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Ethics Opinion #31
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Whether an attorney has an obligation
to notify a disbarred, suspended. or resigned attorney, with
whom he or she must share a fee, of the fact of the settlement
of the underlying suit from which the fees are to be paid.
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RICHMOND COUNTY BAR ASSOCIATION
COMMITTEE ON PROFESSIONAL ETHICS
OPINION # 31
July 10, 2002
The Committee has been presented with an inquiry that can be summarized as follows:
Does an attorney have an obligation to notify a disbarred, suspended or resigned attorney, with whom he or she must share a fee, of the fact of the settlement of the underlying suit from which the fees are to be paid?
The answer appears to be clearly resolved in the affirmative
by DR 9-102(c) (1) (22 NYCRR Section 1200.46 (c) (1)) which
states that “a lawyer shall promptly notify a client or third
person of the receipt of funds, securities, or other properties
in which the client or third person has an interest.”
(see, e.g. New York State Bar Association, Committee on Professional
Ethics, Op. #717 - attorney must notify holders of valid liens
and assignments when settlement check received). Clearly, such
third persons would include former lawyers or law firms who
have a claim against the proceeds of a settlement (see, Nassau
County Bar Association., Committee in Professional Ethics, Op.
#94-2). The fact that the former lawyers may no longer be authorized
to practice law is of no moment, since such persons may recover
attorneys' fees on a quantum meruit basis. (Rosenzweig.~
v. Gomez, 250 AD 2d 664 (2d Dept.)).
The obligation to so notify third persons of the receipt of
funds is a fiduciary one (see, Matter of D'Onofrio, 242
AD 2d 31 (2d Dept.)), such that the failure to comply may be
deemed as a breach of one s fiduciary duty.
The committee notes the case of State ex. rel. Oklahoma Bar
Association v Bedford. 956 P.2d 148, in which an attorney
was suspended for two years by reason of his failure, inter
alia, to notify a hospital possessing a lien of the fact of
receipt of a settlement check. Note is also made of Matter
of Fulton, 343 S.C. 506, in which an attorney was publicly
reprimanded for failing to so notify (and pay) a physician who
billed him $750.00 for a court appearance on behalf of the attorney
s client. Finally, in Matter of D'Onofrio, supra, an
attorney was suspended for two years by reason, inter alia,
of his failure to notify (and pay) a printer of the fact that
his client has given him. $2,500 specifically earmarked for
printing costs relating to an appeal.
The second question presented by the inquirer is whether the
placing of the former attorneys fee in escrow by the current
attorney(s) satisfies their ethical obligations. DR 9- l02(c)(4)
provide that answer in the negative. That Disciplinary Rule
requires the lawyer to “promptly pay or deliver to the
client or third person as requested by the client or third person
the finds, securities, or other properties in the possession
of the lawyer which the client or third. person is entitled
to receive.” Placement in escrow does not satisfy the clear
requirement of payment or delivery, unless there is a bona fide
dispute as to the amount due to the former attorneys
in a given case. Again, the fact that the former attorneys are
currently prohibited from practicing law does not, in and of
itself, create such a dispute. Consequently, all of the requirements
and. ethical responsibilities of the lawyer to notify clients
and third persons of the receipt of funds discussed hereinabove
apply with equal force to the obligation to pay and/or deliver
those funds promptly.
Finally, the committee notes the enactment of the Standards of Civility (22 NYCRR, Part 1200, Appendix A) at paragraph VIII, which provides that a “lawyer should adhere to all express promises and agreements with other counsel, whether oral or in writing, and to agreements implied by the circumstances or by local customs.” While intended only as guidelines, and not ethical mandates, the Standards would. seem to weigh in favor of adherence to any promises or agreements to pay former counsel s share of the fees, and to notify former counsel of the receipt of settlement funds in a particular case, if it is the local custom to do so.
Pursuant to Article VI Section 19 of the R.C.B.A. By-Laws, please be advised that the statements contained herein express the opinion of the Committee alone, and have not been passed upon the Association.
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Wayne M. Ozzi
Chairman, Professional
Ethics Committee |
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