86-4.

Case DateNovember 07, 1986
CourtAlaska
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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