|Attorney for Respondent Michael E.|Attorney for the Indiana Supreme Court|
|Allen |Disciplinary Commission |
|Kevin McGoff, |Donald R. Lundberg, Executive |
|Indianapolis, Indiana |Secretary |
| |Seth T. Pruden, Staff Attorney |
| |Indianapolis, Indiana |
| | |
|Attorney for Respondent Patrick W.|Attorney for the Indiana Supreme Court|
|Young |Disciplinary Commission |
|Samuel J. Goodman, |Donald R. Lundberg, Executive |
|Indianapolis, Indiana |Secretary |
| |Seth T. Pruden, Staff Attorney |
| |Indianapolis, Indiana |
In the
Indiana Supreme Court
_________________________________
No. 49S00-0111-DI-613
In The Matter Of
Michael E. Allen,
Respondent.
_________________________________
No. 45S00-0209-DI-502
In The Matter Of
Patrick W. Young,
Respondent.
________________________________
Disciplinary Action
________________________________
February 9, 2004
Per Curiam.
Attorneys who, during the course of a representation, receive
settlements funds in which a third party has an undisputed legal interest
are obligated promptly to deliver those funds to the third party. If
entitlement to settlement funds is disputed, an attorney must hold the
disputed funds in a separate account until the dispute is resolved.
The Disciplinary Commission has charged respondent attorneys Michael
E. Allen and Patrick W. Young with attorney misconduct arising out of
factually similar but unrelated incidents involving failure to deliver
settlement funds to a third party entitled to receive them or to hold
disputed funds separate. The Commission has charged each with violating
Ind.Professional Conduct Rule 1.15(b). The respondents have agreed with
the Commission upon resolution of the charges. The agreements, which call
for the respondents to be publicly reprimanded, are now before us for final
resolution. This opinion recounts the facts and circumstances of each
case.
Indiana Professional Conduct Rule 1.15(b) provides, in relevant part:
Except as stated in this rule or otherwise permitted by law or
agreement with the client, a lawyer shall promptly deliver to the
client or third person any funds or other property that the client or
third person is entitled to receive and, upon request by the client or
third person, shall promptly render a full accounting regarding such
property.
The Comment to Prof.Cond.R. 1.15(b) provides:
Third parties, such as a client’s creditors, may have just claims
against funds or other property in the 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. However, a lawyer
should not unilaterally assume to arbitrate a dispute between the
client and the third party.
Respondent Allen was admitted to this state’s bar in 1981. Beginning
in 1994, he represented a woman on a claim for injuries she sustained in an
automobile accident. During the course of the representation, the woman
received $5,212 in chiropractic treatment for her injuries. Allen sent to
the chiropractor a “letter of protection,” which provided that the doctor
would be paid from the proceeds of any personal injury settlement. In
1999, the client’s claim settled for $24,259. The client advised Allen
that she would pay the chiropractor if the respondent would forward to her
sufficient settlement proceeds. Allen did not retain funds to pay the
chiropractor, but forwarded $14,135.82 (the settlement proceeds less
Allen’s fee and amounts due to other medical providers) to the client,
believing his client would pay the chiropractor from this amount. The
client failed to pay the chiropractor.
The chiropractor who provided services to Allen’s client had an
undisputed claim to a portion of the settlement proceeds. Neither Allen
nor the client disputed the chiropractor’s entitlement, and his claim to
the funds was memorialized in Allen’s agreement (the “letter of
protection”) with him. Accordingly, Allen violated Prof.Cond.R. 1.15(b)
when he failed promptly to deliver to the chiropractor settlement funds to
which the chiropractor was entitled.
Respondent Young was admitted to this state’s bar in 1984. Beginning
in 1998, he also represented a client on a claim for injuries she suffered
in an automobile accident. During the proceedings, the client received
$4,786 in services from a chiropractor. Young and the client signed a
“Doctor’s Lien,” which provided, inter alia, that the respondent would
“withhold such sums from any settlement, judgment, or verdict as may be
necessary to adequately protect” the chiropractor. Although $2,021.29 of
the chiropractor’s bill was paid, a balance of $2,764.71 remained when the
client’s case settled for $50,000. The client advised Young that she
thought the chiropractor had overcharged her for services. She directed
Young to pay to the chiropractor only $1,000 from the settlement proceeds.
Pursuant to the client’s instruction, Young disbursed only $1,000 to the
chiropractor despite the outstanding “Doctor’s Lien” and the fact that the
chiropractor claimed he was still owed $2,764.71 Young then forwarded
$1,764 to the client from the settlement proceeds, which represented the
claimed unpaid portion of the chiropractor’s bill.
The Commission and Young stipulate that Young violated Prof.Cond.R.
1.15(b), and we agree. Out of the total settlement of $50,000, entitlement
to $2,764.71 (representing the balance of the chiropractor’s unpaid claim)
was disputed between the client and the chiropractor. Rather than
unilaterally resolving the dispute by providing only $1,000 to the
chiropractor and forwarding the balance to the client, the respondent was
obligated to hold the funds in trust until the dispute was resolved.
Professional Conduct Rule 1.15(b) provides that a lawyer shall promptly
deliver to a client or third party funds the client or third party is
entitled to receive. Implicit in that obligation is that a lawyer hold
disputed funds in trust until the dispute is resolved so that the lawyer
can effect accurate disbursement. Moreover, as the Comment to Prof.Cond.R.
1.15(b) indicates, a lawyer should not unilaterally settle a dispute
between his client and a third party.
Having found misconduct, we must now determine whether the agreed
sanction in each case, a public reprimand, is appropriate. In each case,
the parties agree upon several facts in mitigation, including that neither
respondent has been disciplined before and that each was cooperative during
the disciplinary process. In Young’s case, the dispute has been resolved
and the chiropractor paid in full. In Allen’s case, we note that he paid
the third party funds to the client upon the client’s representation that
she would deliver the funds to the third party, and not out of any intent
or design to deprive the third party of funds.
Where an attorney failed to provide to a third party medical provider
funds obligated to the medical provider pursuant to an agreement between
the attorney, the client, and the medical provider, this Court imposed a
public reprimand. Matter of Norman, 708 N.E.2d 867 (Ind. 1999).
Similarly, public reprimands were imposed where an attorney failed to
deliver settlement funds to a third party whose interest was protected by a
“doctor’s lien” executed by the respondent and where an attorney failed to
deliver settlement funds to a medical creditor despite the attorney’s
provision of a letter of protection memorializing the legal interest of the
medical creditor in settlement proceeds. Matter of Kirby, 766 N.E.2d 351
(Ind. 2002); Matter of Alvarez, 755 N.E.2d 162 (Ind. 2001). In each of
those cases, the attorney provided the funds to the client for delivery to
the third party instead of providing the funds directly to the third party.
In light of this precedent, we find a public reprimand is also appropriate
for respondent Allen’s failure to deliver directly to his client’s
chiropractor funds the chiropractor was entitled to receive.
Respondent Young has agreed with the Commission that his failure to
segregate funds which were the object of a dispute between his client and a
third party warrants a public reprimand. We ascribe some measure of added
culpability to respondent Young’s actions because he unilaterally decided
the dispute between his client and the third party by forwarding to the
third party only those sums directed to be paid by the client, despite the
fact that the respondent executed a “Doctor’s Lien” to withhold amounts
necessary to protect the chiropractor’s interest. However, since it is this
Court’s policy to favor agreed resolutions of attorney disciplinary
charges, we accept the tendered agreement calling for a public reprimand.
It is, therefore, ordered that the respondents, Michael E. Allen and
Patrick W. Young, are hereby reprimanded and admonished for their
misconduct.
The Clerk of this Court is directed to provide notice of this order
in accordance with Admis.Disc.R. 23(3)(d), to the hearing officer, and to
the clerk of the United States Court of Appeals for the Seventh Circuit,
the clerk of each of the United States District Courts in this state, and
the clerks of the United States Bankruptcy Courts in this state.
Costs of this proceeding are assessed against the respondents.