If a lawyer cannot locate a client whose statute of limitations is about to run, must the lawyer still settle the claim, and what should the lawyer do with the settlement proceeds?
Apply this to your situation
This page answers the general question as of 1985. Ezel answers yours: whether it's allowed on your facts, under the current rules of professional conduct in your state, with citations.
Plain-English summary
A client injured in a slip-and-fall at a public business, then hospitalized, had retained the inquiring attorney to pursue a damages claim and had executed a general power of attorney authorizing the attorney to negotiate a settlement, execute necessary documents and releases, negotiate or execute any draft or check paid on the client's behalf, and otherwise act as the client's attorney in the matter. The attorney could no longer locate the client despite hiring an investigator, and the statute of limitations on the claim was about to run. The attorney asked about the ethical duty to settle without the client's input, the duty regarding payment of medical bills and attorney's fees, and the proper disposition of the client's funds.
The opinion applied Canon 7's requirement that a lawyer represent a client zealously within the bounds of law, finding no prohibition on the attorney pursuing the claim to a settlement conclusion and, in fact, an ethical obligation to do so. Where there is no reasonable expectation that the client would object, the attorney, acting under the general power of attorney as the client's agent, may pay the client's reasonable and necessary medical and legal contractual obligations arising from the matter; where there is a reasonable expectation of objection, the attorney is ethically prohibited from disbursing the settlement proceeds for those purposes. On the disposition of the remaining funds, the opinion applied Formal Ethics Opinion 84-F-68's standard, drawn from a trusts treatise, that where the amount of client funds held and the expected holding period make it obvious the interest earned would exceed the lawyer's administrative costs and bank charges, the lawyer should consult the client and follow the client's instructions on investing. Because the attorney here could not consult the client, the opinion concluded that if it appears the interest would exceed the costs, the attorney is ethically obligated to deposit the funds in an interest-bearing account on the client's behalf.
Currency note
This opinion was issued in 1985, before Tennessee's adoption of the 2003 Rules of Professional Conduct, which replaced the former Code of Professional Responsibility. 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, deadline, or requirement mentioned here.
Common questions
Q: Must a lawyer settle a client's claim if the client cannot be located before the statute of limitations runs?
A: Yes. The opinion found the attorney ethically obligated to pursue the claim to a settlement conclusion despite being unable to reach the client.
Q: Can the lawyer pay the missing client's medical bills and legal fees out of the settlement proceeds?
A: Only if there is no reasonable expectation the client would object; if there is a reasonable expectation of objection, the opinion prohibits disbursing the proceeds for those purposes.
Q: What should the lawyer do with settlement funds the lawyer cannot deliver to the client?
A: If the funds held and the likely holding period make it obvious the interest earned would exceed administrative costs and bank charges, the lawyer must deposit the funds in a separate interest-bearing account for the client's benefit, since the client cannot be consulted on investment instructions.
Background and rules framework
The opinion applied Canon 7 of the Code of Professional Responsibility (zealous representation within the bounds of law) and the trust-account-interest standard the Board adopted in Formal Ethics Opinion 84-F-68. The modern correlate is Model Rule 1.15 (safekeeping property), cited here as a navigational cross-reference rather than a rule the opinion itself applied.
Citations and references
Other opinions cited:
- Tennessee Formal Ethics Opinion 84-F-68 (May 29, 1984), standard for depositing client funds in an interest-bearing account
See also
- Tennessee Op. 84-F-68: Interest-Bearing Client Trust Accounts
- AL Ethics Op. 1988-92: Unclaimed Client Trust Funds, Escheat to State
- Tenn. Ethics Op. 85-F-97: Giving Interest From Trust Account to Charity (the Board's IOLTA framework for trust-account interest)
Source
- Landing page: https://www.tbpr.org/ethic_opinions/85-f-90
Original opinion text
Reproduced from the official source for research purposes. The linked source is authoritative.
85-F-90 - Interest on separate Client Trust Accounts
BOARD OF PROFESSIONAL RESPONSIBILITY OF THE SUPREME COURT OF TENNESSEE
FORMAL ETHICS OPINION 85-F-90
Inquiry is made concerning the ethical responsibilities of an attorney in the settlement of a matter on behalf of his client, and the handling of settlement proceeds, when the attorney is unable to communicate with the client and the client's whereabouts is unknown.
The client was injured as a result of a slip and fall at a public business establishment and admitted to the hospital for treatment of his injuries. The client employed the attorney to assert his claim for damages. The client executed a general power of attorney authorizing the attorney to negotiate a settlement, execute any necessary documents or releases, to execute or negotiate any draft or check paid in his behalf and to act as his attorney in the matter. The attorney is now unable to locate the client. All efforts, including hiring an investigator, have been fruitless.
The statute of limitations on the client's claim is about to run and the attorney inquires as to his ethical responsibilities, specifically concerning (i) settlement of the case without communication from the client; (ii) payment of medical bills and attorney's fees; and (iii) disposition of the client's funds.
Canon 7 of the Code of Professional Responsibility provides:
A Lawyer Should Represent a Client Zealously Within the Bounds of Law
In this instance, there is no prohibition against the inquiring attorney asserting the lawful claim of his client to a conclusion by settlement of the matter. In fact, the attorney is ethically obligated to pursue the matter to a conclusion.
In the event there is no reasonable expectation of objection by the client, the attorney, under the general power of attorney and as agent of the client, may pay reasonable and necessary medical and legal contractual obligations of the client arising from the legal matter. In the event of a reasonable expectation of objection by the client, then the attorney is ethically prohibited from disbursement of such funds from the settlement proceeds.
Formal Ethics Opinion 84-F-68, citing 2 Scott, The Law of Trusts, Sections 180.3, 181 (3d ed. 1967 and Supp. 1981) states:
... where the amount of funds held for a specific client and the expected holding period make it obvious that the interest which would be earned would exceed the lawyer's administrative costs and the bank charges, the lawyer should consult the client and follow the client's instructions as to investing.
In this instance, the lawyer is unable to consult with the client and, therefore, in the event it appears that the interest would exceed the costs, the attorney is ethically obligated to deposit the funds in an interest-bearing account on behalf of the client.
This 13th day of March, 1985.
ETHICS COMMITTEE:
W. J. Flippin, Chairman
Henry H. Hancock
Edwin C. Townsend
APPROVED AND ADOPTED BY THE BOARD
Get today's answer for your situation
You just read a 1985 opinion on this question. Ezel checks the current rules of professional conduct in your state and answers your specific situation, with citations.
Opens in Ezel Pro. Every answer cites the rules it relies on.