Inside Track: Ethical Dilemmas: Proceeds of Settlement Promised to Another, What If ‘Good Faith’ Dispute Arises? Who Gets the Money?:

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  • Ethical Dilemmas: Proceeds of Settlement Promised to Another, What If ‘Good Faith’ Dispute Arises? Who Gets the Money?

    Ethical dilemmas affect every lawyer's practice. This series of questions and answers appears each month in InsideTrack. The answers, offered by State Bar’s Ethics Counsel org tpierce wisbar Timothy Pierce, provide guidance only and are not legal authority. Each situation will depend on the facts and circumstances involved.

    Timothy J. Pierce

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    Question

    I represent a client in a personal injury action, and we have agreed to a settlement. I just received a letter from the chiropractor who treated my client, enclosing a “Chiropractor’s Lien,” signed by my client, wherein my client agreed to pay the chiropractor’s substantial bill out of any settlement. The chiropractor demands to be paid in full out of the pending settlement. I asked my client about this, and he acknowledged signing the document, but told me not to worry about it and simply pay the client the entire settlement minus my fees. What should I do?

    Tim PierceTim Pierce is ethics counsel with the State Bar of Wisconsin. He can be reached at org tpierce wisbar wisbar tpierce org, or by phone at (608) 250-6168.

    Answer

    The chiropractor has a contractual interest (actually an assignment) in the proceeds of the settlement, and the lawyer must either honor the assignment or, if the client has a good faith dispute about the bill, hold the disputed funds in trust until the dispute is resolved. If the dispute cannot be resolved by other means, the lawyer may file an action for declaratory judgment and deposit the funds with the clerk of court.

    References: SCR 20:1.15(d)(3); Wisconsin Ethics Op. E-09-01; Riegelman v. Krieg, 679 N.W.2d 857, 271Wis.2d 798, Disciplinary Proceedings against Barrock, 727 N.W.2d 833, 299 Wis.2d 207.