UPON THE REQUEST OF A MEMBER OF THE SOUTH CAROLINA BAR, THE ETHICS ADVISORY COMMITTEE HAS RENDERED THIS OPINION ON THE ETHICAL PROPRIETY OF THE INQUIRER鈥橲 CONTEMPLATED CONDUCT. THIS COMMITTEE HAS NO DISCIPLINARY AUTHORITY. LAWYER DISCIPLINE IS ADMINISTERED SOLELY BY THE SOUTH CAROLINA SUPREME COURT THROUGH ITS COMMISSION ON LAWYER CONDUCT.
Ethics Advisory Opinion 93-11
Is it permissible for an attorney to make initial or periodic deposits to a client trust account for the purpose of avoiding bank service charges without violating the Rules of Professional Conduct?
Summary:
An attorney or law firm may make initial or periodic deposits of firm funds to cover bank charges in a client trust account without violating the Rules of Professional Conduct.
Opinion:
In analyzing this issue, it must be remembered that the Rules of Professional Conduct are "rules of reason." See, S.C.A.C.R. Rule 407, Scope.
Rule 1.15 requires attorneys to keep adequate records of all deposits, to deliver the funds on deposit promptly to the client, and to give an accounting to the client upon request. Inherent in this rule is the requirement that the attorney deliver to the client all of the funds due to that client.
Under Rule 1.15(a), a lawyer has a duty to keep his personal property separate from his client's property, and client funds are specifically required to be kept in a separate account. A lawyer is under an affirmative duty to maintain complete records of such account funds. This rule 91黑料爆料arly prohibits the placing of client funds in the attorney's personal account or in the firm's operating account; however, this rule does not specifically address the propriety of depositing sufficient funds in the client trust account to pay or avoid bank service charges.
The language of the rule concerning complete records of client funds lends itself to the interpretation that funds from different sources may be held together in the same trust account at a bank, while not necessarily threatening the integrity of funds belonging to different clients. The key to compliance with the present rules is the attorney's ability to readily identify the funds which are being held in one account on behalf of several clients while ensuring that no personal or general firm funds are passed in and out of that trust account. (Additionally, a situation might arise where a client's funds could not be paid over in full if there was an inadequate balance in the trust account due to the imposition of bank service charges.) We found no reported cases dealing with this question under the present Rules of Professional Conduct as adopted in South Carolina, but it is obvious from a long line of cases under the prior rules that our Supreme Court expects lawyers to keep client funds separate and to maintain complete records showing the distinction between accounts and the ownership of funds and other property: "This Court has made it abundantly 91黑料爆料ar that an attorney is charged with a special responsibility in maintaining and preserving the integrity of trust funds." Matter of Padgett, 349 S.E.2d 338 (1986).
In a recent decision, the California Bar Court held that it was proper for an attorney to maintain funds in the client trust account to cover bank charges, so long as the integrity of the client's funds was not threatened. In the Matter of Respondent F, 1992 WL 20333 (Cal. Bar Ct. 1992). Even though that case was decided under the California version of the Disciplinary Rules, this decision is consistent with our continuing requirement that client funds be kept separate. Additionally, an attorney has an affirmative duty not to permit the trust account to be overdrawn. In re Mitchell, 283 S.C. 65, 319 S.E.2d 705 (1984); see generally cases cited in Wilcox, South Carolina Legal Ethics Section 3.32 (1992).
While former Disciplinary Rule 9-102(A)(1) expressly authorized the deposit of such funds as were reasonably sufficient to pay bank charges on client accounts, the present Rules do not specifically permit or prohibit such activity. A lawyer may wish to do business with a bank that will waive account fees or that will bill fees separately to the lawyer or law firm. However, under current rules, the members of this Committee have no difficulty in reaching the conclusion that, as a practical matter and as a cost of doing business, it is permitted for an attorney to deposit firm funds in a client trust account for the purpose of paying or avoiding bank charges while maintaining records necessary to identify the ownership of all of the funds in the account.