Can a collections attorney deposit earned legal fees into an interest-bearing trust account and remit the accumulated excess interest to the clients?

Currency note

This opinion was issued in 1982, before Tennessee's adoption of the 2003 Rules of Professional Conduct, which replaced the former Code of Professional Responsibility. Subsequent rule 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 Treat this page as historical context, not current guidance.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.

Plain-English summary

An attorney who represented creditors in collection matters asked about depositing the legal fees generated from that work into an interest-bearing trust account, crediting the account quarterly toward accrued legal fees across all collection matters, and remitting any excess accumulated interest to the clients.

The opinion explained that Disciplinary Rule 3-102 prohibits an attorney from sharing legal fees with a non-lawyer, and Disciplinary Rule 9-102 requires an attorney to preserve the identity of funds belonging to the client and to promptly deliver what the client is entitled to receive. It noted the Board's own Formal Ethics Opinion 81-F-6 held it improper for an attorney to divide a fee with the client, and ABA Formal Ethics Opinion 157 similarly held it improper for an attorney to divide a court-awarded fee with the client.

The opinion held that the Code's minimum levels of conduct and mandatory requirements regarding fee division, preserving the identity of client funds, and prompt delivery of client funds should be strictly construed, and concluded that remitting excess interest accumulated on the attorney's own earned fees to clients is improper, because it functions as a division of the attorney's fee with the client.

Common questions

Q: Can a lawyer give a client the interest earned on the lawyer's own already-earned fees?

A: No. The opinion holds "remitting excess funds accumulated from interest on attorney's fees to clients is improper," treating it as a fee division prohibited by DR 3-102.

Q: Why does this count as fee division rather than just returning money to the client?

A: Because the interest accrues on funds that are already the attorney's earned fee, not client funds; the opinion applies the Board's prior holding in 81-F-6 that "it is improper for an attorney to divide his fee with his client," and the ABA's parallel holding in Formal Opinion 157.

Background and rules framework

The opinion applied Disciplinary Rule 3-102 (division of fees with a non-lawyer) and Disciplinary Rule 9-102 (preserving the identity of client funds) of the Tennessee Code of Professional Responsibility, together with the Board's Formal Ethics Opinion 81-F-6 and ABA Formal Ethics Opinion 157. The modern correlates are Model Rule 5.4 (professional independence of a lawyer) and Model Rule 1.15 (safekeeping property), noted here as navigational cross-references rather than rules the opinion itself applied.

Citations and references

Rules of Professional Conduct:

• DR 3-102 (fee division) and DR 9-102 (preserving client funds), Tennessee Code of Professional Responsibility
• Model Rule 5.4 (professional independence) and Model Rule 1.15 (safekeeping property), modern correlates

Other opinions cited:

• Tennessee Formal Ethics Opinion 81-F-6: improper for an attorney to divide a fee with the client
• ABA Committee on Professional Ethics, Formal Opinion 157: improper to divide a court-awarded attorney's fee with the client

See also

• Tennessee Op. 85-F-90: Interest on Separate Client Trust Accounts
• Tennessee Op. 85-F-97: Giving Interest from a Trust Account to Charity

Source

• Landing page: https://www.tbpr.org/ethic_opinions/82-f-30

Original opinion text

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

82-F-30 - Fee Division with Client

BOARD OF PROFESSIONAL RESPONSIBILITY OF THE SUPREME COURT OF TENNESSEE

FORMAL ETHICS OPINION 82-F-30

Inquiry is made concerning the propriety of an attorney depositing legal fees generated from representing creditors in collection matters in an interest bearing trust account to be credited quarterly to payment of accrued legal fees in all collection matters with any excess funds from accumulated interest thereon being remitted to the clients.

Disciplinary Rule 3-102 of the Code of Professional Responsibility prohibits an attorney from sharing legal fees with a non-lawyer. Disciplinary Rule 9-102 provides that the attorney is required to preserve the identity of the funds belonging to the client and to promptly deliver what the client is entitled to receive.

Formal Ethics Opinion 81-F-6 of the Ethics Committee of this Board states that it is improper for an attorney to divide his fee with his client. Formal Ethics Opinion 157 of the Ethics Committee of the American Bar Association states that it is improper for an attorney to divide the amount awarded by the court as attorney's fees with his client.

The minimum levels of conduct and mandatory requirements of the Disciplinary Rules stated in the Code of Professional Responsibility regarding the division of attorney's fees, preserving the identity of the client's funds and promptly delivering the client's funds should be strictly construed. It is, therefore, the opinion of this Committee that remitting excess funds accumulated from interest on attorney's fees to clients is improper.

This 18th day of June, 1982.

ETHICS COMMITTEE:

William R. Willis, Chairman

F. Evans Harvill

John R. Rucker, Senator

APPROVED AND ADOPTED BY THE BOARD