Can a law firm endorse and deposit a settlement or refund check made out to a client the firm cannot locate, and take its fee?

Plain-English summary

A law firm represented hundreds of clients on a contingent-fee basis in real-estate tax protest cases and received refund checks from the County Assessor payable to clients, but despite skip-tracing efforts could not locate several clients. The firm's fee contract did not authorize it to endorse client checks, and the checks were frequently under $100. The firm asked whether it could endorse and deposit the checks, take its fee, hold the checks, or fix past improper endorsements.

The opinion concluded that the Illinois Supreme Court had already answered these questions in In re Walner: absent a narrowly drawn power of attorney, a lawyer cannot negotiate a missing client's check or pay itself a fee. It held that Rule 1.15 requires the firm to keep client checks safe but does not empower the firm to sign clients' names absent a narrowly crafted power of attorney in the fee agreement, and that under Rule 1.5 the firm may withdraw its contingent fee from settlement proceeds only if the client specifically authorized it. The opinion stressed that the small dollar amounts did not matter, because there is no "cut-rate" version of the Rules of Professional Conduct.

On correcting past practice, the opinion concluded the firm could not fully undo the negotiation of the missing clients' checks, but should repay, with interest, into its fiduciary fund any fees it had paid itself from improperly negotiated checks. Going forward, the opinion stated the firm should stay in contact with clients and obtain specific authorization to negotiate the refund checks.

Currency note

This opinion was issued in 1996, before Illinois adopted the 2010 Illinois Rules of Professional Conduct. The ISBA Board of Governors affirmed the opinion in January 2010 as generally consistent with the 2010 Rules (referring to Rules 1.5 and 1.15), while noting the specific standards referenced may differ from the 2010 Rules. Subsequent rule amendments or later opinions may have changed the analysis. Treat this page as historical context, not current guidance. Verify against current rules before relying on any specific rule or requirement mentioned here.

Common questions

Q: Can a firm endorse a check made out to a client it cannot find?

A: No. The opinion concluded that, absent a narrowly drawn power of attorney, a firm cannot negotiate a missing client's check, citing In re Walner.

Q: Can the firm at least take its own contingent fee out of the check?

A: No. The opinion held that under Rule 1.5 the firm may withdraw its fee from settlement proceeds only if the client specifically authorized it, and it cannot pay itself from a missing client's check.

Q: Does it matter that the checks are small?

A: No. The opinion stated there is no "cut-rate" version of the rules; the small amounts did not change the analysis. The firm must keep the checks safe under Rule 1.15.

Q: What should a firm do if it already negotiated such checks?

A: The opinion concluded the firm could not fully undo the negotiations but should repay, with interest, into its fiduciary fund any fees it paid itself from improperly negotiated checks.

Background and rules framework

The opinion interpreted Illinois Rule 1.15 (safekeeping client property; Model Rule 1.15) and Rule 1.5 (fees; Model Rule 1.5), applying the Illinois Supreme Court's holding in In re Walner that a lawyer needs a narrowly drawn power of attorney to negotiate a client's check.

Citations and references

Rules of Professional Conduct:

• Model Rule 1.15 (safekeeping property) / Illinois Rule 1.15
• Model Rule 1.5 (fees) / Illinois Rule 1.5

Cases:

• In re Walner, 119 Ill.2d 511, 519 N.E.2d 903 (1988), a lawyer cannot negotiate a missing client's check absent a narrow power of attorney
• In re Samuels, 126 Ill.2d 509, 535 N.E.2d 808 (1989), no "cut-rate" version of the disciplinary rules

Other opinions cited:

• ISBA Advisory Opinion No. 88-4: negotiating client checks

See also

• ISBA Ethics Op. 97-08: Extra Fee for Lien Reduction
• ISBA Ethics Op. 99-06: Lawyer as a Paid Trust Administrator

Source

• Landing page: https://www.isba.org/ethics/opinions/9511