COLUMN > Ethics & the Law
By Mark J. Fucile
One of the most uncomfortable positions a law firm can face is a disputed third-party claim against funds in the firm’s trust account. Third-party claims can range from statutory liens or contractual obligations11 See generally WSBA Advisory Ops. 185 (rev. 2010) (statutory liens and related contractual guarantees), 1897 (1999) (same), 2166 (2007) (insurance subrogation); ABA Formal Op. 484 (2018) (addressing litigation finance). connected directly to the funds involved to writs of garnishment unrelated to the matters the firm is handling for the client.22 See WSBA Advisory Op. 2220 (2012) (garnishment of trust account). The risks of mishandling third-party claims run from possible regulatory discipline to potential civil liability for the funds involved.33 See generally ABA, ABA Annotated Model Rules of Professional Conduct at 310-11 (10th ed. 2023) (surveying disciplinary decisions nationally); Hetzel v. Parks, 93 Wn. App. 929, 971 P.2d 115 (1999) (discussing fiduciary duty for safekeeping funds held in lawyer trust account). See also MWW, PLLC v. Smith, 2013 WL 1164493 at *2-*3 (Wn. App. Mar. 18, 2013) (unpublished) (noting that civil claims for asserted improper disbursement from law firm trust account must be framed under established theories of civil liability, such as conversion, rather than for alleged violation of RPC 1.15A(g)). Last year, the WSBA released a very pragmatic advisory opinion—Advisory Opinion 202503—addressing the ethical issues raised in this often-difficult situation.44 For generally similar guidance regionally, see Alaska Bar Ethics Ops. 80-1, 86-4 and 92-3, and Oregon State Bar Formal Op. 2005-52 (rev. 2016). See also Restatement (Third) of the Law Governing Lawyers § 45 (2000). In this column, we’ll first survey those issues through the prism of the new advisory opinion. We’ll then turn to the procedural tools available for depositing disputed funds into a court for resolution of the competing claims if the parties are unable to resolve them on their own.
Before we do, two qualifiers are in order.
First, one of the claimants to disputed funds may be the lawyer or law firm that handled the case resulting in the funds involved. Fee agreements often include mechanisms—such as arbitration—to resolve such disputes.55 For a discussion of arbitration provisions in engagement agreements to resolve fee disputes, see generally ABA Formal Op. 02-425 (2002) and WSBA Adv. Op. 1670 (1996). While that doesn’t change the ethical duties that we’ll discuss, it can be a more straightforward process if a dispute resolution mechanism was included in the fee agreement involved.66 See, e.g., Tomchak v. Greenberg, 2016 WL 4081194 at *3 (Wn. App. Aug. 1, 2016) (unpublished) (noting that lawyer left disputed amount of fee in trust pending resolution with client). We’ll save the general topic of lawyer-client fee disputes for another day.
Second, occasionally multiple lawyers are the ones disputing their claimed shares of a fee. Circumstances vary but can include two current firms with a fee division agreement under RPC 1.5(e), prior counsel asserting an attorney lien, or claims stemming from a lawyer departure provision in an employment, partnership, or shareholder agreement.77 See generally Kayshel v. Chae, Inc., 17 Wn. App. 2d 563, 486 P.3d 936 (2021) (fee division between current counsel under RPC 1.5(e)); G. Lee Raaen, Washington Legal Ethics Deskbook § 3.7(4) (2d ed. 2020) (surveying attorney liens); ABA Formal Op. 487 (2019) (fee division with prior counsel); Seattle Truck Law, PLLC v. Banks, 2023 WL 7130561 (Wn. App. Oct. 30, 2023) (unpublished) (discussing lawyer departure agreements); WSBA Advisory Op. 202504 (2025) (same). Again, we’ll leave those discrete topics for another day.
Ethical Duties
RPC 1.15A(g) frames the ethical duty when a dispute arises over funds held in a law firm trust account:
If a lawyer possesses property in which two or more persons (one of which may be the lawyer) claim interests, the lawyer must maintain the property in trust until the dispute is resolved. The lawyer must promptly distribute all undisputed portions of the property. The lawyer must take reasonable action to resolve the dispute, including, when appropriate, interpleading the disputed funds.
Advisory Opinion 202503 begins with two key points.
First, the opinion reminds lawyers that—consistent with the text of RPC 1.15A(g)—the undisputed portion of the funds involved must be promptly distributed.88 See also RPC 1.15A(f) (“Except as stated in this Rule, a lawyer must promptly pay or deliver to the client or third person the property which the client or third person is entitled to receive.”). The opinion uses the example of $100 received by the lawyer in which $10 is disputed but the balance is not. The lawyer in the opinion’s example is obliged to promptly distribute the undisputed $90.99 Advisory Opinion 202503 also addresses situations where either a client and a third party or multiple clients deposited funds to finance litigation and funds remain at the conclusion of the case. For a discussion of these two facets of the opinion, see Sandra Schilling, “How Should Lawyers Handle Disputed Trust Account Funds?” Mar. 30, 2026, WSBA NWSidebar at https://nwsidebar.wsba.org/2026/03/30/how-should-lawyers-handle-disputed-trust-account-funds/. Simultaneous resolution of the claims of multiple clients in the same or related matters can also raise difficult issues under the “aggregate settlement” rule, RPC 1.8(g), and in “limited fund” scenarios under RPC 1.7(a)(1). For a discussion of these nuanced topics in this space, see Mark J. Fucile, “Done Deal: Settlement Ethics,” 76, No. 5 Washington State Bar News 16, 18 (June 2022).
The risks of mishandling third-party claims run from possible regulatory discipline to potential civil liability for the funds involved.
Second, quoting the comment to the ABA version of the safekeeping rule—ABA Model Rule 1.15—Advisory Opinion 202503 counsels that “‘[a] lawyer should not unilaterally assume to arbitrate a dispute between the client and the third party[.]’”1010 WSBA Advisory Op. 202503, supra, at 2; ABA Model Rule 1.15, cmt. 4.
Advisory Opinion 202503 cautions that situations vary enough that no mechanical formula is available to address every scenario. This echoes Comment 9 to RPC 1.15A noting that “the extent of the efforts that a lawyer is obligated to take to resolve a dispute depend on the amount in dispute, the availability of methods for alternative dispute resolution, and the likelihood of informal resolution.” Advisory Opinion 202503 instead offers general guidance for lawyers and law firms that find themselves facing multiple claimants to a given fund.
Advisory Opinion 202503 counsels that a lawyer should first inquire about the factual and legal basis of each claimant’s position. As noted, however, the role of the lawyer is not to arbitrate competing claims—with the opinion cautioning that “it is not the lawyer’s job to adjudicate material issues of fact or law.”1111 WSBA Advisory Op. 202503, supra, at 1. Rather, the opinion frames the lawyer’s preliminary task as determining whether the claims are nonfrivolous. Advisory Opinion 202503 acknowledges that this can be an uncomfortable exercise:
In assessing whether the claimants have nonfrivolous claims, the lawyer may consider that a decision by the lawyer to release disputed funds to one claimant will be subject to second-guessing in subsequent proceedings—
whether by the client or by third parties. Nonetheless the lawyer cannot ignore the obvious. If, for example, one claimant is the lawyer’s client and the other is a third party with an unquestionably legally valid and enforceable statutory lien to which the client appears to have no response that is even potentially legally and factually cognizable, then the lawyer must honor the lien. If, on the other hand, the lawyer concludes that the lien is clearly invalid and that the third party claimant is merely an unsecured creditor of the client to whom no commitments or promises about how the funds would be handled are alleged to have been made by or on behalf of the lawyer or the client, then the lawyer must give the funds to the client.1212 Id. at 3.
The opinion then finds “[i]f, following the lawyer’s preliminary analysis or any further analysis that the lawyer may conduct, the lawyer concludes that more than one claimant has or may have a factually and legally nonfrivolous claim to the funds, the lawyer must not distribute any disputed portion of funds to any claimant.”1313 Id. Rather, the opinion notes in that event “[t]he lawyer must instead inform the claimants that if they cannot or choose not to resolve the dispute on their own, the lawyer will either continue to hold the funds in trust or will interplead them into court.”1414 Id. The opinion counsels that “[t]he lawyer may also set a reasonable time limit to how long the lawyer may hold the funds before interpleading them.”1515 Id. The opinion notes that “[t]he lawyer may also inform the claimants that with their consent, the disputed funds may be transferred to another account, such as an interest-bearing account, pending resolution of the dispute.” Id. See also RPC 1.15A, cmt. 14 (deposit into non-IOLTA account that would pay net positive interest to the beneficiaries of the funds).
Throughout the process, Advisory Opinion 202503 suggests that “[t]he lawyer should make clear to claimants other than the lawyer’s client that they are not the lawyer’s clients and that they must look elsewhere for legal advice.”1616 Id.
Procedural Tools
If the claimants are unable to resolve their dispute and the law firm does not wish to continue to hold the funds in its trust account, court resolution of the competing claims is expressly contemplated by RPC 1.15A.1717 Garnishment has its own procedures. See RCW Chap. 6.27.
If the competing claimants are already parties to the litigation involved, then depositing the funds into the court handling the case is usually the simplest solution.1818 See, e.g., Forbes v. American Bldg. Maintenance Co. West, 170 Wn.2d 157, 163, 240 P.3d 790 (2010) (settling insurance carrier deposited claimed attorney fees into the court under RCW 36.48.090 for resolution of dispute between former lawyer and client over attorney lien). RCW 36.48.090 and 28 U.S.C. §§ 2041-45 govern depositing funds into, respectively, state and federal courts. Local court rules should also be consulted for specific requirements such as whether a notice or motion is required and how a deposit check should be completed.1919 See, e.g., King County Superior Court Instructions for Clerk’s Trust Fund; Western District of Washington LCR 67, Eastern District of Washington LCivR 67.
If all of the claimants are not parties to current litigation, both state and federal courts offer interpleader as a procedural mechanism to bring the disputing parties together for judicial resolution of their competing claims to the fund.2020 See, e.g., Matter of Scandies Rose Fishing Company LLC, 543 F. Supp.3d 1007, 1013-14 (W.D. Wash. 2021) (interpleader used to deposit disputed settlement funds into the court for resolution of competing claims). RCW 4.08.160 and Civil Rule 22 govern interpleader in state court while 28 U.S.C. § 1335 and Federal Rule of Civil Procedure 22 do the same in federal court. With both, the notion is that the stakeholder deposits the funds in dispute into the court, the stakeholder disclaims an interest in the funds and is discharged, and the court resolves the disputing claimants’ rights to the funds.2121 See generally Douglas J. Ende, 15A Wash. Prac., Handbook Civil Procedure, §35.2-.3 (2025) (surveying interpleader in Washington state courts) (Ende); Mack v. Kuckenmeister, 619 F.3d 1010, 1023-24 (9th Cir. 2010) (discussing federal interpleader practice).
In some instances, it may make practical sense for a lawyer to represent the client in the interpleader proceeding if the disputed claim is related to the matter the lawyer is handling for the client.2222 Under RCW 4.08.170, a party interpleading funds who disclaims any interest in the money involved is ordinarily discharged from liability for costs arising in the action. For a nuanced discussion of how an interpleading party’s continuing participation in the interpleader proceeding may expose them to costs, see Ende, supra, § 35.2. If so, prudent practice suggests confirming that additional scope of work in writing if it is not already encompassed within the existing fee agreement. In others, however, the lawyer may lack either the expertise or knowledge of the factual underpinnings to rebut a claim arising outside the case generating the funds in dispute. In that event, the client may be better served by having separate counsel who has the specialized expertise needed or who is already familiar with the underlying facts handle the dispute in the interpleader proceeding.
Summing Up
Our duties when holding funds in trust are among our most sensitive. Moreover, we have a duty of safekeeping to all legitimate claimants to those funds—not just our clients. Therefore, when we face a dispute over funds held in trust, lawyers need to proceed cautiously by, as Advisory Opinion 202503 suggests, encouraging the disputing parties to resolve those claims among themselves or with the assistance of a court rather than putting ourselves in the role of arbitrator.
ABOUT THE AUTHOR
Mark J. Fucile of Fucile & Reising LLP handles professional responsibility and risk management for lawyers, law firms, and legal departments throughout the Northwest. He is a former chair of the WSBA Committee on Professional Ethics and has served on the Oregon State Bar Legal Ethics Committee. He is editor-in-chief of the WSBA’s Washington Legal Ethics Deskbook and is a principal co-editor of the WSBA’s Law of Lawyering in Washington and the OSB Ethical Oregon Lawyer. He also teaches legal ethics as an adjunct for the University of Oregon School of Law at its Portland campus. He can be reached at 503-860-2163 and:
NOTES
1. See generally WSBA Advisory Ops. 185 (rev. 2010) (statutory liens and related contractual guarantees), 1897 (1999) (same), 2166 (2007) (insurance subrogation); ABA Formal Op. 484 (2018) (addressing litigation finance).
2. See WSBA Advisory Op. 2220 (2012) (garnishment of trust account).
3. See generally ABA, ABA Annotated Model Rules of Professional Conduct at 310-11 (10th ed. 2023) (surveying disciplinary decisions nationally); Hetzel v. Parks, 93 Wn. App. 929, 971 P.2d 115 (1999) (discussing fiduciary duty for safekeeping funds held in lawyer trust account). See also MWW, PLLC v. Smith, 2013 WL 1164493 at *2-*3 (Wn. App. Mar. 18, 2013) (unpublished) (noting that civil claims for asserted improper disbursement from law firm trust account must be framed under established theories of civil liability, such as conversion, rather than for alleged violation of RPC 1.15A(g)).
4. For generally similar guidance regionally, see Alaska Bar Ethics Ops. 80-1, 86-4 and 92-3, and Oregon State Bar Formal Op. 2005-52 (rev. 2016). See also Restatement (Third) of the Law Governing Lawyers § 45 (2000).
5. For a discussion of arbitration provisions in engagement agreements to resolve fee disputes, see generally ABA Formal Op. 02-425 (2002) and WSBA Adv. Op. 1670 (1996).
6. See, e.g., Tomchak v. Greenberg, 2016 WL 4081194 at *3 (Wn. App. Aug. 1, 2016) (unpublished) (noting that lawyer left disputed amount of fee in trust pending resolution with client).
7. See generally Kayshel v. Chae, Inc., 17 Wn. App. 2d 563, 486 P.3d 936 (2021) (fee division between current counsel under RPC 1.5(e)); G. Lee Raaen, Washington Legal Ethics Deskbook § 3.7(4) (2d ed. 2020) (surveying attorney liens); ABA Formal Op. 487 (2019) (fee division with prior counsel); Seattle Truck Law, PLLC v. Banks, 2023 WL 7130561 (Wn. App. Oct. 30, 2023) (unpublished) (discussing lawyer departure agreements); WSBA Advisory Op. 202504 (2025) (same).
8. See also RPC 1.15A(f) (“Except as stated in this Rule, a lawyer must promptly pay or deliver to the client or third person the property which the client or third person is entitled to receive.”).
9. Advisory Opinion 202503 also addresses situations where either a client and a third party or multiple clients deposited funds to finance litigation and funds remain at the conclusion of the case. For a discussion of these two facets of the opinion, see Sandra Schilling, “How Should Lawyers Handle Disputed Trust Account Funds?” Mar. 30, 2026, WSBA NWSidebar at https://nwsidebar.wsba.org/2026/03/30/how-should-lawyers-handle-disputed-trust-account-funds/. Simultaneous resolution of the claims of multiple clients in the same or related matters can also raise difficult issues under the “aggregate settlement” rule, RPC 1.8(g), and in “limited fund” scenarios under RPC 1.7(a)(1). For a discussion of these nuanced topics in this space, see Mark J. Fucile, “Done Deal: Settlement Ethics,” 76, No. 5 Washington State Bar News 16, 18 (June 2022).
10. WSBA Advisory Op. 202503, supra, at 2; ABA Model Rule 1.15, cmt. 4.
11. WSBA Advisory Op. 202503, supra, at 1.
12. Id. at 3.
13. Id.
14. Id.
15. Id. The opinion notes that “[t]he lawyer may also inform the claimants that with their consent, the disputed funds may be transferred to another account, such as an interest-bearing account, pending resolution of the dispute.” Id. See also RPC 1.15A, cmt. 14 (deposit into non-IOLTA account that would pay net positive interest to the beneficiaries of the funds).
16. Id.
17. Garnishment has its own procedures. See RCW Chap. 6.27.
18. See, e.g., Forbes v. American Bldg. Maintenance Co. West, 170 Wn.2d 157, 163, 240 P.3d 790 (2010) (settling insurance carrier deposited claimed attorney fees into the court under RCW 36.48.090 for resolution of dispute between former lawyer and client over attorney lien).
19. See, e.g., King County Superior Court Instructions for Clerk’s Trust Fund; Western District of Washington LCR 67, Eastern District of Washington LCivR 67.
20. See, e.g., Matter of Scandies Rose Fishing Company LLC, 543 F. Supp.3d 1007, 1013-14 (W.D. Wash. 2021) (interpleader used to deposit disputed settlement funds into the court for resolution of competing claims).
21. See generally Douglas J. Ende, 15A Wash. Prac., Handbook Civil Procedure, §35.2-.3 (2025) (surveying interpleader in Washington state courts) (Ende); Mack v. Kuckenmeister, 619 F.3d 1010, 1023-24 (9th Cir. 2010) (discussing federal interpleader practice).
22. Under RCW 4.08.170, a party interpleading funds who disclaims any interest in the money involved is ordinarily discharged from liability for costs arising in the action. For a nuanced discussion of how an interpleading party’s continuing participation in the interpleader proceeding may expose them to costs, see Ende, supra, § 35.2.