lawyer may have a duty applicable law to protect such third-party claims against wrongful interference by the client, and accordingly may refuse to surrender the property to the client. However, a lawyer may not unilaterally assume to arbitrate a dispute between the client and third party." These considerations and the possible difficulties should be discussed thoroughly with the client prior to undertaking such an arrangement. Furthermore, the client should be informed that if the attorney became aware that the client was not escrowing all funds with him after such assertions were made, Rule 4.1 could require the attorney to unilaterally inform the client's customers of this fact. While the rules do not prohibit such an arrangement, it would be fraught with difficulties if done on a wholesale basis and should only be undertaken after careful considerations by the attorney and client of the responsibilities and potential costs involved.