Opinion 97-1
(March 1997)
You have asked the Committee for an opinion concerning the ethical implications of the following situation. You represent a client injured in an auto accident, who is also on cash assistance. You informed the Office of Inspector General of the personal injury litigation filed to recover for your client's accident. Subsequently you settled the auto accident litigation on your client's behalf, and the Commonwealth seeks satisfaction of its lien for cash assistance from the proceeds of the settlement. You anticipate no lien on account of any medical assistance payments your client may have received.
Your first inquiry is a hypothetical one: whether you have a duty to notify the Department of Public Welfare of a personal injury claim that likely will result in judgment or settlement, made by someone who receives cash assistance only. The Professional Guidance Committee expresses no opinion concerning the applicable statutory or case law-imposed duties to which either you or your client may be subject. As you pointed out, a recent CLE seminar panel indicated that a client who ceases to receive cash assistance sufficiently prior to the receipt of settlement or judgment proceeds is not subject to the Commonwealth's cash assistance lien and the effects of the lump sum income rule. If you determine through analysis of the statute and applicable case law that your client may take advantage of this situation, then no rule of professional conduct prohibits you from assisting your client to avoid the Commonwealth's lien in this fashion. If you determine, again through analysis of the statute and applicable case law, that avoidance of the lien would constitute fraud, then Rule 1.2(d) and (e) prohibit you from counseling your client to avoid the lien, and Rule 1.16(a)(1) and (b)(1) may require or permit you to withdraw from the representation. Fraud, or fraudulent conduct as defined by the Rules of Professional Conduct denotes conduct having a purpose to deceive and not merely negligent misrepresentation or failure to apprise another of relevant information. Rules 1.2 and 1.16 provide in pertinent part as follows:
Rule 1.2(d): A lawyer shall not counsel a client to engage, or assist a client in conduct that the lawyer knows is criminal or fraudulent, but a lawyer may discuss the legal consequences of any proposed course of conduct with a client and may counsel or assist a client to make a good faith effort to determine the validity, scope, meaning or application of the law.
Rule 1.2(e): When a lawyer knows that a client expects assistance not permitted by the Rules of Professional Conduct or other law, the lawyer shall consult with the client regarding the relevant limitations on the lawyer's conduct.
Rule I.1 6(a): ... [A] lawyer shall not represent a client or, where representation has commenced, shall withdraw from the representation of a client if: (1) the representation will result in violation of the rules of professional conduct or other law;
Rule 1.16(b): ...[A] lawyer may withdraw from representing a client if . . . (1) the client persists in a course of conduct involving the lawyer's services that the lawyer reasonably believes is criminal or fraudulent....
In sum, the question of whether your client can properly avoid the lien by withdrawing from cash assistance prior to the settlement, is a question of substantive law. While you would be justified in assisting your client in those legal steps necessary to relieve your client from the lien obligation, it would be a violation of Rules 1.2 and 1.16 for you to assist your client in any improper effort to avoid an otherwise enforceable and valid lien.

Your second, third, and fourth inquiries all concern the scenario in which you presently find yourself, i.e. the Commonwealth is aware of the settlement, and demands that its lien be satisfied from the settlement proceeds. Rules 1.1 5(b) provides as follows:

Upon receiving funds or other property in which a client or third person has an interest, 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.

Under Rule 1.1 5(b), you are under a duty to notify the Commonwealth of the settlement (in which the Commonwealth, as lienholder, has a property interest), and to deliver to the Commonwealth that portion of the settlement proceeds that the Commonwealth is entitled to receive. If the lien or the Commonwealth's entitlement to it is in dispute, your duty is to escrow a sufficient portion of the settlement proceeds to satisfy the Commonwealth's claim. You may not simply release the settlement proceeds to your client with the admonition that the client is under the obligation to repay the DPW lien.

This conclusion comports with the decision this Committee reached in Opinion 92-2, which required the inquirer to notify DPW of a settlement from which DPW's medical and cash assistance liens could be satisfied. As noted in that opinion, failure to do so would subject the attorney to possible disciplinary action.

The Philadelphia Bar Association's Professional Guidance Committee provides, upon request, advice for lawyers facing or anticipating facing ethical dilemmas. Advice is based on the consideration of the facts of the particular inquirer's situation and the Rules of Professional Conduct as promulgated by the Supreme Court of Pennsylvania. The Committee's opinions are advisory only and are based upon the facts set forth. The opinions are not binding upon the Disciplinary Board of the Supreme Court of Pennsylvania or any other Court. They carry only such weight as an appropriate reviewing authority may choose to give it.