Thursday, September 21, 2017
Attorneys Not Liable For Distributing Settlement Proceeds To Client; Third Party Had No "Just Claim"
Attorneys were not liable for distributing settlement proceeds of a wrongful eviction claim to their client rather than a third party claiming entitlement per a decision of the District of Columbia Court of Appeals
Mr. Banks hired Mr. Zucker and Ms. Daus to represent him in the wrongful eviction case against ESB. Before any suit was filed, Mr. Banks signed a settlement with ESB that gave Mr. Banks $100,000 in exchange for a release of the wrongful eviction and other claims. Mr. Papageorge learned of the settlement two days later, and his lawyer told Mr. Zucker that Mr. Papageorge had a claim to the settlement money. The same day, Mr. Papageorge showed Ms. Daus a copy of his agreement with Mr. Banks and his cotenant along with documentation of $88,740.86 in costs and fees he claimed he was owed. Despite Mr. Papageorge‘s repeated demands, Mr. Zucker and Ms. Daus refused to pay him out of the settlement money, and instead disbursed the money to their client, Mr. Banks. Mr. Papageorge asked the lawyers to stop payment on a check they had already given Mr. Banks, warning that the money would soon be gone because Mr. Banks would spend it, but they rebuffed him.
The attorneys were sued for conversion and negligence in which the plaintiff
contends that an attorney also owes a duty of care to a nonclient third party who presents the attorney with a "just claim" against property in the attorney‘s possession.
He had no "just claim" under Rule 1.15 and the disciplinary rules did not form a basis for civil liability.
The "just claim" concept stems from Rule 1.15 of the District of Columbia Rules of Professional Conduct, which governs the ethical obligations of a lawyer who is in possession of property in which others claim an interest. In particular, the rule requires a lawyer to "promptly deliver to the client or third person any funds or other property that the client or third person is entitled to receive." Rule 1.15 (c). Comment 8 on 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.
The rule does not create an obligation to the plaintiff enforceable in civil litigation
Mr. Papageorge identifies no source of "applicable law" under which Mr. Zucker and Ms. Daus owed him a duty of care other than Rule 1.15 itself and the case law interpreting that rule. Yet as Mr. Papageorge concedes, the Rules of Professional Conduct do not give rise to a private cause of action for their violation.
Here, Mr. Papageorge signed a contract with Mr. Banks and his cotenant that gave him a right to the proceeds from the tenants‘ wrongful eviction claims, but this right was a contractual right enforceable against Mr. Banks and the cotenant, not a property right enforceable against whomever might be in possession of those proceeds. As Mr. Papageorge‘s only entitlement to the settlement money stemmed from the as-yet-unperformed contract with Mr. Banks and his cotenant, he did not have any property rights in the settlement money when he made his demand, and his conversion claim therefore fails.
Associate Judge Beckwith authored the opinion. (Mike Frisch)