May a lawyer keep settlement proceeds disputed by a client and lien claimant in an interest-bearing account?

Plain-English summary

A lawyer had distributed the undisputed portion of a settlement but still held money disputed between the client and a third-party lien claimant.

The opinion allows a reasonable holding period and a non-IOLTA interest-bearing account if the interest is paid to the person entitled to the funds. If progress toward settlement ends, it says the lawyer must file an interpleader action after giving both sides enough notice to allow settlement before that expense.

Currency note

The official page says Rule 4-1.15 was amended in 2013 and its subdivision (f) changed in 2016. It says this 1997 answer applied the earlier rule. Treat it as historical context and verify current rules before relying on it.

Common questions

Q: Who receives interest on the disputed funds?

A: Under the answer, interest on a non-IOLTA account goes to the person to whom the funds belong.

Q: What happens if settlement efforts make no progress?

A: The answer calls for an interpleader action and advance notice to both parties.

Background and rules framework

The source’s reference notes state that Rule 4-1.15 changed in 2013 and subdivision (f) changed in 2016. The answer addresses handling disputed funds under the earlier rule.

Citations and references

Missouri Rules of Professional Conduct:

• Rule 4-1.15 (source reference note)

See also

• Missouri Informal Op. 20000023: Interpleader and Fees
• Missouri Informal Op. 990150: Doctor Lien

Source

• Landing page: https://mo-legal-ethics.org/informal-opinion/970075/

Original opinion text

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

Reference Note: Effective July 1, 2016, subdivision 4–1.15(f) of Rule 4 was repealed and a new subdivision 4–1.15(f) adopted in lieu thereof. This opinion is based on Rule 4–1.15 in effect prior to that date.

Reference Note: Rule 4–1.15 was amended, effective July 1, 2013. This opinion is based on the rule in effect prior to that date. Please see the July 1, 2013 version of Rule 4–1.15.

QUESTION: Attorney is holding settlement funds that are disputed between the client and a third party asserting a lien. The non-disputed funds have been distributed. May Attorney hold these funds in an interest bearing account.

ANSWER: Attorney may hold the funds for a reasonable period of time. While Attorney holds the funds, they may be in a non-IOLTA interest bearing account as long as the interest goes to the person to whom the funds belong. However, Attorney should not continue to hold the funds if progress toward settlement is not being made. Under those circumstances, it will be necessary for Attorney to file an interpleader action. Attorney should advise both parties of Attorney´s intent to file such an action far enough in advance that they will still be able to settle and avoid the expenses of that action.