050719 NYEO, ETH 1165

• Case Date: May 07, 2019
• Court: New York

ETH 1165 Ethics Opinion 1165 New York Ethics Opinion New York State Bar Association Committee on Professional Ethics May 7, 2019          Topic: Unpaid Client Fees          Digest: Lawyer may not remove amounts from client’s trust account if in dispute. Lawyer may only charge reasonable interest if provided for in the engagement letter.          Rules: 1.15(b)(4)          FACTS          1. The inquirer, a New York lawyer, was retained nine years ago to represent a client in numerous litigations arising out of an estate matter. The client is executor of the estate and sole beneficiary of various annuity contracts of the decedent that the Surrogate’s Court ruled, in response to interpleader litigation, were the client’s property and not part of the estate. A sum of money was received into the inquirer’s escrow account while the interpleader litigation regarding the annuity contracts was pending. The Surrogate’s Court has now authorized the distribution of those funds to inquirer’s client.          2. The inquirer had previously sent the client invoices for legal fees and expenses while the litigation was ongoing, but the inquirer agreed at the client’s request to defer payment until the end of the litigation. The client raised no objection to the invoices at the time. The principal balance of the bill is now an amount greater than $50,000, which the inquirer observes is the ceiling set forth for mandatory fee arbitration under 22 N.Y.C.R.R. § 137.1. The client refuses to pay the bill, demanding that the inquirer cut the bill by approximately 20%. The inquirer claims that the inquirer has repeatedly and voluntarily reduced the amount of the bill over the years, and has recently evinced a willingness further to negotiate, but now wants the client to pay the outstanding amount. The inquirer asserts that a “written formal fee agreement” exists. The inquirer wants to withhold payment of the escrowed funds in an amount equal to the fees the inquirer says are due and owing, as well interest on those fees and an amount to cover fees and expenses should litigation arise over the amount the inquirer says is due and owing, which the inquirer proposes...