Can a New York lawyer use a power of attorney in the retainer to settle a case and endorse the client's settlement check?
NY State Bar Ethics Opinion 760: Power of attorney to settle and endorse a settlement check
Short answer: A lawyer may obtain and use a revocable power of attorney, in the retainer or as a standalone document, to settle a case and endorse the client's settlement check, with full disclosure, but only if the lawyer settles on terms the client indicated in advance or submits the settlement for the client's approval, and promptly complies with the DR 9-102 notice, recordkeeping, and disbursement duties after endorsing the check.
Disclaimer: This is an advisory ethics opinion. Advisory opinions are not binding; they interpret the New York State Bar Association's rules of professional conduct and are persuasive authority. This summary is for research purposes only and is not legal advice. Verify current rules before acting on any specific guidance.
About this page: The plain-English summary and Q&A below were written by Ezel based on the official opinion. We do not reproduce the opinion text on this page; follow the linked source for the official text, which controls.
Plain-English summary
The committee considered whether a lawyer may include in the retainer (or use a separately executed) power of attorney authorizing the lawyer to sign a release and stipulation of discontinuance on settlement, or to endorse the client's settlement check. The Code does not expressly forbid powers of attorney, and the lawyer-client relationship is itself an agency relationship, so the committee found nothing inherently improper, subject to important limits.
On settlement authority, the committee stressed that in civil cases the client decides whether to accept a settlement (EC 7-7; Restatement section 22). A retainer is usually signed before the lawyer knows the facts or the parties' willingness to settle, so the disclosures needed to validate settlement authority cannot be made that early. The committee therefore concluded that even with a general power of attorney, the lawyer should not settle without explicit instructions obtained after the lawyer and client discuss the merits, the client's willingness to settle, and acceptable terms. Any settlement power must be revocable; an irrevocable power, or an agreement that the lawyer alone decides terms, is invalid, and the committee noted the discipline imposed in In re Hansen for an irrevocable power that amounted to overreaching.
On settlement checks, the committee held it is not per se unethical to obtain a revocable power to endorse the client's check, which is often convenient in contingent-fee matters where proceeds are deposited into the trust account. But the power does not override the trust-account rules. Under DR 9-102(B)(4), settlement proceeds in which the lawyer claims a fee must go into the trust account, and the lawyer may not withdraw any portion the client disputes. Under DR 9-102(C) the lawyer must promptly notify the client of receipt, and under DR 9-102(D) keep complete records. The committee concluded that if the lawyer promptly deposits the endorsed check, notifies the client, keeps records, and pays the client what is due, no violation occurs; but using the power without prompt compliance violates DR 9-102 and DR 1-102(A), and can amount to conversion (In re Malatesta).
In practice
Under the Code as it stood in 2003, the opinion concluded that a revocable power of attorney to settle and to endorse the settlement check is permissible with full disclosure, but the lawyer may not actually settle on the power alone. The opinion held the lawyer must get explicit client instructions after discussing the merits and acceptable terms, or submit the settlement for approval, and the power must remain revocable.
The opinion concluded that endorsing the check is acceptable only if the lawyer promptly deposits the proceeds into the trust account, notifies the client of receipt, maintains complete records, and pays the client what the client is entitled to receive; failing those steps violates DR 9-102 and DR 1-102(A) and can constitute conversion.
Common questions
Q: Can a New York lawyer put a power of attorney to settle in the retainer?
A: Yes, if revocable and disclosed. The opinion concludes the lawyer may obtain such a power but may not settle on it without explicit client instructions after discussing the merits and acceptable terms.
Q: Can the lawyer endorse the client's settlement check under a power of attorney?
A: Yes, with a revocable power. The opinion holds it is not per se unethical, provided the lawyer promptly deposits the proceeds in the trust account and meets the DR 9-102 notice, recordkeeping, and disbursement duties.
Q: Can the power of attorney be irrevocable?
A: No. The opinion concludes any settlement power must be revocable; an irrevocable power is invalid and, per In re Hansen, amounts to overreaching.
Background and rules framework
The opinion interprets New York's former Code of Professional Responsibility: DR 9-102(B)(4), (C), and (D) (safekeeping client property, holding disputed funds, notice and records) and DR 1-102(A) (misconduct), with EC 7-7 (the client decides whether to settle). The Model Rules analogues are Rule 1.15 (safekeeping property), Rule 1.2(a) (the client decides whether to settle), and Rule 8.4 (misconduct). New York replaced this Code with the Rules of Professional Conduct in 2009; the DR numbers cited here are historical.
Citations and references
Rules of Professional Conduct:
- MR 1.15 (safekeeping property; disputed funds; notice and records)
- MR 1.2(a) (client's decision to settle)
- MR 8.4 (misconduct)
- NY DR 9-102(B)(4), DR 9-102(C), DR 9-102(D), DR 1-102(A); EC 7-7
Cases:
- In re Hansen, 108 A.D.2d 206 (2d Dep't 1985), irrevocable power of attorney to endorse a check was overreaching
- In re Malatesta, 124 A.D.2d 62 (1st Dep't 1987), conversion despite claimed endorsement authority
See also
- NY State Bar Op. 763: Third-party credit card payments and fee deduction
- NY State Bar Op. 759: Using an ATM to deposit into a trust account
- NY State Bar Op. 1044: Advancing a client's transportation costs as a litigation expense
Source
- Landing page: https://nysba.org/ethics-opinion-760/