Final answer:
A lawyer must verify the legitimacy of a third party's claim on escrow funds and act as an intermediary to resolve the dispute, ensuring ethical obligations and legal requirements are met while protecting the client’s interests.
Step-by-step explanation:
When a third party disputes the distribution of funds to a client that a lawyer is representing, especially in cases involving escrow accounts, the lawyer must determine the legitimacy of the claim. For instance, if a client's medical insurer asserts a claim on those funds due to a previous arrangement or legal obligation, the lawyer should first verify the details of the claim, which may include reviewing the terms of the insurance policy and any applicable state laws or previous agreements.
After verifying the claim, the lawyer must serve as an intermediary to resolve the dispute. This could involve negotiating with the third party or returning to court to clarify or enforce the distribution of judgment proceeds. It is important that the lawyer adheres to ethical obligations, ensuring both the client’s interests are protected and any just claims are appropriately addressed.
The key is to ensure that the process aligns with the adversarial judicial system, where disclosure is paramount, and any legal obligations related to the distribution of the funds in escrow are met. The resolution might culminate in a settlement between the parties or a court order directing the disbursement of the funds.