I withdrew from a case and I'm holding a former client's arbitration award in an interest-bearing account in the client's name. The client keeps refusing the check based on a mistaken belief about a collateral matter. What am I supposed to do with the money?
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This page answers the general question as of 2004. Ezel answers yours: whether it's allowed on your facts, under the current rules of professional conduct in your state, with citations.
Plain-English summary
The inquiring attorney had recently withdrawn as counsel of record in a civil matter after a disagreement with the client over how to proceed. The attorney continued to hold substantial funds belonging to the client, awarded after an arbitration whose appeals period had long passed, in a separate interest-bearing account in the client's name. The attorney explained that an interpleader action and depositing the funds with the court registry did not seem appropriate because there was no dispute about who owned the funds. The attorney had mailed the client a check, but the client returned it, continuing to refuse the funds under a mistaken belief that accepting them would forfeit rights in a separate, collateral matter.
The panel applied Rule 1.15 (Safekeeping Property), quoting subsections (a) and (b): subsection (a) requires a lawyer to hold client or third-person property separate from the lawyer's own, in a properly maintained account with complete records preserved for seven years after the representation ends; subsection (b) requires prompt notice of receipt and prompt delivery of funds the client is entitled to receive, along with a full accounting on request.
The panel found the attorney was already doing what Rule 1.15 requires: holding the funds in a separate interest-bearing account for the former client's benefit. It concluded that if the client continues to refuse to accept the money, Rule 1.15 requires the attorney to keep maintaining the trust account holding the client's funds.
In practice
The opinion holds that, under the Rhode Island rules as they stood at the time of the opinion, a lawyer who has already delivered notice and attempted delivery of undisputed client funds satisfies Rule 1.15 by continuing to hold those funds in a properly maintained, separate interest-bearing trust account for as long as the client refuses to accept them, without needing to resort to an interpleader action where there is no genuine dispute over ownership.
Common questions
Q: My former client won't accept funds I'm holding for them, even after I mailed a check. What am I supposed to do?
A: Keep holding the funds in trust. The panel held Rule 1.15 requires maintaining the trust account for as long as the client continues to refuse the money.
Q: Should I file an interpleader action or deposit the funds with the court instead?
A: Not on facts like these. The inquiring attorney concluded interpleader was not appropriate because there was no dispute about ownership of the funds, and the panel's analysis proceeded on that basis without questioning it.
Q: Does it matter why the client is refusing the funds, even if the client's reason seems mistaken?
A: Not to the Rule 1.15 obligation itself. The panel's holding turned on the attorney's safekeeping duties under Rule 1.15, not on evaluating whether the client's stated reason for refusing the funds was sound.
Background and rules framework
The opinion applies Rule 1.15(a), (b) (Safekeeping Property), the Model Rule counterpart of the same number, quoted at length: the separate-account and seven-year record-retention requirements in subsection (a), and the prompt-notice, prompt-delivery, and accounting requirements in subsection (b).
Citations and references
Rules of Professional Conduct:
- MR 1.15(a), (b) (Safekeeping Property) / RI Rule 1.15(a), (b)
See also
- Alabama State Bar Op. 1988-92: Unclaimed Client Trust Funds Escheat to the State
- Alabama State Bar Op. 1990-08: Unclaimed Client Trust Funds, Lawyer's Obligation to Ascertain the Owner
Source
- Landing page: https://www.courts.ri.gov/attorney-resources/Pages/Ethics-Advisory-Panel-default.aspx
- Original PDF: https://www.courts.ri.gov/Opinions/EAP%202004-07.pdf
Original opinion text
Reproduced from the official source for research purposes. The linked source is authoritative.
Final
Rhode Island Supreme Court
Ethics Advisory Panel Opinion No. 2004-07 Request No. 891
Issued November 18, 2004
FACTS
The inquiring attorney recently withdrew as attorney of record in a civil matter
where the client and the inquiring attorney could not agree on how to proceed with the
case. The attorney is currently holding substantial funds of the client in an interest-bearing
account with the client’s name on it. The money was awarded to the client following an
arbitration, the appeals period for which has long passed. The inquiring attorney states that
commencing an interpleader action and depositing the funds in the court registry do not
appear appropriate under these facts, as there is no dispute about the ownership of the
funds.
The inquiring attorney mailed a check to the client, but the client returned the check
to the attorney. The inquiring attorney states that the client refused and continues to refuse
to accept the check under an erroneous belief that by accepting it, the client will forfeit
rights in a collateral matter.
ISSUE PRESENTED
The inquiring attorney asks what to do with client’s funds which the attorney is
holding in an interest-bearing account in the client’s name when the client refuses to accept
the funds.
OPINION
The inquiring attorney is doing all that is required under the Rules of Professional
Conduct, i.e., holding the client’s funds for safekeeping. If the client continues to refuse
to accept the funds, the inquiring attorney must maintain the trust account pursuant to Rule
1.15.
REASONING
Rule 1.15 entitled “Safekeeping property” states in pertinent part:
(a) A lawyer shall hold property of clients or third persons
that is in a lawyer's possession in connection with a
representation separate from the lawyer's own property.
Funds shall be kept in a separate account maintained in the
state where the lawyer's office is situated or elsewhere with
Final 2004-07
Page 2
the consent of the client or third person. Other property
shall be identified as such and appropriately safeguarded.
Complete records of such account funds and other property
shall be kept by the lawyer and shall be preserved for a
period of seven (7) years after termination of the
representation as provided under Rule 1.16.
(b) Upon receiving funds or other property in which a
client or third person has an interest, a lawyer shall
promptly notify the client or third person. Except as stated
in this rule or otherwise permitted by law or by agreement
with the client, a lawyer shall promptly deliver to the client
or third person any funds or other property that the client or
third person is entitled to receive and, upon request by the
client or third persons, shall promptly render a full
accounting regarding such property.
***
It appears from the facts presented that the inquiring attorney is doing that which
is required under Rule 1.15. The attorney is holding the funds in a separate interest-
bearing account for the benefit of his/her former client. The Panel believes that if the
client refuses to accept the money Rule 1.15 requires the inquiring attorney to maintain
the trust account with the client’s funds.
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