Opinion 91-40
(March 1992)

You have asked the Philadelphia Bar Association's Professional Guidance Committee for an opinion regarding a potential conflict of interest in your office arising out of the representation of a client who has not paid his bill for services rendered and your desire to escrow certain monies otherwise held by your firm which belong to that client to protect your fee.

The facts, as we understand them, are that your client is a real estate developer who you have represented over the years with respect to condemnation procedures against certain of his properties. Apparently, some or all of fees charged to him have not been paid. You also indicate that, with respect to one of the properties, your firm has received certain monies from a condemnation which you have been holding as an escrow agent on behalf of the client and the condemnation authority pending satisfaction of conditions precedent. You have apparently been advised that those monies may now be released to the client and are being held solely because of your purported lien. It is your desire to continue to retain those funds and not release them to the client pending resolution of the fee dispute arising out of your work on this, and/or related condemnation matters.

As you have suggested in your inquiry, Rule of Professional Conduct 1.15, addresses situations where a lawyer receives monies which belong to the client but from which a claimed fee is owed. Rule 1.15(c) permits a lawyer to withhold from those monies an amount equal to the fee until resolution of any dispute with the client over fees. In a similar, although not precisely analogous situation, the comments to Rule 1.15 acknowledge that lawyers often receive funds from third persons from which a fee is expected to be paid and which are at risk of dissipation unless retained by counsel. The comments express the intent of the drafter to permit the lawyer to hold onto those funds until the fee issue is resolved. This is analogous to your inquiry, assuming that you and your client treated the representation in the various condemnation matters as related for billing purposes.

As a result of both the Rule and the comments, it is the opinion of the Committee that you may retain the portion of the now released escrow funds which represent a disputed fee provided that (a) the funds are properly segregated from any firm accounts; (b) the amount withheld does not exceed the disputed amount and (c) the client is promptly notified of the fact that the monies have been released by the condemnation authority but are being otherwise withheld by you because of the demand for payment of your fee.

The foregoing, of course, presumes that the facts as we recount them are correct. Your letter, at one point, alludes to your client's partner and at another point to condemning authorities. If there are other parties beside you and your client with an interest in the fund, your right to a lien may be different. However, if the facts as we recount them are correct then our opinion stands.

The Philadelphia Bar Association's Professional Guidance Committee provides, upon request, advice for lawyers facing or anticipating facing ethical dilemmas. Advice is based on the consideration of the facts of the particular inquirer's situation and the Rules of Professional Conduct as promulgated by the Supreme Court of Pennsylvania. The Committee's opinions are advisory only and are based upon the facts set forth. The opinions are not binding upon the Disciplinary Board of the Supreme Court of Pennsylvania or any other Court. They carry only such weight as an appropriate reviewing authority may choose to give it.