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Ohio Legal Ethics Narrative
I. CLIENT-LAWYER RELATIONSHIP
- Primary Ohio References: Ohio Rule 1.15; Gov Bar R VIII; ORC 4705.09-.10
- Background References: ABA Model Rule 1.15
Ohio Rule 1.15 differs significantly from MR 1.15.
1.15(a) contains a number of additions designed to incorporate
the various Ohio-specific aspects of IOLTA accounts. With respect to
such accounts, it provides a detailed checklist of the records that
must be maintained for client and third-party funds (see subdivisions
(a)(1)-(5)) and other property. These records are to be retained for
seven years after termination of the representation or the proper
disbursement of the funds and/or property, whichever event comes
Rule 1.15(b) tracks paragraph (b) of the Model Rule, except that the words "or obtaining a waiver of" have been inserted after the word "paying."
Rule 1.15(c) is identical to paragraph (c) of the Model Rule.
1.15(d) is essentially the same as paragraph (d) of the Model
Rule, except that (1) the words "or a third person, confirmed in
writing," have been added after "by agreement with the
client" in the second sentence, (2) the latter portion of the
Model Rule second sentence has been split into a third sentence
beginning with the word "Upon", and (3) in the third
sentence the words "funds or other" have been added prior
to the final word "property."
Ohio Rule 1.15(e) contains the following changes: In the first sentence the same "funds or other" has been added before the first "property"; "lawyer shall hold the funds or other" has been added before the second "property"; after the second "property", the words "shall be kept separate by the lawyer" have been deleted and "pursuant to division (a) of this rule" substituted in their place. In the second sentence, "funds or other" has again been added before "property".
Ohio Rules 1.15(f), (g), and (h) have no counterparts in the Model Rule. Division (f) deals with duties concerning client funds and the records required by division (a) upon dissolution of a law firm; division (g) deals with the transfer of client funds upon sale of a law practice; and division (h) deals with further duties of lawyers or a firm having an interest in a business providing law-related services, with respect to noninterest-bearing funds of clients or third persons, notification of the existence of an interest-bearing trust account, and the Gov Bar R VI 1(F) reporting requirement.
The following section of the Ohio Code of Professional Responsibility is listed in the Correlation Table (Appendix A to the Rules) as related to Ohio Rule 1.15(a): DR 9-102.
The following section of the Ohio Code of Professional Responsibility is listed in the Correlation Table (Appendix A to the Rules) as related to Ohio Rule 1.15(b): DR 9-102(A)(1).
The following section of the Ohio Code of Professional Responsibility is listed in the Correlation Table (Appendix A to the Rules) as related to Ohio Rule 1.15(c): DR 9-102(A).
The following sections of the Ohio Code of Professional Responsibility are listed in the Correlation Table (Appendix A to the Rules) as related to Ohio Rule 1.15(d), (e), (f) & (g): None. [The Correlation Table is in error with respect to division (g); it corresponds to former DR 9-102(C). In addition, division (d) generally corresponds with the duties concerning client funds and other property set forth in former DR 9-102(B)(1), (3) & (4).]
The following sections of the Ohio Code of Professional Responsibility are listed in the Correlation Table (Appendix A to the Rules) as related to Ohio Rule 1.15(h): DR 9-102(D) & (E).
The material in this section is, in part, excerpted and adapted from Arthur F. Greenbaum, Lawyer's Guide to the Ohio Code of Professional Responsibility § 9.40 (1996).
History: Former OH DR 9-102, originally adopted in 1970, was amended effective June 19, 1985 by adding subsection (C) to take into account the passage of legislation authorizing lawyers to establish Interest on Lawyers' Trust Accounts (IOLTA). ORC 4705.09. OH DR 9-102(C) (which subsequently became 9-102(D)) provided that nothing in the Code of Professional Responsibility shall limit lawyers from using IOLTA accounts as permitted by ORC 4705.09-.10. Two further amendments were made to OH DR 9-102, the first effective November 1, 2002 and the second effective February 1, 2003. The November 2002 amendment added ORC 3953.231 to statutory provisions listed in subsection (C), and added a new subsection (D), which spells out the obligation of a lawyer, law firm, or ancillary business related to the practice of law to (1) maintain funds of clients or third persons in an IOLTA account established in an eligible depository institution as required by the statutory provisions or by any rules adopted by the Ohio Legal Assistance Foundation ("OLAF") pursuant to ORC 120.52, (2) notify the OLAF of the existence of an IOLTA account, and (3) comply with the reporting requirements contained in Gov Bar R VI 1(F). The February 1, 2003 amendment added a new subsection (C), dealing with the obligation to transfer funds held under OH DR 9-102(A) when a law practice is sold. Former subsection (C) became subsection (D), and former subsection (D) subsection (E).
Present status: These OH DR 9-102 provisions are now found, with further elaboration, in Ohio Rule 1.15.
Thus, Ohio Rule 1.15(a) provides the overall obligation concerning client property, third-party property, IOLTA accounts, and record keeping with respect to such client and third-party funds and other property. For property, the lawyer must maintain a record containing the required information; for funds, subdivisions (1) through (5) detail the record-keeping obligations of the lawyer.
Like ORC 4705.09, but unlike former DR 9-102(A), Rule 1.15(a) specifies that the account is to be interest-bearing (as did 9-102(E)(1)). Also unlike either 4705.09 or 9-102(A), the obligations pursuant to the Rule apply to funds and other property of third parties as well as clients.
Rule 1.15(b) restates former 9-102(A)(1) and permits a lawyer to deposit his or her own funds in a client trust account only for the purpose of paying, or obtaining a waiver of, bank service charges on the account.
Rule 1.15(c) provides that legal fees and expenses that have been paid in advance shall be deposited in such an account and can be withdrawn only as earned or incurred. As stated by the Task Force in its Ohio Code Comparison to Rule 1.15, former 9-102(A) precluded the placement of advances for costs and expenses in the trust account.
Rule 1.15(d) requires prompt notice to a client or third party on receipt by the lawyer of funds and other property in which such person has an interest. Unless the law otherwise permits or the parties otherwise contract in writing, the lawyer must promptly deliver such property to the person entitled thereto, and, upon request by such person, must promptly render a full accounting. These obligations concerning client funds and other property were generally set forth in former 9-102(B)(1), (3) & (4).
Rule 1.15(e) requires that funds or other property held by the lawyer in which two or more persons (one of whom can be the lawyer) claim an interest is to be held separately until the dispute is resolved. There was no comparable OHCPR provision.
Rule 1.15(f) deals with accounting and record-keeping obligations upon dissolution of a law firm. There was no comparable provision in the OHCPR.
Rule 1.15(g), as did former 9-102(C) under the Code, spells out the duties with respect to funds held pursuant to this Rule upon the sale of a law practice.
Rule 1.15(h), in slightly different and somewhat confusing language, carrys forward the safekeeping, record-keeping, notice, and reporting obligations formerly contained in 9-102(E). See section 1.15:700 infra.
In Bd. of Comm’rs on Grievances & Discipline Op. 2008-3, 2008 Ohio Griev. Discip. LEXIS 3 (Aug. 15, 2008), the Board opined that a lawyer holding client funds in her trust account, but not knowing the client’s identity or whereabouts, should follow the procedures set forth in ORC Chapter 169 to disposition and reporting of unclaimed funds; doing so does not violate the lawyer’s duty of safekeeping set forth in Rule 1.15.
Statutory provisions: Pursuant to ORC 4705.09(A)(2), lawyers are required to establish IOLTA accounts for deposit of client funds that "are nominal in amount or are to be held by the attorney . . . for a short period of time." The determination of whether funds meet this standard "rests in the sound judgment of the particular attorney" and "[n]o imputation of professional misconduct shall arise from the attorney's exercise of judgment in these matters." ORC 4705.09(A)(3).
In 1990, the General Counsel of the Ohio State Bar Association gave the following guidance to attorneys trying to determine whether it is appropriate to place particular client funds in an IOLTA account:
The generally accepted test as to what funds should go into the IOLTA account is whether the amount of interest that can be earned on the funds by opening a separate account, would be less than the attorney would need to charge for the time spent in opening a separate account and maintaining it.
Albert L. Bell, Client Funds and Property: Handle with Care, Ohio Law., Jul.-Aug. 1990, at 28. For a more recent checklist, see Jeffrey D. Fortkamp, A Guide to Creating and Using an IOLTA Account, Ohio Law., Nov.-Dec. 2004, at 42. These rules of thumb are now detailed in Rule 1.15 cmt. [3A], pursuant to which client funds must go into an IOLTA account, unless the lawyer can otherwise earn income for the client in excess of the costs incurred to secure such income.
All interest earned on these accounts is to be transferred, at least quarterly, to the Treasurer of the State of Ohio for deposit in the state's legal-aid fund. ORC 4705.09(B); ORC 4705.10(A)(3)(a). No part of the interest can be paid to the lawyer, the client, or any third person. ORC 4705.09(B).
In terms of the formal requirements for the account itself, it is to be in the name of "the attorney, firm, or association that established and is maintaining it" and must be identified as "an IOLTA or an interest on lawyer's trust account." ORC 4705.09(A)(1). No funds of the attorney can be deposited in the account "except that funds sufficient to pay or enable a waiver of depository institution service charges on the account shall be deposited in the account," and other funds of the lawyer, firm, or legal professional association may be deposited where allowed under the Code of Professional Responsibility. ORC 4705.09(A)(3). [This reference to the Code will presumably be changed to the Rules of Professional Conduct.]
The account may be established at any appropriately insured bank, savings bank, or savings and loan authorized to do business in Ohio, or at an appropriately insured credit union. ORC 4705.09(A)(1). The funds must be subject to withdrawal on demand, or as soon as permitted by federal law, and the account must pay a rate of interest not less than that offered to regular nonattorney depositors. ORC 4705.10(A)(1)-(2).
Rules governing IOLTA accounts became effective on April 1, 2002. The rules are summarized in 75 Ohio St. B. Ass'n Rep. No. 13, at 264-65 (April 1, 2002); the full text is available online at www.olaf.org/ioltaiota/rules.shtml; they coincide with the November 1, 2002 amendments to what was formerly OH DR 9-102 (E).
In other jurisdictions, IOLTA programs have come under constitutional attack. In upholding a state IOLTA program in Brown v. Legal Found., 538 U.S. 216 (2003), the United States Supreme Court found that it did not constitute a taking under the Fifth Amendment.
Gov Bar R VIII establishes the Clients' Security Fund of Ohio. The fund was established to compensate clients who suffer financial harm as a result of certain dishonest conduct by their attorneys where insurance or bond is unavailable to cover the claim. Gov Bar R VIII 3(D). General information on how to contact the fund is provided below:
NAME: Clients' Security Fund of Ohio
ADMINISTRATOR: Janet Green Marbley
ADDRESS: 65 South Front Street, 5th Floor, Columbus, Ohio 43215-3431
PHONE NUMBERS: (614) 387-9390 or (800) 231-1680 (in Ohio only)
INTERNET WEB SITE http://www.sconet.state.oh.us/Client_Security/
Gov Bar R VIII 3 sets forth the eligibility requirements for claimants. The fund is available to cover client losses occasioned by dishonest conduct, such as defalcation, embezzlement, wrongful taking or conversion, by an attorney licensed to practice law in Ohio at the time of the misconduct, that caused the client a financial loss. Gov Bar R VIII 3-4. An award can be made only if the loss arose out of an attorney/client relationship and the lawyer has either resigned, been disciplined by the Ohio Supreme Court, convicted of embezzlement or misappropriation, or cannot be proceeded against in disciplinary or criminal proceedings because he or she cannot be located or is deceased. Gov Bar R VIII 3(C). The claim must be filed within one year of either the occurrence or the discovery of the loss, subject to certain tolling provisions. Id. Clients with family or business ties with the attorney are for the most part ineligible to seek compensation, absent a showing of extreme hardship or special circumstances. Gov Bar R VIII 3(F).
Gov Bar R VIII 7(F) sets forth guidelines to be employed in determining the amount of the award; they include consideration of:
(1) The amounts available and likely to become available to the fund for the payment of claims and the size and number of claims that are likely to be presented;
(2) The amount of the claimant's loss as compared with the amount of losses sustained by other eligible claimants;
(3) The degree of hardship suffered by the claimant as a result of the loss;
(4) The degree of negligence, if any, of the claimant that may have contributed to the loss;
(5) Any special or unusual circumstances.
The maximum amount that can be awarded is $75,000. Gov Bar R VIII 5. If an award is made, the Fund acquires the client's direct claim against the attorney. Gov Bar R VIII 6(A). Attorney fees cannot be paid from the proceeds of an award unless the Board so directs. Gov Bar R VIII 6(B). For a disciplinary case involving violation of this Rule, see Disciplinary Counsel v. Johnson, 113 Ohio St.3d 344, 2007 Ohio 2074, 865 N.E.2d 873.
Determinations of eligibility and award are made by the Board of Commissioners of the Clients' Security Fund of Ohio. Gov Bar R VIII 7(F). All such determinations of the Board are final. Id. Claims filed and records obtained in considering claims are confidential. If an award is made, however, the parties' names and the nature of the claim may be disclosed. Gov Bar R VIII 7(E).
- Primary Ohio References: Ohio Rule 1.15(a), (d)
- Background References: ABA Model Rule 1.15(a)
- Ohio Commentary: Greenbaum, Lawyer's Guide to the Ohio Code of Professional Responsibility §§ 9.30-9.35, 9.37-9.38
- Commentary: ABA/BNA § 45:109; ALI-LGL §§ 44-46; Wolfram § 4.8
The material in this section is, in part, excerpted and adapted from Arthur F. Greenbaum, Lawyer's Guide to the Ohio Code of Professional Responsibility § 9.30-9.33, 9.37-9.38 (1996).
Restrictions on handling client or third-person funds and other property - General rationale: In the course of representing a client, a lawyer often is entrusted with substantial funds and other valuables. Lawyer mishandling of those funds or valuables has been a repeated cause of lawyer discipline. Rule 1.15, much like OH DR 9-102 before it, sets forth a structure that, if followed, substantially limits the prospect for using, or being tempted to use, client funds for the lawyer's own purposes and/or to the client's or a third person's detriment. See, under the former rule, Toledo Bar Ass'n v. McCreery, 69 Ohio St.2d 359, 432 N.E.2d 209 (1982); Columbus Bar Ass'n v. Tuttle, 41 Ohio St.2d 183, 324 N.E.2d 753 (1975). A significant difference between new Rule 1.15 and former OH DR 9-102 is that the latter dealt only with client property; the Rule expressly covers property of third persons as well. The lawyer’s duties under Rule 1.15 with respect to funds or other property held by the lawyer that are claimed by or owed to a third person are extensively discussed in Bd. of Comm’rs on Grievences & Discipline Op. 2007-7, 2007 Ohio Griev. Discip. LEXIS 7 (Dec. 7, 2007).
The former rule (as presumably Ohio Rule 1.15 will) did more than sanction intentional mishandling of client funds or valuables in a way that harms the client; lawyers were sanctioned even when their conduct resulted in no harm to their clients. For example:
Failure to deposit fees and other client funds in his law firm’s IOLTA account, Disciplinary Counsel v. Zigan, 118 Ohio St.3d 180, 2008 Ohio 1976, 887 N.E.2d 334. For some reason, the Court characterizes the 9-102(A) violation as “prohibiting a lawyer from depositing personal funds in law firm accounts,” id. at para. 4, but this does not accurately describe what occurred in Zigan. (A case in which a lawyer did violate 9-102(A) by placing his personal funds in his client-trust account, in an attempt to hide them from creditors, is Disciplinary Counsel v. Vogtsberger, 119 Ohio St.3d 458, 2008 Ohio 4571, 895 N.E.2d 158.)
Misusing IOLTA account by treating it as regular office account violated former OH DR 9-102(A), despite lack of any evidence suggesting that anyone was harmed by respondent's mismanagement. Disciplinary Counsel v. Wise, 108 Ohio St.3d 381, 2006 Ohio 1194, 843 N.E.2d 1198.
Commingling of unearned fee with lawyer's office account containing business and personal monies violated OH DR 9-102(A), even though client suffered no harm. Cincinnati Bar Ass'n v. Witt, 103 Ohio St.3d 434, 2004 Ohio 5463, 816 N.E.2d 1036.
Placement of client's insurance settlement proceeds in business checking account (lawyer had no client trust account) violated former OH DR 9-102(A), even though lawyer immediately wrote check to client for her share of proceeds. Office of Disciplinary Counsel v. Zarensky, 94 Ohio St.3d 17, 759 N.E.2d 777 (2001).
Using unearned client funds to pay office expenses is sanctionable conduct, even where the client suffers no harm. Columbus Bar Ass'n v. Thompson, 69 Ohio St.2d 667, 433 N.E.2d 602 (1982).
That a violation occurred in an attempt to aid a client was no excuse, particularly where the failure to maintain client funds in a fiduciary account was part of a scheme to conceal the client's assets. Office of Disciplinary Counsel v. Sopkovich, 75 Ohio St.3d 192, 661 N.E.2d 1066 (1996) (concealment to help client qualify for public assistance).
Further, lawyers were disciplined for ignorant or mistaken violations of the former rule's provisions:
Through ignorance, an attorney never set up appropriate trust accounts. Richland County Bar Ass'n v. Davis, 57 Ohio St.3d 196, 566 N.E.2d 678 (1991).
The fact that a lawyer did not intend to violate former OH DR 9-102(B) or to harm clients did not excuse the misconduct. Bar Ass'n of Greater Cleveland v. Rubinstein, 22 Ohio St.3d 212, 490 N.E.2d 584 (1986). But cf. Columbus Bar Ass'n v. Thompson, 69 Ohio St.2d 667, 670, 433 N.E.2d 602, 604 (1982) (imposing sanctions, but treating "misapprehension with regard to the impropriety of [the conduct]" as a mitigating factor in setting the sanction).
A lawyer was sanctioned for "forgetting" to pay a client's medical providers out of settlement funds and withdrawing those funds from the trust account "by mistake," even though he corrected the problem when he learned of the grievance. Cleveland Bar Ass'n v. Snow, 72 Ohio St.3d 409, 650 N.E.2d 858 (1995).
As the Ohio Supreme Court has stated: '"There are few ethical breaches which impact more negatively on the integrity of the legal profession than the misuse of client's funds.' This is true whether the attorney's actions are due to dishonesty or, as was the case herein, ignorance and ineptitude." Office of Disciplinary Counsel v. Lucey, 14 Ohio St.3d 18, 21, 470 N.E.2d 888, 890 (1984) (quoting the oft-repeated language of Office of Disciplinary Counsel v. Morton, 5 Ohio St.3d 206, 208, 450 N.E.2d 275, 277 (1983)).
Nor did the fact that the mishandling of funds resulted from the lawyer's failure to supervise his employees relieve the lawyer of responsibility under this provision, although it was, at times, considered a mitigating factor in assessing punishment. See Office of Disciplinary Counsel v. Lile, 30 Ohio St.3d 5, 505 N.E.2d 955 (1987). Compare Columbus Bar Ass'n v. Thompson, 69 Ohio St.2d 667, 433 N.E.2d 602 (1982) (fact that wrongful withdrawals from trust account were made by substitute secretary, who was unfamiliar with the accounts, was treated as mitigating factor), with Office of Disciplinary Counsel v. Kick, 28 Ohio St.3d 91, 502 N.E.2d 640 (1986) (mishandling of client funds through secretary's theft is not mitigating factor where lawyer's oversight of client accounts was insufficient and lawyer was having personal relationship with secretary). Failure to supervise was also treated as a form of neglect. See section 5.3:300.
Restrictions on handling client or third-person funds and other property - Separation of lawyer funds from client or third-person funds: Rule 1.15(a) requires the lawyer to hold "property of clients or third persons that is in the lawyer's possession in connection with a representation separate from the lawyer's own property." Division (a) further provides that funds of clients or third persons are to be deposited in "a separate interest-bearing account in a financial institution authorized to do business in Ohio and maintained in the state where the lawyer's office is situated." Rule 1.15(a). The first case to fund a violation of Rule 1.15(a) is Cincinnati Bar Ass’n v. Lawson, 119 Ohio St.3d 58, 2008 Ohio 3340, 891 N.E.2d 749 (drawing check on client trust account to pay for rent for firm’s office space). Rule 1.15(a) was similarly found to have been violated in Disciplinary Counsel v. Freeman, 119 Ohio St.3d 330, 2008 Ohio 3836, 894 N.E.2d 31 (respondent “used his client trust accounts as personal checking accounts to pay personal bills and as law office operating accounts to pay office bills,” id. at para. 3). The Board of Commissioners addressed the requirements of Rule 1.15(a) (and (c)) in the context of credit-card payments in Bd. of Comm'rs on Grievances & Discipline Op. 2007-3, 2007 Ohio Griev. Discip. LEXIS 3 (Apr. 13, 2007). Opinion 2007-3 is discussed this section infra at “Exceptions to prohibition on depositing lawyer funds with client or third-person funds.”
See, under former DR 9-102, Cincinnati Bar Ass’n v. Lawson, 119 Ohio St.3d 58, 2008 Ohio 3340, 891 N.E.2d 749 (pre-February 1, 2007 failure to place unearned funds in interest-bearing client trust account violated 9-102(A) & 9-102(E)(1)); Akron Bar Ass'n v. Markovich, 117 Ohio St.3d 313, 2008 Ohio 862, 883 N.E.2d 1046 (paying administrative assistant with client funds constituted impermissible commingling); Disciplinary Counsel v. Bubna, 116 Ohio St.3d 294, 2007 Ohio 6436, 878 N.E.2d 632 (commingling of client and personal funds in trust account and using account as his personal and business checking account violated DR 9-102(A)); Disciplinary Counsel v. Friedman, 114 Ohio St.3d 1, 2007 Ohio 2477, 866 N.E.2d 1076 (failure to maintain client funds in trust account; OH DR 9-102(E)(1) violated); Cincinnati Bar Ass'n v. Greenberger, 113 Ohio St.3d Ohio St.3d 162, 2007 Ohio 1255, 863 N.E.2d 167 (instead of depositing client funds in trust account as required by 9-102(A), respondent used the funds as his own); Cincinnati Bar Ass'n v. Rothermel, 104 Ohio St.3d 413, 2004 Ohio 6559, 819 N.E.2d 1099 (9-102(A) violated for failure to place client funds in separate, identifiable bank account); Dayton Bar Ass'n v. Weiner, 40 Ohio St.2d 7, 317 N.E.2d 783 (1974) (attorney sanctioned in part for maintaining a trust account outside Ohio).
Failure to maintain such accounts was a common basis for discipline under the OHCPR. E.g., Columbus Bar Ass’n v. DeVillers, 116 Ohio St.3d 33, 2007 Ohio 5552, 876 N.E.2d 530; Dayton Bar Ass'n v. Sebree, 111 Ohio St.3d 297, 2006 Ohio 5788, 856 N.E.2d 210; see Disciplinary Counsel v. Maley, 119 Ohio St.3d 217, 2008 Ohio 3923, 843 N.E.2d 180 (in absence of trust account, respondent regularly deposited unearned retainers and settlement checks into his business checking account). So too was commingling funds of the lawyer and funds of the client in an established trust account. See, e.g., Disciplinary Counsel v. Vogtsberger, 119 Ohio St.3d 458, 2008 Ohio 4571, 895 N.E.2d 158 (placing personal funds in client trust account in attempt to evade creditors); Disciplinary Counsel v. Morgan, 114 Ohio St.3d 179, 2007 Ohio 3604, 870 N.E.2d 1171; Disciplinary Counsel v. Croushore, 108 Ohio St.3d 156, 2006 Ohio 412, 841 N.E.2d 781; Office of Disciplinary Counsel v. Mazer, 76 Ohio St.3d 481, 668 N.E.2d 478 (1996) (lawyer sanctioned for commingling his funds in client's account to hide personal funds from IRS); Columbus Bar Ass'n v. Pugh, 68 Ohio St.3d 172, 624 N.E.2d 1041 (1994) (respondent, having no separate professional banking account, used his IOLTA account as a trust account, a business account, and a personal account).
Former DR 9-102(A) precluded placing "advances for costs and expenses" into client trust accounts. In contrast, the Rule requires the lawyer to do so. Ohio Rule 1.15(c). As is noted in the Ohio Code Comparison to Rule 1.15, "[t]he vast majority of jurisdictions consider advances for expenses to be client funds that must be deposited in the trust account." Various provisions of the Ohio Revised Code (ORC 120.52, 3953.231, 4705.09, 4705.10) also control the establishment and handling of trust accounts and should be consulted by the attorney.
Upon the establishment of an appropriate trust account, the lawyer must deposit in that account all funds received that belong to clients or third persons. Under the former OHCPR, lawyers were disciplined for failure to deposit client funds at all or for depositing them in an office account, instead of in the client trust account as required. See, e.g., Cincinnati Bar Ass’n v. Schwieterman, 115 Ohio St.3d 1, 2007 Ohio 4266, 873 N.E.2d 810 (failure to deposit unearned retainers into firm’s trust account; 9-102(A) violated); Ohio State Bar Ass'n v. McCray, 109 Ohio St.3d 43, 2006 Ohio 1828, 845 N.E.2d 509 (placing funds received from client in office operating account violated DR 9-102(A)(2); "unearned fees belong to a client and must be kept in a client trust account," id. at para. 13); Cuyahoga County Bar Ass'n v. Maybaum, 98 Ohio St.3d 507, 2003 Ohio 2062, 787 N.E.2d 1180 (deposit of retainer fee in general operating account, "even though he had not earned any part of it," id. at para. 2; because respondent "genuinely misunderstood" deposit requirements with no harm to client, respondent's sanction was six-month suspension, stayed on conditions); Office of Disciplinary Counsel v. Poley, 94 Ohio St.3d 425, 763 N.E.2d 1163 (2002) (commingling of client and personal funds in general bank account and in client trust account); Office of Disciplinary Counsel v. Shaw, 15 Ohio St.3d 125, 472 N.E.2d 1075 (1984) (failing to deposit client funds at all).
Although the respondent stipulated to a violation of former DR 9-102(A) in Medina County Bar Ass’n v. Butts, 114 Ohio St.3d 472, 2007 Ohio 4265, 873 N.E.2d 279, the facts of the case indicate that respondent complied with that provision – it requires that client funds be deposited in an IOLTA account; Butts did just that by placing settlement proceeds for one of his clients in his firm’s client trust account. (The firm had a single IOLTA account and did not maintain any accounting procedures to enable it to track disbursements for individual clients.) While Butts seemingly satisfied his 9-102(A) obligations and paid the client her share of the settlement proceeds, he took more than 15 months to pay the client’s creditors and medical providers, to the detriment of her credit standing. Thus it is not surprising that Butts was found to have violated DR 1-102(A)(5) (6) and 6-101(A)(3). (His delay in paying creditors the amounts to which they were entitled would now violate Rule 1.15(d). As noted in section 1.15:220, the analogous OHCPR provisions did not include this express obligation to deliver amounts owing to persons other than clients.)
Funds in trust accounts belong to the client or third party and cannot be withdrawn by a lawyer for the lawyer's own purposes. See, e.g., under the former OHCPR, Disciplinary Counsel v. Bubna, 116 Ohio St.3d 294, 2007 Ohio 6436, 878 N.E.2d 632 (mismanagement of trust account; respondent used clients’ money for his personal or business purposes; 9-102(A) violated); Disciplinary Counsel v. Mathewson, 113 Ohio St.3d 365, 2007 Ohio 2076, 865 N.E.2d 891 (respondent overdrew client trust account, allowing balance to fall below $600, the unearned amount paid by client whose case he abandoned); Cleveland Bar Ass'n v. Herron, 112 Ohio St.3d 564, 2007 Ohio 812, 862 N.E.2d 107 (withdrawals from trust account to pay own bills and expenses); Columbus Bar Ass'n v. Winkfield, 107 Ohio St.3d 360, 2006 Ohio 6, 839 N.E.2d 924 (former OH DR 9-102(A) violated where respondent "routinely misappropriated client funds from his trust account for his personal use," id. at para. 33); Columbus Bar Ass'n v. Louden, 48 Ohio St.3d 14, 548 N.E.2d 237 (1990) (lawyer withdrew client funds from trust account to gamble in hope of winning enough to make client whole from previous unauthorized withdrawals). In another case, a lawyer/trustee of a testamentary trust who loaned funds from the trust to himself without express authorization in the trust instrument or approval of the probate court ran afoul of this OHCPR provision. Office of Disciplinary Counsel v. Kurtz, 82 Ohio St.3d 55, 693 N.E.2d 1080 (1998).
IOLTA money belonging to one client cannot be used to discharge the lawyer’s obligation to pay another client amounts to which the latter is entitled. Disciplinary Counsel v. McCauley, 114 Ohio St.3d 461, 2007 Ohio 4259, 973 N.E.2d 269 (violation of 9-102(B)(3) & (4)). Nor can funds be shifted from one client's trust account to another in order to cover shortfalls in any client's trust account. See, e.g., again under the former OHCPR, Office of Disciplinary Counsel v. Lawrence, 72 Ohio St.3d 420, 650 N.E.2d 867 (1995) (9-102(A) violation). As a related matter, the unauthorized loan of one client's funds to another was also found to violate former OH DR 9-102(A). Office of Disciplinary Counsel v. Mesi, 72 Ohio St.3d 45, 647 N.E.2d 473 (1995).
Restrictions on handling client or third-person funds and other property - Exceptions to prohibition on depositing lawyer funds with client or third-person funds: As a general rule, lawyers and law firms may not place their own funds in client accounts. However, the lawyer may deposit funds for the purpose of paying or obtaining a waiver of service charges on the accounts, but only in an amount necessary for that purpose. Rule 1.15(b) (carrying forward the exception found in OH DR 9-102(A)(1)). While hardly a model of clarity, Ohio Rule 1.15 cmt.  purports to elaborate. As best as we can discern, it provides as follows: First, lawyer funds can be commingled with client funds in a client trust account to pay (or obtain a waiver of) bank service charges. Two kinds of service charges may be netted against the client's account – (1) transaction charges (i.e., per check, per deposit charge) and (2) monthly maintenance charges. Seven kinds of bank service charges (funded by the lawyer) may not be netted against the client's account: (1) check-printing charges, (2) NSF charges, (3) stop-payment charges, (4) teller and ATM charges, (5) electronic fund transfer fees, (6) brokerage and credit-card charges, and (7) any other business-related expense not included in the deductible transaction and maintenance charges. Ohio Rule 1.15 cmt. . The comment also refers to an "IOLTA depository" with respect to the deductible fees, and to a "client trust account depository" with respect to those that are not deductible. Are not these depositories one and the same? See Rule 1.15(a) ("The account shall be designated as a "client trust account" [or] "IOLTA account"). Why inject confusion in Comment  if they are, as we believe they are, one and the same? (To the extent they are not, an explanation should be provided.)
In any event, Bd. of Comm’rs on Grievances & Discipline Op. 2007-3, 2007 Ohio Griev. Discip. LEXIS 3 (Apr. 13, 2007), citing to Comment , advises that a lawyer “may place his or her own funds into a client trust account to pay brokerage and credit card service charges. Credit card service charges are the responsibility of the lawyer and may not be deducted from the interest earned on a client trust account.” Id. at *8.
Second, former OH DR 9-102(A)(2) recognized that, at times, funds may belong in part to the client and in part, either presently or potentially, to the lawyer or firm, such as money provided as a retainer or funds paid by an opponent in settlement or in response to an adverse judgment out of which the lawyer's fee is to be paid. See, e.g., Bd. of Comm'rs on Grievances & Discipline Op. 89-07, 1989 Ohio Griev. Discip. LEXIS 14 (Apr. 14, 1989) (treating retainer in this fashion); accord Ohio State Bar Ass'n Informal Op. 90-8 (Oct. 31, 1990) (citing Opinion 89-07 with approval). If a client paid a flat fee for services in advance of representation, those funds could be placed in the lawyer's business account, rather than the client's trust account. Since the funds were given to the lawyer in exchange for the lawyer's promise to carry out the representation in the future, the funds immediately became the lawyer's property rather than the client's. Bd. of Comm'rs on Grievances & Discipline Op. 96-4, 1996 Ohio Griev. Discip. LEXIS 5 (June 14, 1996) (approving practice in the context of a flat-fee arrangement paid in advance of representation in a criminal matter).
To the extent the funds belong in part to the client and in part to the lawyer, OH DR 9-102(A)(2) provided that such funds had to be placed in the client's trust account. See Cuyahoga County Bar Ass'n v. Hardiman, 100 Ohio St.3d 260, 2003 Ohio 5596, 798 N.E.2d 369 (DR 9-102(A)(2) violated where lawyer put retainer in office safe rather than IOLTA account, even though question as to whether attorney-client relationship existed; "the better practice is to err on the side of caution by placing the funds into an IOLTA account," id. at para. 14). The lawyer may then withdraw the portion to which the lawyer or law firm has an undisputed right. Cf. Office of Disciplinary Counsel v. Lile, 30 Ohio St.3d 5, 6, 505 N.E.2d 955, 955 (1987) (lawyer sanctioned for removing funds from trust account to pay office expenses where "the amount of attorneys fees due from [the client] was not established" at the time of the withdrawal).
The result that was called for by DR 9-102(A)(2) – funds belonging in part to the client and in part to the lawyer should be placed in a trust account, but the portion belonging to the lawyer can be withdrawn as earned – was essentially the procedure recommended by the Board of Commissioners in Opinion 2007-3 pursuant to Rule 1.15, even though the 9-102(A)(2) language has not been carried forward as such into the Rule. In the context of credit card payments by clients to a lawyer having only one merchant account to handle such payments, the Board opined that the proper procedure is that all credit card payments should go into the trust account, but any of those amounts constituting payments for earned legal fees and reimbursements of expenses should then promptly be transferred to the lawyer’s business account.
This arrangement honors the strict requirement of Rule 1.15(c) that legal fees and expenses that have been paid in advance go into a client trust account, and accommodates Rule 1.15(a) by the prompt transfer of the earned fees and expense reimbursement into the business account.
Id. at *5. (Ideally, the lawyer will have two merchant accounts for credit card payments, one crediting payments to the trust account and the other crediting payments to a business account. But, as the Board notes, this is not always practicable or feasible.)
To the extent the client disputed the lawyer's right to the funds, the funds had to remain in the client account until the dispute was resolved. OH DR 9-102(A)(2). While not discussed directly in the cases, it appears from their facts that where the withdrawal of funds for attorney fees was not authorized by the client, the lawyer's right to the fees was "disputed" within the meaning of the former rule. See, e.g., Butler County Bar Ass'n v. Green, 1 Ohio St.3d 48, 438 N.E.2d 406 (1982) (withdrawal of fees from estate checking account "without prior agreement with his client" violated OH DR 9-102(A)(2)). See generally Cleveland Bar Ass'n Op. 139 (Feb. 23, 1979) (even where attorney has ultimate right to payment, the lawyer could not make a withdrawal from a particular fund to secure that payment unless the withdrawal was authorized by the client; until then claim was "disputed" within the meaning of OH DR 9-102(A)(2)).
The 9-102(A)(2) disputed-funds exception is now in substance covered by 1.15(e). Division (e) states the rule in terms of a lawyer's possession of property in which two or more persons claim an interest. One of those "two or more persons" can be the lawyer. Id. In such a case, the lawyer must hold the funds or other property pursuant to division (a) until the dispute is resolved, with any undisputed amounts to be "promptly distribute[d] by the lawyer." Id. Presumably, the prior case law under 9-102(A)(2) with respect to retainers and flat fees, etc., discussed above, fits within the 1.15(e) rubric as property that is not, in the ordinary course, disputed and belongs to the lawyer.
Restrictions on handling client or third-person funds and other property - Funds: Rule 1.15(a) contains a detailed checklist of the lawyer's record-keeping obligations with respect to the funds of clients and third persons in the lawyer's possession. See Rule 1.15(a)(1)-(5). These obligations are further discussed in section 1.15:230 of the treatise.
Restrictions on handling client or third-person funds and other property - Other property: Rule 1.15(a) also addresses how the lawyer should handle property of the client or a third person in the lawyer's possession other than funds. For such items, the lawyer must maintain a record that identifies the property, the date received, the person on whose behalf it is held, and the date of distribution. Id. For decisions dealing with such property under the former rule (9-102(B)(2)), see, e.g., Columbus Bar Ass'n v. Garrison, 68 Ohio St.3d 461, 628 N.E.2d 1341 (1994) (rule violated by failure to promptly identify, label, and store securely client securities and properties); Cincinnati Bar Ass'n v. Kasson, 53 Ohio St.3d 268, 560 N.E.2d 203 (1990) (loss of an original invoice given the attorney by the client violated this rule).
In this regard, Rule 1.15 cmt.  states that the "lawyer should hold property of others with the care required of a professional fiduciary. Securities should be kept in a safe deposit box, except when some other form of safekeeping is warranted by special circumstances." Comment  also adds that the required records may be maintained electronically.
Restrictions on handling client or third-person funds and other property - Range of punishment: Under the OHCPR, misuse of client funds typically led to a substantial disciplinary sanction. In 1985 the Court commented that "in recent years this court has articulated a consistent policy of imposing either indefinite suspension or permanent disbarment in cases involving the commingling or other misuse of client funds." Dayton Bar Ass'n v. Gross, 17 Ohio St.3d 206, 208, 478 N.E.2d 792, 794 (1985). Accord Cleveland Bar Ass'n v. Herron, 112 Ohio St.3d 564, 2007 Ohio 812, 862 N.E.2d 107 (violation of DR 9-102(A) and 9-102(B)(3) & (4), together with failure to cooperate in investigation resulted in indefinite suspension concurrent with that which respondent was already serving; Green (see infra) followed); Dayton Bar Ass'n v. Green, 97 Ohio St.3d 119, 2002 Ohio 5314, 776 N.E.2d 1060 (indefinite suspension imposed for violation of OH DR 9-102 (A) & (B), failure to keep appropriate records of client's funds and commingling those funds with respondent's own, and failure to cooperate in the investigation). In 1988 the Court noted that suspensions of at least one year were common for such violations. Columbus Bar Ass'n v. Gill, 39 Ohio St.3d 4, 528 N.E.2d 945 (1988). In Cleveland Bar Ass'n v. Fox, 101 Ohio St.3d 154, 2004 Ohio 300, 803 N.E.2d 395, the respondent was suspended for 18 months with 12 months stayed for violation of former OH DR 9-102(A), 9-102(B)(3) and 9-102(B)(4), where substantial mitigating factors were present. The Court noted that "we have no clear-and-convincing evidence of theft here." Id. at ¶ 8.
In a 1996 case, the Court found that a lawyer violated former OH DR 9-102(B)(4) when, after settling the client's case, the lawyer withheld funds in excess of the fee agreement and, although admitting the error, failed to repay the client fully for over five years. Columbus Bar Ass'n v. Brooks, 75 Ohio St.3d 524, 664 N.E.2d 900 (1996). In ordering a one-year suspension from practice, six months of which to be stayed upon payment of full restitution plus interest to the client, the Court commented:
Any lighter sanction would be a message to the bar that a lawyer may wrongfully withhold a significant amount of funds owing to a client for an indeterminate amount of time and receive little more than an order from this court that the funds must be repaid with interest.
Id. at 526, 664 N.E.2d at 902. The lawyer's partner, who learned of the failure to return the overpayment but failed to rectify the situation, was, by this inaction, also found in violation of OH DR 9-102(B)(4) and was given a one-year suspension, all of which would be suspended upon proof of full restitution to the client of the overpayment and interest thereon. Columbus Bar Ass'n v. Winkfield, 75 Ohio St.3d 527, 664 N.E.2d 902 (1996). Compare Office of Disciplinary Counsel v. McCord, 96 Ohio St.3d 21, 2002 Ohio 2587, 770 N.E.2d 571, where, even though respondent's refusal to return an unearned fee forced the client to take the matter to arbitration and then sue to enforce the award, resulting in a default judgment in favor of the client, which judgment respondent still refused to pay, the Court saw fit to impose only a six-month suspension with the entire time stayed, provided full restitution was made to the client within fourteen days.
In another 1996 opinion, however, the Court commented: "We have consistently held that misappropriation of client funds is an egregious violation of a lawyer's ethical responsibilities and an appropriate sanction for such breach of trust is disbarment. [citations omitted]. We continue to adhere to that standard." Office of Disciplinary Counsel v. Connaughton, 75 Ohio St.3d 644, 645, 665 N.E.2d 675, 676 (1996) (ordering disbarment rather than the indefinite suspension recommended by the Board). Accord Cincinnati Bar Ass'n v. Weaver, 102 Ohio St.3d 264, 2004 Ohio 2683, 809 N.E.2d 1113 (violation of, inter alia, OH DR 9-102 (A) & (B)(3); Greene County Bar Ass'n v. Fodal, 100 Ohio St.3d 310, 2003 Ohio 5852, 798 N.E.2d 1082 ("Respondent routinely took his clients' money and provided nothing in return. In the absence of any compelling mitigating evidence, the sanction for this misconduct and his disregard of the disciplinary process is disbarment," id. at para. 32; violation of OH DR 9-102(B)(4), among a panoply of other violations). But cf. Office of Disciplinary Counsel v. Kurtz, 82 Ohio St.3d 55, 693 N.E.2d 1080 (1998) (Court acknowledged disbarment as the appropriate sanction, but, giving weight to the recommendation of the Board based on mitigating factors, concluded that the Board's sanction of indefinite suspension was appropriate). Accord Cleveland Bar Ass'n v. Rus, 106 Ohio St.3d 467, 2005 Ohio 5520, 835 N.E.2d 1252; Akron Bar Ass'n v. Holder, 105 Ohio St.3d 443, 2005 Ohio 2695, 828 N.E.2d 621 (violation of former OH DR 9-102(A), (B)(1), (B)(3) & (B)(4), among others); Disciplinary Counsel v. Nagorny, 105 Ohio St.3d 97, 2004 Ohio 6899, 822 N.E.2d 1233.
In determining the appropriate sanction, the Court does take into account the severity of the infraction, but it is important to realize that, in this area, even comparatively minor violations have resulted in substantial discipline. See, e.g., Office of Disciplinary Counsel v. Morton, 5 Ohio St.3d 206, 450 N.E.2d 275 (1983) (isolated mismanagement of trust account involving disputed use of $500-$1000 of client money led to a one-year suspension). In Erie-Huron Counties Joint Certified Grievance Comm. v. Miles, 76 Ohio St.3d 574, 577, 669 N.E.2d 831, 833 (1996), in imposing a one-year suspension without stay, the Court commented:
[E]ven if there were no damage caused by respondent's actions, we would be disinclined to relax our standards to the extent of imposing the one-year stayed suspension proposed by the board. We hold it of the utmost importance that attorneys maintain their personal and office accounts separate from their clients' accounts and that the violation of that rule warrants a substantial sanction whether or not the client has been harmed. To find otherwise would be to encourage speculation with clients' accounts.
But if the infractions are minor and mitigating factors are present, the Court on occasion has settled for a public reprimand. For example, commingling funds which caused no harm to the client has led to a public reprimand, rather than more severe sanction, where mitigating factors were present. Columbus Bar Ass'n v. Larson, 60 Ohio St.3d 133, 573 N.E.2d 1055 (1991). Delay in the ultimate payment of client funds to the client also has been punished in this fashion where the lawyer acted improperly, but in apparent good faith. Richland County Bar Ass'n v. Davis, 57 Ohio St.3d 196, 566 N.E.2d 678 (1991). A public reprimand was deemed appropriate for an attorney's violations of OH DR 9-102(B)(1) and (B)(3) where his misconduct was an isolated incident arising in part from a misunderstanding, and where satisfactory restitution had been made. Toledo Bar Ass'n v. Reed, 53 Ohio St.3d 8, 557 N.E.2d 1205 (1990). And see Cuyahoga County Bar Ass'n v. Hardiman, 100 Ohio St.3d 260, 2003 Ohio 5596, 798 N.E.2d 369 (sanction lowered by Court to public reprimand where no aggravating factors, numerous mitigating factors, and issue present as to whether attorney-client relationship existed). In contrast, where the lawyer's mishandling of client funds also involves an OH DR 1-102(A)(4) violation for dishonesty, deceit, misrepresentation, or fraud, the punishment is likely to be substantial. Office of Disciplinary Counsel v. Lawrence, 72 Ohio St.3d 420, 650 N.E.2d 867 (1995) (rejecting Board's recommendation for probation and imposing full one-year suspension for mishandling client funds because lawyer knew conduct constituted stealing from client). (For other 9-102 cases in combination with 1-102(A)(4), see next paragraph.)
Restrictions on handling client or third-party funds and other property - Coupled with other violations: Conduct resulting in violations of former OH DR 9-102 often infringed other disciplinary rules as well. For example, to the extent the lawyer purposely misappropriated client funds, the conduct could violate OH DR 1-102(A)(3) (engaging in illegal conduct involving moral turpitude), 1-102(A)(4) (engaging in conduct involving dishonesty, fraud, deceit, or misrepresentation) 1-102(A)(5) (engaging in conduct that is prejudicial to the administration of justice), and/or 1-102(A)(6) (engaging in any other conduct that adversely reflects on the lawyer's fitness to practice law). See, e.g., Cleveland Bar Ass'n v. Douglas, 113 Ohio St.3d 221, 2007 Ohio 1536, 863 N.E.2d 1044 (violation, in addition to DR 9-102(B)(4), of 1-102(A)(4), 6-101(A)(3), 7-101(A)(2) & (3); indefinite suspension instead of disbarment imposed, since respondent living in homeless shelter); Cleveland Bar Ass'n v. Rus, 106 Ohio St.3d 467, 2005 Ohio 5520, 835 N.E.2d 1252 (in addition to appropriation of client's settlement proceeds to own use, respondent forged client's name on settlement documents, thereby violating former OH DR 1-102(A)(3), (4), (5) & (6) in addition to DR 9-102(A), (B)(1) & (B)(4); because of significant mitigating factors, including ultimately making complete restitution and intention to resign from the bar, respondent was indefinitely suspended, rather than disbarred); Office of Disciplinary Counsel v. McCully, 97 Ohio St.3d 486, 2002 Ohio 6724, 780 N.E.2d 574 (respondent's commingling of client's funds with her own while serving as guardian and attorney for the guardianship, and failure to account for and deliver to client proceeds from sale of residence violated OH DR 1-102(A)(4), in addition to OH DR 9-102(B)(3) & (4), among other violations; two-year susupension with one year stayed); Office of Disciplinary Counsel v. McCord, 96 Ohio St.3d 21, 2002 Ohio 2587, 770 N.E.2d 571 (refusal to reimburse client in accordance with arbitrator's award in favor of client in fee dispute violated OH DR 1-102(A)(5) & (6), as well as OH DR 9-102(B)(4); stayed six-month suspension imposed, with stay conditioned on full restitution to client within 14 days); Cincinnati Bar Ass'n v. Selnick, 94 Ohio St.3d 1, 759 N.E.2d 764 (2001) (pattern of multiple violations of OH DR 9-102(B)(3) & (4), coupled with numerous other violations, including OH DR 1-102(A)(4), (5) & (6), resulted in permanent disbarment; respondent consistently failed to provide accountings, to return case files, to return unused portion of retainers, and to maintain funds in client trust account sufficient to reflect monies collected from or on behalf of clients (such as retainers and settlement proceeds) that should have been in the account). The facts of these cases would still result in multiple violations, now of Ohio Rules 1.15 and 8.4.
In a number of cases in which the lawyer "borrowed" money from the client, an indefinite suspension has been imposed, whether a DR 1-102(A)(4) violation was present, e.g., Disciplinary Counsel v. Nagorny, 105 Ohio St.3d 97, 2004 Ohio 6899, 822 N.E.2d 1233; Cincinnati Bar Ass'n v. Rothermel, 104 Ohio St.3d 413, 2004 Ohio 6559, 819 N.E.2d 1099, or even if it was not, Disciplinary Counsel v. Robertson, 113 Ohio St.3d 360, 2007 Ohio 2075, 865 N.E.2d 886 ("A lawyer's misuse of entrusted funds for any reason . . . . is serious and warrants a commensurate sanction regardless of whether the lawyer also intended to deceive or cheat the client in the process." Id. at para. 17.).
To the extent the lawyer took a client's funds, failed to complete the representation, and then failed to return the funds or account for them, the conduct often violated OH DR 6-101(A)(3) (neglect of a legal matter), OH DR 7-101(A)(1) (failure to seek the lawful objectives of the client), and/or OH DR 7-101(A)(2) (failure to carry out the contract of employment). See, e.g., Lake County Bar Ass'n v. Ryan, 109 Ohio St.3d 301, 2006 Ohio 2422, 847 N.E.2d 430 (with respect to one client, never did work retained to do and failed to return unearned retainer despite numerous requests therefor; as to second clients, respondent failed to satisfy judgment obtained by elderly couple forced to sue respondent for return of unearned fees; despite the obnoxiousness of this (and other) conduct, respondent received only a two-year suspension, with one year stayed on condition of full restitution and probation). Where the client was damaged by these actions taken during the course of the relationship, OH DR 7-101(A)(3) was sometimes cited as well. E.g., Cleveland Bar Ass’n v. Douglas, 113 Ohio St.3d 221, 2007 Ohio 1536, 863 N.E.2d 1044 (in addition to DR 9-102(B)(4), violation of 6-101(A)(3), 7-101(A)(2) & (3); indefinite suspension imposed instead of disbarment, since respondent living in homeless shelter); Cincinnati Bar Ass'n v. Selnick, 94 Ohio St.3d 1, 759 N.E.2d 764 (2001).
Another case in which an OH DR 9-102(A) violation was just one of many, in a pattern of misconduct occurring in the course of a badly-botched representation in connection with an adoption, is Stark County Bar Ass'n v. Hare, 99 Ohio St.3d 310, 2003 Ohio 3651, 791 N.E.2d 966. In addition to "depositing into his personal accounts all the money paid to him by the adoptive parents, which included unearned and unapproved attorney fees as well as funds intended to be used for the birth mother's medical expenses," id. at para. 30, the respondent charged a clearly excessive fee in violation of OH DR 2-106(A), accepted conflicting employment in violation of OH DR 5-101(A)(1), and knowingly falsified adoption documents filed with the probate court in an attempt to conceal his actions, in violation of OH DR 7-102(A)(3)-(7).
A 9-102(B)(4) violation, coupled with failure to cooperate in the investigation as required by Gov Bar R V 4(G), resulted in an indefinite suspension in Cuyahoga County Bar Ass'n v. Wagner, 113 Ohio St.3d 158, 2007 Ohio 1253, 863 N.E.2d 164 (misappropriation of client funds, ignoring requests for refunds, and ignoring bar association requests for information; "[t]hese are actions warranting an indefinite suspension," id. at para. 14). Among the aggravating factors were a pattern of misconduct and multiple offenses, arising out of representation of two clients, each in a single matter.
The material in this section is, in part, excerpted and adapted from Arthur F. Greenbaum, Lawyer's Guide to the Ohio Code of Professional Responsibility § 9.35 (1996).
As stated in Ohio Rule 1.15(d), when a lawyer receives funds or other property in which a client or a third person has an interest, the lawyer must "promptly" notify the interested person of that fact and, "[e]xcept as stated in this rule or otherwise permitted by law or by agreement with the client or a third person, confirmed in writing," must "promptly deliver to the client or third person any funds or other property that the client or third person is entitled to receive." A full accounting with respect to the funds or other property must also be made on the request of the client or third person. Id. These provisions are comparable to former OH DR 9-102(B)(1) (notification), (3) (account), and (4) (delivery), but go further. By its terms the duties under the disciplinary rule ran only to clients, whereas Rule 1.15 extends these obligations to interested third persons as well. See Bd. of Comm’rs on Grievances & Discipline Op. 2007-7, 2007 Ohio Griev. Discip. LEXIS 7 (Dec. 7, 2007) (discussing obligations to third persons regarding undisputed lawful claims under Rule and providing examples of “lawful” third person claims, id. at *7-10). (Note, however, that other Code provisions could be invoked to deal with duties to third persons, as in Medina County Bar Ass’n v. Butts, 114 Ohio St.3d 472, 2007 Ohio 4265, 873 N.E.2d 279 (violation of DR 1-102(A)(5)-(6) & 6-101(A)(3)), discussed supra at section 1.15:200.)
The notification requirement: Examples of sanctionable conduct under former OH DR 9-102(B)(1) included failure to notify a client of the receipt of:
cash in respondent's possession that client's former landlord had found after client moved to nursing home, Disciplinary Counsel v. Robertson, 113 Ohio St.3d 360, 2007 Ohio 2075, 865 N.E.2d 886;
funds received in settlement of a claim, Cleveland Bar Ass’n v. Mishler, 118 Ohio St.3d 109, 2008 Ohio 1810, 886 N.E.2d 818; Cincinnati Bar Ass'n v. Walker, 28 Ohio St.3d 102, 502 N.E.2d 646 (1986);
insurance proceeds, Bar Ass'n of Greater Cleveland v. Jaeger, 22 Ohio St.3d 39, 488 N.E.2d 216 (1986); and
funds received in payment of a judgment, Ohio State Bar Ass'n v. Cantagallo, 6 Ohio St.3d 10, 451 N.E.2d 224 (1983).
The accounting requirement: See section 1.15:230 infra.
The prompt delivery requirement: Under the former rule, the duty to promptly deliver client funds or other property was limited to situations in which the client made a request therefor, e.g., Cleveland Bar Ass’n v. Glatki, 88 Ohio St.3d 381, 726 N.E.2d 993 (2000) (no violation if no request from client), or the lawyer was ordered by a court to do so. See Cuyahoga County Bar Ass’n v. Wagner, 117 Ohio St.3d 456, 2008 Ohio 1200, 884 N.E.2d 1053 (respondent failed to comply with bankruptcy court’s orders to return clients’ fees; DR 9-102(B)(4) violated). The request prerequisite was not carried forward in Rule 1.15(d). Examples of OHCPR cases in which the lawyer failed to return client funds and/or other property upon request include Columbus Bar Ass’n v. Gueli, 119 Ohio St.3d 434, 2008 Ohio 4786, 894 N.E.2d 1231 (case file; in another instance a file was returned, but certain “documents and material evidence were missing,” id. at para. 44); Toledo Bar Ass’n v. Mason, 118 Ohio St.3d 412, 2008 Ohio 2704, 889 N.E.2d 539 (settlement proceeds); Disciplinary Counsel v. Broschak, 118 Ohio St.3d 236, 2008 Ohio 2224, 887 N.E.2d 1176 (client’s file); Disciplinary Counsel v. McCauley, 114 Ohio St.3d 461, 2007 Ohio 4259, 873 N.E.2d 269 (amounts collected for and owing to creditor-clients pursuant to respondent’s debt collection agreement); Disciplinary Counsel v. Friedman, 114 Ohio St.3d 1, 2007 Ohio 2477, 866 N.E.2d 1076 (unearned retainers); Disciplinary Counsel v. Mathewson, 113 Ohio St.3d 365, 2007 Ohio 2076, 865 N.E.2d 891 (unearned fees; request made by client's new attorney); Columbus Bar Ass'n v. McCorkle, 105 Ohio St.3d 430, 2005 Ohio 2588, 828 N.E.2d 99 (funds and files). In administering a revocable trust, a lawyer cannot avoid the duty to turn over trust assets on the mere belief that the client is incompetent. Dayton Bar Ass'n v. Marzocco, 71 Ohio St.3d 306, 643 N.E.2d 1079 (1994) (rejecting this excuse in context of broader array of misconduct).
Ohio Rule 1.15 also provides guidance in carrying out these provisions in special circumstances, such as dissolution of a law firm (division (f); see section 1.15:500) or sale of a practice (division (g); see section 1.15:600). Neither of these provisions is contained in the Model Rules, nor did 1.15(f) have a counterpart in the former OHCPR. (The Code analog to Rule 1.15(g) was DR 9-102(C).)
Other Ohio law gives guidance on handling client property upon the retirement or death of an attorney:
Where a lawyer who retains the originals of a client's will is going to retire, the lawyer should attempt to locate the maker or, if the maker is deceased, the maker's personal representative and return the will to the appropriate party, even though no formal request has been made. If an appropriate recipient cannot be found, the lawyer should retain the documents until his death, at which point they will be disposed of pursuant to Gov Bar R V 8(F). Ohio State Bar Ass'n Informal Op. 98-2 (Dec. 14, 1998).
In 2000, the same bar association dealt with the question of disposition of client files raised by a law firm representing the estate of a deceased lawyer. Ohio State Bar Ass'n Informal Op. 00-02 (Apr. 25, 2000). Opinion 00-02 advised the firm to make a reasonable effort to locate the client, who, if located, could either take possession or authorize disposal. Since the question put to it concerned closed files only (as well as the closed files of the lawyer's lawyer father, who had ceased practice in 1936!), the bar association recognized that it was unlikely that many clients would be found still living. In that case, files "closed for at least five years may be disposed of (subject to the caveat that original or important client papers be retained and that efforts to ascertain the clients' desires have been unavailing)." Id. at 4. To protect confidentiality, disposition should be by shredding or incineration. Because the Commissioner of the Estate for the deceased lawyer now lived in South Carolina, the bar association opined that instead of having her keep the undestroyed files out of state, they should, subject to whatever probate-court approval may be required, be made available to the local bar association or to Disciplinary Counsel. In Opinion 00-02, there was a party, the executor, willing to assume responsibility for the files. Where that is not the case, the procedures set forth in Gov Bar R V 8(F) should be used.
In addressing the duty to deliver client property, special note should be made of the treatment of client files maintained by an attorney. Bd. of Comm'rs on Grievances & Discipline Op. 92-8, 1992 Ohio Griev. Discip. LEXIS 13 (Apr. 10, 1992), provides general guidance on the rights of clients to information held in their case files by attorneys. In the syllabus, the Board stated:
Materials acquired or prepared for the purposes of representing the client and other materials that might prove beneficial to the client should be returned. These materials include but are not limited to all significant correspondence, investigatory documents and reports the client has paid for, filed or unfiled but prepared pleadings and briefs, and all materials supplied by the client.
Id. at *1. In sum, "the client is entitled to receive what he or she has paid for and to the return of what he or she has delivered to the lawyer." Id. at *4. In returning the client's files, the lawyer may retain a copy, but the lawyer should not charge the client for the costs of copying since retention of a copy is for the benefit of the lawyer, not the client. Further, the general duty to return client files does not attach to the extent the lawyer obtains a retaining lien on the material as security in a fee dispute. See Rule 1.8(i)(1) (authorizing retaining liens to secure lawyer's fee or expenses). See section 1.8:1130. Such a practice is discouraged, however, and should not be undertaken where to do so "caus[es] foreseeable prejudice to the rights of a client." Op. 92-8, at syllabus. Failure to return client files upon discharge constitutes a violation not only of Rule 1.15(d) but Rule 1.16(b) as well. See section 1.16:500, at "Return of papers and property to which the client is entitled."
The material in this section is, in part, excerpted and adapted from Arthur F. Greenbaum, Lawyer's Guide to the Ohio Code of Professional Responsibility § 9.34 (1996).
Under Rule 1.15(a), the lawyer has an obligation to keep and preserve "[r]ecords of such account funds and other property" for seven years after termination of the representation or disbursement of the funds or property, whichever comes first. If the materials held are property other than funds, the lawyer must maintain a record that identifies the property, the date received, the person on whose behalf it is held, and the date of distribution.
For funds, the record-keeping requirements are more detailed. Pursuant to subdivisions (a)(1)-(5), the lawyer must maintain
(1) a copy of any fee agreement with each client;
(2) a record for each client on whose behalf funds are held that shows
(i) client name
(ii) date, amount, and source of fund received
(iii) date, amount, payee, and purpose of each disbursement
(iv) current balance;
(3) for each bank account, a record that sets forth
(i) name of account
(ii) date, amount, and client affected by each credit and debit
(iii) balance; and
(4) if provided by the bank, all bank statements, deposit slips, and cancelled checks for each account.
(5) The lawyer shall also perform and retain a monthly reconciliation of all of the items in subdivisions (a)(2), (3), and (4).
A case invoking Rule 1.15(a)(2) and (3) is Disciplinary Counsel v. Freeman, 119 Ohio St.3d 330, 2008 Ohio 3836, 894 N.E.2d 31, which rules the Court described as “requiring a lawyer to maintain complete records of client funds in the lawyer’s possession and to render appropriate accounts to clients regarding them.” Id. at para. 4.
Note that the obligations set forth in subdivisions (a)(1)-(5) are couched in terms of duties to "clients"; there is no reference to comparable obligations with respect to funds of third persons held by the lawyer. Given the structure of the Rule as a whole, however, this would appear to be an oversight; in any event, this discrepancy should be clarified one way or the other.
The prior rule merely referred generally to the duty to keep "complete records." OH DR 9-102(B)(3). Despite this lack of specificity, the Supreme Court predictably found 9-102(B)(3) violations where the record keeping was less than adequate. Thus, the lawyer was sanctioned
for failing to keep complete and accurate records of estate assets and failing to keep records of his time and services as attorney and fiduciary for the estates, Disciplinary Counsel v. Hoskins, 119 Ohio St.3d 17, 2008 Ohio 3194, 891 N.E.2d 324;
for attempting unsuccessfully to reconstruct costs and fees after the fact, resulting in respondent being unable to account for the fees and expenses charged to client, Cleveland bar Ass’n v. Mishler, 118 Ohio St.3d 109, 2008 Ohio 1810, 886 N.E.2d 818;
for having no records to account for client’s funds in his trust account or for checks payable to cash written against that account, all as part of scheme to use account to launder money from client’s retirement funds and thereby defraud nursing homes, which had provide care for his in-law clients, Disciplinary Counsel v. Heiland, 116 Ohio St.3d 521, 2008 Ohio 91, 880 N.E.2d 467;
for failing to keep any records of transactions in trust account, Disciplinary Counsel v. Bubna, 116 Ohio St.3d 294, 2007 Ohio 6436, 878 N.E.2d 632.
for being unable to account for client cash (presumably because of inadequate records, although the opinion does not expressly so state) and for being unable to document all but $350 of $9,000+ fee, Disciplinary Counsel v. Robertson, 113 Ohio St.3d 360, 2007 Ohio 2075, 865 N.E.2d 886.
for failure to keep ledger or other written record of funds received from clients; Court noted respondent's "inattentive and sloppy management of his law practice," Dayton Bar Ass'n v. Sebree, 111 Ohio St.3d 297, 2006 Ohio 5788, 856 N.E.2d 210, id. at ¶ 16.
for nonexistent "client ledgers, records, or receipts showing the source of some of the funds deposited into the IOLTA account." Disciplinary Counsel v. Wise, 108 Ohio St.3d 381, 2006 Ohio 1194, 843 N.E.2d 1198, at ¶ 4.
because of inadequate record keeping, respondent was unable to verify either that all funds deposited into his IOLTA account were client funds or that all withdrawals were for fees he had earned. Disciplinary Counsel v. Croushore, 108 Ohio St.3d 156, 2006 Ohio 412, 841 N.E.2d 781.
"because he had not properly identified the funds in his trust account and often made cash withdrawals from that account without appropriate record keeping." Cincinnati Bar Ass'n v. Witt, 103 Ohio St.3d 434, 2004 Ohio 5463, 816 N.E.2d 1036, at ¶ 14.
for failure to document transactions involving a loan of client funds to the lawyer and the use of client funds for the benefit of third parties. Geauga County Bar Ass'n v. Hall, 38 Ohio St.3d 342, 528 N.E.2d 192 (1988).
where, in commingling his own funds with funds of the client, the lawyer failed to keep virtually any records of client funds. Office of Disciplinary Counsel v. Lucey, 14 Ohio St.3d 18, 470 N.E.2d 888 (1984).
In other instances, the problem surfaced when a dispute arose over the lawyer's conduct with respect to the property and the lawyer's records were inadequate to substantiate the lawyer's version of what had occurred. Thus in Columbus Bar Ass’n v. Gueli, 119 Ohio St.3d 434, 2008 Ohio 4786, 894 N.E.2d 1231, the respondent was found to have violated DR 9-102(B)(3) because he “had no records that justified charging the Barnhill estate $37,500 in attorney fees.” Id. at para. 22. In another example, a lawyer was disciplined when he claimed to have remitted funds to his client but had no record of doing so. Office of Disciplinary Counsel v. Kick, 28 Ohio St.3d 91, 502 N.E.2d 640 (1986). Similarly, in Cincinnati Bar Ass'n v. Trainor, 99 Ohio St.3d 318, 2003 Ohio 3634, 791 N.E.2d 972, the respondent was sanctioned under OH DR 9-102(B)(3) for his handling of a $50,000 settlement obtained for his client. The first $25,000 was properly accounted for, "but as he received the remaining amounts and paid additional litigation and medical expenses, he did not similarly account for the rest of the funds before his client disputed various payments." Id. at para. 3. The upshot was, in attempting to reconcile his records, respondent found that he had actually overpaid the client by more than $12,000. Another 9-102(B)(3) violation occurred in Cincinnati Bar Ass'n v. Rothermil, 104 Ohio St.3d 413, 2004 Ohio 6559, 819 N.E.2d 1099, where respondent, who claimed to have "borrowed" funds from the client trust account, which funds were used for purposes unrelated to the decedent's estate, "failed to maintain complete records of funds in his client trust account and was unable to render appropriate accounts" to his client, the administrator, as required. Id. at para. 6. (Violation of former OH DR 9-102(A) was also found in both Trainor and Rothermil, even though the opinions expressly state that the amounts were placed in "a client trust account.")
Of most real-world significance are those instances in which the lawyer's failure to carry out his or her professional responsibilities to the client were attributable to poor record keeping:
Record-keeping failure that led to oversight in failing to pay subrogated medical bills, as the client had directed, violated OH DR 9-102(B)(3). Cincinnati Bar Ass'n v. Shabazz, 69 Ohio St.3d 535, 634 N.E.2d 994 (1994).
Drawing a check on the lawyer's trust account to settle a dispute on the client's behalf where respondent knew or should have known that the account had insufficient funds to cover the check, due in part to commingling concerns, violated the rule's record-keeping requirement. Columbus Bar Ass'n v. Pugh, 68 Ohio St.3d 172, 624 N.E.2d 1041 (1994).
A lawyer was sanctioned for the loss of a client file and the inaccessibility of records during an audit where the loss interfered with the lawyer's ability to make restitution on the client's behalf for certain bad checks the client had written to third parties. Cincinnati Bar Ass'n v. Ent, 9 Ohio St.3d 44, 457 N.E.2d 1176 (1984).
The importance of proper record keeping is highlighted by the case of Columbus Bar Ass'n v. Zauderer, 80 Ohio St.3d 435, 687 N.E.2d 410 (1997). In Zauderer, an attorney who represented over 300 women in mass tort litigation, incurred over $300,000 in general expenses (nurses, expert witnesses, depositions, court costs, transcripts, subscriptions to periodicals, seminars, and postage), in addition to expenses advanced by him in the course of their specific cases. Respondent not only failed to keep accurate records of the case-specific expenses, but also failed to inform his clients of the extraordinary general expenses being incurred. Nor did respondent itemize these general expenses as they were incurred. Instead, upon settlement, he informed the clients, in a unilateral alteration of the contingent-fee contracts entered into with his clients, that these general expenses would be allocated among the clients pursuant to a formula based upon the amount each client received in settlement. The Court found that respondent's failure to keep appropriate records of expenses violated OH DR 9-102(B)(3) and suspended him for one year, stayed on condition, inter alia, that he refund the general expense amounts overcharged to the clients.
While not directly stated in the rule, OH DR 9-102(B) was interpreted as imposing on the lawyer an independent duty to regularly review records of the client's property as part of maintaining those records. As the Ohio Supreme Court stated in Office of Disciplinary Counsel v. Kick, 28 Ohio St.3d 91, 93, 502 N.E.2d 640, 642 (1986):
Kick's maintenance of his trust account, however, can best be characterized as dismal. Although it does not appear that Kick ever used any trust account funds for his own purposes, he did not review the monthly trust account statements to ascertain that his balance was considerably less than what it should have been.
OH DR 9-102(B)(3) also provided that the lawyer must "render appropriate accounts to his client" about the property. Rule 1.15(d) restates this obligation as requiring the prompt rendering of "a full accounting" with respect to client or third-person funds or other property upon request by the client or third person. See, under the former rule, e.g., Cuyahoga County Bar Ass’n v. Mazanec, 114 Ohio St.3d 427, 2007 Ohio 4268, 872 N.E.2d 1209 (failure to fulfill obligation to make annual accounting as trustee of client’s family trust violated 9-102(B)(3)); Disciplinary Counsel v. Friedman, 114 Ohio St.3d 1, 2007 Ohio 2477, 866 N.E.2d 1076 (failure to provide itemized bill as requested); Cleveland Bar Ass'n v. McNally, 109 Ohio St.3d 560, 2006 Ohio 3258, 849 N.E.2d 1022 (ignoring client requests for itemized bill); Lake County Bar Ass'n v. Ryan, 109 Ohio St.3d 301, 2006 Ohio 2422, 847 N.E.2d 430 (refusal to provide requested itemized statement of services violated 9-102(B)(3)); Columbus Bar Ass'n v. McCorkle, 105 Ohio St.3d 430, 2005 Ohio 2588, 828 N.E.2d 99; Cleveland Bar Ass'n v. Fox, 101 Ohio St.3d 154, 2004 Ohio 300, 803 N.E.2d 395 (failure to account for trust funds that client apparently left in respondent's custody five years prior to client's death). While the failure to account often flows from inadequate record keeping, this is a separate concern. Even if a lawyer maintains adequate records pertaining to a client's property, he still must make the full accounting required on request of the client or third person whose property it is.
Note that under Rule 1.15(d), the obligation to account is triggered by a request therefor by the client or third person, whereas there is no such prerequisite to the duty to deliver funds or property to which a client or third person is entitled. Under former DR 9-102(B)(3) & (4), it was just the opposite: there was no request requirement for an accounting but there was for delivery of funds or other property.
In the typical OHCPR disciplinary case in this area, a lawyer undertook to represent a client, failed to act on the client's behalf, and then, in violation of OH DR 9-102(B)(3), failed to account for the funds received, or misused the client's funds and failed to report that misuse to the client. See, e.g., Cincinnati Bar Ass'n v. Selnick, 94 Ohio St.3d 1, 759 N.E.2d 764 (2001); Cuyahoga County Bar Ass'n v. Stidham, 69 Ohio St.3d 80, 630 N.E.2d 662 (1994). Even if the lawyer did make an accounting, it, of course, had to be truthful to avoid discipline. Ohio State Bar Ass'n v. Cantagallo, 6 Ohio St.3d 10, 451 N.E.2d 224 (1983) (lawyer sanctioned for lying to client about dates funds were received in payment of judgment). Further, lawyers who made an accounting have been sanctioned for failing to do so in a timely fashion. A lawyer's twenty-month delay in accounting for client funds stemming from a misunderstanding about how the legal fee was to be calculated warranted discipline. Ohio State Bar Ass'n v. Sacher, 8 Ohio St.3d 49, 457 N.E.2d 815 (1983). An eight-year delay in making an accounting, allegedly resulting from the lawyer's belief the client was incompetent, was sanctioned in Dayton Bar Ass'n v. Marzocco, 71 Ohio St.3d 306, 643 N.E.2d 1079 (1994).
Under the OHCPR, sanctions were imposed regardless of the intent of the lawyer or lack of prejudice to the client. Thus, failure to maintain complete records, render appropriate accounts, and promptly pay funds to a client was actionable even though it resulted from carelessness, lack of organization, and a lack of communication, rather than bad intent, and caused the client no prejudice. Cincinnati Bar Ass'n v. Altekruse, 63 Ohio St.3d 139, 586 N.E.2d 75 (1992). Presumably, that will continue to be the case under the mandatory provisions of Rule 1.15.
- Primary Ohio References: Ohio Rule 1.15(d)
- Background References: ABA Model Rule 1.15(d)
- Ohio Commentary: Greenbaum, Lawyer's Guide to the Ohio Code of Professional Responsibility § 9.35
- Commentary: ABA/BNA § 45:501; ALI-LGL § 44; Wolfram § 4.8
The material in this section is, in part, excerpted and adapted from Arthur F. Greenbaum, Lawyer's Guide to the Ohio Code of Professional Responsibility § 9.35 (1996).
A lawyer has a fiduciary duty with respect to funds held belonging to others. See Rule 1.15 cmt. : "A lawyer should hold property of others with the care required of a professional fiduciary." Compliance with the record-keeping requirements of subdivisions (a)(1)-(5) of the Rule is also necessary in order to "fulfill the role of professional fiduciary." 1.15 cmt. . "A lawyer's fiduciary duties are independent of the lawyer's employment at a particular firm or the rendering of legal services." Rule 1.15 cmt. .
As noted in section 1.15:220, the duty the lawyer owes the client or third person under Rule 1.15(d) is to "promptly notify the client or third person" of the receipt of funds or other property in which either has an interest and to "promptly deliver" any funds or other property that either is entitled to receive. This is comparable to the duties set forth in former OH DR 9-102(B)(1) (notification) and (4) (delivery). In Office of Disciplinary Counsel v. Sanborn, 81 Ohio St.3d 282, 690 N.E.2d 1272 (1998), the Court held that respondent violated 9-102(B)(1) in failing to promptly notify survivors of his receipt of funds of an estate of which he was fiduciary (which funds he misappropriated to his own account over a period of ten years). And, in Office of Disciplinary Counsel v. McCord, 96 Ohio St.3d 21, 2002 Ohio 2587, 770 N.E.2d 571, the lawyer's 9-102(B)(4) duty to remit funds to which the client was entitled (unearned fees) was violated where respondent refused to return the funds, even though the matter had gone to arbitration, the arbitrator had ruled in favor of the client, and "respondent admitted he was bound by the arbitration process." Id. at ¶ 6.
What if the lawyer holds client funds but is unable to locate the client? In Bd. of Comm'rs on Grievances & Discipline Op. 2005-10, 2005 Ohio Griev. Discip. LEXIS 9 (Dec. 2, 2005), the Board sensibly opined that such funds are held by the lawyer/fiduciary/"holder" as unclaimed funds. The lawyer may report such funds to the state director of commerce as "unclaimed funds" after the statutory dormancy period in accordance with ORC Chapter 169, and in doing so, does not violate the lawyer's ethical duty to preserve such funds under former OH DR 9-102(A) or the duty to deliver them under 9-102(B)(4), so long as the attorney makes a diligent effort to locate the client without success.
See Cincinnati Bar Ass'n v. Stidham, 87 Ohio St.3d 455, 721 N.E.2d 977 (2000), where respondent agreed to escrow, on behalf of the seller of a tavern, one-half of the purchase price paid by his client, the buyer. Instead of opening the escrow account, respondent put the money in his IOLTA account, and then proceeded to draw on the money for other purposes. Respondent was found to have violated OH DR 1-102(A)(4) and (6), but, because the money was restored to the seller and for other mitigating reasons, the Court reduced the sanction from the Board's recommended indefinite suspension to two years, with the second year stayed, subject to monitoring and other conditions imposed. Respondent had also been charged, inter alia, with a violation of OH DR 9-102(B)(4) (failure promptly to pay funds that a client is entitled to receive), but this charge was not proven. This would appear to be the proper result, inasmuch as OH DR 9-102(B)(4) dealt with funds that the client is entitled to receive, whereas the funds in question were those to which the third-party seller was entitled. Under 1.15(d), of course, the duty to remit now extends to property to which a third person, such as the seller in Stidham, is entitled.
- Primary Ohio References: Ohio Rule 1.15(e)
- Background References: ABA Model Rule 1.15(e)
- Ohio Commentary: Greenbaum, Lawyer's Guide to the Ohio Code of Professional Responsibility §§ 7.21, 9.36
- Commentary: ABA/BNA § 45:101; ALI-LGL §§ 44-45; Wolfram § 4.8
The material in this section is, in part, excerpted and adapted from Arthur F. Greenbaum, Lawyer's Guide to the Ohio Code of Professional Responsibility §§ 7.21, 9.36 (1996).
Ohio Rule 1.15(e) provides that if funds or other property in the possession of the lawyer is claimed by two or more persons (one of whom may be the lawyer), "the lawyer shall hold the funds or other property pursuant to division (a) of this rule until the dispute is resolved. The lawyer shall promptly distribute all portions of the funds or other property as to which the interests are not in dispute." Comment  further discusses client/lawyer disputes concerning fees: "The lawyer is not required to remit to the client funds that the lawyer reasonably believes represent fees owed. However, a lawyer may not hold funds to coerce a client into accepting the lawyer's contention." Rule 1.15 cmt. .
Ohio Rule 1.15(e) also deals with property claimed by both the client and a third party. Again, the lawyer is obligated to keep such property separate until the dispute is resolved. See Comment , which provides in part:
A lawyer may have a duty under applicable law to protect such [lawful] third-party claims against wrongful interference by the client. In such cases, when the third-party claim is not frivolous under applicable law, the lawyer must refuse to surrender the property to the client until the claims are resolved. A lawyer should not unilaterally assume to arbitrate a dispute between the client and the third party, but, when there are substantial grounds for dispute as to the person entitled to the funds, the lawyer may file an action to have a court resolve the dispute.
Ohio Rule 1.15 cmt. . These duties with respect to disputed claims under Rule 1.15(e) are explored in some detail in Bd. of Comm’rs on Grievances & Discipline Op. 2007-7, 2007 Ohio Griev. Discip. 7 (Dec. 7, 2007). Examples of lawful third-party claims under applicable law include: valid statutory subrogation rights to funds in the lawyer’s possession; valid judgment liens or other court orders pertaining to such property; written agreements by clients authorizing payment to medical providers; and secured claims by creditors specific to funds in the lawyer’s possession. See id. at *8-10.
The approach set forth in Comment  and Opinion 2007-7 is consistent with Bd. of Comm'rs on Grievances & Discipline Op. 95-12, 1995 Ohio Griev. Discip. LEXIS 3 (Oct. 6, 1995), where, under former OH DR 9-102(B)(2), it was opined that the lawyer should hold the disputed funds until it can be determined, by mediation, arbitration, or interpleader, who has the right to the funds. See also Hsu v. Parker, 116 Ohio App.3d 629, 688 N.E.2d 1099 (Cuyahoga 1996) (where client gave security interest in potential proceeds of action to treating physician but on settlement of action instructed lawyer not to pay, lawyer should have filed complaint in interpleader).
As the decision in Hsu indicates, the client's instructions must be valid to be binding on the lawyer. For example, following the clients' direction to disburse funds to them will not serve as an excuse for violating the terms of an escrow agreement under which the lawyer is holding the proceeds of the sale of property when a problem with the sale arises. See City of Ravenna v. Fouts, No. 92- P-0098, 1994 Ohio App. LEXIS 379 (Portage Feb. 4, 1994) (lawyer cannot "hide behind" former OH EC 7-7 and OH EC 5-21 with "lame excuse" that "clients made him do it," id. at *6). Citing and quoting Fouts, the court in Shiepis Clinic of Chiropractic, Inc. v. Stevenson, No. 1995 CA 00343, 1996 Ohio App. LEXIS 3707 (Stark July 8, 1996), likewise held that the attorney could not use his client's instructions to excuse his failure to pay medical fees to a provider from settlement proceeds.
Upon resolution of the dispute, or if there is no dispute (as where the client requests that funds be disbursed to third parties having valid claim thereto), subdivision (e) mandates that the lawyer "promptly distribute" such property. Cases in which lawyers were sanctioned under the OHCPR for failure to disburse client funds at the client's request included Columbus Bar Ass'n v. McCoy, 28 Ohio St.3d 96, 502 N.E.2d 642 (1986); Bar Ass'n of Greater Cleveland v. Cook, 18 Ohio St.3d 149, 480 N.E.2d 436 (1985). This problem was perhaps better addressed as neglect; the cases typically invoked that provision as well. And, if several clients arguably had a right to the same property and disagreed as to its disbursement, the attorney could not favor one client over the other, but had to seek arbitration or judicial resolution of the matter. Bar Ass'n of Greater Cleveland Op. 85-2 (Dec. 13, 1985) (husband and wife clients of lawyer disagreed over which of them was entitled to possession of an executed, witnessed, notarized, but unrecorded, deed conveying to wife one-half of the husband's interest in certain property). This result seems consistent with that now called for under Rule 1.15(e).
Ohio Rule 1.15(f) provides that former partners, managing partners, or supervisory lawyers of a dissolved firm "shall promptly account for all client funds and shall make appropriate arrangements for one of them to maintain all records generated under division (a) of this rule." There is no analogous Model Rule provision; nor was there under the former OHCPR.
Comment  states as follows:
A lawyer's fiduciary duties are independent of the lawyer's employment at a particular firm or the rendering of legal services. Law firms frequently merge or dissolve. Division (f) provides that whenever a law firm dissolves, the former partners, managing partners, or supervisory lawyers must appropriately account for all client funds. This responsibility may be satisfied by an appropriate designee.
Division (g) obligates the seller of a firm (whether a lawyer, law firm, or estate of a deceased lawyer) to "account for and transfer all funds held pursuant to this rule to the lawyer or law firm purchasing the law practice at the time client files are transferred." Ohio Rule 1.15(g). Division (g) supplements the provisions on sale of a law practice contained in Ohio Rule 1.17. Again, there is no comparable Model Rule provision.
Comment  adds the following:
All lawyers involved in the sale or purchase of a law practice as provided by Rule 1.17 should make reasonable efforts to safeguard and account for client property. Division (g) requires the lawyer, law firm or estate of a deceased lawyer who sells a practice to account for and transfer all client property at the time the client files are transferred.
Ohio Rule 1.15 cmt. . There is no explanation as to why the first sentence of the comment is couched in "should make reasonable efforts" language, when the second sentence of the comment and division (g) itself state the applicable duties in mandatory terms.
Pursuant to Ohio Rule 1.15(h), a lawyer, "a lawyer in the lawyer's firm," or a firm that owns an interest in a business providing law-related services must:
respect to funds of clients and third persons "that cannot earn
any net income," maintain such funds in an interest-bearing
trust account as required by ORC 3953.231, 4705.09 and
4705.10, and any rules adopted under ORC 120.52 by the
Ohio Legal Assistance Foundation (OLAF);
(2) notify OLAF of the existence of the account; and
(3) comply with the Gov Bar R VI 1(F) reporting requirement.
According to the Task Force's Ohio Code Comparison, the division (h) obligation "is the same as the requirements in DR 9-102(D) and (E)."
There are unexplained differences, however. The OHCPR referred to "a lawyer, a law firm, or an ancillary business related to the practice of law in which the lawyer is a principal." In contrast, Rule 1.15(h) is directed at "[a] lawyer, a lawyer in the lawyer's firm, or a firm that owns an interest in a business that provides a law-related service." Surely it was not intended to exclude law firms not having an interest in a law-related service business, but that would appear to be the result produced by a literal reading of the language. The other unexplained difference is the language in division (h) limiting the provisions of subdivision (h)(1) to funds "that cannot earn any net income for the clients or third persons"; this language did not appear in the OHCPR and it is not present in any of the statutory provisions referenced in division (h).
For disciplinary cases under the Code finding a violation of former OH DR 9-102(E)(1) (obligating a lawyer to maintain client funds in an interest-bearing trust account), see Columbus Bar Ass’n v. Peden, 118 Ohio St.3d 244, 2008 Ohio 2237, 887 N.E.2d 1183; Disciplinary Counsel v. Millonig, 108 Ohio St.3d 154, 2006 Ohio 420, 841 N.E.2d 779.
See also section 1.15:110 supra.