Ethics Opinion 230

Assertion of Retaining Liens; Preservation of Confidences and Secrets of Trust Client in Dispute Between Former Co-trustee and Successor Trust

Effective January, 1991, Rule 1.8(i) prohibits an attorney from asserting a retaining lien as to the property of a client in his possession. An attorney whose client requests return of property in the attorney's possession after January, 1991 must return the property even if the attorney's initial assertion of a retaining lien respecting the property occurred prior to January, 1991 and therefore was proper under the District of Columbia Code of Professional Responsibility.

An attorney to a trust may not disclose confidential communications to a former trustee, over the objection of the current trustees, except as permitted by Rule 1.6.

Applicable Rules

• 1.16(d) (Termination of Representation)
• 1.8(i) (Retention of Client Files)
• 1.6 (Preservation of Client Confidences and Secrets)

Inquiry

In December, 1988, Inquirer was retained by one of two co-trustees ("Trustee A") to represent a trust located outside the District of Columbia. Inquirer served as counsel for the trust at the closing of a sale of real property, and was co-trustee under the promissory note securing the deferred purchase money deed of trust. Inquirer delivered copies of the closing documents, copies of two deferred purchase money promissory notes for $1.5 million and $100,000, and a copy of a $150,000 letter of credit to the Trust settlors and to another co-trustee ("Trustee B") of the trust.

In early 1989, after meeting the trust settlors, Inquirer concluded that he could no longer represent the trust. Inquirer orally advised the trust settlors as well as Trustee A and Trustee B of his intention to withdraw, and confirmed that decision in writing. Inquirer took appropriate steps to withdraw from all matters on behalf of the trust, including petitioning the District of Columbia Superior Court to permit him to withdraw as counsel for the trust in three other pending actions and drafting the papers necessary for his removal as trustee under the note securing the deed of trust in the real estate transaction.

Fees of approximately $14,000 due to the Inquirer remained unpaid by the trust. Inquirer asserted a lien against the client's files, including the original of the promissory notes and the letter of credit, and has refused several requests to turn over the files, pending satisfactory arrangements for payment. The most recent request for the files was made in January, 1992.

In June, 1991, Trustee B sought judicial instructions with respect to payment of $76,624.16 in legal fees due to five law firms, including Inquirer. Settlors of the trust then filed suit against Trustee B, claiming that Trustee B had breached its fiduciary duties, incurred unauthorized legal fees, mismanaged trust assets, and misused trust funds.

Apparently after Trustee B sought instructions from the court as to payment of the legal fees, the settlors terminated the trust and created a second trust, under which Trustee A and the settlors serve as co-trustees. The settlors assigned all of the assets of the initial rust to the successor trust.

Trustee B has advised Inquirer that his deposition may be taken in the pending litigation, and that it believes that information disclosed to Inquirer by Trustee A during the course of the professional relationship is not confidential as against Trustee B. Trustee A disagrees.

Discussion

Retaining Lien
The first question presented by the inquiry is whether assertion of a retaining lien is proper under the circumstances presented. Until January 1, 1991, the propriety of Inquirer's assertion of a retaining lien under the District of Columbia Code of Professional Responsibility was clear beyond any serious dispute.¹

The District of Columbia Rules of Professional Conduct are no less clear, but require a contrary conclusion:

In connection with any termination of representation, a lawyer shall take timely 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 Rule 1.8(i).

The inquiry suggests no basis for concluding that the client is not "entitled" to the papers and property in his possession, except his retaining lien arising from the client's failure to pay his fee.²

As to retaining liens, Rule 1.8(i) is unequivocal:

A lawyer shall not impose a lien upon any part of a client's files, except upon the lawyer's own work product, and then only to the extent that the work product has not been paid for. This work product exception shall not apply when the client has become unable to pay, or when withholding the lawyer's work product would present a significant risk to the client of irreparable harm.

The Comments to Rule 1.8(i) emphasize that it was intended to create only a "narrow exception" to the general rule stated in Rule 1.16(d), which "requires a lawyer to surrender papers and property to which the client is entitled when representation of the client terminates." Rule 1.8, Comment [8]. "Only the lawyer's own work product—results of factual investigations, legal research and analysis, and similar materials generated by the lawyer's own effort—could be retained," Rule 1.8, Comment [9], and then only if the client was able to pay and not facing jail or other serious and irreparable harm, Rule 1.8, Comment [10].³

Thus, without questioning the propriety of Inquirer's initial assertion of the retaining lien in accordance with the provisions of the Code, we conclude that the District of Columbia Rules of Professional Conduct, in effect since January 1, 1991, prohibit the refusal to turn over the original promissory notes and letter of credit, as well as any other documents in the file that are not Inquirer's work product, in response to a post-January, 1991 request from the former client. Rule 1.8, Comment [9].⁴

Client Confidences and Secrets

The second question raised by the inquiry is whether Rule 1.6 precludes the disclosure of communications between Trustee A and Inquirer to Trustee B, over the objection of Trustee B's successor Trustees. Inquirer was counsel to the Trust, and not to the individual Trustees. We presume that the "assets" transferred to the successor trust included the right to assert any claim of privilege. See generally Commodity Futures Trading Commission v. Weintraub, 471 U.S. 343, 348-58 (1985). Accordingly, Inquirer's obligations are to the trust, and he can disclose the communications only with the consent of his client or its successor, acting through its authorized agents.

We assume that Trustee B would have been entitled to know what had been said to the Inquirer during the time that Trustee B was a co-trustee of the trust. The settlors terminated the initial Trust, effectively removing Trustee B as a trustee for the trust, and therefore terminated any power Trustee B might otherwise have had to demand disclosure of the privileged communications between Inquirer and the Trust acting through Trustee A.

Without the consent of the successor trust, Inquirer may not disclose the confidences or secrets of his former client, except in the circumstances described in Rule 1.6 (d), none of which appears applicable here.

Inquiry No. 92-6-14
Adopted: September 15, 1992

1. See Rule 5-103(A), District of Columbia Code of Professional Responsibility; Opinion 59 (undated); Opinion 90 (1980). See generally Opinion 107 (Oct. 27, 1981); Opinion 103 (1981). Indeed, the propriety of Inquirer’s assertion of a retaining lien under the Code was confirmed by the Vice Chair of this Committee by letter dated September 14, 1989, and again by Assistant Bar Counsel in October 2, 1990, dismissing a complaint filed against the Inquirer in connection with his retention of the files.
2. The order of the District of Columbia Court of Appeals, adopting the Rules of Professional Conduct states “that with respect to conduct occurring before January 1, 1991, the provisions of the Code of Professional Responsibility in effect on the date of the conduct in question are the governing rules of decision for this court, the Board on Professional Responsibility, its hearing committees, and the Bar Counsel.” Order No. M-165-88 (Mar. 1, 1990). The “conduct in question” here is the attorney’s refusal to turn over the documents in response to his client’s post-January, 1991 request. Accordingly, the Code of Professional Responsibility is not applicable.
3. The so-called Jordan Committee specifically rejected the ABA’s proposed Model Rule 1.8(j), which would have continued the general approval of retaining liens expressed in the Model Code, and substituted the language of Rule 1.8(i) described above. Comments [9] and [10], which broadly construe Rule 1.16 and emphasize the limited reach of Rule 1.8(i), were added by the Board of Governors of the District of Columbia Bar.
4. The inquiry does not suggest any facts indicating that the client is unable to pay, as opposed to simply unwilling. Nor is there anything to suggest that the former client faces any risk of irreparable harm.