I recovered settlement funds split between a divorcing husband and wife; the wife objects to my one-third fee coming from her share. What do I do with the money?

Plain-English summary

The inquiring attorney represented a husband in a divorce action in which the Family Court ordered the marital home sold and the proceeds split equally between husband and wife. After a buyer defaulted on the purchase and sale agreement, the husband retained the attorney to pursue a remedy, and the attorney obtained a $4,000 settlement, which the attorney now holds. The attorney seeks a fee of one-third of the settlement; the husband agrees, but the wife, through her own counsel, objects to any fee being taken from her portion. The attorney asks whether it is proper to collect one-third of the total proceeds and split the remainder equally.

The panel pointed to Rule 1.5(c) and its comment on contingent fee arrangements, which provide that a contingent fee agreement should be in writing and state the method by which the fee is determined. The panel observed that the dispute arose because the attorney did not enter into a fee agreement with the wife before undertaking the breach-of-contract representation: although the husband and wife were adverse in the Family Court matter, their interests were aligned in the breach-of-contract matter, and the attorney represented the wife's interests there without a contingent fee agreement.

The panel then quoted Rule 1.15 (safekeeping property), under which a lawyer holding property claimed by both the lawyer and another must keep it separate until an accounting and severance of interests, and must keep the disputed portion separate until the dispute is resolved. The comment to Rule 1.15 adds that a lawyer may not hold funds to coerce a client into accepting the lawyer's contention; the disputed portion should be kept in trust while the lawyer suggests means of prompt resolution such as arbitration, and the undisputed portion should be promptly distributed.

The panel concluded that the attorney should suggest methods of resolving the dispute with the wife's counsel. Because a Family Court order for the sale is at issue, it may be appropriate to return to the court for guidance, or alternatively the bar association's fee arbitration program may provide a means of resolution. In the interim, the claimed fee should be kept separate until the dispute is resolved, and the undisputed portion promptly tendered in accordance with the court order.

Currency note

This opinion was issued in 1992, after the Rhode Island Supreme Court adopted the Model Rules of Professional Conduct effective November 15, 1988, and it applies Rules 1.5 and 1.15 as originally adopted. The Rhode Island Supreme Court later revised the Rules of Professional Conduct in 2007 as part of the nationwide Ethics 2000 process, which amended these rules. 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.

Common questions

Q: Can I take my one-third fee out of the objecting spouse's share of the settlement?

A: Per the opinion, not while it is disputed; the claimed fee should be kept separate under Rule 1.15 until the dispute is resolved.

Q: What should I do with the part of the settlement that is not disputed?

A: Per the opinion, the undisputed portion should be promptly tendered in accordance with the court order.

Q: How should the fee dispute be resolved?

A: Per the opinion, the attorney should suggest methods of resolution, such as returning to the Family Court for guidance or using the bar association's fee arbitration program.

Q: Why did this dispute arise in the first place?

A: Per the opinion, because the attorney represented the wife's interests in the breach-of-contract matter without first entering into a contingent fee agreement with her, as Rule 1.5(c) contemplates.

Background and rules framework

The opinion applies Rhode Island Rule 1.5 (fees), specifically the written-contingent-fee provision of Rule 1.5(c), and Rule 1.15 (safekeeping property), corresponding to the same-numbered Model Rules. The panel traced the dispute to the absence of a written fee agreement with the aligned non-client spouse, and applied Rule 1.15's requirement to segregate disputed funds, distribute undisputed funds, and pursue prompt resolution rather than using the funds as leverage.

Citations and references

Rules of Professional Conduct:

• MR 1.5 (fees; contingent fee agreements)
• MR 1.15 (safekeeping property)
• RI RPC 1.5(c), 1.15

Statutes:

• None cited.

Cases:

• None cited.

Other opinions cited:

• None cited.

See also

• RI EAP Op. 91-53: Must Hold Disputed Fee Funds in Escrow Until Resolved
• RI EAP Op. 91-56: Discharged Contingency Lawyer, Quantum Meruit, and Escrow
• RI EAP Op. 92-21: Escrow Agent Holding a Disputed Deposit and May Interplead

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%2092-34.pdf

Original opinion text

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

ETHICS ADVISORY PANEL
Opinion #92-34, Request #254
Issued August 12, 1992

An attorney seeks Panel advice regarding the following circumstances. The attorney represents a husband in a divorce action. The wife is represented by separate counsel. Following a trial, the Family Court ordered the marital home sold and the proceeds split equally between husband and wife. A buyer was found and a purchase and sale agreement entered into. The buyer subsequently defaulted. The husband retained the requesting attorney to pursue a remedy against the defaulting buyer. A settlement was reached whereby the defaulting buyer paid damages of $4,000, funds which the attorney now holds. The attorney seeks a fee of one-third of this settlement. The husband is agreeable. The wife, through counsel, objected to the payment of any fee from her portion of the settlement proceeds. The attorney asks whether it is proper to collect a fee equal to one-third of the total settlement proceeds, splitting the remaining proceeds equally between husband and wife.

Rule 1.5(c) and the comments thereto address contingent fee arrangements. In pertinent part, the rule states that:

A fee may be contingent on the outcome of the matter for which the service is rendered . . . a contingent fee agreement should be in writing and should state the method by which the fee is to be determined, including the percentage or percentages that shall accrue to the lawyer in the event of settlement, trial or appeal, litigation and other expenses to be deducted from the recovery, and whether such expenses are to be deducted before or after the contingent fee is calculated. . . .

(emphasis supplied).

The requesting attorney finds himself faced with this dispute as a result of his failure to enter into a fee agreement with the wife prior to undertaking the breach of contract representation. While the husband and wife are adverse in the Family Court matter, their interests were aligned with respect to the breach of contract matter. The requesting attorney represented the interests of the wife in that matter without first entering into a contingent fee agreement, hence the dispute.

Rule 1.15, entitled "Safekeeping Property," states that:

When in the course of representation a lawyer is in possession of property in which both the lawyer and another person claims interest, the property shall be kept separate by the lawyer until there is an accounting and severance of their interests. If a dispute arises concerning their respective interests, the portion in dispute shall be kept separate by the lawyer until the dispute is resolved.

The comment to Rule 1.15 states as follows:

Lawyers often receive funds from third parties from which the lawyers' fee will be paid. If there is a risk that the client may divert the funds without paying the fee, the lawyer is not required to remit the portion from which the fee is to be paid. However, the lawyer may not hold funds to coerce a client to accepting the lawyers' contention. The disputed portion of the funds should be kept in trust and the lawyers should suggest means for prompt resolution of the dispute, such as arbitration. The undisputed portion of the funds shall be promptly distributed.

The Panel agrees that the requesting attorney should suggest methods of resolving this conflict with the wife's counsel. Since a Family Court order for sale of the marital home is at issue, it may be appropriate to return to the court for guidance. In the alternative, the fee arbitration program established by the Bar Association may provide a means for resolving the matter. In the interim, the claimed fee should be kept separate by the requesting attorney until the dispute is resolved, and the undisputed portion of the settlement should be promptly tendered in accordance with the court order.