My client agreed in a divorce decree to pay his ex-wife half of his personal-injury settlement, but says he'll tell me not to pay her. What do I do with the funds?

Plain-English summary

The inquiring attorney represented a husband in a divorce action. Under the final decree, the husband agreed in writing to pay his wife one-half of the net proceeds of his personal injury claim. The attorney anticipated that the client would instruct him not to pay the wife when the settlement proceeds arrived. The wife was unrepresented, and the insurance company was unaware of the agreement. The attorney asked whether he had an obligation to pay the wife her share.

The panel analyzed the question under Rule 1.15 (Safekeeping Property). Rule 1.15(b) requires a lawyer who receives funds in which a client or third person has an interest to promptly notify that person and to promptly deliver any funds the person is entitled to receive. The panel quoted the rule's comment recognizing that third parties may have just claims against funds, that a lawyer may have a duty under applicable law to protect such claims against wrongful interference by the client (and may refuse to surrender the property to the client), but that a lawyer should not unilaterally assume to arbitrate a dispute between the client and the third party.

Applying that framework, the panel concluded that the client was obligated under the final decree to pay his ex-wife her share of the settlement, and that the client and the attorney could not ignore the contract. The panel stated that, under Rule 1.15, the attorney must promptly notify both the client and the wife upon receiving the funds, and that if a dispute arose, the disputed portion must be kept separate until the dispute was resolved.

Currency note

This opinion was issued in 1995, after the Rhode Island Supreme Court adopted the Model Rules of Professional Conduct effective November 15, 1988, and it applies Rule 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 renumbered and amended several provisions. 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 Treat this page as historical context, not current guidance.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: If my client tells me not to pay a third party who is owed settlement money, can I follow that instruction?

A: Under this opinion, no. The panel concluded that where the client is obligated by a final decree to pay the ex-wife her share, the attorney and client cannot ignore that contract, and Rule 1.15 requires the attorney to notify the third party and safeguard the funds.

Q: What must I do with settlement funds a third party claims?

A: The panel stated that Rule 1.15 requires the attorney to promptly notify both the client and the third party on receiving the funds, and to keep any disputed portion separate until the dispute is resolved.

Q: Can I decide who is right and pay out accordingly?

A: No. The panel quoted the rule's comment that a lawyer should not unilaterally assume to arbitrate a dispute between the client and a third party; the disputed portion is held separate pending resolution.

Background and rules framework

The opinion applies Rule 1.15 of the Rhode Island Rules of Professional Conduct, which corresponds to Model Rule 1.15 (Safekeeping Property). Subsection (b), as the panel quoted it, obligates a lawyer who receives funds in which a client or third person has an interest to promptly notify that person and to deliver funds the person is entitled to receive. The panel read the rule together with its comment, which recognizes both a possible duty to protect a third party's just claim against the client's wrongful interference and the limit that the lawyer may not arbitrate the underlying dispute.

Citations and references

Rules of Professional Conduct:

• MR 1.15 (safekeeping property)
• RI RPC 1.15

Statutes:

• None cited.

Cases:

• None cited.

Other opinions cited:

• None cited.

See also

• RI EAP Op. 95-27: Medical Lien Signed by Prior Counsel on Settlement Funds
• RI EAP Op. 95-29: Reducing the Fee When Medicare Has a Lien
• RI EAP Op. 95-30: Reporting a Successor Attorney Who Ignored a Lien

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%2095-31.pdf

Original opinion text

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

FINAL

ETHICS ADVISORY PANEL
OPINION # 95-31, Request # 596
Issued - July 13, 1995

The inquiring attorney represents the husband in a divorce action. Pursuant to the Final Decree, the husband agreed in writing to pay the wife one-half of the net proceeds received by him from a personal injury claim. The inquiring attorney anticipates that the client will instruct him/her not to pay the wife when the proceeds are received. The wife is not represented by counsel and the insurance company is not aware of the agreement. The inquiring attorney asks whether he/she has an obligation to pay the wife her one-half share.

Rule 1.15 entitled "Safekeeping Property" states in pertinent part:

(b) 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.

The comments to this provide further guidance to this inquiry and states:

Third parties . . . may have just claims against funds. A lawyer may have a duty under applicable law to protect such third-party claims against wrongful interference by the client, and accordingly may refuse to surrender the property to the client. However, a lawyer should not unilaterally assume to arbitrate a dispute between the client and the third party.

In accordance with the final decree, the client is under an obligation to pay his ex-wife her share of the personal injury settlement. The client and the inquiring attorney cannot ignore this contract. Pursuant to Rule 1.15, the inquiring attorney shall promptly notify the client and the wife upon receiving the funds. If a dispute arises, the portion in dispute shall be kept separate by the inquiring attorney until the dispute is resolved.