(a) Prohibition Against
Commingling and Misappropriation of Client Funds or Property.
A lawyer in possession of any funds or
other property belonging to another person, where such possession is incident
to his or her practice of law, is a fiduciary, and must not misappropriate such
funds or property or commingle such funds or property with his or her
own.
(b)
Separate Accounts.
(1) A
lawyer who is in possession of funds belonging to another person incident to
the lawyer's practice of law shall maintain such funds in a banking institution
within New York State that agrees to provide dishonored check and overdraft
reports in accordance with the provisions of 22 N.Y.C.R.R. Part
1300. "Banking
institution" means a state or national bank, trust company, savings bank,
savings and loan association or credit union. Such funds shall be maintained,
in the lawyer's own name, or in the name of a firm of lawyers of which the
lawyer is a member, or in the name of the lawyer or firm of lawyers by whom the
lawyer is employed, in a special account or accounts, separate from any
business or personal accounts of the lawyer or lawyer's firm, and separate from
any accounts that the lawyer may maintain as executor, guardian, trustee or
receiver, or in any other fiduciary capacity; into such special account or
accounts all funds held in escrow or otherwise entrusted to the lawyer or firm
shall be deposited; provided, however, that such funds may be maintained in a
banking institution located outside New York State if such banking institution
complies with 22 N.Y.C.R.R. Part
1300 and the lawyer has obtained the prior
written approval of the person to whom such funds belong specifying the name
and address of the office or branch of the banking institution where such funds
are to be maintained. No special account or trust account aforementioned may
have overdraft protection.
(2) A lawyer or the lawyer's firm shall
identify the special bank account or accounts required by Rule 1.15(b)(1) as an
"Attorney Special Account," "Attorney Trust Account," or "Attorney Escrow
Account," and shall obtain checks and deposit slips that bear such title. Such
title may be accompanied by such other descriptive language as the lawyer may
deem appropriate, provided that such additional language distinguishes such
special account or accounts from other bank accounts that are maintained by the
lawyer or the lawyer's firm.
(3) Funds reasonably sufficient to
maintain the account or to pay account charges may be deposited
therein.
(4) Funds
belonging in part to a client or third person and in part currently or
potentially to the lawyer or law firm shall be kept in such special account or
accounts, but the portion belonging to the lawyer or law firm may be withdrawn
when due unless the right of the lawyer or law firm to receive it is disputed
by the client or third person, in which event the disputed portion shall not be
withdrawn until the dispute is finally resolved.
(c) Notification of Receipt of
Property; Safekeeping; Rendering Accounts; Payment or Delivery of Property.
A lawyer shall:
(1) promptly notify a client
or third person of the receipt of funds, securities, or other properties in
which the client or third person has an interest;
(2) identify and label
securities and properties of a client or third person promptly upon receipt and
place them in a safe deposit box or other place of safekeeping as soon as
practicable;
(3)
maintain complete records of all funds, securities, and other properties of a
client or third person coming into the possession of the lawyer and render
appropriate accounts to the client or third person regarding them;
and
(4) promptly pay
or deliver to the client or third person as requested by the client or third
person the funds, securities, or other properties in the possession of the
lawyer that the client or third person is entitled to receive.
(d) Required
Bookkeeping Records.
(1) A
lawyer shall maintain for seven years after the events that they record:
(i) the records of all
deposits in and withdrawals from the accounts specified in Rule 1.15(b) and of
any other bank account that concerns or affects the lawyer's practice of law;
these records shall specifically identify the date, source and description of
each item deposited, as well as the date, payee and purpose of each withdrawal
or disbursement;
(ii) a record for special accounts,
showing the source of all funds deposited in such accounts, the names of all
persons for whom the funds are or were held, the amount of such funds, the
description and amounts, and the names of all persons to whom such funds were
disbursed;
(iii)
copies of all retainer and compensation agreements with clients;
(iv) copies of all statements
to clients or other persons showing the disbursement of funds to them or on
their behalf;
(v)
copies of all bills rendered to clients;
(vi) copies of all records showing
payments to lawyers, investigators or other persons, not in the lawyer's
regular employ, for services rendered or performed;
(vii) copies of all retainer
and closing statements filed with the Office of Court Administration;
and
(viii) all
checkbooks and check stubs, bank statements, prenumbered canceled checks and
duplicate deposit slips.
(2) Lawyers shall make accurate entries
of all financial transactions in their records of receipts and disbursements,
in their special accounts, in their ledger books or similar records, and in any
other books of account kept by them in the regular course of their practice,
which entries shall be made at or near the time of the act, condition or event
recorded.
(3) For
purposes of Rule 1.15(d), a lawyer may satisfy the requirements of maintaining
"copies" by maintaining any of the following items: original records,
photocopies, microfilm, optical imaging, and any other medium that preserves an
image of the document that cannot be altered without detection.
(e) Authorized
Signatories.
All special account withdrawals shall be
made only to a named payee and not to cash. Such withdrawals shall be made by
check or, with the prior written approval of the party entitled to the
proceeds, by bank transfer. Only a lawyer admitted to practice law in New York
State shall be an authorized signatory of a special account.
(f) Missing Clients.
Whenever any sum of money is payable to
a client and the lawyer is unable to locate the client, the lawyer shall apply
to the court in which the action was brought if in the unified court system,
or, if no action was commenced in the unified court system, to the Supreme
Court in the county in which the lawyer maintains an office for the practice of
law, for an order directing payment to the lawyer of any fees and disbursements
that are owed by the client and the balance, if any, to the Lawyers' Fund for
Client Protection for safeguarding and disbursement to persons who are entitled
thereto.
(g)
Designation of Successor Signatories.
(1) Upon the death of a lawyer who was
the sole signatory on an attorney trust, escrow or special account, an
application may be made to the Supreme Court for an order designating a
successor signatory for such trust, escrow or special account, who shall be a
member of the bar in good standing and admitted to the practice of law in New
York State.
(2) An
application to designate a successor signatory shall be made to the Supreme
Court in the judicial district in which the deceased lawyer maintained an
office for the practice of law. The application may be made by the legal
representative of the deceased lawyer's estate; a lawyer who was affiliated
with the deceased lawyer in the practice of law; any person who has a
beneficial interest in such trust, escrow or special account; an officer of a
city or county bar association; or counsel for an attorney disciplinary
committee. No lawyer may charge a legal fee for assisting with an application
to designate a successor signatory pursuant to this Rule.
(3) The Supreme Court may
designate a successor signatory and may direct the safeguarding of funds from
such trust, escrow or special account, and the disbursement of such funds to
persons who are entitled thereto, and may order that funds in such account be
deposited with the Lawyers' Fund for Client Protection for safeguarding and
disbursement to persons who are entitled thereto.
(h) Dissolution of a Firm.
Upon the dissolution of any firm of
lawyers, the former partners or members shall make appropriate arrangements for
the maintenance, by one of them or by a successor firm, of the records
specified in Rule 1.15(d).
(i) Availability of Bookkeeping
Records: Records Subject to Production in Disciplinary Investigations and
Proceedings.
The financial records required by this
Rule shall be located, or made available, at the principal New York State
office of the lawyers subject hereto, and any such records shall be produced in
response to a notice or subpoena duces tecum issued in connection with a
complaint before or any investigation by the appropriate grievance or
departmental disciplinary committee, or shall be produced at the direction of
the appropriate Appellate Division before any person designated by it. All
books and records produced pursuant to this Rule shall be kept confidential,
except for the purpose of the particular proceeding, and their contents shall
not be disclosed by anyone in violation of the attorney-client
privilege.
(j) Disciplinary Action.
A lawyer who does not maintain and keep
the accounts and records as specified and required by this Rule, or who does
not produce any such records pursuant to this Rule, shall be deemed in
violation of these Rules and shall be subject to disciplinary
proceedings.
