Friday, October 5, 2018

Virginia Lawyers: Pay Attention

A rather ordinary lawyer-client situation has led to a significant opinion by the Virginia Supreme Court.

The court - which rarely publishes opinions in bar discipline matters - affirmed findings of misconduct and a reprimand with terms of an attorney for violation of the duty to safeguard entrusted funds.

The client had retained the lawyer on a contingent fee basis to pursue an accident claim. She discharged him before any judgment was secured (the underlying case is still pending).

The attorney required her to keep $150 in trust to draw on for expenses. After discharge, she demanded return of unexpended portion, which was $143.30.

The attorney asserted a lien based on the work he put into the case and took the $143.30 notwithstanding her demand to return the unused portion. 

In April 2016. [attorney] Roberts transferred $143.30, the remaining balance in the trust account, to his firm's operating account, claiming that it vas a partial payment for his firm's fees. The firm did not notify [client] Hayes of this transfer. At that time. Hayes had received no settlement. judgment, or recovery of any kind on her personal injury claim.

The court rejected his claim that he was entitled to take the funds

W'e disagree with the first premise of Robert's argument - that an attorney claiming an interest in trust funds can unilaterally determine whether a dispute over the funds exists or has been resolved.

While the court agreed that the dispute must be grounded in a good faith claim by the client, here it was.

And the attorney's asserted lien was not.

We did not hold in Heinzman that, nor have we ever addressed whether. a discharged contingency-fee attorney can recover in quantum meruit from a personal injury claimant who never receives any compensation whatsoever. Even if quantum meruit principles theoretically permitted such a fee, the fee would still have to be adequately explained to the client, be reasonable under all the circumstances, and not unreasonably hamper the client's right to discharge counsel. See Va. Sup. Ct, R., Part 6. ยง Il, 9'li t.4, l.5(a)-(c). l.16(a)(3): Va. Legal Ethics Op. 1812,2005 Va. Legal Ethics Ops. LEXIS 4, at *6-7(Oct. 31,2005), Whatever the contours ot such a provision. it must not function as a poison pill that financially punishes a client for, and thus deters a client from, exercising her right to end the attorney-client relationship.

The court affirmed that Rule 1.15 is not void-for-vagueness

The common thread throughout all of these arguments is a single. erroneous assertion: the dispute is resolved, and the final determination made, when Roberts says so...

While it is true that the Representation Agreement authorized Roberts to use trust funds to pay legal fees, this authorization was necessarily limited to fees actually due and owing at the time of the withdrawal of funds. Neither Hayes nor any other client signing that agreement could be understood to have consented to the payment of legal fees that were not due and owing and to have thereby authorized fees that the client claimed were never due at all. Robert's argument to the contrary merely assumes his conclusion that he had an unequivocal right to quantum meruit fees prior to, and even despite the potential absence of, any ultimate recovery by Hayes. Again, as we stated before. see supra at 16. we need not affirm or disaffirm this thesis. It is enough that Hayes both disputed Roberts's claim to fees and asserted an interest in the trust funds in good faith.

In contrast, the District of Columbia Court of Appeals has held that the word "dispute" means just that and that, because the attorney acts as a fiduciary, there is no "good faith" element to a dispute

From In re Paul Haar

The Board concluded that the rule requires that there be a "genuine" dispute between the client and the attorney. In short, the Board concluded that it was not sufficient that the client protested the amount of the fee; any such protest must be grounded in reality. The Board then determined, based on all of the correspondence between the respondent and Ms. Baldew, both before and after the funds were withdrawn, that there was no "genuine" dispute over respondent's entitlement to the $4000. Implicit in the Board's finding no "genuine" dispute is its determination that respondent was legally entitled to at least $4000.

The test, however, is not whether, when examining the circumstances objectively, one would conclude that respondent was legally entitled to the amount claimed; rather the test should be whether there was in fact a fee disagreement between the parties concerning respondent's entitlement to the amount withdrawn at the time of withdrawal. The rule is unambiguous: an attorney may not withdraw a portion of the deposited funds when the attorney's right to receive that portion is "disputed" by the client. DR 103(A)(2). There is no requirement that the dispute be "genuine," "serious," or "bona fide," as the Board concluded. Plainly, the word "dispute" means "to argue about; to debate; to question the truth or validity of; [or] to doubt." THE AMERICAN HERITAGE DICTIONARY 380 (1976).

(Mike Frisch)

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