What must an Oregon lawyer do when staff or a bookkeeper steals client funds from the trust account?
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This page answers the general question as of 2023. Ezel answers yours: whether it's allowed on your facts, under the current Oregon Rules of Professional Conduct, with citations.
Plain-English summary
The opinion (issued 2023, revised 2026) addresses a lawyer whose bookkeeper steals from the firm trust account, discovered when an overdraft notice goes to the bar. It assumes the lawyer was not involved in the theft and does not decide whether the lawyer failed to supervise. It answers three questions.
First, on notice: the opinion concludes that under Oregon RPC 1.4 the lawyer must communicate the theft of the client's trust money to the affected client within a reasonable time after discovering it, drawing on ABA Formal Opinion 481 (duty to disclose errors). Second, on conflicts: the opinion concludes the theft creates a conflict under Oregon RPC 1.7(a)(2), because the lawyer and client may end up in adverse roles (a claim, a witness in a criminal matter, a bar complainant). The lawyer must evaluate whether, under RPC 1.7(b)(1), the lawyer can still provide competent and diligent representation, and if so must obtain the client's informed-consent conflict waiver to continue; if the lawyer cannot meet that standard, the client refuses to waive, or the client discharges the lawyer, the lawyer must withdraw under RPC 1.16(a).
Third, on restoring the funds: the opinion concludes, following the companion OSB Formal Opinion 2022-199, that the lawyer may not unilaterally deposit the lawyer's own funds into the trust account to replace the stolen money. Instead, after disclosing the circumstances, the lawyer may (with the client's permission) write a check to the client for deposit into trust or pay those funds directly to the client. The opinion notes the lawyer cannot condition repayment on the client granting a conflict waiver.
In practice
Under this opinion, an Oregon lawyer who discovers staff theft from the trust account is acting within the rules by promptly telling the affected clients, treating the situation as a personal-interest conflict that requires an informed-consent waiver to keep handling each client's matter, and withdrawing if the waiver cannot be obtained or the lawyer cannot competently continue. The opinion treats restoration of the money as something done through the client, not by dropping the lawyer's own funds into trust, which a separate Oregon opinion treats as an impermissible "cushion."
The opinion expressly does not address the lawyer's supervisory liability, civil or criminal exposure, or insurance coverage for the theft; it is limited to the disclosure, conflict, and trust-handling duties.
Common questions
Q: Does an Oregon lawyer have to tell clients if staff stole their trust money?
A: Yes. The opinion concludes the lawyer must communicate the theft to affected clients under RPC 1.4 within a reasonable time after discovering it.
Q: Can the lawyer keep representing clients after their trust funds were stolen?
A: Only with a conflict waiver. The opinion concludes the theft creates a personal-interest conflict under RPC 1.7(a)(2), so the lawyer must reasonably believe they can competently continue and obtain each client's informed-consent waiver, or else withdraw under RPC 1.16(a).
Q: Can the lawyer just put their own money into the trust account to cover the loss?
A: No, not unilaterally. The opinion concludes, following OSB Op. 2022-199, that the lawyer may not deposit their own funds into trust, but may (with the client's permission) write a check to the client or pay the client directly to restore the funds.
Q: Can repayment be conditioned on the client signing a conflict waiver?
A: No. The opinion concludes the lawyer cannot predicate repayment on the client granting a conflict waiver to keep the lawyer on the matter.
Background and rules framework
The opinion interprets Oregon RPC 1.4 (communication), RPC 1.7 (personal-interest conflicts), RPC 1.15-1 (safekeeping client property and trust accounts, with the Bar's Rules of Licensure Title 6 on IOLTA), RPC 1.16 (withdrawal), and RPC 5.1 and 5.3 (supervision of firm lawyers and staff). These track Model Rules 1.4, 1.7, 1.15, 1.16, and 5.3. It builds on OSB Formal Opinion 2022-199 (third-party trust theft) and cites ABA Formal Opinion 481.
Citations and references
Rules of Professional Conduct:
- Oregon RPC 1.4 / Model Rule 1.4 (communication)
- Oregon RPC 1.7 / Model Rule 1.7 (personal-interest conflicts)
- Oregon RPC 1.15-1 / Model Rule 1.15 (safekeeping property; trust accounts)
- Oregon RPC 1.16 / Model Rule 1.16 (withdrawal)
- Oregon RPC 5.1, 5.3 / Model Rule 5.3 (supervision)
Cases:
- In re Strader, 27 DB Rptr 219 (2013), discipline for failure to supervise an office manager who stole client funds
- In re Gassner, 35 DB Rptr 13 (2021), discipline for failing to supervise a firm bookkeeper
Other opinions cited:
- OSB Formal Op. 2022-199: restoring client funds after third-party trust theft
- ABA Formal Op. 481 (2018): duty to disclose errors to clients
- OSB Formal Op. 2005-145: lawyers may not deposit own funds as trust "cushions"
See also
- OSB Ethics Op. 2022-199: Trust Account Theft Beyond the Firm
- ABA Formal Op. 475: Safeguarding Fees Subject to Division
- ABA Formal Op. 505: Fees Paid in Advance
Source
- Landing page: https://www.osbar.org/ethics/toc.html
- Original PDF: https://www.osbar.org/_docs/ethics/2023-202.pdf
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