Tuesday, March 24, 2009

Lien in Litigation, but Client Demanding Money

Posted by Matthew Garretson

I have a client who was seriously injured in a motor vehicle accident. After his no fault (ATIC) cuts him off, he uses his Verizon medical insurance and disability policies to continue to get treatment and money. In addition, he borrows money against the settlement which was multiplying at horrific rate courtesy of Law Funders. Verizon may or may not be ERISA (careful reading of 5550 filing shows that at least one of the plans used is not full blown ERISA.)

Following settlement of the MVA, during which I inform client that we will have to pay back money against settlement and I will hold the remainder pending resolution of the ERISA lien, I move by OSC to vacate lien. Client is informed of status and never calls (from date of settlement in June 2008). I have correspondence to him informing of lien and asking him to call. He never does.

For various reasons, motion is to be argued in early April and even then probably won't resolve matter as the motion is discovery (largely) and not substantive.

Here's the problem - after not hearing from the client for more than six months, he calls today demanding that I release the remainder of his money to him. I don't think I can do that. Does anyone think otherwise?

-New York Attorney

My hunch is that you have some variation of ABA Model Rule 1.15(d) in NY. "Model Rule 1.15(d): Upon receiving funds...in which a client or third person has an interest, a lawyer shall promptly notify the client or third person [and] 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..."

Most state bar associations or disciplinary committees have said that this places an obligation to hold funds until the dispute is resolved if you have actual notice of a just claim.

Of course, that places you in an awkward position with the client.