Legal Question in Civil Litigation in California

Your attorney has a legal and ethical obligation to assure distribution of the settlement proceeds to all third parties (such as medical providers or insurers) who have or may have a lien on the proceeds. Failure to do so will expose both you and your attorney to a potential lawsuit, and will expose your attorney to potential state bar discipline. You have the right to approve the distribution, if any, but not the right to direct your attorney to not distribute money to third parties who are entitled to satisfaction of liens.

Mr. Fox is right. Additionally, some of the funds might be earmarked for costs your lawyer incurred on your behalf from individuals or businesses which don't have liens. Most contingent-fee agreements say that costs will be deducted from the party's share of any recovery and not from the lawyer's. He has likely advanced some (or maybe all) of those costs from his own funds on your behalf. Unless there is something unusual about your contract, you have to reimburse him for those costs, and to absorb any other costs which he incurred but hasn't paid for yet.

But that does not mean the lawyer is entitled to hold onto all of the money. If at least one of the checks is big enough to cover all of the costs, then he must give you the other one now. If, say, the checks are each for $100,000 and he's confident that the costs won't exceed $80,000, he must give you one of the checks now. If he expects the costs to be $120,000, then he may hold onto both of them. Note that, in either of these scenarios, you will receive less in the near term than you're entitled to. That's because he can't cash either check on his own. He would only be able to give you $200K, $100K, or nothing. But he doesn't have to give you more than you're entitled to, even if that means holding onto both checks.

The most likely reason you're in this situation is that your contract presumes the settlement would be paid differently. Most settlement checks are payable either to the lawyer's client-trust account or to the party and the lawyer jointly. The funds then go into the lawyer's trust account, from which the lawyer deducts his fee and pays any outstanding costs. That's feasible because the entire settlement amount will be liquid. As things now stand, none of it is.

One way to deal with this deadlock would be for you to sign the checks over to the lawyer' trust account. That would create the missing liquidity, and enable to lawyer to give you whatever you're clearly entitled to without further delay. It would likewise enable him to promptly pay whichever costs you aren't disputing. An advantage of paying them now instead of tying up the funds is that amounts which have been paid no longer accrue interest -- and any accrued interest would be your responsibility rather than the lawyer's. (The two of you should probably have a new contract to govern this process. It may be worthwhile to pay a different lawyer to write that contract.) Another advantage of this approach is that it would keep the checks from going stale before they're negotiated.

The rules governing lawyers' client trust accounts are quite strict. Your lawyer won't be able to pocket any amounts that you don't agree he's entitled do. But he won't have to disburse them to you, either. They would remain in his trust account until your dispute is resolved via arbitration and/or the courts. Depending on how long that takes, a lot of the funds which might otherwise have become yours could be eaten up by interest.

If the amount counsel is holding exceeds the amount he's claiming, then he has to promptly pay you the difference, minus a sufficient amount to cover any costs that have been incurred but not yet paid, plus any interest that might accrue for the duration of your dispute. Once he has made those payments, he will have to promptly send you the rest. (Note: Just as you are entitled in the meantime to whatever amount is clearly yours, the lawyer is entitled to whatever amount is clearly his. The portion in dispute is all he must keep in his trust account.)

He may have to make interim payments to you if this process takes a long time and if it becomes clear along the way that he's holding more than he needs to. To illustrate: If your lawyer hired an expert witness who worked on the case recently but who hasn't yet billed him, he can't be sure what her bill is going to be. He might expect it to be roughly $10,000, but realize it could be as high as $20,000. He's entitled to hold onto the entire $20,000 until he learns the actual amount of her bill. If that turns out to be $12,000, he will have to send you the remaining $8,000 that he'd been holding. If he disputes the expert's bill and she agrees to accept $10,000 instead, he will then have to also send you the remaining $2,000.

Depending on how much is in dispute, you may want to hire another lawyer to review the case and evaluate the current lawyer's position. You're welcome to contact me if you'd like to discuss your options further.

Whatever you decide to do, good luck.