You have requested an opinion from the Philadelphia Bar Association Professional Guidance Committee on the following facts: a malpractice action is being pursued by a plaintiff who, during the period or after the alleged malpractice occurred, received medical and cash assistance via the Department of Public Welfare (DPW) No settlement has been achieved in the malpractice action; DPW has not been advised of the action, nor have plaintiff and DPW agreed to compromise the DPW lien claim against the plaintiff. You have asked whether plaintiff's counsel has an ethical obligation to notify DPW of any settlement of the malpractice action.
Pennsylvania Rule of Professional Conduct 1.15(b) states:
(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 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.
The Rule is clear; upon receipt of funds, plaintiff's counsel must advise DPW of the settlement, if DPW has an interest in such funds, the existence and extent of which interest is a legal matter for you to determine.
Rule of Professional Conduct 1.6(a) states:
(a) a lawyer shall not reveal information relating to representation of a client unless the client consents after consultation, except for disclosures that are impliedly authorized in order to carry out the representation and except as stated in paragraphs (b) & (c).
Rule of Professional Conduct 1.6(c) states, in part:
(c) a lawyer may reveal such information to the extent the lawyer reasonably believes necessary:
(2) to prevent or rectify the consequences of a client's criminal or fraudulent act in the commission of which the lawyer's services are being or had been used...
Although arguably the disclosure to DPW that a settlement has occurred could violate 1.6(a), Rule 1.6(c)(2) may render such disclosure permissible.
In the event that Rule 1.6(c)(2) is not applicable, you may be inclined to maintain the information about the settlement as a matter between you and your client and thereby comply with Rule 1.6(a) notwithstanding its inconsistency (under these facts) with Rule 1.15(b), particularly in view of the results in Commonwealth v. Thomas, 566 A.2d 365 (Pa. Commonwealth 1989) and Commonwealth v. Portnoy, 566 A.2d 336 (Pa. Commonwealth 1989). Thomas and Portnoy held that, because the Pennsylvania legislature has not provided for penalties and remedies against attorneys for failure to provide notice of a settlement to DPW but has provided for penalties and remedies against providers and recipients in the event of such failure, attorneys who fail to provide such notice cannot be held responsible to DPW for damages in the amount of lost reimbursements. Portnoy refers to 62 P.S. section 1409(b)(12) as stating that:
The beneficiary must give notice of the institution of legal proceedings against a third party or insurer as well as notice of settlement, and that all such notices shall be given by the attorney retained to assert the beneficiary's claim.
566 A.2d at 340.
Although pursuant to Portnoy and Thomas DPW may not be able to recover monetary damages from an attorney in your situation, and although the court in Portnoy refused to enter a declaratory judgment that an attorney in your situation had to comply with the notice provisions of 62 P.S. section 1409(b), again seemingly because of the absence from the statue of legal or equitable remedies as to attorneys, the duty to inform is clearly set forth in section 1409(b) and Rule 1.15(b) requires that the duty be carried out.
As the Preamble to the Rules of Professional Conduct states: A lawyer's conduct should conform to the requirements of the law.... One of the requirements of Pennsylvania law is that an attorney in your situation notify DPW of a settlement of a claim in favor of an assistance recipient who is his client. As Judge Craig said in his dissent in Portnoy:
This court should not give license to any member of the Bar to ignore that explicit legal duty, enacted by the elected lawmakers and obviously designed to facilitate reimbursement to the public treasury, when proper, so that the public assistance program may aid as many citizens as possible.
It is our opinion that, although the state of the law in Pennsylvania may still be that nondisclosure of any settlement will not expose an attorney to a damage claim by DPW, it could expose the attorney to potential disciplinary action.
The dissenting members of the Committee submit nondisclosure to the Department of Welfare would not be a violation of the Pennsylvania Rules of Professional Conduct, and to the contrary believe disclosure might constitute a violation of Rule 1.6 which addresses client confidentiality.