Can North Carolina lawyers in an interstate firm let client funds be deposited in the firm's out-of-state trust account without the client's consent?

Plain-English summary

North Carolina lawyers were affiliated with an interstate firm whose central accounting office in Washington, DC, issued all bills and received payments. Client overpayments, and likely advance fees, were deposited in the firm's DC trust account under that jurisdiction's rules, and the North Carolina lawyers' clients were not routinely asked to consent to having their funds held outside North Carolina. The opinion addressed whether this was permissible without the clients' knowledge and consent.

The opinion concluded it was not. Under the then-current Rules 10.1(b) and (c), funds received by North Carolina lawyers had to be deposited in trust accounts maintained at banks in North Carolina, unless the client otherwise directed in writing. Because the arrangement contemplated depositing client funds in out-of-state trust accounts without consultation with and written direction from the clients to whom the funds belonged, no North Carolina lawyer could ethically participate.

Currency note

This opinion was issued in 1990, before North Carolina's adoption of the 2003 revisions to the Rules of Professional Conduct, and it cites the trust-account rule numbering then in effect (Rules 10.1(b) and (c)). The current trust-account rules are renumbered, and subsequent 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 Treat this page as historical context, not current guidance.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: Could North Carolina lawyers keep client funds in an out-of-state trust account?

A: Not without written direction. The opinion concluded the rules then required client funds to be held in North Carolina bank trust accounts unless the client directed otherwise in writing.

Q: Did the clients have to consent to the out-of-state arrangement?

A: Yes. The opinion concluded that because the firm deposited client funds outside North Carolina without consultation with and written direction from the clients, no North Carolina lawyer could ethically participate.

Background and rules framework

At the time, the opinion applied North Carolina's trust-account rules, then Rules 10.1(b) and (c), requiring client funds to be held in trust accounts at North Carolina banks absent the client's written direction. In current numbering the subject matter corresponds to Model Rule 1.15 (safekeeping property).

Citations and references

Rules of Professional Conduct:

• N.C. Rules 10.1(b), (c) (then in effect): location of client trust accounts
• Current counterpart: Model Rule 1.15 (safekeeping property)

See also

• NC State Bar 2009 FEO 4: Credit Card Trust Acct
• NC State Bar 2003 FEO 11: Fee Split, Old Firm

Source

• Landing page: https://www.ncbar.gov/for-lawyers/ethics-and-governing-rules/ethics-opinions/opinions/rpc-96/

Original opinion text

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

Inquiry:

North Carolina lawyers are affiliated with an interstate law firm having its primary office in Washington, DC. All bills issue from the firm's central accounting office in Washington and clients are asked to remit payment directly to that office. Occasionally, clients overpay bills and such overpayments are deposited in the firm's trust account in the District of Columbia where they are handled in accordance with rules and regulations governing the maintenance of attorney trust accounts in that jurisdiction. It is also likely that any fees which are paid in advance of work being done would also be deposited in the Washington trust account. Clients of the North Carolina lawyers whose funds are being deposited in the Washington trust account are not routinely asked to consent to the deposit of their funds in a trust account maintained outside the State of North Carolina.

May North Carolina lawyers permit funds received on behalf of their clients to be deposited in the out-of-state trust account without their clients' knowledge and consent?

Opinion:

No. Rules 10.1(b) and (c) of the Rules of Professional Conduct require that funds received by North Carolina lawyers be deposited in trust accounts maintained at banks in North Carolina, unless the client has otherwise directed in writing. Since the arrangement described in the inquiry contemplates the deposit of such funds in trust accounts maintained outside the state of North Carolina without consultation with and direction from the clients to whom such funds belong, no North Carolina lawyer could ethically participate.