The debtor's attorney held our lien funds in escrow for about a year without notifying us and only paid after we threatened to enforce. Do we have to report him to the disciplinary board?

Plain-English summary

Attorneys A and B represented a creditor in a collection suit and recorded a lien against a debtor-spouse's interest in real property held as tenants by the entirety. They provided a payoff figure for a closing to Attorney C, the title attorney, but received no funds. A year later, after numerous inquiries, C advised them that the funds had been set aside at the closing but were being held in escrow by Attorney D, the attorney for the debtor-spouse and his wife. It was unclear when the closing occurred. A and B then wrote to D and notified the title insurance company of the lien and their intent to enforce it, after which D promptly forwarded the funds. A and B asked whether D's failure to notify them that he held the funds, or that a dispute arose, imposed a duty on them to report D's conduct to the Disciplinary Board.

The opinion states these facts present a possible violation of Rule 1.15(b) by Attorney D. Rule 1.15(b) requires a lawyer, upon receiving funds or property in which a client or third person has an interest, to promptly notify that person and, except as otherwise permitted, to promptly deliver the funds and render a full accounting on request. Because the facts are unclear as to when the closing occurred, the Panel cannot determine whether D failed to act promptly. It notes, however, that there may have been a one-year delay between D's receipt of the funds and his forwarding them; if so, the opinion believes D's conduct would violate Rule 1.15(b) and trigger A and B's duty to report under Rule 8.3.

Quoting Rule 8.3, the opinion concludes that if Attorneys A and B believe D's conduct violates Rule 1.15(b), then they have a duty to report the misconduct to the Disciplinary Board.

In practice

Under this opinion, whether the reporting duty attaches depends on a factual predicate the Panel could not resolve -- when D received the funds. If the roughly one-year delay is real, the opinion characterizes it as a Rule 1.15(b) violation, which in turn engages the Rule 8.3 duty to report a violation raising a substantial question about another lawyer's honesty, trustworthiness, or fitness. The opinion frames the reporting obligation as turning on the inquiring attorneys' own belief that D violated Rule 1.15(b).

Common questions

Q: Does a lawyer holding third-party lien funds have to give notice?

A: Yes. The opinion applies Rule 1.15(b), which requires promptly notifying a third person with an interest in received funds and promptly delivering them.

Q: Did the Panel decide that Attorney D violated the rule?

A: No. The opinion says it cannot determine whether D acted promptly because the closing date is unclear, but that a one-year delay, if real, would violate Rule 1.15(b).

Q: Must the inquiring attorneys report D?

A: The opinion concludes that if A and B believe D's conduct violated Rule 1.15(b), they have a duty under Rule 8.3 to report it to the Disciplinary Board.

Background and rules framework

The opinion interprets Rhode Island Rules of Professional Conduct 1.15(b) (safekeeping property; prompt notice, delivery, and accounting) and 8.3 (reporting professional misconduct), analogs of the corresponding Model Rules. Rule 1.15(b) governs a lawyer's duties on receiving funds in which a third person has an interest; Rule 8.3(a) requires reporting violations that raise a substantial question as to another lawyer's honesty, trustworthiness, or fitness.

Citations and references

Rules of Professional Conduct:

• MR 1.15 / RI RPC 1.15(b) (safekeeping property; prompt notice and delivery to third persons)
• MR 8.3 / RI RPC 8.3 (reporting professional misconduct)

See also

• RI EAP Opinion 93-48: filing a disciplinary complaint is required, not misconduct, under 8.3
• RI EAP Opinion 93-06: Panel declines to judge opposing counsel's subpoena; may report under 8.3

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%2093-55.pdf

Original opinion text

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

(FINAL)
ETHICS ADVISORY PANEL
OPINION #93-55, REQUEST #396
Issued August 25, 1993

Attorneys A and B represented a creditor in a collection suit and recorded a lien against a debtor-spouse's interest in real property owned as tenants by the entirety. Attorneys A and B provided a payoff figure with regard to a closing to Attorney C, the title attorney, but received no funds. One (1) year later, after numerous inquiries, Attorneys A and B were advised by Attorney C that the funds had been set aside at the closing, but were being held in escrow by Attorney D, the attorney for the debtor-spouse and his wife. It is unclear when the closing occurred. Attorneys A and B subsequently wrote to Attorney D and notified the title insurance company of the lien and their intention to enforce it. As a result, Attorney D promptly forwarded the funds to Attorneys A and B.

Attorneys A and B inquire as to whether Attorney D's actions in failing to notify them that he was holding the funds, or that a dispute arose concerning payment of the same, imposes a duty on them to report Attorney D's conduct to the Disciplinary Board.

The Panel opines that these facts present a possible violation of Rule 1.15(b) by Attorney D. Rule 1.15(b) provides:

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 permitted 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 persons, shall promptly render a full accounting regarding such property.

Pursuant to the rule, a lawyer is required to promptly notify the client or third person holding an interest in funds or other property upon receiving the same. Because the facts are unclear as to when the closing occurred, the Panel cannot determine whether Attorney D failed to act promptly as required under Rule 1.15(b). The Panel notes however, that it appears there may have been a one (1) year delay between the receipt of the funds by Attorney D, and the time Attorney D forwarded the same to Attorneys A and B. If that were the case, the Panel believes Attorney D's conduct would constitute a violation of Rule 1.15(b), and trigger the duty of Attorneys A and B to inform the appropriate professional authority pursuant to Rule 8.3. Rule 8.3 states that:

[A] lawyer having knowledge that another lawyer has committed a violation of the Rules of Professional Conduct that raises a substantial question as to that lawyer's honesty, trustworthiness or fitness as a lawyer in other respects, shall inform the appropriate professional authority.

The Panel opines that if Attorneys A and B believe that Attorney D's conduct violates Rule 1.15(b), then they have a duty to report the misconduct to the Disciplinary Board pursuant to Rule 8.3.