RPC 1.15A(f), 1.15A(g), 1.5, 1.6
Garnishment of Client Trust Account
This opinion concerns a lawyer’s duties under RPC 1.15A when he or she receives a writ of garnishment from a client’s third party creditor for funds held in the lawyer’s client trust account.
Under the facts of the inquiry, a lawyer receives an advance fee deposit from a client and places the funds in his or her client trust account. While work is underway for the client, a third party creditor of the client serves a writ of garnishment on the lawyer based on an unrelated judgment the creditor obtained against the client. The lawyer has requested an advisory opinion on his/her ethical obligations in these circumstances.
On the facts presented, after receipt of a properly served writ of garnishment, the lawyer must determine whether a dispute exists between the creditor and the client regarding the funds subject to the writ. If a dispute exists with respect to entitlement to the subject funds, the lawyer must hold the funds in trust until the issuing court determines the rights of the judgment creditor and debtor with respect to the client funds, or the client and creditor otherwise resolve their dispute. If the client does not dispute the creditor’s assertion of rights to the funds, the lawyer must disburse the funds in accordance with garnishment procedures.
Pursuant to RCW 6.27.020, “[t]he clerks of the superior courts and district courts of this state may issue writs of garnishment returnable to their respective courts for the benefit of a judgment creditor who has a judgment wholly or partially unsatisfied in the court from which the garnishment is sought.” To obtain a writ of garnishment, a judgment creditor or someone in his behalf shall state facts to include that he has “reason to believe, and does believe that the garnishee…is indebted to the defendant in amounts exceeding those exempted from garnishment…or that the garnishee has possession or control of personal property or effects belonging to the defendant.” RCW 6.27.060.
Receipt of a writ of garnishment requires that the garnishee not “deliver, sell, or transfer…any personal property or effects of the defendant” in the garnishee’s “possession or control.” RCW 6.27.100. If the garnishee is in “possession or control” of the defendant’s personal property or effects, the garnishee must answer the writ with an accounting of the defendant’s property or effects in his “possession or control.” Id. Following this accounting, the issuing court will determine the rights of the creditor and debtor with respect to the property or effects at issue.
RPC 1.15A(f) provides that, “[e]xcept as stated in this Rule, a lawyer must promptly pay or deliver to the client or third person the property which the client or third person is entitled to receive.” RPC 1.15A(g) provides that:
If a lawyer possesses property in which two or more persons (one of which may be the lawyer) claim interests, the lawyer must maintain the property in trust until the dispute is resolved. The lawyer must promptly distribute all undisputed portions of the property. The lawyer must take reasonable action to resolve the dispute, including, when appropriate, interpleading the disputed funds.
As recently stated in Advisory Opinion No. 2213:
"To trigger the lawyer’s safekeeping duties under RPC 1.15A(g), a claim by a third party must be specific to the funds in the lawyer’s possession, because the rule only applies to “property in which two or more persons. . .claim interests,” and not to all property of the client. Moreover, it is unreasonable to require a lawyer to protect all claims of all creditors of a client or to pay general unsecured creditors of a client, including general judgment creditors who have not attached or garnished any specific funds."
Advanced fee deposits provided by a client to an attorney are fees for specific services not yet earned, and so the deposits are property of the client. See RPC 1.5, Comment . If the client does not dispute the validity of the writ of garnishment, the lawyer is required to distribute the funds in accordance with garnishment procedures. RPC 1.15A(f). However, if the client disputes the validity of the writ of garnishment and instructs the lawyer not to distribute the funds to the creditor, this dispute triggers the lawyer’s safekeeping duties under RPC 1.15A(g).
A dispute between the client and the creditor with respect to a writ of garnishment triggers a lawyer’s safekeeping duties because the writ of garnishment is specific to funds in the lawyer’s possession, and has a valid legal basis; namely, the underlying judgment, which is presumptively well-founded and represents a legal obligation from client to creditor. In the event of a dispute, the lawyer is required to maintain the client funds in trust until the issuing court determines the rights of the judgment creditor and debtor with respect to the client funds, or the client and creditor otherwise resolve their dispute. Retaining the funds in trust over a client’s objection does not constitute a violation of RPC 1.15A(f) because a client may not be “entitled” to funds subject to a writ of garnishment. RPC 1.15A(g). In addition, if the lawyer has begun work on a matter to the extent that he or she is entitled to fees from the client, then the lawyer’s own interest in the advance deposit may also be part of the dispute to be resolved before the funds are disbursed.
Although beyond the scope of this opinion, it is worth noting that where the law firm itself is the debtor, and a creditor of the law firm obtains a writ of garnishment for funds held in the law firm’s client trust account, the funds held in the client trust account are property of the law firm’s clients, and may be beyond the reach of the law firm’s creditors. See Attorney Grievance Com'n of Maryland v. Foltz, 411 Md. 359, 983 A.2d 434 (M.D. 2009) (finding that “funds placed in an attorney escrow account are beyond the reach of the creditors of the attorney”).
This opinion addresses the duties imposed under RPC 1.15A, and does not preclude additional duties or limitations that may be imposed in certain circumstances under other ethics rules (e.g., a potential duty not to disclose a client’s identity under RPC 1.6).