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Wisconsin Supreme Court Joint Accounts

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					COURT Of APPEALS DIGEST
        UP E E E E UR URT ERS
      S U P RR MM C OC OT O R D O R D E R S




        Supreme Court Order 06-04:

        Court Amends Lawyers’
        Trust Account Rules
        T h e W i s c o n s i n S u p r e m e C o u r t , f o l l o w i n g s t u d y o f t h e p e t i t i o n s a d v a n c e d a n d a d d i t i o n a l r e v i e w, h a s
        a d o p t e d a p e t i t i o n b y t h e Tr u s t A c c o u n t R u l e Wo r k i n g G r o u p t o a m e n d t h e l a w y e r s ’ t r u s t a c c o u n t r u l e s ,
        effective July 1, 2007.


                                                                      of advanced fees, flat fees and retainers,                 lawyers’ fund for client protection:
         Trust Account Rule
                                                                      obtained input from the administrator of                   creation and purpose; definitions.
         In the matter of Creating SCR                                the Wisconsin Lawyers’ Fund for Client                          Section	2. 12.04 (1) of the Supreme
         20:1.15 Safekeeping Property; and                            Protection, and sought further input and                   Court Rules is renumbered SCR 12.04.
         Amending SCR 20:1.0 Definitions;                             comments from members of the State                              Section	3. 12.04 (2) of the Supreme
                                                                      Bar of Wisconsin. On April 5, 2007, the                    Court Rules is renumbered SCR 12.045, and
         SCR 21.16 Discipline; and SCR
                                                                      Working Group submitted a report of its                    SCR 12.045 (5) and (7), as renumbered, are
         12.04 Wisconsin Lawyers’ Fund for                            post-hearing work, including modifications                 amended to read:
         Client Protection (2007 WI 48)                               to the proposed amendments. In addition,                        12.045 (5) “Dishonest Conduct” means
                                                                      a number of individual attorneys and law                   any of the following:
                           Order 06-04                                firms filed letters with the court generally                    (a) a A willful act committed by an
         On May 22, 2006, the Office of Lawyer                        expressing support for the petition. Some                  attorney that causes a reimbursable loss
         Regulation and the State Bar of Wisconsin                    criminal law practitioners wrote expressing                to a client in the manner of defalcation or
         filed a joint petition proposing certain                     concern about the treatment of flat fees                   embezzlement of money.or
         modifications to SCR 20:1.15, the “trust                     under the proposed amendments.                                  (b) the The intentional taking or
         account” rule, together with related                              On April 12, 2007, the court conducted                conversion of money, property or other
         amendments to SCR 20:1.0 (Definitions),                      an open administrative conference at                       things of value. which causes a reimbursable
         SCR 21.16 (Discipline), and SCR 12.04                        which members of the Working Group                         loss to a client.
         (Wisconsin Lawyers’ Fund for Client                          responded to questions from the court                           (c) The failure to refund an unearned
         Protection). A public hearing on the petition                regarding the petition. The court voted                    advanced fee.
         was conducted on Jan. 17, 2007. At the                       6:1 to adopt the petition, as amended                           12.045 (7) (a) “Reimbursable Loss” is
         ensuing open administrative conference                       by the modifications recommended in                        means a loss of money or other property of
         the court expressed concern about aspects                    the post-hearing report. Justice Bradley                   a client which that meets all of the following
         of the proposal, notably the complexity of                   dissented from that portion of the petition                conditions:
         the proposal and the absence of nonlawyers                   permitting alternative protection for                           (i) 1. The loss was caused by the
         on the Trust Account Rule Working Group                      advanced fees, SCR 20:1.15(b)(4m). The                     dishonest conduct of an attorney while
         responsible for the proposal. The court                      court indicated it would like the language                 performing services under his or her license
         directed the petitioners to convene a review                 of the rule to clarify that submission of a                to practice law in Wisconsin;.
         committee consisting of nonlawyers and                       fee dispute to binding arbitration requires                     (ii) 2. The attorney was acting either as
         certain other interested parties to review                   the client’s consent, and recommended                      attorney in the matter out of which the loss
         the proposal in light of the court’s concerns.               that fee agreements reflecting these new                   arose or in a fiduciary capacity customary to
         The court stated it would reconsider the                     rules clarify that an attorney should obtain               the practice of law;.
         petition following this review at an open                    a client’s consent to the election of the                       (iii) 3. The attorney has:
         administrative conference on April 12, 2007.                 alternative set forth in 20:1.15(b)(4m),                        1. a. died, Died;
              In response to the court’s concerns, the                as described herein. Finally, the court                         2. b. been Been adjudicated a bankrupt,;
         Trust Account Rule Working Group added                       ruled that the effective date of these                          3. c. been Been adjudicated an
         five public members to the Working Group                     amendments shall be July 1, 2007.                          incompetent,;
         and conducted two additional meetings                        Therefore,                                                      4. d. been Been disbarred or suspended
         to elicit comments and concerns from the                          IT IS ORDERED that:                                   from the practice of law,; or has
         public members. The Working Group also                       	 Section	1. 12.04 (title) of the                               e. consented Consented to the
         researched trust account rules throughout                    Supreme Court Rules is amended to read:                    revocation of his or her license to practice
         the country with respect to the handling                          SCR 12.04 (title) Wisconsin                           law,;


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      f. Failed to refund an unearned                upon services, or for a fixed, agreed-upon        lawyer should identify whether any portion,
advanced fee;                                        stage in a representation, regardless of the      and if so what portion, of the fee is a true
      5. g. become Become a judgment                 time required of the lawyer to perform the        retainer. A true nonrefundable retainer
debtor of the person claiming the loss,;             service or reach the agreed-upon stage in         is a fee that a lawyer charges the client
      6. h. been Been adjudicated guilty of a        the representation. A flat fee, sometimes         not necessarily for specific services to be
crime, which adjudication shall have been            referred to as “unit billing,” is not an          performed but, for example, to ensure the
based upon the dishonest conduct of the              advance against the lawyer’s hourly rate          lawyer’s availability whenever the client may
attorney,; or                                        and may not be billed against at an hourly        need legal services. These fees become the
      7. i. left Left the jurisdiction or cannot     rate. Flat fees become the property of            property of the lawyer when received and
be found.                                            the lawyer upon receipt and are subject           may not be deposited into the lawyer’s trust
      (iv) 4. The act which that occasioned the      to the requirements of SCR 20:1.5, SCR            account. In addition, they are presumed
loss occurred on or after March 1, 1981.             20:1.15(b)(4) or (4m), SCR 20:1.15(e)(4)h.,       to be nonrefundable, provided that they
      The following are not reimburseable            SCR 20:1.15(g), and SCR 20:1.16(d).               meet the “reasonable” standard of SCR
losses:                                                   20:1.0 (mm) “Retainer” denotes an            20:1.5. subject to SCR 20:1.15 and SCR
      (b) “Reimbursable Loss” does not               amount paid specifically and solely to secure     20:1.16. Such retainers Retainers are to be
include any of the following:                        the availability of a lawyer to perform           distinguished from an “advance” “advanced
      (i) 1. Losses of a spouse, child, parent,      services on behalf of a client, whether           fee” which generally is considered to be is
grandparent, sibling, partner, associate, or         designated a “retainer,” “general retainer,”      paid for future services and earned only as
employee of the attorney(s) attorney or              “engagement retainer,” “reservation               services are performed, and which should
attorneys causing the losses.                        fee,” “availability fee,” or any other            be deposited into the lawyer’s trust account.
      (ii) 2. Losses covered by any bond,            characterization. This amount does not            See Advanced fees are subject to SCR
surety agreement or insurance contract to            constitute payment for any specific legal         20:1.5, SCR 20:1.15, and SCR 20:1.16.
the extent covered thereby, including any            services, whether past, present, or future        These funds do not belong to the lawyer
loss to which any bondsman or surety or              and may not be billed against for fees or         and should be returned if not earned. SCR
insurer is subrogated to the extent of that          costs at any point. A retainer becomes the        20:1.16(d) expressly provides that any
subrogated interest.                                 property of the lawyer upon receipt, but is       “advance payment of fee that has not been
      (iii) 3. Losses of any financial institution   subject to the requirements of SCR 20:1.5         earned” should be returned to the client
that could be recoverable under a “banker’s          and SCR 20:1.16(d).                               upon termination of the representation.
blanket bond” or similar insurance or surety              Section	7. The following Comment to          See also State Bar of Wis. Comm. on Prof’l
contract, whether or not the institution had         SCR 20:1.0 (dm) is not adopted, but will          Ethics, Formal Op. E-93-4 (1993).
such bond or contract in force.                      be published and may be consulted for                   Section	9. SCR 20:1.9 (b) (2), as
      (iv) 4. Losses which that are recoverable      guidance in interpreting and applying the         affected by Supreme Court Order Number
from some other source.                              Wisconsin Rules of Professional Conduct:          04-07, is amended to read:
      (v) 5. Losses barred under any                                                                         20:1.9(b)(2) about whom the lawyer
applicable statute of limitations.                   Wisconsin Comment: The definition of              had acquired information protected by sub.
      Section	4. SCR 12.045 (title) is created       flat fee specifies that flat fees “become         (c) and SCR 20:1.6 and SCR 20:1.9 (c) that
to read:                                             the property of the lawyer upon receipt.”         is material to the matter; unless the former
      12.045 (title) Definitions.                    Notwithstanding, the lawyer must either           client gives informed consent, confirmed in
      Section	5. Supreme Court Rule 20:1.0           deposit the advanced flat fee in trust until      a writing signed by the client.
(a), as affected by Supreme Court Order              earned, or comply with the alternative in               Section 10. SCR 20:1.15, as affected
Number 04-07, is renumbered 20:1.0(ar).              SCR 20:1.15(b)(4m), alternative protection        by Supreme Court Order Number 04-07, is
      Section	6. Supreme Court Rule 20:1.0           for advanced fees. In addition, as specified      repealed and recreated to read:
(ag), (dm) and (mm) are created to read:             in the definition, flat fees are subject to the         SCR 20:1.15 Safekeeping property;
      20:1.0 (ag) “Advanced fee” denotes an          requirements of all rules to which advanced       trust accounts and fiduciary accounts.
amount paid to a lawyer in contemplation             fees are subject.                                       (a) Definitions.
of future services, which will be earned                   Section	8. The Wisconsin Committee                In this section:
at an agreed-upon basis, whether hourly,             Comment to SCR 20:1.5, pertaining to                    (1) “Demand account” means an
flat, or another basis. Any amount paid to a         advances and retainers, as affected by            account upon which funds are disbursed
lawyer in contemplation of future services           Supreme Court Order Number 04-07, is              through a properly payable instrument.
whether on an hourly, flat or other basis, is        amended to read:                                        (2) “Fiduciary” means an agent,
an advanced fee regardless of whether that                 In addition, paragraph (b) differs          attorney-in-fact, conservator, guardian,
fee is characterized as an “advanced fee,”           from the Model Rule in requiring that             personal representative, special
“minimum fee,” “nonrefundable fee,” or               the purpose and effect of any retainer            administrator, trustee, or other position
any other characterization. Advanced fees            or advance fee paid to the lawyer shall           requiring the lawyer to safeguard the
are subject to the requirements of SCR               be communicated in writing and that a             property of a 3rd party.
20:1.5, SCR 20:1.15(b)(4) or (4m), SCR               lawyer shall promptly respond to a client’s             (3) “Fiduciary account” means an
20:1.15(e)(4)h., SCR 20:1.15(g), and SCR             request for information concerning fees           account in which the lawyer deposits
20:1.16(d).                                          and expenses. The lawyer should inform            fiduciary property.
      20:1.0 (dm) “Flat fee” denotes a fixed         the client of the purpose and effect of any             (4) “Fiduciary property” means funds
amount paid to a lawyer for specific, agreed-        retainer or advance fee. Specifically, the        or property of a client or 3rd party that is in


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the lawyer’s possession in a fiduciary capacity   acronym, such as “IOLTA,” “IOTA,” or                client must provide written notice of the
that directly arises in the course of, or as a    “LTAB,” without further elaboration, does           dispute to the lawyer within 30 days of the
result of, a lawyer-client relationship or an     not clearly designate the account as a client       mailing of the accounting; and
appointment by a court. Fiduciary property        account or trust account.                                3. notice that, if the lawyer is unable to
includes, but is not limited to, property              (3) Lawyer funds. No funds belonging           resolve the dispute to the satisfaction of the
held as agent, attorney-in-fact, conservator,     to the lawyer or law firm, except funds             client within 30 days after receiving notice of
guardian, personal representative, special        reasonably sufficient to pay monthly                the dispute from the client, the lawyer shall
administrator, or trustee, subject to the         account service charges, may be deposited           submit the dispute to binding arbitration.
exceptions identified in sub. (k).                or retained in a trust account.                          c. Upon timely receipt of written notice
     (5) “Financial institution” means a bank,         (4) Unearned fees and cost                     of a dispute from the client, the lawyer shall
savings bank, trust company, credit union,        advances. Except as provided in par. (4m),          attempt to resolve that dispute with the
savings and loan association, or investment       unearned fees and advanced payments of              client, and if the dispute is not resolved,
institution, including a brokerage house.         fees shall be held in trust until earned by         the lawyer shall submit the dispute to
     (6) “Immediate family member”                the lawyer, and withdrawn pursuant to sub.          binding arbitration with the State Bar Fee
means the lawyer’s spouse, child, stepchild,      (g). Funds advanced by a client or 3rd party        Arbitration Program or a similar local bar
grandchild, sibling, parent, grandparent,         for payment of costs shall be held in trust         association program within 30 days of the
aunt, uncle, niece, or nephew.                    until the costs are incurred.                       lawyer’s receipt of the written notice of
     (7) “Interest of Lawyer Trust Account             (4m) Alternative protection for                dispute from the client.
(“IOLTA”)” means a pooled, interest-bearing,      advanced fees. A lawyer who accepts                      d. Upon receipt of an arbitration award
demand account, separate from the lawyer’s        advanced payments of fees may deposit               requiring the lawyer to make a payment
business and personal accounts, via which         the funds in the lawyer’s business account,         to the client, the lawyer shall pay the
the lawyer deposits, holds, and disburses         provided that a court of competent                  arbitration award within 30 days, unless
funds received in trust on behalf of a client     jurisdiction must ultimately approve the            the client fails to agree to be bound by the
or 3rd party, the interest on which does not      lawyer’s fee, or that the lawyer complies           award of the arbitrator.
go to the client. Typical funds that would be     with each of the following requirements:                 (6) Trust property other than
placed in an IOLTA account include earnest             a. Upon accepting any advanced                 funds. Unless the client otherwise directs
monies, loan proceeds, settlement proceeds,       payment of fees pursuant to this subsection,        in writing, a lawyer shall keep securities
collection proceeds, cost advances, and           the lawyer shall deliver to the client a notice     in bearer form in a safe deposit box at
advance payments for fees that have not yet       in writing containing all of the following          a financial institution authorized to do
been earned. These accounts are subject to        information:                                        business in Wisconsin. The safe deposit
the provisions of SCR Chapter 13, Interest             1. the amount of the advanced                  box shall be clearly designated as a “Client
on Trust Accounts Program.                        payment;                                            Account” or “Trust Account.” The lawyer
     (8) “Properly payable instrument” means           2. the basis or rate of the lawyer’s fee;      shall clearly identify and appropriately
an instrument that, if presented in the normal         3. any expenses for which the client will      safeguard other property of a client or 3rd
course of business, is in a form requiring        be responsible;                                     party.
payment pursuant to the laws of this state.            4. that the lawyer has an obligation to             (7) Multi-jurisdictional practice.
     (9) “Trust account” means an account in      refund any unearned advanced fee, along             If a lawyer also licensed in another state
which the lawyer deposits trust property.         with an accounting, at the termination of           is entrusted with funds or property in
     (10) “Trust property” means funds or         the representation;                                 connection with a representation in the
property of clients or 3rd parties that is in          5. that the lawyer is required to submit       other state, the provisions of this rule shall
the lawyer’s possession in connection with        any dispute about a requested refund of             not supersede the applicable rules of the
a representation, which is not fiduciary          advanced fees to binding arbitration within         other state.
property.                                         30 days of receiving a request for such a                (c) Types of trust accounts.
     (b) Segregation of trust property.           refund; and                                              (1) IOLTA accounts. A lawyer who
     (1) Separate account. A lawyer shall              6. the ability of the client to file a claim   receives client funds shall maintain a pooled
hold in trust, separate from the lawyer’s own     with the Wisconsin lawyers’ fund for client         interest-bearing, demand account for
property, that property of clients and 3rd        protection if the lawyer fails to provide a         deposit of client or 3rd-party funds that are:
parties that is in the lawyer’s possession in     refund of unearned advanced fees.                        a. nominal in amount or expected to be
connection with a representation. All funds of         b. Upon termination of the                     held for a short period of time; or
clients and 3rd parties paid to a lawyer or law   representation, the lawyer shall deliver to              b. not deposited in an account or
firm in connection with a representation shall    the client in writing all of the following:         investment under par. (2); or
be deposited in one or more identifiable trust         1. a final accounting, or an accounting             c. not eligible for an account or
accounts.                                         from the date of the lawyer’s most recent           investment under par. (2), because the
     (2) Identification of account. Each          statement to the end of the representation,         client is a corporation or organization
trust account shall be clearly designated         regarding the client’s advanced fee payment         not permitted by law to maintain such an
as a “Client Account,” a “Trust Account,”         with a refund of any unearned advanced              account or the terms of the account are
or words of similar import. The account           fees;                                               not consistent with a need to make funds
shall be identified as such on all account             2. notice that, if the client disputes the     available without delay.
records, including signature cards, monthly       amount of the fee and wants that dispute                 (1m) The interest accruing on an
statements, checks, and deposit slips. An         to be submitted to binding arbitration, the         account under par. (1), less any transaction


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                                                                                                             SUPREME COURT ORDERS



costs, shall be paid to the Wisconsin Trust             (4) Professional judgment. The                trust until the dispute is resolved. Disputes
Account Foundation, Inc., which shall be           determination whether funds to be invested         between the lawyer and a client are subject
considered the beneficial owner of the             could be utilized to provide a positive            to the provisions of sub. (g)(2).
accrued interest, pursuant to SCR Chapter          net return to the client rests in the sound             (e) Operational requirements for
13, Interest on Trust Accounts Program. A          judgment of the lawyer or law firm. If a           trust accounts.
lawyer may notify the client of the intended       lawyer acts in good faith in making this                (1) Location. Each trust account shall
use of these funds.                                determination, the lawyer is not subject to        be maintained in a financial institution that
     (2) Other client accounts. A lawyer           any charge of ethical impropriety or other         is authorized by federal or state law to do
shall deposit all client funds in an account       breach of the Rules of Professional Conduct.       business in Wisconsin and that is located
specified in par. (1) unless the funds are              (5) WisTAF. For accounts created              in Wisconsin or has a branch office located
deposited in any of the following:                 under par. (1), the lawyer or law firm shall       in Wisconsin, and which agrees to comply
     a. a separate interest-bearing trust          direct the financial institution to remit to the   with the overdraft notice requirements of
account for the particular client or client’s      Wisconsin Trust Account Foundation, Inc.,          sub. (h).
matter, the interest on which shall be paid to     also known as “WisTAF,” at least quarterly,             (2) Insurance requirements. Each
the client, less any transaction costs;            all of the following:                              trust account shall be maintained at a
     b. a pooled interest-bearing trust                 a. the interest or dividends, less any        financial institution that is insured by the
account with sub-accounting by the financial       service charges or fees, on the average            federal deposit insurance corporation,
institution, the lawyer, or the law firm that      monthly balance in the account or as               the national credit union share insurance
will provide for computation of interest           otherwise computed in accordance with an           fund, the Wisconsin credit union savings
earned by each client’s funds and the              institution’s standard accounting practice;        insurance corporation, the securities
payment of the interest to the client, less any    and                                                investor protection corporation, or any
transaction costs;                                      b. a statement showing the name of            other investment institution financial
     c. an income-generating investment            the lawyer or law firm for whose account           guaranty insurance.
vehicle selected by the client and designated      the remittance is sent, the rate of interest            (3) Interest requirements. An
in specific written instructions from the          applied, the amount of service charges             interest-bearing trust account shall bear
client or authorized by a court or other           deducted, if any, and the account balance          interest at a rate of not less than that
tribunal, on which income shall be paid            for the period for which the report is made.       applicable to individual accounts of the
to the client or as directed by the court or       A copy of the statement shall be provided to       same type, size, and duration and in which
other tribunal, less any transaction costs; or     the lawyer or law firm.                            withdrawals or transfers can be made
     d. an income generating investment                 (d) Prompt notice and delivery of             without delay when funds are required,
vehicle selected by the lawyer to protect          property.                                          subject only to any notice period that
and maximize the return of funds in a                   (1) Notice and disbursement. Upon             the depository institution is required to
bankruptcy estate, which investment vehicle        receiving funds or other property in which         observe by law.
is approved by the trustee in bankruptcy and       a client has an interest, or in which the               (4) Prohibited transactions.
by a bankruptcy court order, consistent with       lawyer has received notice that a 3rd party             a. Cash. No disbursement of cash shall
11 U.S.C. s. 345; or                               has an interest identified by a lien, court        be made from a trust account or from a
     e. a demand deposit or other non-             order, judgment, or contract, the lawyer           deposit to a trust account, and no check
interest-bearing account for funds that are        shall promptly notify the client or 3rd party      shall be made payable to “Cash.”
neither nominal in amount nor expected             in writing. Except as stated in this rule or            b. Telephone transfers. No deposits
to be held for a short term, if the client         otherwise permitted by law or by agreement         or disbursements shall be made to or from
specifically so approves.                          with the client, the lawyer shall promptly         a pooled trust account by a telephone
     (3) Selection of account. In deciding         deliver to the client or 3rd party any funds       transfer of funds. This section does not
whether to use the account specified               or other property that the client or 3rd party     prohibit any of the following:
in par. (1) or an account or investment            is entitled to receive.                                 1. wire transfers.
vehicle specified in par. (2), a lawyer shall           (2) Accounting. Upon final distribution            2. telephone transfers between
determine, at the time of the deposit,             of any trust property or upon request by the       separate, non-pooled demand and
whether the client funds could be utilized to      client or a 3rd party having an ownership          separate, non-pooled, non-demand trust
provide a positive net return to the client by     interest in the property, the lawyer shall         accounts that a lawyer maintains for a
taking into consideration all of the following:    promptly render a full written accounting          particular client.
     a. the amount of income that the funds        regarding the property.                                 c. Internet transactions. A
would earn during the period the funds are              (3) Disputes regarding trust                  lawyer shall not make deposits to or
expected to be on deposit;                         property. When the lawyer and another              disbursements from a trust account by way
     b. the cost of establishing and               person or the client and another person            of an Internet transaction.
administering the account, including the           claim ownership interest in trust property              d. Electronic transfers by 3rd
cost of the lawyer’s services and the cost         identified by a lien, court order, judgment,       parties. A lawyer shall not authorize a
of preparing any tax reports required for          or contract, the lawyer shall hold that            3rd party to electronically withdraw funds
income accruing to a client’s benefit; and         property in trust until there is an accounting     from a trust account. A lawyer shall not
     c. the capability of financial institutions   and severance of the interests. If a dispute       authorize a 3rd party to deposit funds into
to calculate and pay interest or other income      arises regarding the division of the property,     the lawyer’s trust account through a form
to individual clients.                             the lawyer shall hold the disputed portion in      of electronic deposit that allows the 3rd


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SUPREME COURT ORDERS



party making the deposit to withdraw the        advances by credit card, debit card or          trust account to the IOLTA trust account
funds without the permission of the lawyer.     other electronic deposit. A lawyer may          immediately upon becoming available for
     e. Credit card transactions. A             establish a trust account, separate from the    disbursement; and
lawyer shall not authorize transactions         lawyer’s IOLTA trust account, solely for the          4. within 3 business days of receiving
by way of credit card to or from a trust        purpose of receiving advanced payments          actual notice that a chargeback or surcharge
account. However, earned fees may               of legal fees and costs by credit card, debit   has been made against the credit card
be deposited by way of credit card to a         card or other electronic deposit, subject to    trust account, the lawyer shall replace any
lawyer’s business account.                      the following conditions:                       and all funds that have been withdrawn
     f. Debit card transactions. A lawyer            1. the separate trust account shall be     from the credit card trust account by the
shall not use a debit card to make deposits     entitled: “Credit Card Trust Account”;          financial institution or card issuer; and shall
to or disbursements from a trust account.            2. lawyer and law firm funds,              reimburse the account for any shortfall or
     g. Exception: Collection trust             reasonably sufficient to cover all monthly      negative balance caused by a chargeback or
accounts. Upon demonstrating to                 account fees and charges and, if necessary,     surcharge. The lawyer shall not accept new
the office of lawyer regulation that a          any deductions by the financial institution     payments to the credit card trust account
transaction prohibited by sub. (e)(4)c.,        or card issuer from a client’s payment by       until the lawyer has reimbursed the credit
e., or f., constitutes an integral part         credit card, debit card, or other electronic    card trust account for the chargeback or
of the lawyer’s practice, a lawyer may          deposit, shall be maintained in the credit      surcharge.
petition that office for a separate, written    card trust account, and a ledger for account          (5) Availability of funds for
agreement, permitting the lawyer to             fees and charges shall be maintained;           disbursement.
continue to engage in the prohibited                 3. each payment by credit card, debit           a. Standard for trust account
transaction, provided the lawyer identifies     card or other electronic deposit, including,    transactions. A lawyer shall not disburse
the excepted account, provides adequate         if necessary, a reimbursement by the            funds from any trust account unless the
account security, and complies with             lawyer or law firm for any deduction by         deposit from which those funds will be
specific record-keeping and production          the financial institution or card issuer        disbursed has cleared, and the funds are
requirements.                                   from the gross amount of each payment,          available for disbursement.
     h. Exception: Fee and cost                 shall be transferred from the credit card             b. Exception: Real estate
                                                                                                transactions. In closing a real estate
                                                                                                transaction, a lawyer’s disbursement of
                                                                                                closing proceeds from funds that are
                                                                                                received on the date of the closing, but that
                                                                                                have not yet cleared, shall not violate sub.
                                                                                                (e)(5)a. if those proceeds are deposited no
                                                                                                later than the first business day following the
                                                                                                closing and are comprised of the following
                                                                                                types of funds:
                                                                                                      1. a certified check;
                                                                                                      2. a cashier’s check, teller’s check,
                                                                                                bank money order, official bank check
                                                                                                or electronic transfer of funds, issued or
                                                                                                transferred by a financial institution insured
                                                                                                by the federal deposit insurance corporation
                                                                                                or a comparable agency of the federal or
                                                                                                state government;
                                                                                                      3. a check drawn on the trust account
                                                                                                of any lawyer or real estate broker licensed
                                                                                                under the laws of any state;
                                                                                                      4. a check issued by the state of
                                                                                                Wisconsin, the United States, or a political
                                                                                                subdivision of the state of Wisconsin or the
                                                                                                United States;
                                                                                                      5. a check drawn on the account of
                                                                                                or issued by a lender approved by the
                                                                                                federal department of housing and urban
                                                                                                development as either a supervised or a
                                                                                                nonsupervised mortgagee as defined in 24
                                                                                                C.F.R. s. 202.2;
                                                                                                      6. a check from a title insurance
                                                                                                company licensed in Wisconsin, or from a
                                                                                                title insurance agent of the title insurance
                                                                                                company, if the title insurance company has


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guaranteed the funds of that title insurance     unprofessional conduct and grounds for            deposit item, the client or matter associated
agent;                                           disciplinary action.                              with each deposit item, and the date of the
     7. a non-profit organization check in            (8) Business account. Each lawyer            deposit. The lawyer shall maintain a copy or
an amount not exceeding $5000 per closing        who receives trust funds shall maintain           duplicate of each deposit slip. All deposits
if the lawyer has reasonable and prudent         at least one demand account, other than           shall be made intact. No cash, or other form
grounds to believe that the deposit will be      the trust account, for funds received and         of disbursement, shall be deducted from
irrevocably credited to the trust account;       disbursed other than in the lawyer’s trust        a deposit. Deposits of wired funds shall
and                                              capacity, which shall be entitled “Business       be documented in the account’s monthly
     8. a personal check or checks in an         Account,” “Office Account,” “Operating            statement.
aggregate amount not exceeding $5000 per         Account,” or words of similar import.                  e. Disbursement records.
closing if the lawyer has reasonable and              (f) Record-keeping requirements for               1. Checks. Checks shall be pre-printed
prudent grounds to believe that the deposit      trust accounts.                                   and pre-numbered. The name and address
will be irrevocably credited to the trust             (1) Demand accounts. Complete                of the lawyer or law firm, and the name of
account.                                         records of a trust account that is a demand       the account shall be printed in the upper left
     bm. Without limiting the rights of the      account shall include a transaction register;     corner of the check. Trust account checks
lawyer against any person, it shall be the       individual client ledgers; a ledger for account   shall include the words “Client Account,” or
responsibility of the disbursing lawyer to       fees and charges, if law firm funds are held      “Trust Account,” or words of similar import
reimburse the trust account for any funds        in the account pursuant to sub. (b)(3);           in the account name. Each check disbursed
described in sub. (e)(5)b. that are not          deposit records; disbursement records;            from the trust account shall identify
collected and for any fees, charges, and         monthly statements; and reconciliation            the client matter and the reason for the
interest assessed by the financial institution   reports, subject to all of the following:         disbursement on the memo line.
on account of the funds being disbursed               a. Transaction register. The                      2. Canceled checks. Canceled
before the related deposit has cleared and       transaction register shall contain a              checks shall be obtained from the financial
the funds are available for disbursement.        chronological record of all account               institution. Imaged checks may be
The lawyer shall maintain a subsidiary           transactions, and shall include all of the        substituted for canceled checks.
ledger for funds of the lawyer that are          following:                                             3. Imaged checks. Imaged checks
deposited in the trust account to reimburse           1. the date, source, and amount of all       shall be acceptable if they provide both the
the account for uncollected funds and            deposits;                                         front and reverse of the check and comply
to accommodate any fees, charges, and                 2. the date, check or transaction            with the requirements of this paragraph.
interest.                                        number, payee and amount of all                   The information contained on the reverse
     c. Exception: Collection trust              disbursements, whether by check, wire             side of the imaged checks shall include any
accounts. When handling collection work          transfer, or other means;                         endorsement signatures or stamps, account
for a client and maintaining a separate trust         3. the date and amount of every other        numbers, and transaction dates that appear
account to hold funds collected on behalf        deposit or deduction of whatever nature;          on the original. Imaged checks shall be
of that client, a lawyer’s disbursement               4. the identity of the client for whom       of sufficient size to be readable without
to the client of collection proceeds that        funds were deposited or disbursed; and            magnification and as close as possible to the
have not yet cleared, does not violate                5. the balance in the account after each     size of the original check.
sub. (e)(5)a. so long as those collection        transaction.                                           4. Wire transfers. Wire transfers shall
proceeds have been deposited prior to the             b. Individual client ledgers. A              be documented by a written withdrawal
disbursement.                                    subsidiary ledger shall be maintained for         authorization or other documentation, such
     (6) Record retention. A lawyer              each client or matter for which the lawyer        as a monthly statement of the account that
shall maintain complete records of trust         receives trust funds, and the lawyer shall        indicates the date of the transfer, the payee,
account funds and other trust property and       record each receipt and disbursement of           and the amount.
shall preserve those records for at least 6      that client’s funds and the balance following          f. Monthly statement. The monthly
years after the date of termination of the       each transaction. A lawyer shall not disburse     statement provided to the lawyer or law firm
representation.                                  funds from the trust account that would           by the financial institution shall identify the
     (7) Production of records. All trust        create a negative balance with respect to any     name and address of the lawyer or law firm
account records have public aspects related      individual client or matter.                      and the name of the account.
to a lawyer’s fitness to practice. Upon               c. Ledger for account fees and                    g. Reconciliation reports. For each
request of the office of lawyer regulation,      charges. A subsidiary ledger shall be             trust account, the lawyer shall prepare and
or upon direction of the supreme court, the      maintained for funds of the lawyer deposited      retain a printed reconciliation report on a
records shall be submitted to the office of      in the trust account to accommodate               regular and periodic basis not less frequently
lawyer regulation for its inspection, audit,     monthly service charges. Each deposit and         than every 30 days. Each reconciliation
use, and evidence under any conditions           expenditure of the lawyer’s funds in the          report shall show all of the following
to protect the privilege of clients that the     account and the balance following each            balances and verify that they are identical:
court may provide. The records, or an            transaction shall be identified in the ledger.         1. the balance that appears in the
audit of the records, shall be produced               d. Deposit records. Deposit slips            transaction register as of the reporting date;
at any disciplinary proceeding involving         shall identify the name of the lawyer or law           2. the total of all subsidiary ledger
the lawyer, whenever material. Failure           firm, and the name of the account. The            balances for IOLTA accounts and other
to produce the records constitutes               deposit slip shall identify the amount of each    pooled accounts, determined by listing and


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totaling the balances in the individual client   statements provided by the financial          property or securities in bearer form shall
ledgers and the ledger for account fees and      institution to the lawyer or law firm; and    maintain a property ledger that identifies
charges, as of the reporting date; and                b. all transaction records, including    the property, date of receipt, owner, client
     3. the adjusted balance, determined by      passbooks, records of electronic fund         or matter, and location of the property. The
adding outstanding deposits and other credits    transactions, duplicates of any instrument    ledger shall also identify the disposition
to the balance in the financial institution’s    issued by the financial institution from      of all of the trust property received by the
monthly statement and subtracting                funds held in the account, duplicate          lawyer.
outstanding checks and other deductions          deposit slips identifying the source of any        b. Receipt upon taking custody.
from the balance in the monthly statement.       deposit, and duplicate withdrawal slips       Upon taking custody, in trust, of any
     (2) Non-demand accounts. Complete           identifying the purpose of any withdrawal.    tangible personal property or securities in
records of a trust account that is a non-             (3) Tangible trust property and          bearer form, the lawyer shall provide to the
demand account shall include all of the          bearer securities.                            previous custodian a signed receipt, with a
following:                                            a. Property ledger. A lawyer who         description of the property and the date of
     a. all monthly or other periodic            receives, in trust, tangible personal         receipt.
                                                                                                    c. Dispositional receipt. Upon
                                                                                               disposition of any tangible personal property
                                                                                               or securities in bearer form held in trust, the
                                                                                               lawyer shall obtain a signed receipt, with a
                                                                                               description of the property and the date of
                                                                                               disposition, from the recipient.
                                                                                                    (4) Electronic record retention.
                                                                                                    a. Back-up of records. A lawyer
                                                                                               who maintains trust account records by
                                                                                               computer shall maintain the transaction
                                                                                               register, client ledgers, and reconciliation
                                                                                               reports in a form that can be reproduced to
                                                                                               printed hard copy. Electronic records must
                                                                                               be regularly backed up by an appropriate
                                                                                               storage device.
                                                                                                    b. IOLTA account records. In
                                                                                               addition to the requirements of sub. (f)(4)a.,
                                                                                               the transaction register, the subsidiary
                                                                                               ledger, and the reconciliation report shall
                                                                                               be printed every 30 days for the IOLTA
                                                                                               account. The printed copy shall be retained
                                                                                               for at least 6 years, as required under sub.
                                                                                               (e)(6).
                                                                                                    (g) Withdrawal of non-contingent
                                                                                               fees from trust account.
                                                                                                    (1) Notice to client. At least 5
                                                                                               business days before the date on which a
                                                                                               disbursement is made from a trust account
                                                                                               for the purpose of paying fees, with the
                                                                                               exception of contingent fees or fees paid
                                                                                               pursuant to court order, the lawyer shall
                                                                                               transmit to the client in writing all of the
                                                                                               following:
                                                                                                    a. an itemized bill or other accounting
                                                                                               showing the services rendered;
                                                                                                    b. notice of the amount owed and the
                                                                                               anticipated date of the withdrawal; and
                                                                                                    c. a statement of the balance of the
                                                                                               client’s funds in the lawyer trust account
                                                                                               after the withdrawal.
                                                                                                    (1m) Alternative notice to client. The
                                                                                               lawyer may withdraw earned fees on the
                                                                                               date that the invoice is transmitted to the
                                                                                               client, provided that the lawyer has given
                                                                                               prior notice to the client in writing that
                                                                                               earned fees will be withdrawn on the date


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                                                                                                            SUPREME COURT ORDERS



that the invoice is transmitted. The invoice             a. In the case of a dishonored              member maintains a trust account, a safe
shall include each of the elements required         instrument, the report shall be identical to     deposit box, or both, as required by this
by sub. (g)(1)a., b., and c.                        an overdraft notice customarily forwarded        section. The state bar shall supply to each
     (2) Objection to disbursement.                 to the depositor or investor, accompanied        member, with the annual dues statement, or
If a client makes a particularized and              by the dishonored instrument, if a copy          at any other time directed by the supreme
reasonable objection to the disbursement            is normally provided to the depositor or         court, a form on which the certification must
described in sub. (g)(1), the disputed              investor.                                        be made.
portion shall remain in the trust account                b. In the case of instruments that are           (2) Trust account record
until the dispute is resolved. If the client        presented against insufficient funds and         compliance. Each state bar member shall
makes a particularized and reasonable               are honored, the report shall identify the       explicitly certify on the state bar certificate
objection to a disbursement described in            financial institution involved, the lawyer       described in par. (1) that the member has
sub. (g)(1) or (1m) within 30 days after the        or law firm, the account number, the date        complied with each of the record-keeping
funds have been withdrawn, the disputed             on which the instrument is paid, and the         requirements set forth in subs. (f) and (j)(5).
portion shall be returned to the trust              amount of overdraft created by the payment.           (3) Certification by law firm. A law
account until the dispute is resolved, unless            (5) Timing of report. A report              firm shall file one certificate on behalf of the
the lawyer reasonably believes that the             made under this subsection shall be made         lawyers in the firm who are required to file a
client’s objections do not present a basis          simultaneously with the overdraft notice         certificate under par. (1). The law firm shall
to hold funds in trust or return funds to           given to the depositor or investor.              give a copy of the certificate to each lawyer
the trust account under this subsection.                 (6) Confidentiality of report. A report     in the firm.
The lawyer will be presumed to have a               made by a financial institution under this            (4) Suspension for non-compliance.
reasonable basis for declining to return            subsection shall be subject to SCR 22.40,        The failure of a state bar member to file
funds to trust if the disbursement was              Confidentiality.                                 the certificate is grounds for automatic
made with the client’s informed consent, in              (7) Withdrawal of report by                 suspension of the member’s membership in
writing. The lawyer shall promptly advise           financial institution. The office of lawyer      the state bar in the same manner provided in
the client in writing of the lawyer’s position      regulation shall hold each overdraft report      SCR 10.03(6) for nonpayment of dues. The
regarding the fee and make reasonable               for 10 business days to enable the financial     filing of a false certificate is unprofessional
efforts to clarify and address the client’s         institution to withdraw a report provided        conduct and is grounds for disciplinary
objections.                                         by inadvertence or mistake. The deposit of       action.
     (h) Dishonored instrument                      additional funds by the lawyer or law firm            (j) Fiduciary property.
notification; (Overdraft notices).                  shall not constitute reason for withdrawing           (1) Separate account. A lawyer shall
     All demand trust accounts and                  an overdraft report.                             hold in trust, separate from the lawyer’s
demand fiduciary accounts are subject to                 (8) Lawyer compliance. Every                own funds or property, those funds or that
the following provisions on dishonored              lawyer practicing or admitted to practice in     property of clients or 3rd parties that are
instrument notification:                            Wisconsin shall comply with the reporting        in the lawyer’s possession when acting in a
     (1) Overdraft reporting agreement.             and production requirements of this              fiduciary capacity that directly arises in the
A lawyer shall maintain demand trust                subsection.                                      course of, or as a result of, a lawyer-client
accounts only in a financial institution that            (9) Service charges. A financial            relationship or by appointment of a court.
has agreed to provide an overdraft report           institution may charge a lawyer or law firm           (1m) Other fiduciary accounts. A
to the office of lawyer regulation under par.       for the reasonable costs of producing the        lawyer shall deposit all fiduciary funds
(3).                                                reports and records required by this rule.       specified in par. (1) in any of the following:
     (2) Identification of accounts                      (10) Immunity of financial                       a. a pooled interest-bearing fiduciary
subject to this subsection. A lawyer or             institution. This subsection does not            account with sub-accounting by the financial
law firm shall notify the financial institution     create a claim against a financial institution   institution, the lawyer, or the law firm that
at the time a trust account or fiduciary            or its officers, directors, employees, or        will provide for computation of interest
account is established that the account is          agents for failure to provide a trust account    earned by each fiduciary entity’s funds and
subject to this sub. (h) and shall provide the      overdraft report or for compliance with this     the proportionate allocation of the interest
financial institution with a list of all existing   subsection.                                      to the fiduciary entity, less any transaction
accounts at that institution that are subject            (i) Certification of compliance with        costs;
to this subsection.                                 trust account rules.                                  b. an income-generating investment
     (3) Overdraft report. In the event                  (1) Annual requirement. A member            vehicle, on which income shall be paid to
any properly payable instrument is                  of the state bar of Wisconsin shall file with    the fiduciary entity or its beneficiary or
presented against a lawyer trust account            the state bar of Wisconsin annually, with        beneficiaries, less any transaction costs;
containing insufficient funds, whether or           payment of the member’s state bar dues                c. an income-generating investment
not the instrument is honored, the financial        or upon any other date approved by the           vehicle selected by the lawyer and approved
institution shall report the overdraft to the       supreme court, a certificate stating whether     by a court for guardianship funds if the
office of lawyer regulation.                        the member is engaged in the practice of law     lawyer serves as guardian for a ward under
     (4) Content of report. All reports             in Wisconsin. If the member is practicing        chs. 54 and 881, stats.;
made by a financial institution under this          law, the member shall state the account               d. an income-generating investment
subsection shall be substantially in the            number of any trust account, and the name        vehicle selected by the lawyer to protect
following form:                                     of each financial institution in which the       and maximize the return on funds in a


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bankruptcy estate, which investment vehicle         transactions. The lawyer shall maintain all    description of the property, and the date of
is approved by the trustee in bankruptcy and        of the following:                              receipt.
by a bankruptcy court order, consistent with             a. all monthly or other periodic               c. Dispositional receipt. Upon
11 U.S.C. s. 345; or                                statements provided by the financial           disposition of any tangible personal property
     e. a demand deposit or other non-              institution to the lawyer or law firm; and     or securities in bearer form held by the
interest bearing account when, in the                    b. all transaction records, including     lawyer as a fiduciary, the lawyer shall obtain
sound professional judgment of the lawyer,          canceled or imaged checks, passbooks,          a signed receipt, with a description of the
placement in such an account is consistent          records of electronic fund transactions,       property and the date of disposition, from
with the needs and purposes of the fiduciary        duplicates of any instrument issued by the     the recipient.
entity or its beneficiary or beneficiaries.         financial institution from funds held in the        (9) Dishonored instrument
     (2) Location. Each fiduciary account           account, duplicate deposit slips identifying   notification or alternative protection.
shall be maintained in a financial institution      the source of any deposit, and duplicate       A lawyer who holds fiduciary property
as provided by the written authorization of         withdrawal slips identifying the purpose of    in a demand account from which funds
the client, the governing trust instrument,         any withdrawal.                                are disbursed through a properly payable
organizational by-laws, an order of a court              (6) Record retention. A lawyer            instrument issued directly by the lawyer or
or, absent such direction, in a financial           shall maintain complete records of             a member or employee of the lawyer’s firm
institution that, in the lawyer’s professional      fiduciary accounts and other fiduciary         shall take one of the following actions:
judgment, will best serve the needs and             property during the course of the fiduciary         a. comply with the requirements of
purposes of the client or 3rd party for whom        relationship. A lawyer shall maintain a        sub. (h) dishonored instrument notification
the lawyer serves as fiduciary. If a lawyer acts    complete record of the fiduciary account       (overdraft notices); or
in good faith in making this determination,         for the 6 most recent years of the account’s        b. have the account independently
the lawyer is not subject to any charge of          existence and shall maintain, at a minimum,    audited by a certified public accountant on
ethical impropriety or other breach of the          a summary accounting of the fiduciary          at least an annual basis; or
Rules of Professional Conduct. When the             account for prior years of the account’s            c. hold the funds in a demand account,
fiduciary property is held in a demand              existence. After the termination of the        which requires the approving signature of
account from which funds are disbursed              fiduciary relationship, the lawyer shall       a co-trustee, co-agent, co-guardian, or co-
through a properly payable instrument               preserve complete records for at least 6       personal representative before funds may be
issued directly by the lawyer or a member           years.                                         disbursed from the account.
or employee of the lawyer’s firm and the                 (7) Production of records. All                 (10) Certification requirements.
account is at a financial institution that is not   fiduciary account records have public          Funds held by a lawyer in a fiduciary
located in Wisconsin or authorized by state or      aspects related to a lawyer’s fitness to       account shall comply with the certification
federal law to do business in Wisconsin, the        practice. Upon request of the office of        requirements of sub. (i).
lawyer shall comply with the requirements of        lawyer regulation, or upon direction of             (k) Exceptions to this section.
sub. (j)(9)b. or c.                                 the supreme court, the records shall                This rule does not apply in any of the
     (3) Prohibited transactions.                   be submitted to the office of lawyer           following instances in which a lawyer is
     a. Cash. No disbursement of cash shall         regulation for its inspection, audit, use,     acting in a fiduciary capacity:
be made from a fiduciary account or from a          and evidence under any conditions to                (1) the lawyer is serving as a bankruptcy
deposit to a fiduciary account, and no check        protect the privilege of clients that the      trustee, subject to the oversight and
shall be made payable to “Cash.”                    court may provide. The records, or an          accounting requirements of the bankruptcy
     b. Internet transactions. A lawyer shall       audit of the records, shall be produced        court;
not make deposits to or disbursements from          at any disciplinary proceeding involving            (2) the property held by the lawyer
a fiduciary account by way of an Internet           the lawyer, whenever material. Failure         when acting in a fiduciary capacity
transaction.                                        to produce the records constitutes             is property held for the benefit of an
     c. Credit card transactions. A lawyer          unprofessional conduct and grounds for         “immediate family member” of the lawyer;
shall not authorize transactions by way of          disciplinary action.                                (3) the lawyer is serving in a fiduciary
credit card to or from a fiduciary account.              (8) Tangible fiduciary property and       capacity for a civic, fraternal, or non-profit
     d. Debit card transactions. A lawyer           bearer securities.                             organization that is not a client and has other
shall not use a debit card to make deposits to           a. Property ledger. A lawyer who,         officers or directors participating in the
or disbursements from a fiduciary account.          as a fiduciary, receives tangible personal     governance of the organization; or
     (4) Availability of funds for                  property or securities in bearer form shall         (4) the lawyer is acting in the course of
disbursement. A lawyer shall not disburse           maintain a property ledger that identifies     the lawyer’s employment by an employer
funds from a fiduciary account unless the           the property, date of receipt, owner, and      not itself engaged in the practice of law,
deposit from which those funds will be              location of the property. The ledger shall     provided that the lawyer’s employment is not
disbursed has cleared, and the funds are            also identify the disposition of all such      ancillary to the lawyer’s practice of law.
available for disbursement. However, the            fiduciary property received by the lawyer.
exception for real estate transactions under             b. Receipt upon taking custody.           Wisconsin Comment: A lawyer must hold
sub. (e)(5)b. shall apply to fiduciary accounts.    Upon taking custody, as a fiduciary, of any    the property of others with the care required
     (5) Records. For each fiduciary account,       tangible personal property or securities in    of a professional fiduciary. All property that
the lawyer shall retain records of receipts and     bearer form, the lawyer shall provide to the   is the property of clients or 3rd parties must
disbursements as necessary to document the          previous custodian a signed receipt, with a    be kept separate from the lawyer’s business


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and personal property and, if monies, in one     from which the fee is to be paid. However, a    be deposited in such an account except as
or more trust or fiduciary accounts.             lawyer may not hold funds to coerce a client    follows ….
	 SCR 20:1.15(b)(1) Separate                     into accepting the lawyer’s contention. The          This requirement is specifically
accounts.                                        disputed portion of the funds should be         addressed in SCR 20:1.15(b)(4).
      With respect to probate matters, a         kept in trust, and the lawyer should suggest         SCR 20:1.15(b)(4m) Alternative
lawyer’s role may be to represent the estate’s   means for prompt resolution of the dispute,     protection for advanced fees.
personal representative, to serve as the         such as arbitration. The undisputed portion          This section allows lawyers to
personal representative, or to act as both       of the funds shall be promptly distributed.     deposit advanced fees into the lawyer’s
personal representative and attorney for              Lawyers also receive cost advances         business account, as an alternative to
an estate. SCR 20:1.15(b) identifies the         from clients or 3rd parties. Since January 1,   SCR 20:1.15(b)(4). The lawyer’s fee
rules that apply when a lawyer holds trust       1987, the supreme court has required cost       remains subject to the requirement of
property as the attorney for a client/personal   advances to be held in trust. Prior to that     reasonableness (SCR 20:1.5) as well as the
representative. Those rules, SCR 20:1.15(b)-     date, the applicable trust account rule, SCR    requirement that unearned fees be refunded
(i), also apply when the lawyer serves as both   20.50(1), specifically excluded such advances   upon termination of the representation
the attorney and personal representative         from the funds that the supreme court           [SCR 20:1.16(d)]. A lawyer must comply
for an estate. However, if the lawyer serves     required lawyers to hold in trust accounts.     either with SCR 20:1.15(b)(4), or with SCR
solely as an estate’s personal representative,   However, by order, dated March 21, 1986,        20:1.15(b)(4m), and a lawyer’s failure to
the lawyer acts as a fiduciary and is subject    the supreme court amended SCR 20.50(1)          do so shall be professional misconduct and
to the requirements of SCR 20:1.15(j).           as follows:                                     grounds for discipline.
      SCR 20:1.15(b)(4) Advances for fees             All funds of clients paid to a lawyer or        The writing required by SCR
and costs.                                       law firm, other than advances for costs and     20:1.15(b)(4m)a. must contain language
      Lawyers often receive funds from 3rd       expenses, shall be deposited in one or more     informing the client that the lawyer is
parties from which the lawyer’s fee will         identifiable bank trust accounts as provided    obligated to refund any unearned advanced
be paid. If there is risk that the client may    in sub. (3) maintained in the state in which    fee at the end of the representation, that the
divert the funds without paying the fee, the     the law office is situated and no funds         lawyer will submit any dispute regarding a
lawyer is not required to remit the portion      belonging to the lawyer or law firm may         refund to binding arbitration, such as the




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programs run by the State Bar of Wisconsin           corporation, the securities investor            full amount of the payment and absorb the
and Milwaukee Bar Association, within 30             protection corporation or any other             charges. Before holding a client responsible
days of receiving a request for refund, and          investment institution financial guaranty       for such charges, a lawyer needs to disclose
that the lawyer is obligated to comply with          insurance. However, since federal law limits    this practice to the client in advance, and
an arbitration award within 30 days of the           the amount of the insurance coverage,           assure that the client understands and
award. The client is not obligated to arbitrate      funds in excess of the limit are not insured.   consents to the charges.
the fee dispute and may elect another forum          Consequently, the purpose of the insurance           In addition, the lawyer needs to
in which to resolve the dispute. The writing         requirement is not to guarantee that all        investigate the following concerns before
must also inform the client of the opportunity       funds are adequately insured. Rather, it        accepting payments by credit card:
to file a claim in the event an unearned             is to assure that trust funds are held in            1. Does the credit card issuer
advanced fee is not refunded, and should             reputable financial institutions.               prohibit a lawyer/vendor from requiring
provide the address of the Wisconsin lawyers’             SCR 20:1.15(e)(4)d. Electronic             the customer to pay the charge? If
fund for client protection.                          transfers by 3rd parties.                       a lawyer intends to credit the client for
      If the client’s fees have been paid                 Many forms of electronic deposit           anything less than the full amount of the
by one other than the client, then the               allow the transferor to remove the funds        credit card payment, the lawyer needs to
lawyer’s responsibilities are governed by            without the consent of the account holder.      assure that this practice is not prohibited by
SCR 20:1.8(f). If there is a dispute as to           A lawyer must not only be aware of the          the credit card issuer’s regulations and/or
the ownership of any refund of unearned              bank’s policy but also federal regulations      by the agreement between the lawyer and
advanced fees paid by one other than the             pertaining to the specific form of electronic   the credit card issuer. Entering into an
client, the unearned fees should be treated as       deposit, and must ensure that the transferor    agreement with a credit card issuer with the
trust property pursuant to SCR 20:1.15(d)(3).        is prohibited from withdrawing deposited        intent to violate this type of requirement
      This alternative applies only to advanced      funds without the lawyer’s consent.             may constitute conduct involving dishonesty,
fees for legal services. Cost advances must be            SCR 20:1.15(e)(4)g. Exception:             fraud, or deceit, in violation of SCR
deposited into the lawyer’s trust account.           Collection trust accounts.                      20:8.4(c).
      Advanced fees deposited into the                    This exception was adopted in response          2. Does the credit card issuer
lawyer’s business account pursuant to this           to concerns raised by members of the            require services to be rendered before
subsection may be paid by credit card, debit         collection bar who presently rely on certain    a credit card payment is accepted? If
card, or an electronic transfer of funds. A cost     electronic banking practices that were not      a lawyer intends to accept fee advances
advance cannot be paid by credit card, debit         expressly prohibited prior to the adoption      by credit card, the lawyer needs to assure
card, or an electronic transfer of funds under       of this rule. The court acknowledges            that fee advances are not prohibited by
this section. Such payments are subject to           that electronic banking practices are           the credit card issuer’s regulations and/or
SCR 20:1.15(b)(1) or SCR 20:1.15(e)(4)h.             increasingly used in the practice of law.       by the agreement between the lawyer and
      SCR 20:1.15(d) Interest of 3rd                 However, the court also acknowledges            the credit card issuer. Entering into an
parties.                                             that such transactions will require new         agreement with a credit card issuer with the
      Third parties, such as a client’s creditors,   approaches to alleviate legitimate concerns     intent to violate this type of requirement
may have just claims against funds or other          about the potential for fraud and risk of       may constitute conduct involving dishonesty,
property in a lawyer’s custody. A lawyer may         conversion with respect to their usage in       fraud, or deceit, in violation of SCR
have a duty under applicable law, including          connection with trust accounts. Collection      20:8.4(c).
SCR 20:1.15(d), to protect such 3rd-party            lawyers may be able to satisfy these                 3. By requiring clients to pay the
claims against wrongful interference by              concerns because of security measures           credit cards charges, is the lawyer
the client, and accordingly, may refuse              inherent in their practice. This exception is   required to make certain specific
to surrender the property to the client.             intended as a temporary measure, pending        disclosures to such clients and offer
However, a lawyer should not unilaterally            further consideration of the issue and          cash discounts to all clients? If a lawyer
assume to arbitrate a dispute between the            eventual adoption of a rule that will permit    intends to require clients to pay credit card
client and the 3rd party.                            electronic banking procedures in additional     charges, the lawyer needs to assure that the
      If a lawyer holds property belonging           practice areas, conditioned upon the            lawyer complies with all state and federal
to one person and a second person has a              implementation of appropriate safeguards.       laws relating to such transactions, including,
contractual or similar claim against that            The agreement referenced in the exception       but not limited to, Regulation Z of the Truth
person but does not claim to own the                 is available from the office of lawyer          in Lending Act, 12 C.F.R. s. 206.
property or have a security interest in it, the      regulation.                                          SCR 20:1.15(e)(5)b. Real estate
lawyer is free to deliver the property to the             SCR 20:1.15(e)(4)h.3. Exception:           transactions.
person to whom it belongs.                           Fee and cost advances by credit card,                SCR 20:1.15(e)(5)b. establishes an
      SCR 20:1.15(e)(2) Insurance                    debit card or other electronic deposit.         exception to the requirement that a lawyer
requirements.                                             Financial institutions, as credit card     only disburse funds that are available for
      Pursuant to SCR 20:1.15(e)(2), trust           issuers, routinely impose charges on            disbursement, i.e., funds that have been
funds are required to be held in accounts            vendors when a customer pays for goods          credited to the account. This exception was
that are insured by the federal deposit              or services with a credit card. That charge     created in recognition of the fact that real
insurance corporation (FDIC), the national           is deducted directly from the customer’s        estate transactions in Wisconsin require a
credit union share insurance fund, the               payment. Vendors who accept credit cards        simultaneous exchange of funds. However,
Wisconsin credit union savings insurance             routinely credit the customer with the          even under this exception, the funds from


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                                                                                                          SUPREME COURT ORDERS



which a lawyer disburses the proceeds of          suggested employment of that method to                A lawyer must hold the property
the real estate transaction, i.e., the lender’s   resolve a dispute between a client and a         of others with the care required of a
check, draft, wire transfer, etc., must be        3rd party over funds held in trust by the        professional fiduciary. All property which is
deposited no later than the first business        lawyer. See Riegleman v. Krieg, 2004 WI          the property of clients or 3rd parties must
day following the date of the closing. In         App 85, 271 Wis. 2d 798, 679 N.W.2d 857,         be kept separate from the lawyer’s business
refinancing transactions, the lender’s funds      2004 Wisc. App. LEXIS 229 (2004).                and personal property and, if monies, in
must be deposited as soon as possible,                 Additionally, when a lawyer’s fees are      one or more segregated accounts. SCR
but no later than the first business day          subject to final approval by a court, such as    20:1.15(j) identifies the requirements and
after the loan proceeds are distributed.          fees paid to a guardian ad litem or lawyer’s     responsibilities of a lawyer with respect to
Proceeds are generally distributed three          fees in formal probate matters, objections       the management of fiduciary property.
days after the closing date.                      to disbursements by clients or 3rd party              SCR 20:1.15(j)(1) Separate accounts.
     SCR 20:1.15(e)(7) Inspection of              payors are properly brought before the                With respect to probate matters,
records.                                          court having jurisdiction over the matter. A     a lawyer’s role may be to represent the
     The duty of the lawyer to produce            lawyer should hold disputed funds in trust       estate’s personal representative, to serve
client trust account records for inspection       until such time as the appropriate court         as the personal representative, or to act as
under SCR 20:1.15(e)(7) is a specific             resolves the dispute.                            both personal representative and attorney
exception to the lawyer’s responsibility to            SCR 20:1.15(i) and SCR                      for an estate. SCR 20:1.15(j) applies only
maintain the confidentiality of the client’s      20:1.15(j)(10) Certification of                  when the lawyer serves solely as an estate’s
information as required by SCR 20:1.6.            compliance.                                      personal representative. If the lawyer
     SCR 20:1.15(g) Withdrawal                         The current rule is intended to             represents a client/personal representative,
of non-contingent fees from trust                 implement the supreme court’s order of           or when the lawyer serves as both personal
account.                                          April 11, 2001; certification is required        representative and attorney for the estate,
     This section applies to attorney             for “all trust accounts and safe deposit         the lawyer is responsible for “trust” property
fees, other than contingent fees. It does         boxes in which the lawyer deposits clients’      and is subject to the requirements of SCR
not apply to filing fees, expert witness          funds or property held in connection with        20:1.15(b)-(i).
fees, subpoena fees, and other costs              a representation or held in a fiduciary               Section	11. Supreme Court Rule 21.16
and expenses that a lawyer may incur              capacity that directly arises in the             (intro.) and (1) to (6) are renumbered SCR
on behalf of a client in the course of a          course of or as a result of a lawyer-client      21.16 (1m) (intro.) and (a) to (f).
representation.                                   relationship.”                                        Section	12. SCR 21.16 (1m) (em)
     In addition, this section does not                SCR 20:1.15(j) Lawyer as                    and (2m) of the Supreme Court Rules are
require contingent fees to remain in              professional fiduciary.                          created to read:
the trust account or to be returned to
the trust account if a client objects to
the disbursement of the contingent
fee, provided that the contingent fee
arrangement is documented by a written
fee agreement, as required by SCR
20:1.5(c). While a client may dispute the
reasonableness of a lawyer’s contingent
fee, such disputes are subject to SCR
20:1.5(a), not to this subsection.
     A client’s objection under sub. (g)(3)
must offer a specific and reasonable basis
for the fee dispute in order to trigger the
lawyer’s obligation to keep funds in the
lawyer’s trust account or return funds to                                  CORRIS
the lawyer’s trust account. A generalized
objection to the overall amount of the fees
or a client’s unilateral desire to abrogate
the terms of a fee agreement should not
ordinarily be considered sufficient to
trigger the lawyer’s obligation. A lawyer
may resolve a dispute over fees by offering
to participate and abide by the decision of
a fee arbitration program. In addition, a
lawyer may bring an action for declaratory
judgment pursuant to s. 806.04, Wis.
Stats. to resolve a dispute between the
lawyer and a client regarding funds held in
trust by the lawyer. The court of appeals


                                                                                     J U N E 2 0 0 7 – W I S C O N S I N L AW Y E R – PA G E 3 9
SUPREME COURT ORDERS


     21.16(1m) (em) Restitution, as provided     ¶1 ANN WALSH BRADLEY, J.                       Against Scanlan, 2006 WI 38, 290 Wis. 2d
under sub. (2m).                                 (concurring in part, dissenting in part).      30, 712 N.W.2d 877 (six-month suspension
     21.16(2m) (a) An attorney may be            Prior to the majority’s adoption of the        for placing advanced fees into his business
ordered to do any of the following as            advanced fee alternative rule, SCR             checking account rather than his trust
restitution under sub. (1m)(em):                 20:1.15(b)(4m),1 attorneys were required       account, other trust account violations, and
     1. Pay monetary restitution to the          to deposit advances of unearned hourly         failure to cooperate with OLR).
person whose money or property was               fees into their trust accounts and draw out         ¶7 Admittedly, the cases cited above
misappropriated or misapplied in the amount      amounts as they were earned. See SCR           involved discipline for offenses in addition
or value of such money or property as found      20:1.15(b)(4) and former SCR 20:1.15(a).2      to discipline for conversion. The court
in the disciplinary proceedings.                 Now, under the new rule, attorneys can         does not break down how much of the
     2. Reimburse the Wisconsin lawyers’         deposit advances of hourly fees directly       discipline is attributable to what violation.
fund for client protection for awards made       into their general business accounts rather    Yet, undeniably, some period of the above
to the person whose money or property was        than into their trust accounts. This allows    suspensions are attributable to conversion.
misappropriated or misapplied.                   them to spend their clients’ money before           ¶8 The adoption of this rule favors the
     (b) Any payment made as restitution         it is earned.                                  ease of enforcement over the protection of
under par. (a) does not limit, preclude or             ¶ 2 Although I join the majority         clients.
impair any liability for damages in any civil    in all other respects, I cannot join the            ¶9 Part of the justification for
action or proceeding for an amount in excess     majority in the adoption of the advanced       proposing this new advanced fee
of the payment.                                  fee alternative rule. I believe the adoption   alternative rule was that it was difficult
     (c) Upon ordering restitution to the        of this rule is fundamentally wrong, calls     to enforce the old rule on conversion. It
Wisconsin lawyers’ fund for client protection    into question our prior decisions which        makes no sense to me to make conversion
under par. (a)2., the supreme court shall        imposed discipline for conversion of client    lawful simply because it is difficult to
issue a judgment and furnish a transcript of     funds, and favors the ease of enforcement      enforce. The protection of clients’ funds is
the judgment to the Fund. The transcript of      over the protection of clients.                paramount, and I fear that the adoption of
the judgment may be filed and docketed in              ¶ 3 The adoption of the new rule is      this rule compromises that protection.
the office of the clerk of court in any county   fundamentally wrong.                                ¶10 For the above stated reasons, I
and shall have the same force and effect as            ¶ 4 In determining whether we            respectfully dissent to the adoption of SCR
judgments docketed under ss. 809.25 and          should adopt this portion of the petition,     20:1.15(b)(4m).
806.16, stats.                                   we need do nothing more than apply
     IT IS FURTHER ORDERED that                  fourth grade playground ethics: it is wrong    1
                                                                                                  SCR 20:1.15(b)(4m) reads in part:
notice of the repeal and recreation of SCR       to spend money that is not yours. Some         (4m) Alternative protection for advanced fees.
20:1.15 and the amendments to SCR 12.04,         call that stealing. As applied to attorneys,     A lawyer who accepts advanced payments
20:1.0, and 21.16 be given by a single                                                            of fees may deposit the funds in the lawyer’s
                                                 we used to call that conversion. Under
                                                                                                  business account, provided that a court of
publication of a copy of this order in the       the majority’s decision, we now call that        competent jurisdiction must ultimately ap-
official state newspaper and in an official      lawful.                                          prove the lawyer’s fee, or that the lawyer com-
publication of the State Bar of Wisconsin.             ¶ 5 The adoption of the advanced           plies with each of the following requirements:
     Dated at Madison, Wis., this 2nd day of     fee alternative rule calls into question our   a. Upon accepting any advanced payment of
                                                                                                  fees pursuant to this subsection, the lawyer
May, 2007.                                       prior decisions which imposed discipline         shall deliver to the client a notice in writing
                                                 for conversion of client funds.                  containing all of the following information ….
By the court:                                          ¶ 6 We have on several occasions in      2
                                                                                                  SCR 20:1.15(b)(4), effective July 1, 2004,
David R. Schanker                                the past imposed discipline for the very         provides in relevant part:
Clerk of Supreme Court                                                                          (b) Segregation of trust property…
                                                 conduct that we are now condoning.
                                                                                                (4) Unearned fees and cost advances. Unearned
                                                 As recently as April 19, 2007, the court         fees and advanced payments of fees shall be
                                                 found that an attorney who failed to hold        held in trust until earned by the lawyer, and
                                                 funds belonging to his client in trust was       withdrawn pursuant to SCR 20:1.15(g)….
                                                 guilty of violating former SCR 20:1.15(a).     Former SCR 20:1.15(a) applied to misconduct
                                                                                                  committed prior to July 1, 2004, and provided
                                                 Disciplinary Proceedings Against Winch,          in relevant part:
                                                 2007 WI 41, __ Wis. 2d __, __ N.W.2d __
                                                                                                (a) A lawyer shall hold in trust, separate from
                                                 (one-year suspension for failing to hold         the lawyer’s own property, that property of
                                                 funds in trust and other trust account           clients and third persons that is in the lawyer’s
                                                 violations). See, e.g., other recent cases       possession in connection with a representa-
                                                 in which an attorney was disciplined             tion or when acting in a fiduciary capacity…
                                                                                                  All funds of clients and third persons paid
                                                 for conduct which SCR 20:1.15(b)(4m)             to a lawyer or law firm shall be deposited in
                                                 now condones: Disciplinary Proceedings           one or more identifiable trust accounts ….
                                                 Against Cooper, 2007 WI 37, __ Wis.              The trust account shall be clearly designated
                                                 2d __, 729 N.W.2d 206 (three-year                as “Client’s Account” or “Trust Account” or
                                                                                                  words of similar import. No funds belonging
                                                 suspension for 35 instances of professional
                                                                                                  to the lawyer or law firm, except funds reason-
                                                 misconduct, including depositing $13,000         ably sufficient to pay or avoid imposition of
                                                 into his personal account rather than a          account service charges, may be deposited in
                                                 trust account); Disciplinary Proceedings         such an account….



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