Opinion #98. Allowing Undisbursed Fees Earned to Remain in Client Trust Account

Issued by the Professional Ethics Commission

Date Issued: August 16, 1989

Facts

Attorney A receives a $2,000 advance against fees to commence some legal work on behalf of Client C. Their agreement is that she would charge her time against these funds at a rate of $100 per hour, and the fee is due when earned.

Attorney A performs 20 hours worth of work and writes to Client C informing him of the status of the case, supplying some requested information and informing Client C that she needs an additional $1,000 to continue with the work. Client C never writes back or otherwise responds to Attorney A.

To date, Attorney A has kept the entire original $2,000 in her client trust account.

Questions

  1. Has Attorney A commingled her own funds with her client’s funds by not withdrawing her fees as earned?

  2. If the answer above is yes, what is a reasonable time to make withdrawals of such fees as earned so as to not commingle?

Opinion

Determination of the questions before the Commission requires an interpretation of Maine Bar Rule 3.6(f), “Preserving Identity of Funds and Property.” This rule directs all lawyers and law firms to place any funds paid by a client, other than retainers and advances for costs and expenses, into “one or more identifiable accounts.” The rule prohibits any funds “belonging to the lawyer or law firm” from being deposited in this account, with the following relevant exception, contained in Rule 3.6(f)(1)(ii):

Funds belonging in part to a client and in part presently or potentially to a lawyer or law firm must be deposited therein, but the portion belonging to the lawyer or law firm may be withdrawn when due unless the right to receive it is disputed by the client; in that event, the disputed portion shall not be withdrawn until the dispute is finally resolved.

Thus, unless there is a dispute between the lawyer and the client, Rule 3.6(f)(1)(ii) permits the lawyer or law firm to withdraw fees earned when they are due. In performing such a withdrawal, the lawyer is acting in his or her capacity as trustee for the client, and remains strictly accountable to the client for his or her conduct in administering the account. See Bar Ass’n v. Marshall, 269 Md. 510, 307 A.2d 677 (1973). It is the opinion of the Commission that, as trustee, the lawyer does not have a proprietary interest in the client’s funds, but rather has a claim to those funds representing fees earned, and has the right to disburse those funds to himself or herself. The rule permits, but does not require, the withdrawal of funds belonging to the lawyer when due. Thus, the failure of a lawyer to withdraw money from the trust account when earned does not violate the rule.

While few cases have dealt directly with the issues involved here, the Commission’s conclusion is consistent with the decisions of many courts who have considered the question of commingling. Nearly all the cases involve lawyers who have either deposited the client’s funds in their personal accounts, In re Barron, 246 Ga. 327, 271 S.E.2d 474 (1980); used the client’s trust account for their personal expenses, The Florida Bar v. Padgett, 481 So.2d 919 (Fla. 1986); or who failed to keep an accurate accounting of the client’s money, Louisiana State Bar Ass’n v. Hopkins, 447 So.2d 464 (La. 1985).

None of the above factors are present here, and the Commission’s determination that undisbursed funds for fees earned do not constitute “funds belonging to the lawyer or law firm” does not conflict with ABA Ethical Consideration 9‑5, which states in part that “separation of the funds of a client from those of his lawyer not only serves to protect the client but also avoids even the appearance of impropriety.” It is difficult to imagine how simply delaying disbursement of earned fees would create a threat to the client’s funds or the appearance of impropriety.

There are two cases in which courts have implied that leaving earned fees in a client’s trust account violated the rule against commingling. In Wright v. Virginia State Bar, 357 S.E.2d 518 (Va. 1987), the lawyer, Wright, was accused of several ethics code violations. In upholding the commingling convictions of the lower court, the Virginia Supreme Court said that “between October 1983 and December 1984, Wright routinely permitted his fees to remain in his trust account. He failed to record such amounts on his trust account records and thereby commingled his own funds with those of his clients.” Wright, 357 S.E.2d at 519.

While the Virginia court’s holding seems to contradict the conclusion of the Commission the two cases are actually very different. In Wright, the lawyer was charged with violating a series of Virginia record‑keeping requirements that do not even exist in the Maine Bar Rules. As to the general requirement that the lawyer shall “maintain complete records of all funds . . . of a client coming into possession of the lawyer,” which is contained in Maine Bar Rule 3.6(f)(2)(iii), there is no evidence of any record‑keeping problems in the present case, and hence the Virginia ruling would not apply.

In a second case, North Carolina State Bar v. Speckman, 360 S.E.2d 129 (N.C. App. 1987), the lawyer deposited a $70,000 settlement check on behalf of his client into his trust account. After paying the client her share of the settlement, the lawyer left his fee in the account and wrote checks on the account to cover his office expenses.

In a somewhat confusing opinion, the court confirmed the conviction for commingling, but implied in its opinion that the lawyer had also deposited additional personal funds in the trust account, something not mentioned in the original recitation of the facts. In its opinion, the court said that “defendant claims he placed personal funds in his trust account for the sole purpose of making it possible to clear personal injury settlement drafts and checks . . .”, Speckman, 360 S.E.2d at 133. The court went on to hold that the defendant’s motivation was irrelevant to whether he violated the ethics code, apparently basing its conclusion of guilt on the additional funds placed in the account and not on the failure to disburse the fees earned. Even if the court intended to base its conviction on the facts as originally stated, the fact that the lawyer in Speckman had actually written checks for his expenses on the trust account distinguishes it from the present case, where the funds were simply left untouched in the client’s trust account. In either case, therefore, the holding does not apply to the present case.

Because we find that no commingling of funds has occurred in the present case, we see no need to address the issue posed by Question No. 2. However, since there was no evidence of misappropriation of client funds or laxity of record‑keeping, factors which could affect the outcome of a commingling case, we explicitly limit the application of our opinion to the facts presented herein.


Enduring Ethics Opinion