After a security breach or identity fraud drains a trust account, can a lawyer deposit the lawyer's own money into the account to cover the loss?
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This page answers the general question as of 2022. Ezel answers yours: whether it's allowed on your facts, under the current Oregon Rules of Professional Conduct, with citations.
Plain-English summary
A lawyer wants to deposit the lawyer's own money into the lawyer trust account to correct problems outside the lawyer's control, such as third-party theft from a security breach or identity fraud, in order to safeguard the funds in the account or to disburse funds promptly when clients request them. The opinion clarifies that "outside the lawyer's control" means third parties the lawyer has no relationship with, not the lawyer's own employees, staff, or bookkeepers. The opinion asks whether the lawyer may make such a deposit, and answers no, with a path to restoring the client's funds.
The opinion applies Oregon RPC 1.15-1(a), which requires holding client property separate from the lawyer's own, and Oregon RPC 1.15-1(b), which lets a lawyer deposit the lawyer's own funds into a trust account only to pay bank service charges or meet minimum balance requirements, and only in the amounts necessary. Citing OSB Formal Ethics Opinion 2005-145, which held that 1.15-1(b) does not allow a financial cushion against bookkeeping or bank errors, the opinion concludes a lawyer likewise may not deposit the lawyer's own money into the trust account to mitigate losses from a security breach, identity theft, or other causes. To comply with the duty to safeguard client property, however, the lawyer may write a check to the affected client, drawn on the lawyer's own funds, to restore or repay the funds.
The opinion identifies two further duties. First, under Oregon RPC 1.7(a)(2), restoring lost funds can create a self-interest conflict, more likely if the amount is material to the representation; the lawyer must determine whether the rule applies and, if so, obtain written informed consent under Oregon RPC 1.7(b) to continue. Second, under Oregon RPC 1.4 and Oregon RPC 1.15-1(d), the lawyer must inform the client of the loss of the client's property from the trust account, of the lawyer's use of the lawyer's own funds to replace it, and of enough information for the client to make informed decisions, including a clear statement that the lawyer is using the lawyer's own funds to replace the client's property and disclaims all rights to those funds. The opinion does not address the effect on other obligations, such as the duties to safeguard property, review the trust account, or supervise other lawyers.
In practice
This opinion (issued 2022) interprets the current Oregon Rules of Professional Conduct. The opinion holds that a lawyer cannot use the trust account as a place to deposit the lawyer's own funds to cover theft or fraud losses, because Oregon RPC 1.15-1(b) narrowly limits when a lawyer's own money may sit in trust. Per the opinion, the correct response is to repay the affected client directly from the lawyer's own funds, with a clear statement disclaiming any interest in those funds, and to give the client notice and information under Oregon RPC 1.4 and 1.15-1(d). The opinion holds that the lawyer must also assess whether restoring the funds creates a self-interest conflict under Oregon RPC 1.7(a)(2) and obtain written informed consent if it does.
Common questions
Q: After a trust account is drained by theft or fraud, can the lawyer just deposit personal funds to cover it?
A: No. The opinion concludes a lawyer may not deposit the lawyer's own money into the trust account to mitigate theft or fraud losses, because Oregon RPC 1.15-1(b) allows the lawyer's own funds only for bank charges and minimum-balance requirements.
Q: How can the lawyer make the client whole?
A: The opinion concludes the lawyer may write a check to the affected client, drawn on the lawyer's own funds, to restore or repay the lost funds, with proper notice to the client.
Q: Does replacing the funds create a conflict?
A: It can. The opinion concludes that restoring lost funds may create a self-interest conflict under Oregon RPC 1.7(a)(2), especially if the amount is material, in which case the lawyer must obtain written informed consent to continue.
Q: What must the lawyer tell the client?
A: The opinion concludes the lawyer must inform the client of the loss, of the lawyer's use of the lawyer's own funds to replace it, and clearly state that the lawyer is replacing the client's property and disclaims all rights to those funds.
Background and rules framework
The opinion interprets Oregon RPC 1.15-1(a), (b), and (d) (safekeeping property; limited deposit of the lawyer's own funds; notice on receiving client property), Oregon RPC 1.7(a)(2) (self-interest conflicts), and Oregon RPC 1.4 (communication), corresponding to Model Rules 1.15, 1.7, and 1.4. It follows OSB Formal Ethics Opinion 2005-145 on the limits of depositing the lawyer's own funds in trust.
Citations and references
Rules of Professional Conduct:
- Oregon RPC 1.15-1(a), (b), (d) / Model Rule 1.15 (safekeeping property; lawyer's own funds; notice)
- Oregon RPC 1.7(a)(2) / Model Rule 1.7 (self-interest conflicts; informed consent)
- Oregon RPC 1.4 / Model Rule 1.4 (communication)
Other opinions cited:
- OSB Formal Ethics Op. No. 2005-145 (no trust-account cushion of the lawyer's own funds)
See also
- OSB Ethics Op. 2005-145: Trust-Account Cushions to Avoid Overdrafts
- OSB Ethics Op. 2005-149: Replenishing a Trust Account When Fees Are Disputed
- OSB Ethics Op. 2005-172: Accepting Credit Card Retainer Payments
Source
- Landing page: https://www.osbar.org/ethics/toc.html
- Original PDF: https://www.osbar.org/_docs/ethics/2022-199.pdf
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