When may a Missouri lawyer disburse a deposited settlement check to the client and take the lawyer's fee?

Plain-English summary

Rule 4-1.15(a)(6), as applied in this 2020 opinion, prohibits disbursement while the lawyer has reasonable cause to believe the deposit has not actually been collected and until a reasonable collection period has passed. Comment [5] distinguishes good funds from a deposit merely shown as cleared.

The opinion states that ten days after the recorded deposit is presumed reasonable absent notice to wait longer, while a shorter period may sometimes suffice. Information creating doubt requires delayed disbursement and additional collection measures.

Once the lawyer reasonably believes the funds were collected, Rule 4-1.15(d) requires prompt payment to the client. The lawyer's fee leaves reasonably promptly after the funds become good, the client is billed, and the client has an opportunity to dispute or agrees to disbursement. The opinion states a one-month presumption for that lawyer-fee transfer.

In practice

Under the rule as described in this 2020 opinion, a bank indication that a check cleared is not alone the good-funds determination. Actual collection, available contrary information, client payment, billing, and dispute opportunity control the sequence.

Common questions

Q: Are cleared funds necessarily good funds?

A: No. Comment [5] distinguishes the concepts.

Q: What timing presumption did the opinion state for collection?

A: Ten days after the recorded deposit, unless the lawyer has notice requiring a longer wait; a shorter period may sometimes be reasonable.

Q: When is the client's share paid?

A: Promptly after the lawyer has reason to believe the institution collected the funds.

Q: When may the lawyer take the fee?

A: After good funds, billing, and a client opportunity to dispute or agreement, with the opinion stating a one-month reasonable-promptness presumption.

Background and rules framework

Rule 4-1.15(a)(6) and Comment [5] govern collection and good funds. Rule 4-1.15(d) governs prompt client delivery, and Comment [6] addresses removal of the lawyer's fee.

Citations and references

Rules of Professional Conduct:

• Missouri Rules 4-1.15(a)(6) and 4-1.15(d)
• Missouri Rule 4-1.15 Comments [5] and [6]

See also

• North Carolina RPC 232: Mortgage-Check Good Funds
• Missouri Informal Op. 2020-14: Expenses from Trust
• Minnesota LPRB Op. 9: Trust-Account Books and Records

Source

• Landing page: Missouri Informal Opinion 2020-15

Original opinion text

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

QUESTION: Attorney deposited a settlement check in the trust account. When should Attorney distribute the client’s portion and Attorney’s fees from the settlement?

ANSWER: Rule 4–1.15(a)(6) prohibits Attorney from disbursing funds deposited in the trust account if Attorney has reasonable cause to believe the funds have not actually been collected by the financial institution and until a reasonable period of time has passed for the financial institution to collect the funds. Comment [5] provides guidance that “good funds” should be distinguished from funds from a deposit that has “cleared.” What constitutes a reasonable period of time may vary depending, but ten days after the date the deposit is recorded is presumed to be reasonable, unless Attorney has notice of a reason to wait longer on a specific deposit. A shorter period of time may be reasonable in some circumstances. If Attorney has information that causes doubt about the collection of the deposit, Attorney should delay disbursement and take additional measures to ensure collection. Rule 4–1.15, Comment [5]. Once Attorney has reason to believe the funds have been collected by the financial institution, Attorney should disburse the funds promptly to the client. Rule 4–1.15(d). As to disbursement of Attorney’s fees, Comment [6] provides it should occur “reasonably promptly” after the settlement funds in the trust account become “good funds,” the client has been billed, and the client has had an opportunity to dispute the disbursement or otherwise has agreed to the disbursement. See Rule 4–1.15, Comment [6]. Disbursing Attorney’s portion of the funds within a period of one month shall be presumed to be reasonably promptly. Rule 4–1.15, Comment [6].