ETH 2009-177.

Court:California
 
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California Ethics Opinion 2009. ETH 2009-177. THE STATE BAR OF CALIFORNIASTANDING COMMITTEE ONPROFESSIONAL RESPONSIBILITY AND CONDUCTFORMAL OPINION NO. 2009-1772009ISSUES:In what manner may an attorney maintain her rights in a charging lien when her former client demands that the attorney endorse a settlement check jointly payable to the client and his current and former attorneys without violating the requirement of rule 4-100 of the California Rules of Professional Conduct that the attorney promptly pay or deliver funds to which the client is entitled?DIGEST: When responding to a request to endorse a settlement check made jointly payable to a client and his or her current and former attorneys where the former attorney has asserted a valid lien on the settlement proceeds, the former attorney must take prompt steps to find a reasonable method or methods of delivering the undisputed portion of the proceeds to which the client is entitled. The former attorney does not violate rule 4-100 by refusing to use a method that would extinguish the attorney's charging lien, but has a duty to consult governing legal authorities and make a reasonable determination of the amount to which he or she is entitled under the circumstances. If the client does not agree to proposed reasonable methods for delivering the undisputed portion or does not agree with the former attorney's determination of the amount of the proceeds that undisputedly belong to the client, the attorney must promptly seek resolution of the fee dispute through arbitration or judicial determination, as appropriate. AUTHORITIES INTERPRETED: Rules 3-700 and 4-100 of the Rules of Professional Conduct of the State Bar of California. Commercial Code section 3110(d). Civil Code section 2913. STATEMENT OF FACTS Client retained Attorney A to represent Client in a personal injury action against a construction company. The retainer agreement between Attorney A and Client provided for a contingency fee of 35 percent of any recovery obtained by Client through judgment, settlement or other recovery and specifically included a legally valid charging lien in favor of Attorney A upon the proceeds of Client's prospective recovery. Upon receiving the signed retainer agreement, Attorney A commenced work on the matter. After two years of active litigation, Client discharged Attorney A and retained Attorney B. Attorney A filed a notice of lien in the litigation. The litigation was resolved several months later by settlement when the opposing party sent Attorney B a check made out to "Client, Attorney A, and Attorney B." Client demanded that Attorney A endorse the check. Fearing that endorsing the check in that manner would forfeit certain legal rights she had pursuant to the lien, Attorney A declined to endorse the check under those conditions, but did offer to take prompt and reasonable steps so that the portion of the settlement check that undisputedly belonged to Client, as determined in accordance with applicable governing authorities concerning the reasonable value of the services Attorney A had rendered at the time of discharge, could be immediately released to Client. Client refused to agree to the steps Attorney A proposed. Consequently, Attorney A initiated an independent action to determine the amount of fees to which she is entitled and provided timely and proper notice to Client of his right to arbitration. DISCUSSION 1. Rule 4-100 of the California Rules of Professional Conduct(FN1) Obligates an Attorney To Promptly Pay or Deliver Any Funds or Property the Client Is Entitled To Receive. The dilemma faced by Attorney A is created when the settlement check is jointly made payable to Client, Attorney A and Attorney B. Attorney A does not want to endorse the check if it will forfeit her lien, but, alternatively, does not want to take any action that improperly delays Client's receipt of the settlement proceeds to which Client is entitled. Rule 4-100(B)(4) provides that an attorney shall "[p]romptly pay or deliver, as requested by the client, any funds, securities, or other properties in the possession of the member which the client is entitled to receive." Thus, where an attorney has asserted no lien rights over the settlement proceeds and no valid rights to any portion of such proceeds exist...

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