Ethics Committee Formal Opinion #1998-99/3
Safeguarding Settlement Funds of Clients and Third Parties: Recognized Valid Liens on Settlement Funds in Lawyer’s Possession
Presented to the Board of Governors May 20, 1999
QUESTION:
What ethical obligations does a lawyer have to a lienholder who has a recognized valid lien on settlement funds in the lawyer’s possession?
FACTUAL SETTING:
During the process of settling a personal injury claim on behalf of an injured client, a lawyer will often recognize and agree with a third party, who has provided medical or other benefits to the injured client, to protect the lienholder’s valid statutory interest in the settlement proceeds in exchange for reducing the lien amount. Ordinarily, the lienholder will be paid promptly out of settlement proceeds received by the lawyer without incident. However, if a dispute arises regarding the lienholder’s interest in settlement proceeds in the lawyer’s possession, the lawyer can be presented with a perplexing predicament.