The Risk Manager, Winter 2003

KBA Bar Counsel Ben Cowgill’s article “The Ethical Duty to Pay Vendors” in the November 2002 Bench & Bar does a fine job of explaining a lawyer’s professional responsibility for payment of litigation-related services. If you missed it, we suggest you take time to read it. What we want to do here is to tag on to Ben’s timely advice by adding some risk management practices to avoid both bar complaints and liability for these fees.

• Always cover with the client in writing (preferably a letter of engagement) precisely how client funds are to be disbursed.
• Get written authority to pay creditors with an interest in the recovery. This is particularly important for those you have personally engaged such as medical services required to develop a personal injury case. If your client gets all the recovery proceeds and stiffs those people, you could be liable. Maybe as bad, it is your credibility that suffers on the next case when you try to get needed services.
• Get client approval before hiring experts and other high expense aspects of case preparation (i.e., don’t surprise your client with a huge disbursement).
• Consider getting the client to pay large expenses directly while the case is ongoing and prior to final recovery disbursement. This simplifies things at the conclusion of the matter for all concerned.
• Never disburse funds to a client or vendor before checks providing funds for the disbursement have cleared.