Ethics – By David Hirsh:

When a plaintiff in a personal injury claim settles his/her personal injury case for less money that there is necessary to pay the client’s outstanding medical bills received for the client’s subject injury and the Plaintiff has arguably given Letters of Protection Liens to the various medical providers, can the lawyer handling the case pay the funds from the settlement which are in dispute over to his client who demands them without payment of the medical bills if:

A.  A Letter of Protection Lien promising to pay for medical services and treatment from the settlement proceeds of a particular legal matter is given by the client did not specify the exact injury date of the one claimed in the complaint and the Client has had multiple accidents since the injury date in 2012 for which he/she sought treatment from various providers?

B. The Letter of Protection Liens were signed only by the Client not the lawyer?

C. The Letter of Protection Liens were signed by the Client more than Five years prior to the settlement which would make them contractually beyond the Florida Statute of Limitations?

D. The Liens claimed was for a statutory hospital lien which by case law have been held to be invalid?

Question 2: 

Does the Lawyer even have to tell these claimants who’s claims appear legally invalid that he has received the funds?

Question 3: 

Can the lawyer take his money even if the Client’s portion of the funds is in dispute?

Answer - 

Rule 5-1.1, Rules Regulating the Florida Bar, states in pertinent part:

(e) Notice of Receipt of Trust Funds; Delivery; Accounting.  

Upon receiving funds or other property in which a client or third person has an interest, a lawyer shall promptly notify the client or third person.  Except as stated in this rule or otherwise permitted by law or by agreement with the client, a lawyer shall promptly deliver to the client or third person any funds or other property that the client or third person is entitled to receive and, upon request by the client or third person, shall promptly render a full accounting regarding such property.

(f) Disputed Ownership of Trust Funds.  

When in the course of representation, a lawyer is in possession of property in which 2 or more persons (1 of whom may be the lawyer) claim interests, the property shall be treated by the lawyer as trust property but the portion belonging to the lawyer or law firm shall be withdrawn within a reasonable time after it becomes due unless the right of the lawyer or law firm to receive it is disputed, in which event the portion in dispute shall be kept separate by the lawyer until the dispute is resolved. The lawyer shall promptly distribute all portions of the property as to which the interests are not in dispute.

The comment to the rule elaborates:

Third parties, such as a client’s creditors, may have lawful claims against funds or other property in a lawyer’s custody.  A lawyer may have a duty under applicable law to protect such third-party claims against wrongful interference by the client. 

When the lawyer has a duty under applicable law to protect the third-party claim and the third-party claim is not frivolous under applicable law, the lawyer must refuse to surrender the property to the client until the claims are resolved.

However, a lawyer should not unilaterally assume to arbitrate a dispute between the client and the third party, and, where appropriate, the lawyer should consider the possibility of depositing the property or funds in dispute into the registry of the applicable court so that the matter may be adjudicated.  (emphasis added)

Thus, the Lawyer is required to notify third persons with an interest in the funds held in trust and deliver those funds to persons that are entitled to receive them.  Further, if there are disputes regarding the entitlement to funds held in trust, the Lawyer must maintain those funds in trust until the dispute can be resolved.

Ultimately, if the dispute cannot be resolved, depositing the funds into the court registry is a possibility.