Opinion 2000-3
(March 2000)

Your inquiry of January 13, 2000 seeks guidance from this Committee regarding your ethical obligations under the Pennsylvania Rules of Professional Conduct ("R.P.C.") in connection with your handling of proceeds obtained for a client in a personal injury matter. Apparently, while the personal injury action was pending, your client was prosecuted criminally in a neighboring state on theft related charges which resulted in a guilty plea and a restitution order. Compliance with the restitution order is in arrears, and you have informed us that the restitution order has been entered as a judgment in the Commonwealth of Pennsylvania by the neighboring state. As your inquiry states, because of your knowledge of the existing judgment, the neighboring state is currently "looking to you" to pay the judgment from your client's personal injury settlement, but the client does not wish you to do so. You have not indicated whether the neighboring state has placed you on notice of an actual lien in its favor.

R.P.C. 1.15 states:

(a) A lawyer shall hold property of clients or third persons that is in a lawyer's possession in connection with a representation separate from the lawyer's own property. Funds shall be kept in a separate account maintained in the state where the lawyer's office is situated, or elsewhere with the consent of the client or third person. Other property shall be identified as such and appropriately safeguarded. Complete records of such account funds and other property shall be preserved for a period of five years after termination of the representation.

(a) Upon receiving funds or other property in which a client or third person has an interest, [emphasis added], a lawyer shall promptly notify the client or 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 client or third person any funds or other property that the client or third person is entitled to receive and, upon request by the client or third person, shall promptly render a full accounting regarding such property.

The Committee assumes that upon your receipt of the funds from the personal injury case, the funds will be placed in a separate account in accordance with R.P.C. 1.15(a). With respect to the Pennsylvania judgment filed by the neighboring state, consideration of R.P.C. 1.15(b) is triggered. If the judgment obtained by the neighboring state constitutes "an interest," you are under a duty to promptly notify the neighboring state. Furthermore, except for reasons stated in R.P.C. 1.15 or otherwise permitted by law or by agreement with the client, if the neighboring state has "an interest" in the proceeds, you must promptly deliver those proceeds to the client and the neighboring state or, in the event of a dispute between your client and the neighboring state, hold the disputed funds in escrow.

The question of whether the judgment obtained in the Commonwealth of Pennsylvania by the neighboring state constitutes "an interest" is a question of law and thus outside of the purview of this Committee. However, you are directed to prior opinions of this Committee, which are available from the Philadelphia Bar Association or through the Internet at www.philadelphiabar.org (see opinions 90-4, 91-6, 92-2, 92-18, 94-9 and 97-1). Those opinions conclude that a statutory lien (e.g., a Department of Public Welfare Lien, Opinion 97-1) and a contractual obligation pursuant to an assignment of benefits (Opinion 90-4) , constitute "an interest," under R.P.C. 1.15(b) so as to trigger a lawyer's obligations under R.P.C. 1.15(b).

"An interest" that does not arise out of a statutory or contractual lien is more difficult to evaluate. Although the comments to the R.P.C. are not adopted as law in Pennsylvania, they do provide direction. The comment to Rule 1.15 states:

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.

Thus, if you believe the judgment obtained by the neighboring state constitutes "an interest" (i.e., a "just claim" against the funds), you must comply with the provisions of Rule 1.15(b). On the other hand, if you conclude that the judgment does not constitute "an interest," you are under no legal duty to deliver any of the funds to the neighboring state, nor are you required by R.P.C. 1.15(b) to notify the neighboring state of the existence of the res. Furthermore, under such circumstances R.P.C. 1.6 concerning disclosure of confidential information would preclude you from revealing such information to the neighboring state.

Given the circumstances pursuant to which the judgment was obtained, if you are licensed to practice in the neighboring state at issue, you should evaluate whether the Rules of Professional Conduct of that state mandate, either directly by statute, or Rule, or through case law, a result different than that in Pennsylvania. To do otherwise could subject you to disciplinary action in that other jurisdiction. See, R.C.P. 8.5.

Lastly, because a criminal prosecution gave rise to the judgment in the Commonwealth of Pennsylvania, R.P.C. 1.1 mandates that you make sure your client is counseled regarding what impact, if any, the failure to pay the judgment may have on your client's sentence, probation and/or parole.

CAVEAT: The foregoing opinion is advisory only and is based upon the facts set forth above. The opinion is not binding upon the Disciplinary Board of the Supreme Court of Pennsylvania or any other Court. It carries only such weight as an appropriate reviewing authority may choose to give it.