What does a lawyer do with settlement money in trust when the client refuses to cash the check?

Plain-English summary

A lawyer settled an underinsured-motorist (UIM) claim for $25,000, tried to disburse $20,000 to the client while keeping $5,000 as a discounted fee, and the unhappy client would not cash the $20,000 check. The lawyer asked what to do with funds in trust that rightfully belong to a client who refuses to accept them.

The committee gave a four-part answer. First, the lawyer must determine whether there is a dispute over the $5,000 fee; if there is, the lawyer must replenish the trust account with the disputed amount and then resolve the dispute. Second, the lawyer must tell the client that the receipt document accompanying the $20,000 should not have included a release of the lawyer's liability, because that release violates RPC 1.8(h); if the client is entitled to the $20,000, the lawyer must disburse it with no strings attached. Third, under RPC 1.3 and 1.4 the lawyer must represent the client diligently, adopt an effective way to communicate, and confirm the client received those communications. Fourth, under RPC 1.14(a)(2) the lawyer must engage in whatever court proceedings are necessary to resolve the disputes over the settlement funds rather than simply leaving the funds in trust.

Currency note

This opinion was issued in 1996, 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 Treat this page as historical context, not current guidance.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. Washington's then-current RPC 1.14 (safekeeping of property) corresponds to ABA Model Rule 1.15; RPC 1.8(h), 1.3, and 1.4 correspond to ABA Model Rules 1.8(h), 1.3, and 1.4.

Common questions

Q: Can a lawyer make the client sign a release of malpractice claims to receive settlement funds?

A: No. The committee said conditioning the funds on a liability release violated RPC 1.8(h), and the lawyer had to disburse the money the client was entitled to without any strings attached.

Q: What if part of the lawyer's fee is disputed?

A: The committee said the lawyer must replenish the trust account with the disputed amount and then resolve the dispute, rather than treat the fee as settled.

Q: Can the lawyer just leave the money in trust when the client refuses it?

A: No. The committee said under RPC 1.14(a)(2) the lawyer must engage in whatever court proceedings are necessary to resolve the dispute rather than leave the funds sitting in trust.

Background and rules framework

The opinion applied four rules as they stood in 1996: RPC 1.8(h) (limiting a lawyer's malpractice liability, corresponding to ABA Model Rule 1.8(h)); RPC 1.3 and 1.4 (diligence and communication, corresponding to ABA Model Rules 1.3 and 1.4); and RPC 1.14(a)(2) (safekeeping of client property and resolving disputes over it, corresponding to ABA Model Rule 1.15). The committee treated the lawyer's options as duties: cure the improper release, segregate disputed fee amounts, communicate, and use court process to break the impasse.

Citations and references

Rules of Professional Conduct:

• ABA Model Rule 1.8(h) (limiting malpractice liability); Washington RPC 1.8(h)
• ABA Model Rule 1.3 (diligence); Washington RPC 1.3
• ABA Model Rule 1.4 (communication); Washington RPC 1.4
• ABA Model Rule 1.15 (safekeeping property); Washington RPC 1.14(a)(2)

See also

• WA Ethics Op. 1678: Suing or Mediating a Fee Dispute With a Client
• WA Ethics Op. 1677: Suing a Former Client for Expert Witness Fees

Source

• Landing page: https://ao.wsba.org/print.aspx?ID=746

Original opinion text

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

Advisory Opinion: 1664
Year Issued: 1996
RPC(s): RPC 1.3; 1.4; 1.8(h); 1.14(a)(2)
Subject: Trust account; client refuses to cash trust check; duty to resolve dispute with client; release of lawyer's liability for malpractice

The Committee discussed your inquiry regarding what to do with trust account funds rightfully belonging to your client that your client will not accept. You settled a UIM claim for $25,000, attempted to disburse $20,000 of the settlement to your client, while keeping $5,000 as your discounted attorney's fee. Your client is unhappy with your representation and will not cash the $20,000 settlement check.

The Committee concluded that: (1) You need to determine if there is a dispute with respect to the $5,000 you kept for your attorney's fee. If there is a dispute regarding the amount of your fee, then you need to replenish your client trust account with the disputed amount and then resolve the dispute. (2) You need to communicate to your client that you should not have included a release from liability in the receipt of trust funds document you sent your client for the $20,000 settlement amount. This release is in violation of RPC 1.8(h). If your client is entitled to the $20,000, you have a duty to disburse that amount to the client without any strings attached. (3) You have a duty under RPC 1.3 and 1.4 to represent your client diligently, to adopt an effective way to communicate with your client, and to make sure that she has received your communications. (4) You have a duty under RPC 1.14(a)(2) to engage in whatever court proceedings are necessary to resolve the disputes regarding the settlement funds rather than just leave the funds in the trust account.