BAR ASSOCIATION OF NASSAU COUNTY
COMMITTEE ON PROFESSIONAL ETHICS

Opinion No. 1991-5

(Inquiry No. 297 )

Re:
Reimbursement for attorney’s out-of-pocket litigation expenses from funds advanced by client for expert medical witness.

Digest:
An attorney may, with the consent of the client, properly take reimbursement for litigation expenses from funds advanced by the client for costs and expenses where the actual expenses were not the particular litigation expenses anticipated at the time the advance was made. In the event of a dispute, the attorney may assert a retaining lien on those funds and/or upon the file to secure reimbursement.

Code Provisions:
DR 9-l02(B)
EC 5-7

Digest:
An attorney may, with the consent of the client, properly take reimbursement for litigation expenses from funds advanced by the client for costs and expenses where the actual expenses were not the particular litigation expenses anticipated at the time the advance was made. In the event of a dispute, the attorney may assert a retaining lien on those funds and/or upon the file to secure reimbursement.

Described Facts:
Plaintiff’s personal injury attorney received from client, in advance of trial, certain money for expert medical witness, which was mistakenly deposited into an lOLA account. In a bifuracted prqceeding, jury returned verdict for defendant as to liability, making expert medical testimony as to damages unnecessary. In connection with the litigation, counsel made out-of-pocket expenditures for which he seeks reimbursement from the previously deposited advances toward expenses.

Inquiry:
(1) May an attorney, with the consent of the client, take reimbursement for out-of-pocket litigation expenses from funds, mistakenly deposited into an lOLA account, representing advances for expenses of expert medical testimony?

(2) May an attorney assert a retaining lien upon such funds or upon the file?

Determination:
Inquiring counsel may, with the consent of the client, take reimbursement for out-of-pocket expenses from funds advanced by client for costs and expenses, notwithstanding the fact that the actual expense was not the particular expense anticipated at the time of the advance. Counsel may, in the event of a dispute, assert a retaining lien over that portion of the funds as are in dispute, as well as over the file, and may commence an appropriate action.

Analysis:
Though the question was not specifically asked, we note that an attorney is not required to place funds given by a client to cover charges, expenses, and disbursements in an escrow or attorney trust account, but may place same in the attorney’s business account. Nassau County 88-28. The decision as to which funds may be appropriately placed in the IOLA Program is left to the discretion of the lawyer to whom the funds are entrusted. Nassau County 84-2, quoting N.Y. State 554.

DR 9-102(B) (4) provides:

“Funds belonging in part to a client or third person and in part presently or potentially tothe lawyer or law firm shall be kept in such special account or account(s) but the portion belonging to the lawyer or law firm may be withdrawn when due unless the right of the lawyer or law firm to receive it is disputed by the client or third person, in which event the disputed portion shall not be withdrawn until the dispute is finally resolved”.

Client funds which are advances for costs and expenses are not trust funds or escrow funds: they are analogous to advance fee payments, which are not considered to be client funds necessitating deposit in a trust account. Nassau County 88-28. In that Opinion, this Committee observed:

“Finally, it should be noted, the reason many lawyers require advance fee payments is so that they will not be subject to a client’s subsequent refusal to pay for legal services after they have been rendered. If fee advances were required to be deposited in a client’s trust account it would follow that the purpose of requiring advance payment easily could be defeated by a client who, after services had been rendered, were to dispute a justly earned fee, and such fee cannot be distributed to the lawyer from an escrow or trust account until such dispute with the client is resolved”.

Where a lawyer has possession of funds(not trust funds or escrow) that belong to a client, the lawyer may permissibly assert a retaining lien on those funds pending resolution of a fee dispute. Nassau County 85-7. The attorney may commence an appropriate action to seek a judicial determination as to the disputed funds. Nassau County 89-13, 89-14.

In the case presented, the inquiring attorney may, with the consent of the client, take reimbursement for the actual costs and expenses from the funds advanced by the client for trial expenses, notwithstanding the fact that the actual expenses may not have been the particular litigation expenses anticipated at the time the advance was made. In the event of a dispute with the client, the attorney may ethically assert a retaining lien upon the funds, up to the amount of his expenses, and may assert such a lien against the file as well. DR 5-103 (A) (1), EC 57-7, Nassau County 87-40, 85-7, 90-10.

Accordingly the inquiries are answered in the affirmative.

(Approved by Executive Subcommittee on February 26, 1991; approved by Full Committee on February 27, 1991)