Opinion 99-2
(May 1999)

The inquirer received a referral in a worker's compensation matter from Attorney R who was at the time employed at Law Firm M. Attorney R, while at Law Firm M also represented the client in a related motor vehicle accident. When Attorney R left Law Firm M, the client opted to stay with Attorney R rather than Law Firm M. The inquirer has now received a lump sum settlement in the worker's compensation claim, but both Attorney R and Law Firm M are claiming they are entitled to the referral fee. The inquirer asks how he can determine who is entitled to the referral fee so that the money can be distributed from his escrow account.

How to determine who is entitled to the disputed funds is a substantive law question, beyond the scope of the Committee's charge. However, there are some ethical considerations which arise under this inquiry which the Committee will address.

Pennsylvania attorneys are governed by the Rules of Professional Conduct ("Rules") as adopted by the Supreme Court of Pennsylvania effective April 1, 1988. Rule 1.5(e) provides that in order for an attorney to share a fee with a lawyer not in the same firm two conditions must be met. First, the client must be advised of the proposed division of fee and not object to it (Rule 1.5(e)(1)), and the total fee of the lawyers is not illegal or clearly excessive for the legal services rendered to the client (Rule 1.5 (e)(2)).

Rule 1.15a also requires that an attorney who comes into possession of property that belongs to third parties, be they clients or other individuals, keep such funds in a separate account usually referred to as an "escrow account."

In the facts as described, providing the requirements of Rules 1.5e1&2 have been met, the inquirer is handling the funds and the dispute in the appropriate fashion. If the funds are in a large amount, an attorney's fiduciary obligation may require that the inquirer transfer the funds out of an IOLTA account, and put them in a separate interest bearing account. (See Rule 1.15d). However, an attorney's ethical obligations are met once the disputed funds are in the appropriate escrow account. Should the inquirer, rather than waiting for Attorney R and Law Firm M to resolve their dispute, wish to take some action, the inquirer can file an interpleader with the court, outlining the dispute and requesting that the funds be paid to the court so that the inquirer can end his participation in the matter.

The Committee assumes that the inquirer does not have the authority to determine the various entitlements to the funds presently held in escrow, and based upon this assumption cautions the inquirer not to take it upon himself to determine what the entitlements to the escrowed funds are. This is beyond the scope of his duties, and in fact could be considered a violation of Rule 1.15a.

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.