86-4.
Case Date | November 07, 1986 |
Court | Alaska |
Alaska Ethics Opinion
1986.
86-4.
Ethics Opinion No. 86-4Attorney's Duty when Dispute Arises
Concerning the Rights of Third Parties to Client Funds in the Possession of
Attorney, and Vacating Opinion No. 80-1 in Part.The Committee has been asked about, or has been involved in,
several situations recently involving disputes concerning the rights of third
parties to client funds in the hands of the client's attorney. All the
situations faced by the Committee have dealt with disputes between the client
and a third party over entitlement to the funds. Disputes could also arise,
however, between two third parties. These situations involve potentially grave
ethical, legal, and practical consequences for the attorney, as illustrated by
some of the situations in which the Committee has been involved.
The Committee has recently been asked about, or involved, in the
following four situations:
(1) The client suffered significant personal injury in an
accident, was treated at a hospital, and incurred substantial medical expenses.
The client paid the hospital for only a portion of the amount due on discharge.
The client gave the hospital a specific assignment, on a standard hospital
form, assigning client's proceeds from settlement or judgment to the hospital
in the amount of the balance due.
Thereafter, the client retained the attorney to represent the
client's interests in litigation as against possible responsible defendants.
Settlement was reached after approximately one year of litigation. Settlement
terms included payment of three installments of settlement funds over a
two-year period. On specific written instruction from client, attorney
disbursed the first two installments of settlement proceeds belonging to client
to other assignees. Thereafter, the hospital notified the attorney of the
existence of the signed assignment form. Attorney then contacted client to
inquire of client as to how proceeds were to be distributed, advising client as
to client's liability for unpaid hospital bills. The client specifically
instructed the attorney to pay the final settlement proceeds directly to the
client, and not to pay the hospital bill, notwithstanding the specific
assignment.
(2) Client changed attorneys in the middle of a proceeding. The
client apparently agreed to an attorney's lien to secure compensation to the
first attorney, and the first attorney filed a claim of lien in the court file
in accord with AS 34.35.430. The second attorney subsequently settled the
client's case. The client requested payment of the full amount of the
settlement proceeds from the second attorney. The second attorney turned over
the funds to the client, in accord with the client's request. Litigation
brought, by the first attorney against the second attorney for failure to
recognize the attorney's lien is presently pending.
(3) An attorney representing a tort defendant had retained money
in his trust account for the purpose of funding a settlement with the...
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