If a client signs a doctor's lien and later tells the lawyer to ignore it at disbursement, what must the lawyer do with the settlement money?

Plain-English summary

An attorney's contingency-fee contract included a provision that the attorney would honor written statements the client signed giving any medical provider a lien against the client's share of any recovery. After a favorable recovery, but before disbursing the client's share, the attorney received a doctor's lien the client had signed. The client then asked the attorney to disregard that lien when disbursing the proceeds. The question was whether refusing the client's request would be unethical.

The committee concluded it would not be unethical to refuse. The attorney and client had defined the scope of representation in the fee contract (Rule 1.2(a)) to include paying assigned medical providers, and the client could not unilaterally change that agreement at settlement. Once the attorney knew of assignments to medical providers, Rule 1.15(b) prevented disbursing to the client funds in which the provider had an interest. But the committee was equally clear the attorney could not simply pay the provider over the client's objection: if the client contended the provider was not entitled to payment (for reasons such as prior payment, insurance coverage, billing error, or malpractice), the attorney owed the client a duty not to pay the provider. The rule required notifying the provider and holding the funds until the dispute was resolved, because a lawyer should not unilaterally arbitrate a dispute between a client and a third party. The committee cited a public reprimand in In the Matter of Frederick K. Jones for failing to keep money separate until such a dispute was resolved, and recognized that this conclusion departed from earlier Advisory Opinions 91-10 and 81-14, which had suggested paying the client on demand and ignoring the lien; the committee said the better practice now was to notify the creditor and hold the money.

Currency note

This opinion was issued in 1993, before the South Carolina Bar's adoption of the 2005 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 Treat this page as historical context, not current guidance.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 refuse a client's demand to ignore a doctor's lien the client signed?

A: Yes. The committee concluded the attorney could refuse, because the fee contract defined paying assigned providers as an objective of the representation and the client could not unilaterally change it at settlement.

Q: So should the lawyer just pay the doctor instead?

A: Not if the client disputes the provider's entitlement. The committee said the attorney owes the client a duty not to pay the provider, and must notify the provider and hold the funds until the dispute is resolved.

Q: Did this change earlier guidance?

A: Yes. The committee acknowledged this departed from Advisory Opinions 91-10 and 81-14, which suggested paying the client and ignoring the lien, and said the better practice is now to notify the creditor and hold the money until the dispute is resolved.

Background and rules framework

The opinion applied Rule 1.2(a) (scope of representation) and Rule 1.15(b) (safekeeping property), which correspond to like-numbered Model Rules. Rule 1.15(b) requires a lawyer who receives funds in which a third person has an interest to notify the third person and deliver funds the third person is entitled to receive, and its comment addresses holding disputed funds without unilaterally arbitrating the dispute.

Citations and references

Rules of Professional Conduct:

• South Carolina RPC 1.2(a) / Model Rule 1.2(a): the lawyer and client define the scope and objectives of the representation.
• South Carolina RPC 1.15(b) / Model Rule 1.15(b): on receiving funds in which a third person has an interest, a lawyer must notify the third person and hold disputed funds rather than arbitrate the dispute.

Cases:

• In the Matter of Frederick K. Jones, Opinion No. 23851 (S.C. re-filed July 19, 1993), public reprimand for, among other things, failing to keep money separate until a dispute between client and creditor was resolved.

Other opinions cited:

• SC Bar Advisory Opinions 91-10 and 81-14 (the latter under the former Code of Professional Responsibility), which the committee departed from.

See also

• SC Bar Ethics Op. 01-02: A Doctor's 'Rule 1.15 Lien'
• SC Bar Ethics Op. 05-08: Disputed Subrogation Funds
• SC Bar Ethics Op. 93-34: Fees on a Subrogated Recovery

Source

• Landing page: https://www.scbar.org/for-lawyers/quicklinks/legal-resources/ethics-advisory-opinions/ethics-advisory-opinion-93-14/

Original opinion text

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

UPON THE REQUEST OF A MEMBER OF THE SOUTH CAROLINA BAR, THE ETHICS ADVISORY COMMITTEE HAS RENDERED THIS OPINION ON THE ETHICAL PROPRIETY OF THE INQUIRER’S CONTEMPLATED CONDUCT. THIS COMMITTEE HAS NO DISCIPLINARY AUTHORITY. LAWYER DISCIPLINE IS ADMINISTERED SOLELY BY THE SOUTH CAROLINA SUPREME COURT THROUGH ITS COMMISSION ON LAWYER CONDUCT.

Ethics Advisory Opinion 93-14

Attorney provides in his written contingency fee contract with his clients a provision that "attorney is to honor all written statements signed by client giving any medical provider a lien against the portion of the proceeds of any recovery to which client is entitled as a result of any settlement or judgment obtained by attorney".

Question:
If prior to the disbursement of client's portion of a favorable recovery attorney receives a "doctor's lien" signed by client with respect to his portion of the proceeds, would it be unethical for attorney to refuse to comply with a specific request of client to disregard the "doctor's lien" when disbursing the proceeds of the recovery?

Summary:
It would not be unethical for attorney to refuse to comply with client's request to disregard "doctor's lien". The attorney's duty of loyalty to the client would prevent the attorney from paying the money to the doctor over the client's objection. The attorney would also be prevented, however, from paying the money to the client until the dispute between the client and the medical provider was resolved.

Opinion:
The attorney and client together define the scope of the attorney's representation of the client. Rule 1.2(a). Here the attorney and the client have, in the fee contract, agreed that one of the objectives of representation is to be the payment of bills of medical providers who have been assigned a portion of the proceeds. The client cannot thereafter, at the time of settlement, unilaterally change the representation agreement. Consequently, the attorney is entitled to refuse to honor the client's later instructions to disregard the "lien". Once the attorney knows of assignments which have been made by client in favor of medical care providers, he is prevented from disbursing to the client monies in which the medical care provider has an interest. Rule 1.15(b) clearly provides, "Upon receiving funds or other property in which a ...

third person has an interest, a lawyer shall promptly notify the ... 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 ... third person any funds or other property that the ... third person is entitled to receive...".

If the client now contends that the medical care provider is, for some reason, not entitled to receive payment, the attorney owes a duty to the client not to make payment to the provider. The client may be correct for some reason (payment already made but not credited, insurance having paid, billing error, malpractice, etc.), and the provider may have no interest and not be entitled to payment. This Rule requires the attorney, however, to notify the provider and to hold the funds until the dispute is resolved. The Comment to Rule 1.15 addressed this very situation:

"Third parties, such as a client's creditors, may have just claims against funds or other property in a lawyer's custody. 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." Although it is not clear from the opinion how similar the underlying facts may be to those in this inquiry, see In the Matter of Frederick K. Jones, Opinion No. 23851 (re-filed July 19, 1993), in which the attorney received a public reprimand for, among other things, failing to keep money separate until a dispute between his client and a creditor was resolved. It is recognized that this opinion appears to reach a different conclusion from two earlier advisory opinions, No. 91-10 and 81-14 (the latter decided under the Code of Professional Responsibility not the Rules of Professional Conduct), as it relates to the situation where a client has signed a "doctor's lien" and the attorney has notice of the lien but the attorney has not signed anything with the third party agreeing to honor the lien. The earlier opinions suggest that the attorney should pay the money to the client on demand and ignore the "lien". For the reasons set forth in this opinion, the committee believes that it is now the better practice, if a dispute arises, to notify the creditor and hold the money until the dispute is resolved.