ETHICS DOCKET NO. 1988-09

MARYLAND STATE BAR ASSOCIATION, INC.

COMMITTEE ON ETHICS

ETHICS DOCKET NO. 1988-09

Fees - Disposition of Fees received but not earned, by deceased attorney

You state that Attorney A is the attorney for the estate of a deceased lawyer. The deceased was paid an advanced fee shortly before his death to represent several individuals who were charged with criminal offenses. The fee was advanced on behalf of each of these clients by one of their relatives.

  The deceased did little or no work in connection with this matter. Upon his death, each of the clients engaged Lawyer B, who promptly prepared the cases for the scheduled trial and who successfully defended them. Subsequently, a request was made to Lawyer A by Lawyer B on behalf of the relative who advanced the fee for the return of the advanced fee. Also a stated amount was authorized to be retained by Lawyer A for the decedent's estate, to compensate the estate for any work done and costs expended by the deceased.

  The decedent had deposited this advanced fee, and others, in his operating account, rather than in an escrow account. Apparently, there is a shortfall in this account, so that all unearned advanced fees cannot be returned immediately. Lawyer A states that monies will be paid to the estate for services rendered by the deceased on matters completed by other lawyers, and that this ""ongoing income should persist for a matter of years and ought to be used in conjunction with other monies coming into the estate to satisfy the shortfall prior to 'secured creditors'."" Lawyer B feels that the unused portion of the advanced fee in question should be returned immediately, and that the payor of the advanced fee should not be ""lumped in with a long list of creditors"" of the estate, all of whom apparently cannot be satisfied immediately. We have been asked to comment and advise on this situation.

  Rule 1.16(d) of the Maryland Rules of Professional Conduct requires, among other things, that unearned advanced fees be returned immediately upon the termination of the lawyer's representation, which occurred in this case when the decedent died.

  As for the propriety of the estate's retaining or receiving a portion of the advanced fee for work done prior to the decedent's death, this, as well as other questions dealing with the handling of the estate of a deceased lawyer, were addressed in Opinion Docket 80-51, a copy of which is enclosed. In that Opinion, citing DR9-102(A)(2) of the former Code of Professional Responsibility, which is identical to current Rule 5.4(a)(2), we stated, in pertinent part:

[T]he Committee is of the opinion that, if the estate is authorized under the substantive law, to receive payments for work done, there is no ethical impediment to receipt of such fees .... to

  In the light of our prior Opinion Docket 83-62, a copy of which is also enclosed, there was no requirement that the advanced fees in question be deposited into an escrow account. In that opinion we decided that advanced fees do not constitute ""funds of clients, at least in-so-far as DR 9-102 of the Code of Professional Responsibility required that ""funds of clients"" be deposited into a separate account and not be intermingled with funds of the lawyers. Rule 1.15 of the current Rules is substantially similar to DR 9-102. Nevertheless, we are of the opinion that advanced fees do not lose their character as funds to be held in trust for the client until earned, even though they may be intermingled with other funds of the lawyer.

  However, the question posed regarding priorities among various creditors or claimants to the funds in the decedent's estate deals not with ethics, but rather it is a legal one. Such matters of law are outside the authority of the Committee.