I have a medical-payment check for my former client, but she won't endorse it, her new lawyer wants me to forward it, and the chiropractor who has a lien wants me to hold it. What do I do with the check?

Plain-English summary

The inquiring attorney represented a client in a personal injury claim arising from an automobile accident. The client, who lacked health insurance, was treated by a chiropractor and a facility that took x-rays, and signed a "Doctor's Lien" giving the chiropractor a lien on any settlement or judgment and directing the attorney to pay the provider directly and withhold sums as necessary; the attorney signed the document acknowledging the lien and agreeing to honor it, and signed a similar document for the x-ray provider. Months later, the attorney received a $1,000 check payable to the client under the medical-payment coverage of an insurance policy. The client did not respond to the attorney's request to come endorse the check and instead retained new counsel, who demanded the attorney forward the proceeds to the client; the chiropractor, meanwhile, asked the attorney not to forward the check to either the successor counsel or the client. The attorney asked the panel what to do with the check.

The panel applied Rule 1.15(d), which requires a lawyer who receives funds in which a client or third person has an interest to notify the client or third person promptly, and, except as otherwise agreed or required, to promptly deliver the funds and render an accounting on request. The panel explained that where the client does not consent to payment of a third party or repudiates a prior agreement to pay a third party, the lawyer may not pay the third party, and the lawyer must protect the disputed property notwithstanding a client's demand for disbursement. Because the attorney had notified both the client and the providers but the client had not consented to paying the providers, and both the client and the providers claimed an interest in the check, the panel found Rule 1.15(e) required the attorney to hold the check until the dispute is resolved. Because the check was made payable to the client, who would not endorse it, the panel noted the attorney could not simply deposit it into the attorney's client account for safekeeping; the alternative was to file an interpleader action for resolution by the court.

In practice

The opinion holds that, under the Rhode Island rules as they stood at the time of the opinion, where a lawyer holds funds that both the client and a third-party lienholder claim an interest in, and the client has not consented to paying the lienholder, Rule 1.15(e) requires the lawyer to keep the property separate and hold it until the dispute is resolved, rather than disbursing to either claimant based on one side's demand. Where the disputed check cannot be deposited for safekeeping because it is payable to a client who will not endorse it, the opinion holds that the lawyer's alternative is to file an interpleader action so the court can resolve the competing claims.

Common questions

Q: My former client won't endorse a settlement check, and her new lawyer wants me to forward the proceeds, but a medical lienholder wants me to hold it. What should I do?

A: The opinion holds that where the client and a third party both claim an interest in the funds and the client has not consented to paying the third party, Rule 1.15(e) requires the lawyer to hold the property until the dispute is resolved, not to disburse based on one party's demand.

Q: Can I just deposit the disputed check into my trust account and wait?

A: Not if the check is made payable to the client and the client will not endorse it. The opinion notes that in that situation the attorney does not have the option of depositing the check into a client account for safekeeping.

Q: If I can't deposit the check and can't disburse it, what's my alternative?

A: The opinion identifies filing an interpleader action so the court can resolve the dispute between the client and the third-party claimant as the attorney's alternative to holding the check indefinitely.

Q: Does it matter that I already signed the "Doctor's Lien" agreeing to honor the chiropractor's lien?

A: The opinion's analysis turns on the client's lack of consent to the third-party payment at the time of the dispute, not solely on the attorney's earlier agreement; because the client had not consented and both claimants asserted an interest, Rule 1.15(e) required holding the funds rather than automatically honoring the lien.

Background and rules framework

The opinion interprets Rhode Island Rule 1.15(d) and (e) (Safekeeping Property), which track Model Rule 1.15. Rule 1.15(d) imposes duties to notify, promptly deliver, and account for funds in which a client or third person has an interest. Rule 1.15(e) requires a lawyer who possesses property in which two or more persons claim interests to keep the disputed portion separate until the dispute is resolved, while promptly distributing any portion not in dispute.

Citations and references

Rules of Professional Conduct:

• MR 1.15(d) (safekeeping property; duties to notify, deliver, and account)
• MR 1.15(e) (safekeeping property; disputed claims must be kept separate until resolved)

Statutes:

• None cited.

Cases:

• None cited.

Other opinions cited:

• Ethics Advisory Panel General Informational Opinion No. 7 (duties to notify, deliver, and account under Rule 1.15(d); a lawyer may not pay a third party absent client consent and must protect disputed property notwithstanding the client's demand for disbursement)

See also

• Alabama Bar Op. 1990-48: Lawyer Properly Interplead Disputed Trust Funds Into Court to Allow Adjudication of Clients' and Third-Party Creditors' Rights
• DC Bar Op. 293: Disposition of Property of Clients and Others Where Ownership Is in Dispute
• Arizona Bar Op. 98-06: Liens; Creditors of Clients; Client Funds and Property; Settlements

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%2008-03.pdf

Original opinion text

Best-effort transcription from a scanned PDF. Minor errors may remain; the linked PDF is authoritative.

Final

RHODE ISLAND SUPREME COURT
ETHICS ADVISORY PANEL
Opinion No. 2008-03 Request No. 951
Issued July 10, 2008

FACTS:

The inquiring attorney represented a client in a claim for personal injuries related to an
automobile accident. Following the accident, the client was treated by various medical
providers, including a chiropractor and a medical facility that took x-rays. The client did
not have health insurance. The client signed a purported assignment, entitled "Doctor's
Lien," in which the client gave "a lien to [the chiropractor] on any settlement, claim,
judgment, or verdict as a result of said accident/illness, and authorize and direct you, my
attorney/insurance carrier, to pay directly to said doctor such sums as may be due and
owing for services rendered me, and to withhold such sums from such settlement, claim,
judgment or verdict as may be necessary to protect said doctor." The inquiring attorney
also signed the document, in which he acknowledged receipt of the "lien" and agreed to
honor it. The inquiring attorney signed a similar document in favor of the provider of x-
rays.

Several months later, the inquiring attorney received a check in the amount of $1000
from an insurance company under the medical-payment coverage of the pertinent
insurance policy. The check was made payable to the client. The inquiring attorney
phoned the client and requested that the client come to the law office to endorse the
check, but the client did not respond. The next day, the client retained other counsel to
pursue the claim. The successor counsel has sent the inquiring attorney a letter,
requesting him/her to forward the proceeds to the client. The chiropractor has asked the
inquiring attorney not to forward the check to either the successor counsel or the client.

ISSUE PRESENTED:

The inquiring attorney requests the Panel's advice regarding what to do with the check.

OPINION:

Under Rule 1.15(d) and (e), the inquiring must hold the check until the disputes between
the client and the providers can be resolved, or file an interpleader action for resolution

by the court.

Final 2008-03
Page 2 of 2

REASONING:

Paragraphs (d) and (e) of Rule 1.15 entitled "Safekeeping property" are pertinent to this
inquiry, and state as follows:

(d) 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 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.

(e) When in the course of representation a lawyer is in possession of property in
which two or more persons (one of whom may be the lawyer) claim interests, the
property shall be kept separate by the lawyer until the dispute is resolved. The
lawyer shall promptly distribute all portions of the property as which the interests

are not in dispute.

Rule 1.15(d) imposes three obligations on a lawyer receiving funds in which a client or
third party has an interest: the duty to notify promptly, the duty to deliver promptly, and
the duty to account. Ethics Advisory Panel Gen'l Informational Opinion No. 7. Where
the client does not consent to payment of a third party or repudiates a prior agreement to
pay a third party, the lawyer may not pay the third party. Id. The lawyer has an
obligation to protect the disputed property notwithstanding a client's demand that
amounts be disbursed to the client. Id.

In the instant inquiry, the inquiring attorney has notified the client and the providers, but
the client has not consented to the inquiring attorney's paying them. The client and the
providers both are claiming an interest in the check. In that instance, Rule 1.15(e)
requires the inquiring attorney to hold the check until the dispute is resolved. Because
the check is made payable to a client who will not endorse it, the inquiring attorney does
not have the option of depositing it in his/her client account for safekeeping.
Alternatively, the inquiring attorney may institute an interpleader action for resolution by

the court.