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Some portions of the collection may already be severely out of date, so please be cautious in your use of this material.

Michigan Legal Ethics

1.15   Rule 1.15 Safekeeping Property

1.15:100   Comparative Analysis of MI Rule

¥ Primary Michigan References: MI Rule 1.15
¥ Background References: ABA Model Rule 1.15, Other Jurisdictions
¥ Commentary:

1.15:101      Model Rule Comparison

MRPC 1.15 has added a substantial section which deals with interest-bearing and other bank accounts. It generally requires the deposit of client funds in pooled interest-bearing trust accounts, the interest to be paid over to the Michigan State Bar Foundation to establish a fund to support delivery of legal services to the poor and other designated judicial projects.

1.15:102      Model Code Comparison

[The discussion of this topic has not yet been written.]

1.15:110      MI IOLTA Plan

[The discussion of this topic has not yet been written.]

1.15:120      MI Client Security Fund

[The discussion of this topic has not yet been written.]

1.15:200   Safeguarding and Safekeeping Property

¥ Primary Michigan References: MI Rule 1.15(a)
¥ Background References: ABA Model Rule 1.15(a), Other Jurisdictions
¥ Commentary: ABA/BNA ¤ 45:101, ALI-LGL ¤¤ 44-46, Wolfram ¤ 4.8
¥ MI Commentary: Dubin and Schwartz MRPC 1.15

A lawyer has an obligation to keep the property of the client separate from the lawyerÕs business and personal property with the care required of a professional fiduciary. For example, securities should be kept in a safe deposit box except when some other form of safekeeping is warranted by special circumstances. The Michigan Rule provides detailed instructions on the deposit of clientÕs funds in pooled interest-bearing trust accounts pursuant to Subparagraph (d). The obligations of a lawyer under this Rule are independent of those arising from activities other than rendering legal services, such as acting as escrow agent.

In In re Doors & More, Inc, 127 BR 1001 (Bankr ED Mich, 1991), an attorney received a pre- petition retainer of $4,000.00 which he characterized as payment for any and all work up to the first 32 hours. However, he did not place the funds in his client trust account. The court cited Rule 1.15 and Formal Ethics Opinion R-7 in concluding that appropriation of the fee by the attorney without placing the fee in his client trust account was improper under both the MRPC and the Bankruptcy Code. Formal Ethics Opinion R-7 contains a general discussion of responsibilities as to client trust funds under MRPC.

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

Informal Opinion RI-58 discusses the responsibility of a lawyer as to a pre-paid fee when the client pays the fee but cannot then be contacted and the fee remains unearned. Informal Opinion RI-69 discusses when a fixed fee becomes the lawyerÕs property under the circumstances of a non- refundable retainer in determining what portion of the fixed fee is ÒearnedÓ if representation is terminated before the lawyerÕs work under the fixed fee agreement is complete. In Informal Opinion RI-224, the State Bar stated that a lawyer who received referrals from another lawyer and then asked the referring lawyer to take several matters back was obligated to provide an accounting of funds in the client trust account pending resolution of the dispute as to which of the two lawyers had a right to which fees.

1.15:220      Surrendering Possession of Property

In In re Contempt of Calcutt, 184 Mich App 749; 458 NW2d 919 (1990), lv den 442Mich 910; 503 NW2d 447 (1993), lv den 445 Mich 872; 519 NW2d 160 (1994), the Michigan Court of Appeals held an attorney in contempt for failing to return $180,000.00 in health insurance proceeds to the court after prematurely withdrawing them, thus contravening the automatic 21-day stay imposed by MCR 2.614(A)(1). The court held that the lawyerÕs duty to take possession and safely keep his clientÕs property under MRPC 1.15 was not compromised by the MCR 2.614(A)(1) stay. The assertion of a defense under MRPC 1.15 was therefore insufficient to the contempt charge.

In Informal Opinion RI-156, the State Bar discusses the duty of the safekeeping of documents from a former representation with a former client whose new counsel but has not requested possession of the documents. In Information Opinion RI-245, it was concluded that a client file is the property of the client, and is not the property of a firm subject to retention if a lawyer leaves the firm.

In Formal Opinion R-19 issued August 4, 2000, the Ethics Committee held that where a lawyer has provided copies or access to materials prepared for the client or to which the client is entitled, and the client later desires a Òcopy of the file,Ó the lawyer may properly charge reasonable costs for search and reproduction of information to which the client is legally entitled that is contained in the lawyerÕs files.

1.15:230      Documents Relating to Representation

In Formal Opinion R-12, the State Bar discusses the archiving and other disposition of client files after the termination of representation, including microfilming as an archiving/safekeeping medium under this Rule. In Informal Opinion RI-63, the State Bar surveys the conditions under which a lawyer may release the contents of a clientÕs medical file to the client when the clientÕs doctor has supplied the file to the lawyer with strict instructions as to the conditions under which the lawyer may release the information to the client. In Informal Opinion RI-86, the State Bar stated that the transfer of a client file to a lawyer leaving a firm cannot be conditioned on the lawyerÕs discharge of an obligation to the firm. Informal Opinion RI-109 discusses disposal of client files damaged in a fire, and Informal Opinion RI-188 discusses the duty of a lawyer functioning as a neutral arbitrator or mediator to maintain records relating to the arbitration or mediation.

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

¥ Primary Michigan References: MI Rule 1.15(b)
¥ Background References: ABA Model Rule 1.15(b), Other Jurisdictions
¥ Commentary: ABA/BNA ¤ 45:101, ALI-LGL ¤ 44, Wolfram ¤ 4.8
¥ MI Commentary: Dubin and Schwartz MRPC 1.15

As reflected in the Comment to the Rule, lawyers often receive funds from third parties from which the lawyerÕs fee will be paid. If there is a 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. However, a lawyer may not hold funds to coerce a client into accepting the lawyerÕs contention, and the disputed portion of the funds should be kept in trust subject to a prompt resolution of the dispute with the undisputed portion being promptly distributed. If third parties have a just claim against the funds, a lawyer may have a duty to protect such a third-party claim against wrongful interference by the client. However, the lawyer should not assume to arbitrate or otherwise resolve the dispute between the client and the third person.

Formal Ethics Opinion R-10 discusses the responsibility of rendering an accounting of the client trust funds in the context of representing the personal representative of a decedentÕs estate where there is a dispute as to the allocation of funds in the trust fund account among several parties, including the personal representative. In Informal Opinion RI-61, the State Bar opined that a lawyer could not unilaterally mediate the dispute between a lawyer, client and third parties who all claimed interest in funds in a client trust account but rather must begin proceedings immediately to resolve the dispute.

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

¥ Primary Michigan References: MI Rule 1.15(c)
¥ Background References: ABA Model Rule 1.15(c), Other Jurisdictions
¥ Commentary: ABA/BNA ¤ 45:101, ALI-LGL ¤¤ 44-45, Wolfram ¤ 4.8
¥ MI Commentary: Dubin and Schwartz MRPC 1.15

As reflected in the discussion of this Rule set forth above, a lawyer may not utilize the holding of funds to coerce the client into accepting the lawyerÕs position as to entitlement of funds and must seek prompt resolution of any dispute as to entitlement of the funds. With respect to those funds as to which there is no dispute, the lawyer must turn them over to the client forthwith.