When a client switches lawyers in a contingent fee case, must successor counsel protect the prior lawyer's charging lien out of the recovery?

Plain-English summary

The opinion addresses a recurring sequence: a client signs a contingent fee agreement with one lawyer (predecessor counsel), later terminates that lawyer, retains a different lawyer (successor counsel) under a new agreement, the case resolves, and the proceeds are paid to successor counsel. The question is what successor counsel must do about the predecessor's potential claim against the recovery.

The opinion explains that under Pennsylvania law a charging lien may arise in favor of predecessor counsel against the recovery, and it sets out the five conditions for recognizing a charging lien from Recht v. Urban Redevelopment Authority, 168 A.2d 134 (Pa. 1961). It notes the Pennsylvania Supreme Court most recently recognized the continued applicability of the lien in Meyer, Darragh, Buckler, Bebenek & Eck, P.L.L.C. v. Law Firm of Malone Middleman, PC (Pa. 2018).

Turning to the ethics rule, the opinion quotes Rule 1.15(f): when a lawyer holds funds or property in which two or more persons claim an interest, the funds must be kept separate until the dispute is resolved, and undisputed portions must be promptly distributed. It quotes Comment [8], which directs that when a third party's claim is not frivolous the lawyer must refuse to surrender the property to the client until the claims are resolved, should not unilaterally arbitrate the dispute, and may file an action to have a court resolve it. Citing Philadelphia Bar Association Professional Guidance Committee Opinion 2003-4, which opines that a colorable claim must be protected under Rule 1.15(f), the opinion concludes that successor counsel must retain in trust sufficient monies to satisfy the predecessor's quantum meruit claim pending adjudication of the lien entitlement in a neutral forum or agreement among the parties.

In practice

Under this opinion, a Pennsylvania lawyer who takes over a contingent fee matter and later receives the recovery holds funds subject to a competing claim by the prior lawyer. The opinion concludes the successor must keep enough of the recovery separate in the trust account to cover the predecessor's quantum meruit claim until the lien dispute is resolved by agreement or by a neutral forum, must not unilaterally decide the dispute, and may distribute the undisputed remainder.

Common questions

Q: Can I just pay my client the full recovery and let the prior lawyer chase them for fees?

A: No. The opinion concludes that under Rule 1.15(f) and Comment [8], when the predecessor's claim is colorable the lawyer must hold the disputed amount in trust rather than surrender it to the client.

Q: How much must I hold back?

A: Enough to satisfy the predecessor's quantum meruit claim. The opinion concludes successor counsel must retain in trust sufficient monies to satisfy that claim pending resolution.

Q: Can I decide the dispute myself?

A: No. The opinion, quoting Comment [8] to Rule 1.15, states the lawyer should not unilaterally arbitrate the dispute and may file an action to have a court resolve it.

Background and rules framework

The opinion interprets Pennsylvania Rule of Professional Conduct 1.15(f) and Comment [8], which govern a lawyer's duties when holding funds claimed by more than one person, including a third party with a lawful claim such as a charging lien. The rule corresponds to ABA Model Rule 1.15's provisions on disputed property. The opinion grounds the existence of the predecessor's charging lien in Pennsylvania case law rather than in the ethics rule itself.

Citations and references

Rules of Professional Conduct:

• Pa.R.P.C. 1.15(f) and Comment [8]; ABA Model Rule 1.15

Cases:

• Recht v. Urban Redevelopment Authority, 168 A.2d 134 (Pa. 1961), five conditions for a charging lien
• Meyer, Darragh, Buckler, Bebenek & Eck, P.L.L.C. v. Law Firm of Malone Middleman, PC (Pa. 2018), continued applicability of the charging lien

Other opinions cited:

• Philadelphia Bar Association Professional Guidance Committee Op. 2003-4: a colorable claim must be protected under Rule 1.15(f)

See also

• PA Bar Ethics Op. 2020-200: Obligations of Successor Contingent Fee Counsel to Advise Client of Potential Obligations to Prior Counsel
• ABA Formal Op. 487: Fee Division With Client's Former Counsel
• PA Bar Ethics Op. 2021-300: Ethical Considerations for Lawyers Retaining Original Wills

Source

• Landing page: PBA Ethics Opinions (Public)
• Original PDF: f2020-500.pdf