ETH 2009-177.
Court | California |
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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