The Committee has been asked by the inquiring attorney (the Inquirer) for advice under the following circumstances: The Inquirer has negotiated a settlement of a client's uninsured motorist claim, which settlement is in the amount of the policy limits. The client has repeatedly refused to sign the release form, which the insurance carrier requires before payment of the settlement proceeds. The client's refusal to sign the release apparently is based on the client's unwillingness to pay a fee to the Inquirer. The Inquirer, who has a signed fee agreement with the client, has explained to the client the basis for the fee, subsequently has agreed to reduce the fee, and now is willing to agree that the settlement check be payable solely to the client, at which point the client will decide when and how much to pay the Inquirer. Even with the latter agreement, though, the Inquirer is concerned that the client will not sign the release.
Rule 1.3 of the Rules of Professional Conduct requires a lawyer to act with reasonable diligence in representing a client. As stated in the Comment to that Rule, Unless the relationship is terminated as provided in Rule 1.16, a lawyer should carry through to conclusion all matters undertaken for a client. (Although the Comments to the Rules were not adopted by the Supreme Court of Pennsylvania as a part of the Rules, they explain and illustrate the meaning and purpose of the Rules.) Thus, it is the Committee's opinion that the Inquirer must counsel the client to execute the release so that the matter can be concluded and the settlement proceeds secured. In the event that the client continues to refuse to sign the release despite the Inquirer's agreement as aforesaid, the Inquirer then may terminate representation of the client by taking the steps reasonably practicable to protect the client's interests, as provided in Rule 1.16(d).
The Inquirer apparently has complied with Rule 1.5 (b), in that the Inquirer has a written fee agreement with the client (which fee agreement was not provided to the Committee). If the client executes the release, upon receipt of the settlement check from the insurance carrier, the Inquirer should look to Rule 1.15 (b), which requires the Inquirer to notify the client of the receipt of the check promptly. In addition, Rule 1.15 (b) states that, except as provided elsewhere in Rule 1.15 or otherwise permitted by law or by agreement with the client, a lawyer must promptly deliver to the client any funds that the client is entitled to receive. As the Inquirer is willing to request that the insurance carrier make the settlement check payable to the client alone, it is the Committee's opinion that the Inquirer cannot then hold the settlement check pending resolution of the fee dispute with the client. The Committee cites the Inquirer to the Comment to Rule 1.15, which states that, ... a lawyer may not hold funds to coerce a client into accepting the lawyer's contention [that the lawyer is entitled to payment of the lawyer's fee out of the settlement proceeds].
Of course, if the client agrees to accept a settlement check made payable to the client and the Inquirer, then Rule 1.15 (c) would permit the Inquirer to retain the portion of the settlement representing the disputed fee amount in escrow pending resolution of the fee dispute. In addition, if the settlement check is made payable solely to the client, the Rules do not prohibit the Inquirer from suing the client for the Inquirer's fee. As a matter of fact, Rule 1.6 (c) (3) specifically permits a lawyer to reveal what would otherwise be confidential information to the extent reasonably necessary to establish such a claim against the client.