Thursday, October 10, 2013
I have just received an e-mail advising me that Kentucky has amended its ethical rule regarding safekeeping of entrusted property (Rule 1.15).
The rule change is found on page 9 of the document linked above.
The effect of the rule change is to remove any protection for non-clients in that the Model Rule references to the rights of third parties has been entirely removed.
The third-party protection is a fundamental aspect of the rule, as recognized by the commentary to the Model Rule:
Paragraph (e) also recognizes that third parties may have lawful claims against
specific funds or other property in a lawyer's custody, such as a client's
creditor who has a lien on funds recovered in a personal injury action. A lawyer
may have a duty under applicable law to protect such third-party claims against
wrongful interference by the client. In such cases, when the third-party claim
is not frivolous under applicable law, the lawyer must refuse to surrender the
property to the client until the claims are resolved. A lawyer should not
unilaterally assume to arbitrate a dispute between the client and the third
party, but, when there are substantial grounds for dispute as to the person
entitled to the funds, the lawyer may file an action to have a court resolve the
Now, presumably, Kentucky attorneys are free to disregard agreements to pay medical providers out of litigation proceeds, cheat non-clients in probate and real estate matters, and engage in all sorts of financial chicanery so long as the entrusted funds do not belong to a client.
I eagerly await an explanation/justification for this pro-lawyer/anti-public interest rule change. (Mike Frisch)