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 93-14
Attorney provides in his written contingency fee contract with his clients a provision that "attorney is to honor all written statements signed by client giving any medical provider a lien against the portion of the proceeds of any recovery to which client is entitled as a result of any settlement or judgment obtained by attorney".
Question:
If prior to the disbursement of client's portion of a favorable recovery attorney receives a "doctor's lien" signed by client with respect to his portion of the proceeds, would it be unethical for attorney to refuse to comply with a specific request of client to disregard the "doctor's lien" when disbursing the proceeds of the recovery?
Summary:
It would not be unethical for attorney to refuse to comply with client's request to disregard "doctor's lien". The attorney's duty of loyalty to the client would prevent the attorney from paying the money to the doctor over the client's objection. The attorney would also be prevented, however, from paying the money to the client until the dispute between the client and the medical provider was resolved.
Opinion:
The attorney and client together define the scope of the attorney's representation of the client. Rule 1.2(a). Here the attorney and the client have, in the fee contract, agreed that one of the objectives of representation is to be the payment of bills of medical providers who have been assigned a portion of the proceeds. The client cannot thereafter, at the time of settlement, unilaterally change the representation agreement. Consequently, the attorney is entitled to refuse to honor the client's later instructions to disregard the "lien". Once the attorney knows of assignments which have been made by client in favor of medical care providers, he is prevented from disbursing to the client monies in which the medical care provider has an interest. Rule 1.15(b) clearly provides, "Upon receiving funds or other property in which a ...
third person has an interest, a lawyer shall promptly notify the ... third person. Except as stated in this Rule or otherwise permitted by law or by agreement with the client, a lawyer shall promptly deliver to the ... third person any funds or other property that the ... third person is entitled to receive...".
If the client now contends that the medical care provider is, for some reason, not entitled to receive payment, the attorney owes a duty to the client not to make payment to the provider. The client may be correct for some reason (payment already made but not credited, insurance having paid, billing error, malpractice, etc.), and the provider may have no interest and not be entitled to payment. This Rule requires the attorney, however, to notify the provider and to hold the funds until the dispute is resolved. The Comment to Rule 1.15 addressed this very situation:
"Third parties, such as a client's creditors, may have just claims against funds or other property in a lawyer's custody. A lawyer may have a duty under 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 should not unilaterally assume to arbitrate a dispute between the client and the third party." Although it is not clear from the opinion how similar the underlying facts may be to those in this inquiry, see In the Matter of Frederick K. Jones, Opinion No. 23851 (re-filed July 19, 1993), in which the attorney received a public reprimand for, among other things, failing to keep money separate until a dispute between his client and a creditor was resolved. It is recognized that this opinion appears to reach a different conclusion from two earlier advisory opinions, No. 91-10 and 81-14 (the latter decided under the Code of Professional Responsibility not the Rules of Professional Conduct), as it relates to the situation where a client has signed a "doctor's lien" and the attorney has notice of the lien but the attorney has not signed anything with the third party agreeing to honor the lien. The earlier opinions suggest that the attorney should pay the money to the client on demand and ignore the "lien". For the reasons set forth in this opinion, the committee believes that it is now the better practice, if a dispute arises, to notify the creditor and hold the money until the dispute is resolved.