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Last Post 20 Jun 2013 02:06 PM by  gtrachtenberg
R-11-0024 Ethical Rule 1.15 (“Safeguarding Property”) of Rule 42, Arizona Rules of the Supreme Court
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AZStateBar
Posts:

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21 May 2012 02:20 PM
John A. Furlong, Bar No. 018356
General Counsel
State Bar of Arizona
4201 N. 24th Street, Suite 100
Phoenix, Arizona 85016-6266
602.252.4804
John.Furlong@staff.azbar.org
Attachments
AZStateBar
Posts:

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05 Jul 2012 01:50 PM
Patricia A. Sallen, Bar No. 012338
State Bar of Arizona
4201 N. 24th Street, Suite 100
Phoenix, Arizona 85016-6266
602.252.4804
Patricia.Sallen@staff.azbar.org
Attachments
Michael Cordova
Posts:

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09 Jul 2012 05:11 PM
Michael Fairbairn Córdova
Michael Cordova P.C.
1700 North 7th Street
Phoenix, AZ 85006
602-265-6700
michael@mcordova.com
State Bar Number 14164

I have read the proposed change to ER 1.15 authored by Mr. Trachtenberg and Mr. Abney. It eloquently and concisely outlines a major dilemma in personal injury lawsuits where the claimant is represented by counsel. I encourage the Committee to adopt the proposed rule change.

As a plaintiff personal injury lawyer, over the past few years I have been required to expend more and more of my time and client funds addressing lien assertions by third parties. Some of those lien assertions have merit. Unfortunately, many times they do not. In those situations where there is a lack of merit, because of the fear that the unmeritorious lien claimant may accuse me of not properly fulfilling my ethical duties under Rule 1.15, I am forced to withhold my client's funds pending some sort of resolution with the unmeritorious lien claimant. In other words, the client's money is oftentimes held hostage because of my ethical duties. Had my clients not retained an attorney, they would have immediate access to their funds.

Not only is it unfair to allow unmeritorious lien claimants to take advantage of my ethical duties with impunity , it is unfair to force an injury victim's attorney, i.e., me, to file a lawsuit against the unmeritorious lien claimant to have the lien declared unenforceable or illegal. That improperly places the burden to disprove the validity of the lien upon the injury victim, instead of the party claiming the unmeritorious lien. The burden should be on the lien claimant to prove that it has a right to the injury victim's funds.
Giving a lien claimant 30 days to file an action to enforce its alleged lien will stop unmeritorious lien claimants from extorting money from injury victim's, while preserving the lien claimant's right to pursue a lien in those instances where the lien claimant believes there is a material dispute to the propriety of the lien.

In conclusion, the proposed rule change set forth by Mr. Trachtenberg and Mr. Abney seeks to equitably place the burden of proving a lien claim upon the lien claimant. No longer will it be permissible for unmeritorious lien claimants to hold an injury victim's funds hostage because the injury victim retained counsel.

The proposed change to ER 1.15 should be adopted in full.
MichaelLarkin
Posts:

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11 Sep 2012 03:35 PM
Michael E. Larkin
LAW OFFICE OF MICHAEL E. LARKIN
405 W. Franklin St.
Tucson, Arizona 85701
Fax: 520 620 6702
michael@larkinlaw.psemail.com
Bar Number: 009497

Justices of the Arizona Supreme Court
I write to comment on the proposed change to ER 1.15. submitted by the Arizona Association of Justice. I support Petition R12-0032. It is a common sense resolution to an impractical obligation on plaintiffs and their attorneys in personal injury matters. The proposed change places the burden on the person making the claim to a plaintiff's personal injury recovery. This is as it should be. The proposed change provides for a reasonable time period for the person making such a claim to act. The proposed change provides for reasonable notice to the person making the claim. The proposed change is necessary and welcome. Please adopt the proposed change.
Michael E. Larkin
todstewart
Posts:

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12 Sep 2012 03:38 PM
Tod Lee Stewart
Stewart & Torgersen, P.A.
1702 E. Highland Avenue, #409
Phoenix, AZ 85016
602-297-9300
tod@1800ourlawyer.com
State Bar Number 018163

Dear Justices,

I have read the proposed change to ER 1.15 submitted by the Arizona Association for Justice and am writing in support of Petition R-12-0032.

The current state of ER 1.15, as written and interpreted:

(a) creates an ethical-equivalent to a prejudgment attachment without any of the statutory or constitutional protections;

(b) puts attorneys in a conflict-riddled position of owing dueling ethical and legal duties to clients and third-parties (which are almost always adverse to one another), e.g., Hotel Emps. & Rest. Emps. Int'l Union Welfare Fund v. Gentner, 50 F.3d 719, 721 (9th Cir. 1995) (holding that the imposition of a "dual service" to a client and third party lien claimant violates ethical rules and put attorneys in an "untenable position" of representing dueling interests that are typically adverse); and

(c) makes clients--particularly clients under financial distress--vulnerable to illegitimate claims.

The practical and real-world effect of ER 1.15 is that it freezes client funds, but it does so without any established or preliminary legal process. In fact, the ethical rule is triggered merely by "claim[ed] interests" of third-parties, ER 1.15(e), and is broadly applied to all "matured legal or equitable claims." ER 1.15, Comment No. 4. This results in inexorable application of the rule in virtually every setting since no one knows the true definition of a "matured legal or equitable claim" and the Comment warns against attorneys "unilaterally arbitrating" these matters.

This puts attorneys at odds with their clients, to whom they owe fiduciary duties. The situation is worsened, however, by the Rule and Comment's suggestion that the burden is on these attorneys and their clients to file suit to litigate the existence or scope of alleged third-party claims. The fact is, most injured clients are under financial duress -- after all, tort recoveries only aim to put the victim back to where they were before the tort. This leaves injured clients vulnerable to illegitimate claims against their tort recoveries, often forcing them to make the impossible choice between expensive and time-consuming litigation versus extortive nuisance payments to unscrupulous third-party claimants.

I have read the examples of illegitimate claims in the Petition and those mirror the types of circumstances I now face in my personal injury practice. This is a problem that has increased substantially over the last 5 to 10 years.

The proposed change in R-12-0032 strikes a reasonable and just balance between protecting legitimate third-party claims, ensuring conflict-free representation and protecting the public from improper third-party claimants. It should be adopted in full.

/s/ Tod Lee Stewart
AZStateBar
Posts:

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29 Apr 2013 10:44 AM
John A. Furlong, Bar No. 018356
General Counsel
State Bar of Arizona
4201 N. 24th Street, Suite 100
Phoenix, Arizona 85016-6266
602.252.4804
John.Furlong@staff.azbar.org
Attachments
gtrachtenberg
Posts:

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20 Jun 2013 02:06 PM
Geoffrey M. Trachtenberg
Levenbaum Trachtenberg PLC
362 North Third Avenue
Phoenix, Arizona 85003
(602) 271-0183 - voice
(602) 271-4018 - facsimile
gt@LTinjurylaw.com

June 20, 2013

Clerk of the Supreme Court
1501 W. Washington Street, Room 402
Phoenix, Arizona 85007

Re: Supreme Court No. R-12-0032 and R-11-0024.

Dear Justices,

I am writing on behalf of Petitioners to reply to the Comment of the State Bar of Arizona on Petition to Amend Ethical Rule 1.15, Rule 42, Rules of the Arizona Supreme Court (filed 4/29/2013 under P-11-0024) (the “SBA Alternative”).

Petitioners support the SBA Alternative and appreciate the hard work of the SBA and its Committees, all of whom recognize the need to amend ER 1.15. The Court should consider whether it is advisable to adopt the language in the SBA Alternative concerning whether “the lawyer believes that the third party does not have a matured legal or equitable claim to the property.”

While the SBA has indicated in Committee that a subjective belief would be sufficient to satisfy this requirement, Petitioners request that the Court consider whether it is necessary or appropriate (a) to carve out this circumstance for application of the new rule or (b) to require the lawyer to render a legal opinion that a third-party claim is not a “matured legal or equitable claim.”

First, carving out application of the rule to situations where “the lawyer believes that the third party does not have a matured legal or equitable claim” is unnecessary. The contemplated notice mechanism provides ample due process to third parties who assert disputed claims to property in the lawyer’s possession. This notice mechanism calls for both personal service and a three-month sequester to allow the third-party to file suit before property is released to a client. And even then, the new rule does nothing to impair the third party’s substantive legal rights if they subsequently decide to make a claim.

Second, requiring a lawyer to render a legal opinion that a third-party claim is not a “matured legal or equitable claim” puts a burden on the lawyer and may discourage some lawyers from adopting the new procedure. Although the SBA says that the standard is subjective, the phrase “matured legal or equitable claim” is a vague phrase that is not defined by any known source. In fact, it appears to originate from Professors Hazard and Hodes who state “the third party must have a matured legal or equitable claim, such as a lien on specific funds, in order to trigger the lawyer’s duty to hold the funds . . . pending resolution of the dispute.” Geoffrey C. Hazard, Jr. & W. William Hodes, The Law of Lawyering, §19.6 (3d ed. Supp. 2005-2). They use the phrase once and they do not define it.

The SBA Alternative is welcomed and supported by Petitioners. But, the Court should consider whether it is necessary to include a requirement that limits the new rule to situations where the lawyer subjectively “believes that the third party does not have a matured legal or equitable claim.” Petitioners respectfully suggest the Court consider eliminating that portion of the SBA Alternative in any final rule.

Kind regards,

LEVENBAUM TRACHTENBERG PLC


Geoffrey M. Trachtenberg
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