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Prof Responsibility • Administrative
PR#048
Legal Definition
Under 1.15(e), if the lawyer is in possession of funds or other property to which the lawyer or a third person has a claim, and the client disputes the claim, the lawyer must keep the disputed portion of the funds or property separate until the dispute is resolved.
Plain English Explanation
When a lawyer has money or property that both the client and someone else (including the lawyer) claim, the lawyer must keep the disputed part separate until the disagreement is settled. The lawyer can give out any part that isn't disputed.
Hypothetical
Hypo 1: Bob represents Sam in a personal injury case that settles for $100,000. Bob's fee is 30%, but Sam disputes this, claiming they agreed to 25%. Result: Bob must keep the disputed 5% ($5,000) in his client trust account and can disburse the undisputed 70% ($70,000) to Sam and 25% ($25,000) to himself. The disputed $5,000 must remain in the trust account until the fee dispute is resolved.
Hypo 2: Bob is holding $50,000 in settlement funds for Sam. A third party, Tim, claims he's entitled to $20,000 of those funds due to a prior lien. Sam disputes Tim's claim. Result: Bob must keep the disputed $20,000 in his client trust account and can disburse the undisputed $30,000 to Sam. The $20,000 must remain separate until Sam and Tim resolve their dispute, potentially through court action.
Hypo 5: Bob is holding $100,000 for Sam from a real estate sale. The buyer claims $5,000 should be returned due to undisclosed repairs, which Sam disputes. Bob, believing the buyer is right, sends the buyer $5,000 from the funds. Result: Bob has violated Rule 1.15(e). Despite his personal belief, Bob should have kept the disputed $5,000 separate until Sam and the buyer resolved their disagreement. Bob does not have the authority to unilaterally decide the dispute.
Hypo 2: Bob is holding $50,000 in settlement funds for Sam. A third party, Tim, claims he's entitled to $20,000 of those funds due to a prior lien. Sam disputes Tim's claim. Result: Bob must keep the disputed $20,000 in his client trust account and can disburse the undisputed $30,000 to Sam. The $20,000 must remain separate until Sam and Tim resolve their dispute, potentially through court action.
Hypo 5: Bob is holding $100,000 for Sam from a real estate sale. The buyer claims $5,000 should be returned due to undisclosed repairs, which Sam disputes. Bob, believing the buyer is right, sends the buyer $5,000 from the funds. Result: Bob has violated Rule 1.15(e). Despite his personal belief, Bob should have kept the disputed $5,000 separate until Sam and the buyer resolved their disagreement. Bob does not have the authority to unilaterally decide the dispute.
Visual Aids
Related Concepts
In California, can an attorney hold a client's materials hostage as leverage to get paid?
In California, how long must a lawyer preserve records of client funds or other property?
What is a lawyer's Duty to Keep Client Property and Records?
When there is no longer a dispute about an attorneys fees, what must happen to funds still held in the trust account?