Legal Ethics Opinion No. 1413

Attorney Breaching Contract to Pay Medical Bills Out of 
Settlement Proceeds

You have presented a hypothetical situation in which personal
injury client [Client] entered into an agreement with Medical
Group authorizing Lawyer to pay directly to Medical Group sums
due and owing for medical services rendered, and to withhold such
sums from any settlement, judgment, or verdict as may be
necessary to adequately protect Medical Group.  Client also
agreed to give a lien on his case to Medical Group against any
and all proceeds of any settlement, judgment, or verdict which
may be paid to Lawyer or Client as a result of the injuries for
which he had been treated.  Furthermore, Client agreed to be
directly and fully responsible to Medical Group for all medical
bills submitted for services rendered, and also agreed that
payment was not contingent on any settlement, judgment, or
verdict by which he might eventually recover such fee.  Lawyer
signed his name below language in the Agreement which stated that
he agreed to observe all terms of the Agreement between Client
and Medical Group and that he specifically agreed to withhold
such sums from any settlement, judgment, or verdict as might be
necessary to protect Medical Group.

Lawyer subsequently received a settlement on Client's personal
injury claim.  Although Lawyer had received a bill from Medical
Group, he did not pay any of the settlement proceeds to Medical
Group.  Instead, Lawyer paid Medical Group's portion directly to
Client who said he was having financial difficulties and
preferred to pay Medical Group directly.  You indicate that,
ultimately, Client did not pay any portion of the proceeds to
Medical Group as payment of their bill. 

You have asked the committee to opine whether, under the facts of
the inquiry, it was improper for Lawyer to pay over the
settlement proceeds to Client, rather than to Medical Group, when
Lawyer had agreed to pay Medical Group directly for services
rendered and to withhold such sums from any settlement as might
be necessary to protect the medical group. 

The committee is of the opinion that the question you raise
requires a legal determination beyond the its purview.  Since the
committee believes that determination of the ownership of the
funds is by nature a contractual matter, the resolution of which
must be made preliminary to any disbursement, the committee is of
the further opinion that DR 9-102(B)(4), regarding a lawyer's
prompt payment of funds in his possession to clients or others,
is not applicable to the facts presented since it addresses only
the preservation of a client's funds.  

Committee Opinion 
January 10, 1992