South Carolina State Bar

Ethics Advisory Opinion 90-40

Facts:

All facts provided with this inquiry are contained in the text of the
questions.

Questions:

1. May an attorney ask for referrals from a doctor and agree to protect the
doctor’s medical fees (if the referral consents to this, of course) from the
results of suit or settlement?

2. May a business not engaged in the practice of law advise customers (or
potential customers) that all funds received from sales or rentals are
escrowed by the business’s attorney?

Summary:

1. An attorney may not exchange assistance in collecting medical fees for
referral of client. Rule of Professional Conduct. 7.2(c).

2. An attorney may provide escrow services for a client provided he complies
with the requirement of the rules for maintenance of client funds and the
arrangement is not misrepresented to the business’s customers. Rules of
Professional Conduct 1.15 and 4.1.

Opinion:

Question 1. This question implies a quid pro quo with a physician referring
patients with potential legal claims to an attorney who in turn guarantees
in all instances where there is recovery and the client agrees to pay
outstanding medical bills.

Rule 7.2(c) is explicit: A lawyer shall not give anything of value to a
person for recommending the lawyer’s services,…

Assurances of assistance in the collection of outstanding medical bills are
questionably of value and therefore this arrangement is proscribed by the
Rules. See also In Re Bloom, 217 S.E. 2d 143 (1975).

However, it is permissible for a lawyer on behalf of a client to assure a
physician that their bills will be paid in order to obtain continued
treatment for the client or reports necessary to pursue the client’s legal
claims. The lawyers arrangement with the client should provide for
reimbursement by the client for these costs. See ABA Informal Ethics Opinion
664 (1963) and 1084 (1969). The arrangement must be in the interest of an
existing client rather than as a reward for soliciting business on behalf of
an attorney. Question 2. The second question presented by the inquiry asks
whether an attorney can escrow sales proceeds for a client on a regular
basis. Nothing in the rules forbids this practice provided the attorney
complies with Rule 1.15(b) which sets forth the conditions for an attorney
holding funds for a client or third party. These include promptly notifying
the client or third party of the deposit of such funds, providing a full
accounting of the funds for the client or third party on request and
promptly delivering funds to which a client or third party is entitled.

The third requirement of prompt delivery has the potential for placing the
attorney in a position of conflict with his client should a dispute arise
between the client and a customer about the disposition of funds. The
commentary at Rule 1.15 discusses this situation:

“Third parties, such as client’s creditors, may have just claims against
funds or other property in a lawyer custody. A lawyer may have a duty
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 may not unilaterally assume to
arbitrate a dispute between the client and third party.” These
considerations and the possible difficulties should be discussed thoroughly
with the client prior to undertaking such an arrangement. Furthermore, the
client should be informed that if the attorney became aware that the client
was not escrowing all funds with him after such assertions were made, Rule
4.1 could require the attorney to unilaterally inform the client’s customers
of this fact. While the rules do not prohibit such an arrangement, it would
be fraught with difficulties if done on a wholesale basis and should only be
undertaken after careful considerations by the attorney and client of the
responsibilities and potential costs involved.

Back to the Ethics Map