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End-of-life notice: American Legal Ethics Library

As of March 1, 2013, the Legal Information Institute is no longer maintaining the information in the American Legal Ethics Library. It is no longer possible for us to maintain it at a level of completeness and accuracy given its staffing needs. It is very possible that we will revive it at a future time. At this point, it is in need of a complete technological renovation and reworking of the "correspondent firm" model which successfully sustained it for many years.

Many people have contributed time and effort to the project over the years, and we would like to thank them. In particular, Roger Cramton and Peter Martin not only conceived ALEL but gave much of their own labor to it. We are also grateful to Brad Wendel for his editorial contributions, to Brian Toohey and all at Jones Day for their efforts, and to all of our correspondents and contributors. Thank you.

We regret any inconvenience.

Some portions of the collection may already be severely out of date, so please be cautious in your use of this material.


Texas Legal Ethics

1.15   Rule 1.15 Safekeeping Property

1.15:100   Comparative Analysis of Texas Rule

Primary Texas References: TX Rule 1.14
Background References: ABA Model Rule 1.15, Other Jurisdictions
Commentary:

1.15:101      Model Rule Comparison

Texas Rule 1.14, "Safekeeping Property," is very similar to Model Rule 1.15 of the same name. Each rule contains three essentially similar paragraphs ((a), (b), and (c)). Paragraph (a) of the Texas Rule adds the words "belonging in whole or part to clients or third persons . . .." Paragraph (c) of the Texas Rule also adds this sentence: "All funds in a trust or escrow account shall be disbursed only to those persons entitled to receive them by virtue of the representation or by law." The last sentence of the Texas version of paragraph (c) also adds the words "and the undisputed portion shall be distributed appropriately."

For two Texas cases involving client property and other issues, see Minnick v. State Bar, 790 S.W.2d 87 (Tex. App.—Austin 1990, writ denied), and Butler v. Commission for Lawyer Discipline, 928 S.W.2d 659 (Tex. App.—Corpus Christi 1996, writ denied).

1.15:102      Model Code Comparison

The Model Code addresses client funds and property in DR 9-102, "Preserving Identity of Funds and Property of a Client." Model Rule 1.15 and Texas Rule 1.14 add language about "third persons," as further set forth in section 1.15:101.

1.15:110      Texas IOLTA Plan

For an interesting Supreme Court decision discussing the Texas IOLTA plan and concluding, among other things, that, under Texas law, interest income generated by funds held in IOLTA accounts is the private property of the owner of principal for purposes of the Takings Clause of the United States Constitution, see Phillips v. Washington Legal Foundation, 118 S. Ct. 1925 (June 15, 1998).

1.15:120      Texas Client Security Fund

See generally section 1.15:110.

1.15:200   Safeguarding and Safekeeping Property

Primary Texas References: TX Rule 1.14
Background References: ABA Model Rule 1.15(a), Other Jurisdictions
Commentary: ABA/BNA § 45:101, ALI-LGL §§ 56-58, Wolfram § 4.8

Texas Rule 1.14, "Safekeeping Property," provides in full in paragraph (a):

A lawyer shall hold funds and other property belonging in whole or in part to clients or third persons that are in a lawyer's possession in connection with a representation separate from the lawyer's own property. Such funds shall be kept in a separate account, designated as a "trust" or "escrow" account, maintained in the state where the lawyer's office is situated, or elsewhere with the consent of the client or third person. Other client 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 five years after termination of the representation.

Texas Rules Rule 1.14(a).

1.15:210      Status of Fee Advances [see also 1.5:420]

See discussion at section 1.15:400.

1.15:220      Surrendering Possession of Property

For a discussion of this subject, see sections 1.15:200-210 and sections 1.15:300 and 1.15:400.

1.15:230      Documents Relating to Representation

For a discussion of this subject, see sections 1.15:200-210 and sections 1.15:300 and 1.15:400. Further, paragraph(d) of Texas Rule 1.15, "Declining or Terminating Representation," provides in full:

Upon termination of representation, a lawyer shall take steps to the extent reasonably practicable to protect a client's interests, such as giving reasonable notice to the client, allowing time for employment of other counsel, surrendering papers and property to which the client is entitled and refunding any advance payments of fee that has not been earned. The lawyer may retain papers relating to the client to the extent permitted by other law only if such retention will not prejudice the client in the subject matter of the representation.

Texas Rules Rule 1.15(d).

1.15:300   Holding Money as a Fiduciary for the Benefit of Clients or Third Parties

Primary Texas References: TX Rule 1.14(b)
Background References: ABA Model Rule 1.15(b), Other Jurisdictions
Commentary: ABA/BNA § 45:101, ALI-LGL § 56, Wolfram § 4.8

Texas Rule 1.14, "Safekeeping Property," provides in paragraph (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 person, shall promptly render a full accounting regarding such property.

Texas Rule 1.14(b).

1.15:400   Dispute Over Lawyer's Entitlement to Funds Held in Trust

Primary Texas References: TX Rule 1.14(c)
Background References: ABA Model Rule 1.15(c), Other Jurisdictions
Commentary: ABA/BNA § 45:101, ALI-LGL §§ 56-57, Wolfram § 4.8

Texas Rule 1.14, "Safekeeping Property," provides in paragraph (c):

When in the course of representation a lawyer is in possession of funds or other property in which both the lawyer and another person claim interests, the property shall be kept separate by the lawyer until there is an accounting and severance of their interest. All funds in a trust or escrow account shall be disbursed only to those persons entitled to receive them by virtue of the representation or by law. If a dispute arises concerning their respective interests, the portion in dispute shall be kept separate by the lawyer until the dispute is resolved, and the undisputed portion shall be distributed appropriately.

Texas Rules Rule 1.14(c).

As comment 2 to Texas Rule 1.14 observes in pertinent part, lawyers "often receive funds from third parties from which the lawyer's fee will be paid. These funds should be deposited into a lawyer's trust account. If there is risk that the client may divert the funds without paying the fee, the lawyer is not required to remit the portion from which the fee is to be paid." Texas Rules Rule 1.14 cmt. 2. "However, a lawyer may not hold funds to coerce a client into accepting the lawyer's contention. The disputed portion of the funds should be kept in trust and the lawyer should suggest means for prompt resolution of the dispute, such as arbitration. The undisputed portion . . .should be promptly distributed to those entitled to receive them . . . ."

Texas Rules Rule 1.14 cmt. 2.

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