Opinion 92-18
(December 1992)

You have requested an opinion from the Philadelphia Bar Association Professional Guidance Committee on the following facts: you are about to receive funds in settlement of a personal injury case on behalf of a client who was injured in 1985. In 1986, your client was hospitalized. X corporation is now the Conservator of the assets of this hospital and claims that it is entitled to collect the hospital bill for the services rendered to your client. You have advised this Committee that you believe that X has no interest in the funds for the following reasons: a) neither X nor its predecessors in interest has taken any action to recover the debt for the hospital bills or assert any subrogation interest in the funds that you are about to receive; b) no lien has been filed against the funds or against your client; c) no assignment has been executed by your client in favor of the hospital; and d) no letter of protection was ever given by former counsel to the hospital. On the basis of the foregoing, you have sought an opinion that you are ethically free to release the settlement funds to your client.

The applicable Pennsylvania Rule of Professional Conduct which governs these facts is Rule 1.15 entitled "Safekeeping Property." Subparagraphs (b) and (c) of that Rule provide as follows:

(b) Upon receiving funds or other property in which a client or third person has an interest, a lawyer shall promptly notify the client or third person. Except as stated in this Rule or otherwise permitted by law or by agreement with the client, a lawyer shall promptly deliver to the client or third person any funds or other property that the client or third person is entitled to receive and, upon request by the client or third person, shall promptly render a full accounting regarding such property.

(c) When in the course of representation a lawyer is in possession of property in which both the lawyer and another person claim interest, the property shall be kept separate by the lawyer until there is an accounting and severance of their interests. If a dispute arises concerning their respective interests, the portion in dispute shall be kept separate by the lawyer until the dispute is resolved.

Your duties under this rule are clear. You are required to notify your client when the funds are received. If you are of the opinion that the claimant X has no legal interest in the funds that you are about to receive and that you are under no other legal duty to notify X by virtue of applicable law, Rule 1.15(b) would not impose such a duty. Moreover, if you are of the opinion that claimant X has no legal interest in the funds that you are to receive, and you are under no legal duty to deliver any of the funds to claimant X, you are not required specifically by Rule 1.15 (b) to deliver any of the funds to claimant X. However, Rule 1.15 (c) must be considered before a conclusion can be reached on your ability to remit the funds to your client.

Under Rule 1.15(c), if a lawyer comes into possession of property in which both the lawyer and another person claim interest, the property shall be kept separate by the lawyer until there is an accounting and severance of their interest. The Rule further requires that in the event of a dispute, "the portion in dispute shall be kept separate by the lawyer until the dispute is resolved." This rule comes into play only where there is a dispute between the lawyer and another person with respect to the funds. A dispute exits here between claimant X and your client as to the funds. Under the facts that have been presented to the Committee, there is no dispute with respect to that portion of the fund that is attributable to your fee. There being no dispute between you and a third person with respect to the fund, you do not have an obligation under 1.15(c) to keep the fund separate until resolution of the dispute between your client and claimant X. The foregoing is based upon the assumption that (a) you have determined that there is not duty under applicable law to protect the claims of claimant X and (b) no portion of your fee is the subject of a dispute with claimant X.

This Committee expresses no opinion regarding any civil liability which you have or may have with regard to the delivery of the settlement funds to your client upon demand or escrow of the settlement funds in light of the claims of claimant X.

The Committee has considered its own prior opinions 92-2, 89-4 and 88-24, opinions of the Pennsylvania Bar Association Committee on Legal Ethics and Professional Responsibility (91-148, 92-11 and 92-67), and that Committee's opinion to this inquirer on the same facts before this Committee. This Committee feels that the facts before it provide a basis for reaching the conclusions that it has reached. It feels obligated to point out that the inquirer is not free to ignore that prior advice. In view of the different conclusion reached by this Committee, it is recommended you revisit this matter with the Pennsylvania Bar Association Committee on Legal Ethics and Professional Responsibility.

   

The Philadelphia Bar Association's Professional Guidance Committee provides, upon request, advice for lawyers facing or anticipating facing ethical dilemmas. Advice is based on the consideration of the facts of the particular inquirer's situation and the Rules of Professional Conduct as promulgated by the Supreme Court of Pennsylvania. The Committee's opinions are advisory only and are based upon the facts set forth. The opinions are not binding upon the Disciplinary Board of the Supreme Court of Pennsylvania or any other Court. They carry only such weight as an appropriate reviewing authority may choose to give it.