Duties When A Dispute Arises

A recent opinion of the Rhode Island Ethics Advisory Panel

FACTS

The inquiring attorney represented a mother and daughter in a motor vehicle accident case. The mother and daughter were in the same vehicle at the time of the accident. Liability was accepted by the other driver’s insurer. The mother’s claims thereafter settled for the policy limit. The inquiring attorney disbursed the settlement funds to the mother and closed her portion of the case. The daughter, who was a minor at the time of the accident, did not settle her claims until after she turned 18 years old. Before the inquiring attorney disbursed the settlement funds to the daughter, the mother contacted the inquiring attorney claiming the daughter owes her a debt she had agreed to pay out of the settlement funds. The mother has produced a notarized promissory note apparently signed by the daughter in support of her claim. However, the daughter denies owing the mother a debt and alleges that the promissory note is a forgery. The purported debt is less than the total sum of the daughter’s settlement funds. The inquiring attorney has placed the funds in his or her IOLTA account pending resolution of the dispute.

ISSUE PRESENTED

The inquiring attorney asks what his or her obligations are under the Rules of Professional Conduct regarding the disputed settlement funds?

OPINION

It is the Panel’s opinion that the inquiring attorney is obligated to notify the mother that he or she is in possession of the amount claimed but does not have the daughter’s authority to disburse the funds. The inquiring attorney must then transfer to the daughter that portion of the settlement funds not in dispute and retain the disputed portion pending resolution of the matter or, in the alternative, deposit the disputed amount into the court registry and file an action to have a court resolve the dispute.

(Mike Frisch)