My client's predecessor counsel withdrew from a contingency case and is now claiming a lien for a third of a rejected settlement offer. Do I have to hold that amount in escrow while we dispute it?

Currency note

This opinion was issued in 2001, before Rhode Island's later renumbering of 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 Treat this page as historical context, not current guidance.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 mentioned here.

Plain-English summary

A client's first attorney had obtained a settlement offer the client rejected; the relationship then broke down and predecessor counsel withdrew. Successor counsel later obtained an arbitration award for the client. Predecessor counsel asserted a lien equal to one-third of the previously rejected settlement offer, an amount the inquiring successor attorney disputed.

On the fee amount, the panel held predecessor counsel was not entitled to a contingency-based share of the rejected offer, citing Ashford v. Interstate Trucking Corp. of America, Inc., 524 N.W.2d 500 (Minn. 1994), for the principle that an attorney's lien after a justified withdrawal from a contingency case is not based on the terminated contingency contract. Instead, the fee should be based on quantum meruit, the fair value of the services rendered before withdrawal, citing R.I. Sup. Ct. Ethics Advisory Panel Op. 92-61 (1992). The panel characterized the precise dollar determination of that fair value as a substantive-law question outside the scope of legal ethics and discipline, and suggested the attorneys and client first try to agree on the value or submit the dispute to a court or the bar association's fee-arbitration program.

On the escrow question, the panel held Rule 1.15 required the successor attorney to protect the disputed funds, either by holding them in the client trust account until the matter is resolved or by paying them into the court registry through an interpleader action.

Common questions

Q: Is predecessor counsel entitled to one-third of a settlement offer the client rejected before predecessor counsel withdrew?

A: No. The panel held predecessor counsel's fee should be based on quantum meruit, the fair value of services rendered before withdrawal, not a percentage of a rejected offer.

Q: Who decides what predecessor counsel's fee should actually be?

A: The panel treated the dollar-value determination as a substantive-law question outside the Panel's ethics jurisdiction, suggesting agreement between the attorneys and client, or referral to a court or the bar's fee-arbitration program.

Q: What must I do with the disputed amount while the fee dispute is pending?

A: Under Rule 1.15, the panel held the successor attorney must either escrow the disputed funds in the client trust account or pay them into court through an interpleader action until the dispute is resolved.

Background and rules framework

The opinion applies Rule 1.15 (Model Rule 1.15, Safekeeping Property), which requires a lawyer holding property in which two persons claim an interest to keep the disputed portion separate until the dispute is resolved. The underlying fee entitlement question was analyzed under the common-law doctrine of quantum meruit rather than a specific Rule of Professional Conduct, consistent with the panel's view that valuing predecessor counsel's services is a substantive-law matter outside its ethics jurisdiction.

Citations and references

Rules of Professional Conduct:

• MR 1.15 (Safekeeping Property) / RI Rule 1.15

Cases:

• Ashford v. Interstate Trucking Corp. of America, Inc., 524 N.W.2d 500 (Minn. 1994): the amount of an attorney's lien after a justified withdrawal from a contingency-fee case is not based on the terminated contingency contract, and is not limited to an hourly-rate calculation

Other opinions cited:

• R.I. Sup. Ct. Ethics Advisory Panel Op. 92-61 (1992): predecessor counsel's fee after withdrawal is based on the fair value of services rendered

See also

• ABA Formal Op. 487: Fee Division with Client's Prior Counsel
• Alabama State Bar Op. 1990-86: Contingent Fee, Attorney Lien, Quantum Meruit

Source

• Landing page: https://www.courts.ri.gov/attorney-resources/Pages/Ethics-Advisory-Panel-default.aspx
• Original PDF: https://www.courts.ri.gov/Opinions/EAP%202001-03.pdf

Original opinion text

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

Final

Rhode Island Supreme Court
Ethics Advisory Panel
Opinion No. 2001-03 Request No. 822
Issued May 17, 2001

FACTS:

The inquiring attorney represents a client who was previously represented by another attorney in a personal injury matter. The client's first attorney had obtained an offer of settlement which the client would not accept. As a result of this and also what appears to have been a breakdown in the attorney-client relationship, predecessor counsel withdrew from the representation.

The inquiring attorney recently obtained an arbitration award on behalf of the client.
Predecessor counsel has asserted a lien on the proceeds equal to one-third of the previously rejected settlement offer. The inquiring attorney disputes the amount of the lien, and seeks the Panel's guidance.

ISSUE PRESENTED:

(1) Is predecessor counsel entitled to payment equal to one-third of the rejected settlement offer? (2) Is the inquiring attorney obligated to escrow the amount claimed by predecessor counsel?

OPINION:

(1) Predecessor counsel is entitled to payment on a quantum meruit basis only. The issue of what amounts are due to predecessor counsel is a substantive law question which is outside the area of legal ethics and discipline. (2) Pursuant to Rule 1.15, the inquiring attorney has an obligation to protect the amount claimed by predecessor counsel by either placing the disputed funds in his/her client's account until the matter is resolved, or paying them into the court registry in an interpleader action.

REASONING:

Under the facts of this inquiry, predecessor counsel is not entitled to a contingency fee. See, e.g. Ashford v. Interstate Trucking Corp. Of Amer. Inc., 524 N.W. 2d. 500 (Minn. 1994) (amount of attorney's lien when attorney justifiably withdraws from contingency fee case may not be based on terminated contingency contract.) The fee should be based on quantum meruit, that is, the fair value of services rendered before predecessor counsel's termination of the

Final 2001-03
Page 2

representation. 1 See R.I. Sup. Ct. Ethics Advisory Panel Op. 92-61 (1992). A determination of the fair value of predecessor counsel's services is a matter of substantive law which is outside the area of legal ethics and discipline.

The attorneys and the client should attempt to reach an agreement on the reasonable value of predecessor counsel's services prior to his/her withdrawal, and if that fails, then the attorneys and the client should consider submitting the fee dispute to a court or to the bar association's fee-arbitration program. Accordingly the inquiring attorney must either escrow the disputed funds in his/her client's account until the matter is resolved, or pay them into the court registry in an interpleader action.

1
Quantum meruit is generally determined by multiplying the number of hours worked by a reasonable hourly fee. However, the determination of the fair value of services performed by a predecessor attorney in a contingency fee case is not limited to this formula. See e.g. Ashford v. Interstate Trucking Corp. Of Amer., Inc., 524 N.W. 2d. 500 (Minn. 1994) (When an attorney justifiably withdraws from contingency fee case, court is not limited to considering only attorney's hourly rate and number of hours worked when determining amount of attorney's lien.)