Must a lawyer holding settlement proceeds pay the client's creditors after the client withdraws authorization to pay them?

Plain-English summary

The inquiry concerned a lawyer's duty to disburse client funds to the client's creditors. The clients had previously authorized the lawyer to pay their creditors out of settlement proceeds, but later withdrew that authorization because of subsequent fee disputes with those creditors.

The committee was of the opinion that, absent a valid lien on the funds, it would be a violation for the lawyer to distribute the trust funds to the creditors over the clients' objection. The committee noted that the question of where to resolve such a dispute is a question of law it could not address, but stated that the lawyer has an affirmative duty to resolve the dispute.

Currency note

This opinion was issued in 1995, before the Washington State Bar Association's adoption of the 2006 revisions to the Rules of Professional Conduct. 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 Treat this page as historical context, not current guidance.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: Can a lawyer pay a client's creditors from settlement proceeds after the client cancels the authorization?

A: No. The committee concluded that, absent a valid lien, disbursing the trust funds to creditors over the client's objection would be a violation once the client withdrew authorization.

Q: Does a creditor's claim to the funds change the answer?

A: The committee made the answer turn on whether the creditor had a valid lien. Absent a valid lien, the client's objection controlled, and the lawyer could not pay the creditors.

Q: What is the lawyer supposed to do with the disputed funds?

A: The committee said the lawyer has an affirmative duty to resolve the dispute, while declining to address the legal question of the proper venue for doing so.

Background and rules framework

The opinion does not cite a specific Rule of Professional Conduct. It addresses a lawyer's handling of settlement proceeds held for clients when the clients and their creditors dispute who is entitled to the money. The committee made the analysis turn on whether the creditors held a valid lien on the funds and treated the resolution of the dispute as the lawyer's affirmative duty, while declining the underlying legal question of venue.

Citations and references

Rules of Professional Conduct:

• The opinion cites no specific rule; it addresses a lawyer's duties as to disputed funds held for a client.

See also

• WSBA Ethics Op. 1674: Funds for an Unidentified Client
• WSBA Ethics Op. 1029: Trust Funds, Unreachable Clients
• WSBA Ethics Op. 1032: Lawyer-Fiduciary Trust Funds

Source

• Landing page: https://ao.wsba.org/print.aspx?ID=1124

Original opinion text

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

Advisory Opinion: 1610
Year Issued: 1995
RPC(s):
Subject: Duty to disburse client funds to creditors after client withdraws authorization

The Committee reviewed your inquiry regarding your duty to disburse client funds to client creditors. Your clients previously authorized you to pay their creditors out of settlement proceeds, but later withdrew that authorization because of subsequent fee disputes with those creditors. It was the Committee's opinion that absent a valid lien on the funds, it would be a violation for you to distribute the trust funds to the creditors over the objection of your clients. Because the question of a venue for resolving a dispute is a question of law, the Committee cannot address that issue. However, you do have an affirmative duty to resolve the dispute.