Can a lawyer assert a retaining lien on client funds that were entrusted for a specific purpose if some of the money turns out not to be needed?

Plain-English summary

The inquiring attorney had clients place a $50,000 certificate of deposit in his trust account to be held as collateral for a loan on a vessel. After the clients discharged him (owing about $21,000 in fees) and directed him to deliver the certificate to the lender, the attorney wished to assert a retaining lien on the "equity," the portion of the certificate exceeding the loan balance. He asked whether he ethically could.

The committee explained that while a Florida attorney may in many circumstances assert a retaining lien on client funds in the trust account, there are situations in which he may not. Rule 4-1.15(b) requires a lawyer to promptly deliver funds the client or a third person is entitled to receive, and the comment to Rule 4-1.15 provides that money entrusted for a specific purpose is held in trust and must be applied only to that purpose, is not subject to setoff for fees, and that refusal to deliver it on demand is a conversion (while still allowing retention where the lawyer has a valid lien or an agreement for fees from the proceeds). This tracked the former Integration Rule, Article XI, Rule 11.02(4).

The committee relied on Florida Supreme Court authority (Bratton and Wilkerson) holding that an attorney cannot impose a retaining lien on funds entrusted for a specific purpose where the parties did not agree that fees would be paid from them. It noted Bratton, where a $10,000 bond deposit was held not subject to a retaining lien on release because it was delivered for a specific purpose with no fee agreement. Because the certificate of deposit here was entrusted for the specific purpose of serving as loan collateral, the committee concluded the attorney is not permitted to assert a retaining lien on any portion of it.

Currency note

This opinion was issued in 1987, before The Florida Bar's adoption of the 2006 revisions to the Rules of Professional Conduct. Subsequent rule amendments or later opinions may have changed the analysis. Treat this page as historical context, not current guidance. Verify against current rules before relying on any specific rule, deadline, or requirement mentioned here. The opinion notes that Rule 4-1.15 was significantly amended in April 2002 and its substance is now incorporated into Rule 5-1.1.

Common questions

Q: Can a lawyer keep a retaining lien on funds held for a specific purpose?

A: The opinion concluded that an attorney may not assert a retaining lien on funds entrusted for a specific purpose, absent an agreement that fees would be paid from those funds.

Q: What about the leftover portion not needed for that purpose?

A: The opinion concluded the attorney may not assert a retaining lien on any portion of the entrusted funds, including the "equity" exceeding what the specific purpose required.

Q: When can a lawyer retain entrusted funds for fees?

A: The opinion explained that funds entrusted for a specific purpose are not subject to setoff for fees, but retention is permitted where the lawyer has a valid lien or where the parties agreed fees would be paid from the proceeds.

Background and rules framework

The opinion interprets Rule 4-1.15(b) (Model Rule 1.15; substance now in Florida Rule 5-1.1) on safekeeping property and the prompt delivery of funds a client or third person is entitled to receive, together with its comment and the former Integration Rule Article XI, Rule 11.02(4). The lien analysis rests on Florida Supreme Court case law.

Citations and references

Rules of Professional Conduct:

• Fla. Rule 4-1.15(b) / Model Rule 1.15 (safekeeping property; now Fla. Rule 5-1.1)
• Integration Rule Art. XI, 11.02(4) (former)

Cases:

• Daniel Mones, P.A. v. Smith, 486 So. 2d 559 (Fla. 1986)
• The Florida Bar v. Bratton, 413 So. 2d 754 (Fla. 1982)
• Wilkerson v. Olcott, 212 So. 2d 119 (Fla. 1968)

See also

• FL Bar Ethics Op. 88-11: Retaining Lien for Unpaid Costs
• FL Bar Ethics Op. 02-4: Third-Party Claims on Settlement
• FL Bar Ethics Op. 02-6: Disputed Real Estate Deposit

Source

• Landing page: https://www.floridabar.org/etopinions/etopinion-87-12/
• Original PDF: https://www-media.floridabar.org/uploads/2017/04/FL-Bar-Ethics-Op-87-12-1.pdf

Original opinion text

Reproduced from the official source for research purposes. The linked source is authoritative.

FLORIDA BAR ETHICS OPINION
OPINION 87-12
November 1, 1987
Advisory ethics opinions are not binding.

An attorney may not assert a retaining lien against any portion of funds entrusted to him by a client for a specific purpose, even if some portion of the funds proves to be not needed to fulfill that specific purpose.

Note: Rule 4-1.15 was significantly amended by the Supreme Court in April 2002. The substance of the rule is now incorporated into Rule 5-1.1.

RPC: 4-1.15(b)
Integration Rule: Art. XI, 11.02(4)
Cases: Daniel Mones, P.A. v. Smith, 486 So.2d 559 (Fla. 1986); The Florida Bar v. Bratton, 413 So.2d 754 (Fla. 1982); Wilkerson v. Olcott, 212 So.2d 119 (Fla. 1968)

The inquiring attorney represented two clients in matters concerning the validity of title to a sailing vessel and a "preferred ship's mortgage" given by the clients to a lender as collateral for a loan on the vessel. The lender had declared the loan in default due to an alleged problem with the title. The inquiring attorney negotiated with the lender's attorney and reached an agreement whereby the inquirer was to have his clients place in his trust account a certificate of deposit in the amount of $50,000. The certificate was to be held in the trust account as collateral for the loan.

Subsequently, the clients retained another attorney to represent them and discharged the inquirer. The clients owe the inquiring attorney approximately $21,000 in unpaid legal fees. Apparently, the inquirer's former clients have now decided to satisfy their loan obligation through liquidation of the certificate of deposit. They have directed the inquiring attorney to deliver the certificate to the lender immediately. The attorney states that the remaining balance due on the loan is less than the amount of the certificate, and he desires to claim a retaining lien on that "equity."

The attorney asks whether he ethically may assert a retaining lien on that portion of the certificate of deposit proceeds not needed to satisfy the loan.

In many circumstances, a Florida attorney may assert a retaining lien on funds of a client that are held in the attorney's trust account. Daniel Mones, P.A. v. Smith, 486 So.2d 559 (Fla. 1986). However, there are situations in which an attorney is not entitled to assert a retaining lien. Rule 4-1.15(b) of the Rules Regulating The Florida Bar provides:

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.

With respect to whether a client or third person is "entitled to receive" certain trust funds, the Comment to Rule 4-1.15 advises:

Money or other property entrusted to a lawyer for a specific purpose, including advances for costs and expenses, is held in trust and must be applied only to that purpose. Money and other property of clients coming into the hands of a lawyer are not subject to counterclaim or setoff for attorney's fees, and a refusal to account for and deliver over such property upon demand shall be a conversion. This is not to preclude the retention of money or other property upon which a lawyer has a valid lien for services or to preclude the payment of agreed fees from the proceeds of transactions or collections. [Emphasis added.]

(This language was contained in the former Integration Rule of The Florida Bar, Article XI, Rule 11.02(4).)

The Florida Supreme Court has held that an attorney cannot impose a retaining lien on client funds entrusted to the attorney for a specific purpose where the parties have not agreed that attorney's fees should be paid out of the entrusted funds. The Florida Bar v. Bratton, 413 S.2d 754, 755 (Fla. 1982); Wilkerson v. Olcott, 212 So.2d 119, 121 (Fla. 1968); See also Daniel Mones, P.A. v. Smith, 486 So.2d at 561–62. In the situation presented, the certificate of deposit was entrusted to the inquiring attorney for a specific purpose — to be held as collateral for the loan.

As noted, the inquiring attorney states that he wishes to assert a retaining lien only on the "equity" in the certificate. In this respect, Bratton is instructive. In that case, the client entrusted the attorney with $10,000 to be posted as a bond in a mortgage foreclosure proceeding. The attorney argued that when the funds were released from the bond at the conclusion of the proceeding, he had the right to a retaining lien on the funds. The Supreme Court disagreed, stating that the funds were delivered to the attorney for a specific purpose and that there was no agreement for attorney's fees to be paid from the funds; consequently, the funds were not subject to a retaining lien. 413 So.2d at 755.

In view of the above, it appears that the inquiring attorney is not permitted to assert a retaining lien on any portion of the certificate of deposit.