If a bank insists on depositing a credit-card retainer into a lawyer's general business account, can the lawyer leave it there instead of in an IOLTA or trust account?

Plain-English summary

A lawyer asked whether a retainer paid by credit card could be deposited into the lawyer's general business account when the bank insisted on placing credit-card receipts there rather than in the lawyer's IOLTA account. The Commission framed the answer under Maine Bar Rule 3.6(e), which requires that client funds, or funds belonging in part to a client and in part to the lawyer, be kept in a segregated account rather than a general business account.

The Commission defined client funds as funds held by the lawyer that may be refundable to the client. If there are no circumstances under which any portion of the funds could be refunded, the funds can be characterized as the lawyer's or law firm's; all other funds received from the client are client funds. So the lawyer must first decide to whom the funds belong, presently or potentially. Funds paid for services already rendered, or to reimburse advances the lawyer has already paid, belong to the lawyer; funds paid for services not yet rendered or costs not yet paid belong to the client.

Reading Rule 3.6(e)(1) together with subparagraph (ii), the Commission reconciled the rule's apparent internal tension by treating the phrase "retainers and advances for costs and expenses" to mean only funds that are truly non-refundable. Funds that are potentially refundable, whatever label they carry, are wholly or partly client funds that must be segregated. The Commission concluded that, despite the bank's insistence, funds that are client funds may not be placed in a general business account but must go directly into an IOLTA or other identifiable account. It referred lawyers to its earlier Opinion #98 for questions about later withdrawing from an IOLTA account the portion of funds to which the lawyer becomes entitled.

Currency note

This opinion was issued in 2000, before Maine's replacement of the former Maine Bar Rules with the Maine Rules of Professional Conduct (effective August 1, 2009). 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 Treat this page as historical context, not current guidance.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, deadline, or requirement mentioned here.

Common questions

Q: Can a lawyer keep a credit-card retainer in the general business account if the bank requires it?

A: Not if the funds are client funds. The opinion concluded that, despite the bank's insistence, funds that are potentially refundable to the client must go into an IOLTA or other identifiable account, not the general business account.

Q: How did the opinion decide whether a retainer is client money?

A: By asking whether any portion could be refunded. The opinion treated funds as client funds whenever they might be refundable; only funds with no circumstances under which they could be refunded counted as the lawyer's.

Q: Did the opinion treat all retainers the same way?

A: No. The opinion read "retainers and advances" in Rule 3.6(e)(1) to mean only truly non-refundable funds, so a non-refundable flat fee could be the lawyer's, while a refundable advance for unearned services or unincurred costs remained client funds.

Background and rules framework

The opinion interprets Maine Bar Rule 3.6(e), and specifically Rule 3.6(e)(1) and (e)(1)(ii), which govern the segregation of client funds and funds belonging in part to a client and in part to the lawyer. This corresponds to ABA Model Rule 1.15 (safekeeping of client and third-party property). The opinion relied on its own definition of client funds as funds that may be refundable and reconciled the rule's "retainers and advances" exception with its segregation requirement.

Citations and references

Rules of Professional Conduct:

• Model Rule 1.15 (safekeeping property)
• Maine Bar Rule 3.6(e), 3.6(e)(1), 3.6(e)(1)(ii)

Other opinions cited:

• Maine Professional Ethics Commission Opinion #98 (withdrawal of funds from IOLTA accounts).

See also

• ABA Formal Op. 505: Fees Paid in Advance
• NY State Bar Op. 816: Advance-Payment Retainer and Trust Account
• NY State Bar Op. 763: Credit-Card Payments and Fee Deduction

Source

• Landing page: https://mebaroverseers.org/attorney_services/opinion.html?id=89499

Original opinion text

Reproduced from the official source for research purposes. The linked source is authoritative.

Issued by the Professional Ethics Commission

Date Issued: March 7, 2000

QUESTION

May a lawyer accept a retainer from a client by credit card if the lawyer's bank insists on placing the funds in the lawyer's general business account rather than the lawyer's IOLTA account?

OPINION

We start our analysis of this question by noting that client funds or funds belonging in part to a client and in part presently or potentially to a lawyer or law firm must be kept in a segregated account, in some instances an IOLTA account, rather than a general business account pursuant to Rule 3.6(e) of the Maine Bar Rules. For the purposes of this analysis, we determine that client funds are funds held by the lawyer that may be refundable to the client. Put differently, if there are no circumstances under which the funds or any portion of the funds may be refunded to the client, then the funds can be fairly characterized as funds of the lawyer or law firm. All other funds received from the client are client funds.

Accordingly, before determining into what account the funds shall be placed, the lawyer must first determine to whom the funds belong, presently or potentially. If the lawyer decides, based upon an explicit understanding reached with the client that the funds belong to the lawyer or law firm and there are no circumstances under which the funds (or any portion of the funds) may be refunded to the client, then the lawyer may place the funds in a general business account. If on the other hand, the lawyer determines that the funds are client funds, then the rule prohibits placement in a general business account.

Funds paid by a client for services rendered and funds paid by a client to reimburse a lawyer for advances for costs and expenses paid by a lawyer would be expected to belong to the lawyer, whereas funds paid by a client for services not yet rendered and for costs and expenses not yet paid by the lawyer would be expected to belong to the client.

Having analyzed the problem as we have, we turn now to that portion of Maine Bar Rule 3.6(e)(1) that provides as follows:

All funds of clients paid to a lawyer or law firm, other than retainers and advances for costs and expenses, shall be deposited in one or more identifiable accounts . . .. No funds belonging to the lawyer or law firm shall be deposited therein except as follows: . . . (ii) Funds belonging in part to a client and in part presently or potentially to a lawyer or law firm must be deposited therein.

We note that the provisions of Rule 3.6(e)(1) and 3.6(e)(1)(ii) appear to contradict each other in that paragraph (1) excepts retainers and advances, but subparagraph (ii) makes no such exception. The provisions are reconciled by interpreting the phrase "retainers and advances for costs and expenses" to mean only those funds that are truly non-refundable to the client. In contrast, funds that are potentially refundable to the client, whether labeled retainers, advances, or something else, are fully or partially client funds and accordingly, must be segregated in accordance with section (ii).

We also recognize that in revising Rule 3.6(e), the Advisory Committee on Professional Responsibility added the word "retainer? in the first paragraph. The reporter's note indicates that this change was made as "advance payment of fees is not improper.? Although this change and the reason therefore appear to be as ambiguous as the rule, we construe the phrase ?advance payment of fees" to mean payment of a flat fee by a client that is non-refundable.

The answer to the question posed then turns upon whether the funds that are the subject of the credit card payment are potentially refundable (in which case they are client funds) or not (in which case they are not client funds). Once the lawyer answers that question, the options available to the lawyer are clear. Despite the bank's insistence, funds that are client funds may not be placed in a general business account, but rather must go directly into either an IOLTA account or other identifiable account.

We point out that once client funds are placed in an IOLTA account, any portion of those funds to which a lawyer becomes entitled may then be transferred to the lawyer's general business account. This issue was addressed in Opinion #98 of this Commission and should be referred to for questions concerning the withdrawal of funds from IOLTA accounts.