Ethical Considerations for Lawyers' Protection Letters

Does a lawyer have an ethical obligation to honor “protection letters” sent by the lawyer to creditors of a client when the client instructs the lawyer not to pay the creditor? Under Ohio Rule of Professional Conduct 1.15, if there is no dispute about the ownership of the funds, a lawyer’s duty is to promptly notify and deliver the funds to the rightful owner, which may be the creditor1.

If there is a valid dispute between a lawyer’s client and a third party claiming a lawful interest in funds in the lawyer’s control, Rule 1.15 obligates the lawyer to notify both parties and hold the disputed funds in a trust account until the dispute is resolved2. The lawyer’s duty to hold the disputed funds is triggered not only when a lawyer knows about a non-client’s lawful claim, but also when the lawyer is unclear about the lawfulness of the non-client’s claim3. Lawyers should anticipate and try to resolve such disputes between a client and a third person before taking custody of disputed funds.

While most “protection letters” are provided in good faith, a lawyer may run afoul of rules relating to truthfulness and honesty, if, at the time the protection letters were sent, the lawyer had a reason to believe the client did not really intend to pay the creditor. Lawyers are cautioned against unilaterally trying to arbitrate disputes over funds between their clients and third parties4.

Footnotes

1. Ohio Sup. Ct. Bd. Of Comm’rs on Grievances and Discipline, Op. 2007-7 (2007).

2. Id; Prof. Cond. R. 1.15(d).

3. Id.

4. Id.

For more information on this topic contact Alvin Mathews at 614.227.2312. or visit our Legal Ethics and Professional Responsibility Resource Center.

This document has been prepared as a general reference for careful lawyers and their staff for informational purposes. The information contained herein is not intended to be and should not be construed as legal advice. Each circumstance should be considered and evaluated separately, and possibly with involvement of legal counsel.

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