Opinion 99-10
(October 1999)

You have asked the Committee whether you may follow your client's instructions to return settlement proceeds held in your trust account, without telling other counsel that you are doing so.

The facts that you provided to the Committee are as follows. The case is venued in the United States District Court in the Eastern District of Pennsylvania. Your client is a defendant in the case. Approximately nine months ago, counsel negotiated a settlement in principle which was reported to the court, and the case was dismissed as settled under Local Rule 41.2 (b). Opposing counsel circulated a settlement agreement and mutual releases, which were executed by your client. Opposing counsel had written that settlement was conditioned upon receipt of a cashier or certified check the next day. You told opposing counsel that you had placed your client's settlement proceeds in your trust account, where you would hold them until the mutual releases were executed by the other parties, a condition that was accepted by counsel. Later that month, you advised opposing counsel that the release and settlement agreement that his clients executed were undated and not notarized, and that you would forward the settlement check from your trust account after you received a properly executed settlement agreement. You have heard nothing further from counsel and the settlement proceeds remain in your trust account.

Your client has now instructed that you return the settlement proceeds to him without informing opposing counsel, so that your client can collect the interest until adverse counsel decides to recontact you.

Rule 1.15 of the Rules of Professional Conduct Governs a lawyer's obligations upon receiving funds in which a client or third person has an interest. Rule 1.15(b) requires that you promptly notify the interested party that you received the funds, and you have provided that notice. Although the Rule does not specifically address whether you may thereafter move the funds without a renotification to the party, the Comment to the rule is instructive:

A lawyer may have a duty under applicable law to protect such third-party claims against wrongful interference by the client, and accordingly, may refuse to surrender the property to the client.

Since at least one other party to this litigation has a claim to the settlement proceeds in your trust account upon proper execution of the settlement documents, you should not return the funds to your client without notice to other counsel.

Rule 1.15 would not prevent you from writing a letter in which you notify counsel of your intent to return the money to your client if you do not receive the properly executed documents within a stated deadline. In this regard, you should separately admonish your client of his duty to pay the settlement proceeds upon your receipt of the properly executed release and settlement agreement, and further advise your client of the time within which such payment must be made.

This opinion addresses the issues raised under the Pennsylvania Rules of Professional Conduct only. It is beyond the jurisdiction of this Committee to opine on the application of New Jersey's professional responsibility rules. 

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.