State Bar of Arizona Ethics Opinions
92-01: Client Property; Retaining Liens
Obligation of an attorney in possession of his client's file to turn over documents, where a dispute has arisen between the client and the client's former attorney and both are claiming an interest in documents in the file.
March 12, 1992
The inquiring attorney represents a client in a matter in which the client was previously represented by another attorney. The client’s former attorney asserted no attorney’s lien against the papers contained in the file, and provided the inquiring attorney with the entire original file.
A dispute has now arisen between the client and the former attorney, in which the contents of the file may be material. Both the client and the former attorney have requested original documents from the file in the inquiring attorney's possession.
Should the inquiring attorney provide the original file to the client, or may he provide the client with a copy of the file and return the original file to the client’s former attorney?
ETHICAL RULES INVOLVED
ER 1.15. Safekeeping Property
(b) ... 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.
(c) When in the course of representation a lawyer is in possession of property in which both the lawyer and another person claim interests, the property shall be kept separate by the lawyer until there is an accounting and severance of their interests. If a dispute arises concerning their respective interests, the portion in dispute shall be kept separate by the lawyer until the dispute is resolved.
Comment to ER 1.15. ***** Third parties, such as a client’s creditors, may have just 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, and accordingly may refuse to surrender the property to the client. However, a lawyer should not unilaterally assume to arbitrate a dispute between the client and the third party. *****
ER 1.16. Declining or Terminating Representation
(d) Upon termination of representation, a lawyer shall take steps to the extent reasonably practicable to protect a client’s interests, such as giving reasonable notice to the client, allowing time for employment of other counsel, surrendering papers and property to which the client is entitled and refunding any advance payment of fee that has not been earned. The lawyer may retain papers relating to the client to the extent permitted by other law.
The Arizona Rules of Professional Conduct do not address the inquiring attorney’s ethics question directly. ER 1.15(b) requires a lawyer to "promptly deliver to the client or third person any funds or other property that the client or third person is entitled to receive," unless otherwise permitted by law or by agreement with the client. Similarly, ER 1.16(d) states that, when a lawyer terminates representation of a client, he must "surrender[ ] papers and property to which the client is entitled," while retaining papers relating to the client to the extent permitted by "other law." ER. 1.15(c) provides that, where a dispute has arisen over who is entitled to property in the lawyer’s possession, the lawyer must keep the property separate until the dispute is resolved. The Rules therefore indicate that, unless an attorney has some legal basis for withholding a client’s papers or other property in his possession from the client, the client is "entitled to receive" the documents, unless a third person has some claim to the property in the attorney’s possession in addition to that of the client. The inquiring attorney's question, then, boils down to the resolution of two issues: (1) does the inquiring attorney have a legal basis for withholding original documents in the file from both the client and the client’s former attorney?; and (2) does the client’s former attorney have a legal right to any original documents in the file?
I. THE INQUIRING ATTORNEY’S ENTITLEMENT TO THE DOCUMENTS
As to whether the inquiring attorney has a legal right to retain the documents in the file, we note that this is a pure legal question upon which the committee has traditionally declined to issue an opinion. See, e.g., our Opinions Nos. 91-10 (April 2, 1991) and 82-19 (December 7, 1982). However, the committee has touched upon this issue in some of its earlier opinions. In our opinion No. 81-32 (November 2, 1981), we determined that an attorney must return a client’s papers and documents unless he can assert a valid retaining lien on the documents. If the client has paid all attorney’s fees due, an attorney has an ethical obligation to return the file at the client’s request. Opinion No. 81-32 at 4. The committee continued:
[The attorney’s obligation to turn over documents to his client] does not, however, extend to such things as the attorney's own notes and memos to himself; nor to his myriad scratchings on note sheets: nor to records of passing thoughts dictated to a machine or a secretary and placed in the file; nor to ideas, plans or outlines as to the course the attorney’s representation is to take. Those recorded thoughts remain the property of the attorney and, in our opinion, he need not release those even though his bill has been paid in full.
Opinion No. 81-32 at 5. Finally, on a related issue, we determined that a discharged attorney could not charge the client for the cost of copying papers and documents being returned to the client unless there was a prior agreement with the client requiring him to pay for such copies. However, we held that it was permissible for an attorney to retain copies of documents in the file made at his own expense. Id. at 5. See also our Opinion No. 75-25 (December 23, 1975).
Opinion No. 81-32 was a non-binding, advisory opinion issued by the committee only because of the great frequency of requests the committee had received regarding retaining liens. Id. at 2. After the issuance of this opinion, the Supreme Court of Arizona extensively discussed the validity and scope of retaining liens in its opinion in National Sales and Service Co. v. Superior Court, 136 Ariz. 544, 667 P.2d 738 (1983). Obviously, the Supreme Court has the final word on this question, and we recommend that the inquiring attorney consult that opinion.
In short, the inquiring attorney must determine whether, under applicable Arizona law, he may assert a retaining lien on any of the documents in the file. If he may not do so, he must turn the documents over either to his client or to his client’s former attorney, whoever is entitled to receive them.
II. THE FORMER ATTORNEY'S ENTITLEMENT TO THE DOCUMENTS
Whether the client’s former attorney has any legal entitlement to any of the documents in the file depends on whether the former 'attorney can assert a valid retaining lien on these documents. Opinion No. 81-32. Since the inquiring attorney has indicated that the former attorney has asserted no such lien on the file, that attorney has no legal claim to any of the original documents and the inquiring attorney must therefore return them to the client.
Although this resolves the issue as between the inquiring attorney’s client and the client’s former attorney, we note that, if the former attorney did assert an attorney’s lien, the situation would be governed by our Opinions Nos. 88-02 (January 11, 1988) and 88-06 (July 5, 1988). In Opinion No. 88-02, we held that an attorney in possession of settlement funds in which both his client and a medical lienholder were claiming an interest had to determine initially whether the lien was legally valid and, if so, to distribute the funds to the lienholder. If, on the other hand, the attorney were to determine that the lien was not legally valid, he was required to distribute the funds to his client. Opinion No. 88-02 at 5. However, if the attorney had any good faith doubt as to who was entitled to receive the funds, we concluded in Opinion No. 88-06 that he should hold the funds in trust pending resolution of the dispute and, if no resolution of the dispute was reached within a reasonable time, that he should formally interplead the funds. Id. at 3.
In the present inquiry, the situation is analogous. If the inquiring attorney has any good faith doubt as to whether his client or his client’s former attorney is entitled to receive the documents in the file, he should hold the documents until the issue is resolved. If no resolution occurs within a reasonable time, the inquiring attorney should take some affirmative legal action to have the dispute resolved.
In conclusion, the inquiring attorney must forward to his client all original documents that the client is entitled to receive. The client is entitled to receive all documents in the file unless the inquiring attorney has a legal basis for retaining the documents. Whether, and to what extent, the inquiring attorney may assert such a lien is a legal question outside the scope of the committee’s jurisdictional policies.
Formal Opinions of the Committee on the Rules of Professional Conduct are advisory in nature only and are not binding in any disciplinary or other legal proceedings.
©State Bar of Arizona 1992
Call the State Bar of Arizona Ethics Department at (602) 340-7236 for a copy of this Opinion.