ABA Task Force Rule 1.15 by liwenting

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									              ABA RULES                                ABA COMMENTS


RULE 1.15: SAFEKEEPING                       RULE 1.15: SAFEKEEPING
PROPERTY                                     PROPERTY

(a) A lawyer shall hold property of
clients or third persons that is in a
lawyer's possession in connection with a
representation separate from the lawyer's
own property. Funds shall be kept in a
separate account maintained in the state
where the lawyer's office is situated, or
elsewhere with the consent of the client
or third person. Other property shall be
identified as such and appropriately
safeguarded. Complete records of such
account funds and other property shall
be kept by the lawyer and shall be
preserved for a period of [five years]
after termination of the representation.

(b) A lawyer may deposit the lawyer's        The Commission heard testimony that in
own funds in a client trust account for      some jurisdictions lawyers are unable to
the sole purpose of paying bank service      avoid bank charges unless they are
charges on that account, but only in an      permitted to deposit money in a client
amount necessary for that purpose.           trust account to cover such charges. The
                                             addition of this new paragraph is
                                             designed to address that problem.

(c) A lawyer shall deposit into a client     This new paragraph provides needed
trust account legal fees and expenses that   practical guidance to lawyers on how to
have been paid in advance, to be             handle advance deposits of fees and
withdrawn by the lawyer only as fees are     expenses.     The      Commission    is
earned or expenses incurred.                 responding to reports that the single
                                             largest class of claims made to client
                                             protection funds is for the taking of
                                             unearned fees.

(b) (d) Upon receiving funds or other
property in which a client or third person
has an interest, a lawyer shall promptly
notify the client or third person. Except
as stated in this rule or otherwise
permitted by law or by agreement with
the client, a lawyer shall promptly
deliver to the client or third person any
funds or other property that the client or
third person is entitled to receive and,



RULE 1.15
             ABA RULES                                 ABA COMMENTS


     SAFEKEEPING PROPERTY                         SAFEKEEPING PROPERTY
upon request by the client or third
person, shall promptly render a full
accounting regarding such property.

(c) (e) When in the course of                Current Rule 1.15(c) is presently written
representation a lawyer is in possession     to cover disputes between the lawyer and
of property in which both two or more        "another person," usually the client. The
persons (one of whom may be the              change proposed recognizes that at least
lawyer and another person) claim             three kinds of disputes are in fact
interests, the property shall be kept        possible: client-lawyer, client-creditor
separate by the lawyer until there is an     and lawyer-client's creditor. The
accounting and severance of their            proposed change thus uses more general
interests. If a dispute arises concerning    language, tightens the first two sentences
their respective interests, the portion in   into one and reiterates the lawyer's duty
dispute shall be kept separate by the        to pay over undisputed sums. The final
lawyer until the dispute is resolved. The    additional sentence clarifies the lawyer's
lawyer shall promptly distribute all         duty to promptly distribute all portions
portions of the property as to which the     of the property that are not subject to
interests are not in dispute.                dispute.




RULE 1.15
            ABA RULES         ABA COMMENTS


    SAFEKEEPING PROPERTY   SAFEKEEPING PROPERTY




RULE 1.15
            ABA RULES         ABA COMMENTS


    SAFEKEEPING PROPERTY   SAFEKEEPING PROPERTY




RULE 1.15
            ABA RULES         ABA COMMENTS


    SAFEKEEPING PROPERTY   SAFEKEEPING PROPERTY




RULE 1.15
            ABA RULES         ABA COMMENTS


    SAFEKEEPING PROPERTY   SAFEKEEPING PROPERTY




RULE 1.15
              ABA RULES                                 ABA COMMENTS


     SAFEKEEPING PROPERTY                          SAFEKEEPING PROPERTY




Comment

[1] A lawyer should hold property of          [1] Consistent with the Commission's
others with the care required of a            action with respect to Rule 1.18, a
professional fiduciary. Securities should     phrase has been added to make clear that
be kept in a safe deposit box, except         prospective clients are included among
when some other form of safekeeping is        the third parties to whom the lawyer
warranted by special circumstances. All       owes a duty to protect property pursuant
property that is the property of clients or   to this Rule.
third    persons     should,     including
prospective clients, must be kept             While the black letter of this Rule is
separate from the lawyer's business and       written in mandatory terms, the
personal property and, if monies, in one      Comments are often permissive.
or more trust accounts. Separate trust        Sometimes that may be appropriate, as
accounts may be warranted when                where a safe deposit box is suggested
administering estate monies or acting in      unless something else is warranted by
similar fiduciary capacities. A lawyer        the circumstances. When the issue is
should maintain on a current basis books      close, permissive language has been
and records in accordance with generally      retained. However, Rule 1.15(a) clearly
accepted accounting practice and comply       requires that client property, including
with any recordkeeping rules established      money, be kept separate from the
by law or court order. See, e.g., ABA         lawyer's own, and the Comment has
Model Financial Recordkeeping Rule.           been changed to make that clear. A
                                              sentence has been added to provide
                                              guidance to lawyers regarding the proper
                                              maintenance of trust accounts.




RULE 1.15
              ABA RULES                                 ABA COMMENTS


     SAFEKEEPING PROPERTY                          SAFEKEEPING PROPERTY




[2] While normally it is impermissible to     [2] This new Comment addresses new
commingle the lawyer's own funds with         paragraph (b).
client funds, paragraph (b) provides that
it is permissible when necessary to pay
bank service charges on that account.
Accurate records must be kept regarding
which part of the funds are the lawyer's.

[2] [3] Lawyers often receive funds           [3] This Comment deals with handling
from third parties from which the             client funds that may be set aside for
lawyer's fee will be paid. If there is risk   payment of fees. The current language
that the client may divert the funds          refers only to funds received from third
without paying the fee, the The lawyer is     parties, whereas the usual payer will be
not required to remit the portion from        the client. Further, the lawyer should not
which the fee is to be paid to the client     have to show that the client is in fact
funds that the lawyer reasonably              likely to leave town if, pursuant to
believes represent fees owed. However,        agreement, the lawyer is entitled to have



RULE 1.15
              ABA RULES                                 ABA COMMENTS


      SAFEKEEPING PROPERTY                          SAFEKEEPING PROPERTY
a lawyer may not hold funds to coerce a       the security of funds paid over before the
client into accepting the lawyer's            fee is actually earned.
contention. The disputed portion of the
funds should must be kept in a trust          In addition, as in Comment [1], the clear
account and the lawyer should suggest         Rule 1.15(a) and (e) requirements that
means for prompt resolution of the            disputed client funds be kept in a
dispute, such as arbitration. The             separate account is made mandatory
undisputed portion of the funds shall be      rather than permissive.
promptly distributed.

[3] [4] Third Paragraph (e) also              [4] This Comment deals with a practical
recognizes that third parties, such as a      problem in which a client's creditor tries
client's creditors, may have just lawful      to get at funds in the hands of the
claims against specific funds or other        lawyer. There is no doubt that, as a
property in a lawyer's custody, such as a     matter of substantive law, in some cases
client's creditor who has a lien on funds     the lawyer would be required to make
recovered in a personal injury action. A      the creditor whole if the lawyer remitted
lawyer may have a duty under applicable       property to the client to which the
law to protect such third-party claims        creditor was found entitled. In those, but
against wrongful interference by the          only those, cases, paragraph (e)
client, and accordingly may. In such          mandates a lawyer's refusal to remit the
cases, when the third-party claim is not      funds to the client until the dispute is
frivolous under applicable law, the           resolved, while this Comment reinforces
lawyer must refuse to surrender the           and tries to explain this sometimes
property to the client until the claims are   controversial point. The Comment
resolved. However, a A lawyer should          further explains that the lawyer's duty to
not unilaterally assume to arbitrate a        protect client creditors only exists when
dispute between the client and the third      the creditor has a claim against specific
party, but, when there are substantial        funds being held by the lawyer and that
grounds for dispute as to the person          the lawyer's duty to protect the third
entitled to the funds, the lawyer may file    party exists only when there is a
an action to have a court resolve the         nonfrivolous claim under applicable law.
dispute.                                      When there are substantial grounds for
                                              dispute as to the person entitled to the
                                              funds, the lawyer may file an action to
                                              have a court resolve the dispute.

[4] [5] The obligations of a lawyer           [5] These changes clarify that when a
under this Rule are independent of those      lawyer holds funds in a capacity other
arising from activity other than              than as a lawyer representing a client,
rendering legal services. For example, a      this Rule does not apply.
lawyer who serves only as an escrow
agent is governed by the applicable law
relating to fiduciaries even though the
lawyer does not render legal services in



RULE 1.15
             ABA RULES                                ABA COMMENTS


      SAFEKEEPING PROPERTY                       SAFEKEEPING PROPERTY
the transaction and is not governed by
this Rule.

[5] [6] A "clients' security lawyers'       [6] The change to "lawyers' fund for
fund" for client protection provides a      client protection" reflects the current
means through the collective efforts of     nomenclature for these funds. The new
the bar to reimburse persons who have       language in the second sentence
lost money or property as a result of       indicates a lawyer has an obligation to
dishonest conduct of a lawyer. Where        contribute to these funds in jurisdictions
such a fund has been established, a         where they are mandatory.
lawyer must participate where it is
mandatory, and, even when it is
voluntary, the lawyer should participate.




RULE 1.15

								
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