(a) A lawyer shall hold property of clients or third persons that is in a lawyer’s possession in connection with a representation separate from the lawyer’s own property. Except as provided in (g) and the IOLTA Rules below, funds shall be kept in one or more separate interest-bearing client trust accounts maintained in a bank or savings and loan association: 1) authorized by federal or state law to do business in Louisiana, the deposits of which are insured by an agency of the federal government; 2) in the state where the lawyer’s primary office is situated, if not within Louisiana; or 3) elsewhere with the consent of the client or third person. No earnings on a client trust account may be made available to or utilized by a lawyer or law firm. Other property shall be identified as such and appropriately safeguarded. Complete records of such account funds and other property shall be kept by the lawyer and shall be preserved for a period of five years after termination of the representation.
(b) A lawyer may deposit the lawyer’s own funds in a client trust account for the sole purpose of paying bank service charges on that account or obtaining a waiver of those charges, but only in an amount necessary for that purpose.
(c) A lawyer shall deposit into a client trust account legal fees and expenses that have been paid in advance, to be withdrawn by the lawyer only as fees are earned or expenses incurred. The lawyer shall deposit legal fees and expenses into the client trust account consistent with Rule 1.5(f).
(d) Upon receiving funds or other property in which a client or third person has an interest, a lawyer shall promptly notify the client or third person. For purposes of this rule, the third person’s interest shall be one of which the lawyer has actual knowledge, and shall be limited to a statutory lien or privilege, a final judgment addressing disposition of those funds or property, or a written agreement by the client or the lawyer on behalf of the client guaranteeing payment out of those funds or property. Except as stated in this rule or otherwise permitted by law or by agreement with the client, a lawyer shall promptly deliver to the client or third person any funds or other property that the client or third person is entitled to receive and, upon request by the client or third person, shall promptly render a full accounting regarding such property.
(e) When in the course of representation a lawyer is in possession of property in which two or more persons (one of whom may be the lawyer) claim interests, the property shall be kept separate by the lawyer until the dispute is resolved. The lawyer shall promptly distribute all portions of the property as to which the interests are not in dispute.
(f) Every check, draft, electronic transfer, or other withdrawal instrument or authorization from a client trust account shall be personally signed by a lawyer or, in the case of electronic, telephone, or wire transfer, from a client trust account, directed by a lawyer or, in the case of a law firm, one or more lawyers authorized by the law firm. A lawyer shall not use any debit card or automated teller machine card to withdraw funds from a client trust account. On client trust accounts, cash withdrawals and checks made payable to “Cash” are prohibited. A lawyer shall subject all client trust accounts to a reconciliation process at least quarterly, and shall maintain records of the reconciliation as mandated by this rule.
(g) A lawyer shall create and maintain an “IOLTA Account,” which is a pooled interest-bearing client trust account for funds of clients or third persons which are nominal in amount or to be held for such a short period of time that the funds would not be expected to earn income for the client or third person in excess of the costs incurred to secure such income.
(1) IOLTA Accounts shall be of a type approved and authorized by the Louisiana Bar Foundation and maintained only in “eligible” financial institutions, as approved and certified by the Louisiana Bar Foundation. The Louisiana Bar Foundation shall establish regulations, subject to approval by the Supreme Court of Louisiana, governing the determination that a financial institution is eligible to hold IOLTA Accounts and shall at least annually publish a list of LBF-approved/certified eligible financial institutions. Participation in the IOLTA program is voluntary for financial institutions.
IOLTA Accounts shall be established at a bank or savings and loan association authorized by federal or state law to do business in Louisiana, the deposits of which are insured by an agency of the federal government or at an open-end investment company registered with the Securities and Exchange Commission authorized by federal or state law to do business in Louisiana which shall be invested solely in or fully collateralized by U.S. Government Securities with total assets of at least $250,000,000 and in order for a financial institution to be approved and certified by the Louisiana Bar Foundation as eligible, shall comply with the following provisions:
(A) No earnings from such an account shall be made available to a lawyer or law firm.
(B) Such account shall include all funds of clients or third persons which are nominal in amount or to be held for such a short period of time the funds would not be expected to earn income for the client or third person in excess of the costs incurred to secure such income.
(C) Funds in each interest-bearing client trust account shall be subject to withdrawal upon request and without delay, except as permitted by law.
(2) To be approved and certified by the Louisiana Bar Foundation as eligible, financial institutions shall maintain IOLTA Accounts which pay an interest rate comparable to the highest interest rate or dividend generally available from the institution to its non-IOLTA customers when IOLTA Accounts meet or exceed the same minimum balance or other eligibility qualifications, if any. In determining the highest interest rate or dividend generally available from the institution to its non-IOLTA accounts, eligible institutions may consider factors, in addition to the IOLTA Account balance, customarily considered by the institution when setting interest rates or dividends for its customers, provided that such factors do not discriminate between IOLTA Accounts and accounts of non-IOLTA customers, and that these factors do not include that the account is an IOLTA Account. The eligible institution shall calculate interest and dividends in accordance with its standard practice for non-IOLTA customers, but the eligible institution may elect to pay a higher interest or dividend rate on IOLTA Accounts.
(3) To be approved and certified by the Louisiana Bar Foundation as eligible, a financial institution may achieve rate comparability required in (g)(2) by:
(A) Establishing the IOLTA Account as: (1) an interest-bearing checking account; (2) a money market deposit account with or tied to checking; (3) a sweep account which is a money market fund or daily (overnight) financial institution repurchase agreement invested solely in or fully collateralized by U.S. Government Securities; or (4) an open-end money market fund solely invested in or fully collateralized by U.S. Government Securities. A daily financial institution repurchase agreement may be established only with an eligible institution that is “well-capitalized” or “adequately capitalized” as those terms are defined by applicable federal statutes and regulations. An open-end money market fund must be invested solely in U.S. Government Securities or repurchase agreements fully collateralized by U.S. Government Securities, must hold itself out as a “money-market fund” as that term is defined by federal statutes and regulations under the Investment Company Act of 1940, and, at the time of the investment, must have total assets of at least $250,000,000. “U.S. Government Securities” refers to U.S. Treasury obligations and obligations issued or guaranteed as to principal and interest by the United States or any agency or instrumentality thereof.
(B) Paying the comparable rate on the IOLTA checking account in lieu of establishing the IOLTA Account as the higher rate product; or
(C) Paying a “benchmark” amount of qualifying funds equal to 60% of the Federal Fund Target Rate as of the first business day of the quarter or other IOLTA remitting period; no fees may be deducted from this amount which is deemed already to be net of “allowable reasonable fees.”
(4) Lawyers or law firms depositing the funds of clients or third persons in an IOLTA Account shall direct the depository institution:
(A) To remit interest or dividends, net of any allowable reasonable fees on the average monthly balance in the account, or as otherwise computed in accordance with an eligible institution’s standard accounting practice, at least quarterly, to the Louisiana Bar Foundation, Inc.;
(B) to transmit with each remittance to the Foundation, a statement, on a form approved by the LBF, showing the name of the lawyer or law firm for whom the remittance is sent and for each account: the rate of interest or dividend applied; the amount of interest or dividends earned; the types of fees deducted, if any; and the average account balance for each account for each month of the period in which the report is made; and
(C) to transmit to the depositing lawyer or law firm a report in accordance with normal procedures for reporting to its depositors.
(5) “Allowable reasonable fees” for IOLTA Accounts are: per check charges; per deposit charges; a fee in lieu of minimum balance; sweep fees and a reasonable IOLTA Account administrative fee. All other fees are the responsibility of, and may be charged to, the lawyer or law firm maintaining the IOLTA Account. Fees or service charges that are not “allowable reasonable fees” include, but are not limited to: the cost of check printing; deposit stamps; NSF charges; collection charges; wire transfers; and fees for cash management. Fees or charges in excess of the earnings accrued on the account for any month or quarter shall not be taken from earnings accrued on other IOLTA Accounts or from the principal of the account. Eligible financial institutions may elect to waive any or all fees on IOLTA Accounts.
(6) A lawyer is not required independently to determine whether an interest rate is comparable to the highest rate or dividend generally available and shall be in presumptive compliance with Rule 1.15(g) by maintaining a client trust account of the type approved and authorized by the Louisiana Bar Foundation at an “eligible” financial institution.
(7) “Unidentified Funds” are funds on deposit in an IOLTA account for at least one year that after reasonable due diligence cannot be documented as belonging to a client, a third person, or the lawyer or law firm.
(h) A lawyer who learns of Unidentified Funds in an IOLTA account must remit the funds to the Louisiana Bar Foundation. No charge of misconduct shall attend to a lawyer’s exercise of reasonable judgment under this paragraph (h). A lawyer who either remits funds in error or later ascertains the ownership of remitted funds may make a claim to the Louisiana Bar Foundation, which after verification of the claim will return the funds to the lawyer.
- Comments to ABA Model Rule 1.15
- Commingling Funds
- Location of Trust Account
- Reconciling the Trust Account
- Return of Client Property
- Unidentified Funds and Funds of a Missing Client
- Predecessor Lawyer with Interest in Settlement Funds
- Interest on Lawyers’ Trust Accounts Program
- American Bar Association Model Rule on Financial Record Keeping
- Disciplinary Sanctions
In 2010, the Louisiana Supreme Court amended this rule to prohibit “cash” and ATM withdrawals from a lawyer’s trust account. In March 2016, the court amended it to address a lawyer’s duties with regard to “unidentified funds” in a trust account.
For additional provisions governing Interest on Lawyers’ Trust Accounts, see Louisiana Supreme Court IOLTA Rules.
Paragraph (a) is identical to ABA Model Rule of Professional Conduct 1.15(a), with the additional requirement that the lawyer’s trust account must be maintained in “a bank or similar institution.” This requirement assures that lawyers do not attempt to set up trust accounts using shoe boxes at their offices.
Paragraph (b) is identical to Model Rule 1.15(b).
Paragraph (c) is identical to Model Rule 1.15(c), with the addition of the last sentence: “The lawyer shall deposit legal fees and expenses into the client trust account consistent with Rule 1.5(f).” This sentence simply directs lawyers to the provisions of Rule 1.5(f), which outlines in detail how lawyers are to handle payments of different types of legal fees, expenses, general retainers and advance deposits.
Paragraph (d) is identical to Model Rule 1.15(d), with the addition of the second sentence, which begins with the language “[f]or purposes of this rule . . . .” This sentence serves to clarify and limit when a lawyer must recognize a nonclient’s interest in funds that the lawyer holds on behalf of a client. Only when the lawyer holding the funds knows that such a third party has an identifiable and proprietary interest in the specific funds held by the lawyer must the lawyer respect the interest.
Paragraph (e) is identical to Model Rule 1.15(e).
Paragraph (f) contains provisions necessary to implement Louisiana’s Interest on Lawyers’ Trust Accounts (“IOLTA”) program. It also includes the following language not found in the Model Rules: “A lawyer shall not use any debit card or automated teller machine card to withdraw funds from a client trust account. On client trust accounts, cash withdrawals and checks made payable to “Cash” are prohibited.” On January 13, 2015, the Louisiana Supreme Court adopted a Louisiana State Bar Association recommendation to amend Rule 1.15(f) to require periodic reconciliations of client trust accounts.
Paragraph (h) relating to “unidentified funds” in trust is not found in the Model Rules. The Louisiana Supreme Court added this provision in March 2016. See Order Amending Louisiana Rule of Professional Conduct 1.15 (signed and effective March 23, 2016).
Paragraphs (g)(7) and (h) require a lawyer who learns of “Unidentified Funds in an IOLTA account” to “remit the funds to the Louisiana Bar Foundation.” See Order Amending Louisiana Rule of Professional Conduct 1.15 (signed and effective March 23, 2016). The rule defines “Unidentified Funds” as: “[F]unds on deposit in an IOLTA account for at least one year that after reasonable due diligence cannot be documented as belonging to a client, a third person, or the lawyer or law firm.”
Comments to ABA Model Rule 1.15
 A 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. All property that is the property of clients or third persons, including prospective clients, must be kept separate from the lawyer’s business and personal property and, if monies, in one or more trust accounts. Separate trust accounts may be warranted when administering estate monies or acting in similar fiduciary capacities. A lawyer should maintain on a current basis books and records in accordance with generally accepted accounting practice and comply with any recordkeeping rules established by law or court order. See, e.g., Model Rules for Client Trust Account Records.
 While normally it is impermissible to commingle the lawyer’s own funds with client funds, paragraph (b) provides that it is permissible when necessary to pay bank service charges on that account. Accurate records must be kept regarding which part of the funds are the lawyer’s.
 Lawyers often receive funds from which the lawyer’s fee will be paid. 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. The disputed portion of the funds must be kept in a trust account and the lawyer should suggest means for prompt resolution of the dispute, such as arbitration. The undisputed portion of the funds shall be promptly distributed.
 Paragraph (e) also recognizes that third parties may have lawful claims against specific funds or other property in a lawyer’s custody, such as a client’s creditor who has a lien on funds recovered in a personal injury action. A lawyer may have a duty under applicable law to protect such 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.
 The obligations of a lawyer under this Rule are independent of those arising from activity other than rendering legal services. For example, a lawyer who serves only as an escrow agent is governed by the applicable law relating to fiduciaries even though the lawyer does not render legal services in the transaction and is not governed by this Rule.
 A lawyers’ fund for client protection provides a means through the collective efforts of the bar to reimburse persons who have lost money or property as a result of dishonest conduct of a lawyer. Where such a fund has been established, a lawyer must participate where it is mandatory, and, even when it is voluntary, the lawyer should participate.
This rule requires a lawyer to segregate property belonging to others, to maintain separate accounting records for such property, and to preserve all records for at least five years after termination of the representation to which they relate. See Restatement (Third) of the Law Governing Lawyers § 44 (2000). Although Rule 1.15 covers all types of client and third-party property, its most common application is to funds received by a lawyer. Thus, the rule forbids a lawyer from commingling personal funds with those of clients and third parties. A lawyer typically avoids commingling by establishing a trust account. Any such account must be established at a bank (or similar institution) in the state in which the lawyer practices, unless the lawyer and the client agree otherwise.
Furthermore, Rule 1.15 requires a lawyer to notify the relevant client or third party1 as soon as the lawyer receives funds or property belonging to them. Thereafter, the lawyer must promptly deliver and account for such property. See Restatement (Third) of the Law Governing Lawyers § 45 (2000). Failure to do so constitutes conversion and violates this rule.
Commingling of funds, whether inadvertent or intentional, is one of the most common infractions prosecuted by the Louisiana Office of Disciplinary Counsel. See, e.g., In re Wilson, 90 So. 3d 1018, 1022 (La. 2012); In re Dobbins, 805 So. 2d 133, 136 (La. 2002) (“Commingling and conversion are among the most serious professional breaches an attorney can commit.”); In re Floyd, 742 So. 2d 868 (La. 1999); In re Horne, 721 So. 2d 846 (La. 1998). Commingling charges are often joined with allegations of conversion of client funds. See, e.g., In re Avery, 110 So. 3d 563, 571 (La. 2013); In re Aubrey, 928 So. 2d 524 (La. 2006); In re Bradley, 917 So. 2d 1068 (La. 2005); Dobbins, 805 So. 2d at 133; In re Aime, 653 So. 2d 1173 (La. 1995); In re Bourg, 644 So. 2d 371 (La. 1994).
Lawyers often do not realize the breadth of this rule’s prohibition against commingling. Commingling funds even for an instant violates this rule. See e.g., In re Wilson, 90 So. 3d 1018, 1023 (La. 2012) (suspending lawyer for improper use of accounts, creating potential harm, despite no actual harm); In re Mayeux, 762 So. 2d 1072 (La. 2000) (disciplining lawyer for commingling client funds even though funds never in actual danger of loss). For example, if a plaintiff’s lawyer receives a settlement check from an insurance company, deposits the check into the lawyer’s personal checking account and then immediately disburses the client’s share of the proceeds, the lawyer has violated Rule 1.15. Likewise, if a lawyer retains earned fees in a client trust account for an inordinate period of time, the lawyer has violated Rule 1.15. See In re Caskey, 866 So. 2d 226 (La. 2004). Furthermore, commingling is a strict-liability offense–it is irrelevant that the lawyer’s commingling was done innocently or that no harm befell the lawyer’s client. See In re Wilson, 90 So. 3d at 1023; In re Mayeux, 762 So. 2d at 1072; In re Dumas, 187 So. 3d 428 (La. 2016) (lawyer suspended for two years for grossly mishandling trust account and comingling and converting client funds).
A lawyer who employs others to handle client funds must put into place reasonable measures to ensure that employees–and partners2 and the law firm’s trust account”). ]>–do not engage in conversion or commingling. The negligent failure of a lawyer to create reasonable safeguards may subject the lawyer to discipline. See, e.g., In re Bailey, 115 So. 3d 458, 465 (La. 2013); In re Caver, 632 So. 2d 1157 (La. 1994); La. State Bar Ass’n. v. Keys, 567 So. 2d 588 (La. 1990).
The obligation to segregate funds applies not only to client funds, but also to funds belonging to third parties. See, e.g., In re Yonter, 930 So. 2d 956, 959-960 (La. 2006); see also Restatement (Third) of the Law Governing Lawyers § 44(1) (2000). For further example, a lawyer who receives funds from a settlement of a personal injury claim must segregate any portion that is designated for third-party medical service providers. See, e.g., In re Robinson, 129 So. 3d 513 (La. 2013); In re Cooper, 90 So. 3d 1023, 1027 (La. 2012); In re Scheurich, 871 So. 2d 1104, 1107 (La. 2004); In re Lewis, 728 So. 2d 846 (La. 1999); In re Pinkston, 728 So. 2d 381 (La. 1998); In re Constantino, 714 So. 2d 690 (La. 1998).
Location of Trust Account
Under this rule, the lawyer must keep all client funds in a bank or similar institution in the state in which the lawyer’s office is located. However, the lawyer and client can agree that client funds will be kept elsewhere. A lawyer who, without such consent, keeps client funds elsewhere and later relies on a “black box” defense (i.e., that the lawyer kept the client’s funds secretly but securely in a safe or unregulated depository) is presumed to have embezzled such funds. See La. State Bar Ass’n v. Krasnoff, 515 So. 2d 780, 783 (La. 1987). As a result of this presumption of embezzlement, a lawyer seeking to exonerate himself or herself bears both the burden of going forward with evidence and the burden of persuasion. Id.
For additional IOLTA Rules, see Louisiana Supreme Court IOLTA Rules.
Reconciling the Trust Account
While it is clear that the Rule 1.5(f) requires quarterly trust account reconciliations, it is less clear who must perform these reconciliations. By its terms, however, Rule 1.5(f) does not require a lawyer to personally perform the reconciliation—the lawyer passively must “subject all client trust accounts to a reconciliation process.” It is not realistic to expect every Louisiana lawyer to perform a personal quarterly reconciliation. Instead, lawyers rely on nonlawyer assistants.
Of course, a lawyer must adequately supervise these assistants. See La. Rules of Prof’l Conduct R. 5.3 (2004); In re Wahlder, 728 So. 2d 837 (La. 1999) (holding that a lawyer has ultimate responsibility for actions of nonlawyer staff); In re Serret, 35 So. 3d 256, 259 (La. 2011) (disciplining lawyer for failure to recognize and prevent secretary’s embezzelement); In re Geiger, 27 So. 3d 280 (La. 2010) (disciplining lawyer for not adequately supervising his non-lawyer employee who had access to and may have misappropriated funds from client trust accounts); In re McClanahan, 26 So. 3d 756 (La. 2010) (disbarring lawyer for, among other things, instructing a non-lawyer assistant to cash a check issued from a client’s trust account instead of the operating account); see also Restatement (Third) of the Law Governing Lawyers § 11(4)(a) (2000). Adequate supervision might include the following measures, among others:
- Assuring that a lawyer reviews the nonlawyer’s reconciliation report each month.
- Registering for an email or text message alert to be sent to a lawyer whenever funds are disbursed from trust.
- Assuring that a lawyer receives and reviews the firm’s trust account bank statement each month.
- Assuring that nonlawyer personnel cannot draw checks from trust without a lawyer’s signature. See Rule 1.15(f).
- Assuring that nonlawyer personnel cannot electronically withdraw or disburse funds from trust without a lawyer’s express approval. See id.
Return of Client Property
On request, a lawyer must permit a client or a former client to inspect and copy any documents possessed by the lawyer that relate to the representation, unless substantial grounds exist for the lawyer to refuse. See Restatement (Third) of the Law Governing Lawyers § 46(1) (2000). Furthermore, upon request, a lawyer must deliver to the client all original files that relate to the client’s matter–regardless of whether the client has paid all outstanding invoices for fees and costs. See La. Rules of Prof’l Conduct r. 1.16(d) (2004); see also Restatement (Third) of the Law Governing Lawyers § 46(3) (2000). The lawyer, of course, is free to copy such files before releasing them to the client. Note that under the Louisiana Civil Code, the prescriptive period for an action by a client for the return of papers relating to a lawsuit is three years. La. Civ. Code Ann. art. 3496 (2007). Prescription runs from the rendition of a final judgment in the lawsuit or the termination of the attorney-client relationship. Id.
Unidentified Funds and Funds of a Missing Client
The Louisiana Supreme Court amended this rule in March 2016 to provide that “[a] lawyer who learns of Unidentified Funds in an IOLTA account must remit the funds to the Louisiana Bar Foundation.” See Order Amending Louisiana Rule of Professional Conduct 1.15 (signed and effective March 23, 2016). The rule defines “Unidentified Funds” as: “[F]unds on deposit in an IOLTA account for at least one year that after reasonable due diligence cannot be documented as belonging to a client, a third person, or the lawyer or law firm.” Id. The rule prohibits ODC from charging a lawyer with committing professional misconduct for the “exercise of reasonable judgment” under this provision. Finally, if a lawyer remits funds in error or later identifies the owner of remitted funds, the lawyer “may make a claim to the Louisiana Bar Foundation, which after verification of the claim will return the funds to the lawyer.” See id.
When a lawyer can source funds in trust to a specific client but can’t find the client, the lawyer must make reasonable efforts to locate the client. If those efforts are fruitless after approximately five (5) years, the lawyer should consult the Louisiana Department of the Treasury, Unclaimed Property Division. Additional guidance is available on the LSBA website in a public opinion by the association’s Ethics Advisory Service: LSBA Public Opinion 06-RPCC-009.
Predecessor Lawyer with Interest in Settlement Funds
A lawyer who receives funds in which a predecessor lawyer has an interest must “promptly notify” that lawyer if he “knows” of the predecessor’s interest, and the “interest” is perfected through a statutory lien or privilege, a final judgment, or a written agreement guaranteeing payment out of the disputed funds. See La. Rules of Prof’l Conduct r. 1.15(d) (2004). A predecessor lawyer may acquire a protectable “interest” in the proceeds of a lawsuit from a contingency fee contract, with his former client. Such an interest operates as a privilege on funds eventually obtained in the lawsuit.3 Recordation under Louisiana Revised Statutes § 37:218A is not necessary for enforcement of a contingency contract as between the lawyer and the client. However, to be effective against third parties, the contract must be recorded. See Breeden v. Crumes, 102 So. 3d 133, 136 (La. Ct. App. 4th Cir. 2012); Hall v. St. Paul Fire and Marine Ins. Co., 868 So. 2d 910 (La. Ct. App. 5th Cir. 2004) (citing Hawthorne v. National Union Fire Insurance Company, 562 So. 2d 473 (La. Ct. App. 3d Cir. 1990)); Ruiz v. Williams, 425 So. 2d 929 (La. Ct. App. 4th Cir. 1983).
Interest on Lawyers’ Trust Accounts Program
Participation in the IOLTA program is mandatory for all lawyers and law firms in Louisiana.4 If a client demands the interest earned on client funds, the lawyer must, if reasonably feasible, comply with the client’s request. Interestingly, however, the IOLTA rules expressly state that a lawyer is not required to inform the client about the disposition of the interest earned on the client’s funds. See La. S. Ct. IOLTA Rules 1-3 (Dec. 13, 1990).
American Bar Association Model Rule on Financial Record Keeping
Although not mandatory, the following ABA Model Rule on Financial Recordkeeping provides useful guidance to lawyers and law firms “particularly those new to the practice of law.” See ABA Model Rule on Fin. Recordkeeping preface (1993).
(A) A lawyer who practices in this jurisdiction shall maintain current financial records as provided in this rule, and shall retain the following records for a period of [five years] after termination of the representation:
(1) receipt and disbursement journals containing a record of deposits to and withdrawals from bank accounts which concern or affect the lawyer’s practice of law, specifically identifying the date, source, and description of each item deposited, as well as the date, payee and purpose of each disbursement;
(2) ledger records for all trust accounts required by [Rule 1.15 of the Model Rules of Professional Conduct], showing, for each separate trust client or beneficiary, the source of all funds deposited, the names of all persons for whom the funds are or were held, the amount of such funds, the descriptions and amounts of charges or withdrawals, and the names of all persons to whom such funds were disbursed;
(3) copies of retainer and compensation agreements with clients [as required by Rule 1.5 of the Model Rules of Professional Conduct];
(4) copies of accountings to clients or third persons showing the disbursement of funds to them or on their behalf;
(5) copies of bills for legal fees and expenses rendered to clients;
(6) copies of records showing disbursements on behalf of clients;
(7) checkbook registers or check stubs, bank statements, records of deposit, and prenumbered canceled checks or their equivalent;
(8) copies of [monthly] trial balances and [quarterly] reconciliations of the lawyer’s trust accounts; and
(9) copies of those portions of clients’ files that are reasonably necessary for a complete understanding of the financial transactions pertaining to them.
(B) With respect to trust accounts required by [Rule 1.15 of the Model Rules of Professional Conduct]:
(1) only a lawyer admitted to practice law in this jurisdiction shall be an authorized signatory on the account;
(2) receipts shall be deposited intact and records of deposit should be sufficiently detailed to identify each item; and
(3) withdrawals shall be made only by check payable to a named payee and not to cash, or by authorized bank transfer.
(C) Records required by this rule may be maintained by electronic, photographic, computer or other media provided that they otherwise comply with this rule and provided further that printed copies can be produced. These records shall be located at the lawyer’s principal office in the jurisdiction or in a readily accessible location.
(D) Upon dissolution of any partnership of lawyers or of any legal professional corporation, the partners or shareholders shall make appropriate arrangements for the maintenance of the records specified in Paragraph A of this rule.
(E) Upon the sale of a law practice, the seller shall make appropriate arrangements for the maintenance of the records specified in Paragraph A of this rule.
Absent aggravating or mitigating circumstances, the following sanctions are generally appropriate in cases involving a lawyer’s failure to preserve client property: disbarment, when the lawyer knowingly converts client property and causes injury or potential injury to the client;5n attorney’s misuse of a client’s funds represents the ‘gravest form of professional misconduct’ and disbarment is warranted.” In re Boohaker, 927 So. 2d 268, 270 (La. 2006) (citing La. State Bar Ass’n v. Selenberg, 270 So. 2d 848 (La. 1972). ] suspension, when the lawyer knows or should know that he is dealing improperly with client property and causes injury or potential injury to a client;6 reprimand, when the lawyer is negligent in dealing with client property and causes injury or potential injury to a client; and, admonition, when the lawyer is negligent in dealing with client property and causes little or no actual or potential injury to a client.
The Louisiana Supreme Court has consistently held that the baseline sanction for negligent mismanagement of a trust account is fully-deferred suspension. In In re Alex, 205 So.3d 895 (La. 2016), the court stated as follows:
In its report, the board cited cases in which we have imposed fully deferred suspensions for trust account mismanagement when there was little or no actual harm. We agree that respondent’s misconduct is similar to those cases, in that she mismanaged her trust account, creating the potential for harm to clients and third parties. However, it is significant that unlike the attorneys in those cases, respondent has a disciplinary history for similar misconduct. Accordingly, we find a fully deferred suspension is not appropriate. Rather, considering all the factors of this case, we will adopt the board’s recommendation and suspend respondent from the practice of law for one year and one day, with all but thirty days deferred…
Id. at 900-01. 7 Other Louisiana Supreme Court Cases are in accord. See In re Monroe, 121 So.3d 1199 (La. 2013) (public reprimand for errors in trust accounting and failure to supervise non lawyers); In re Bloom, 103 So.3d 357 (La. 2012) (year-and-a-day suspension, fully deferred, for negligent conversion of client funds); In re Spears, 72 So.3d 819 (La. 2011) (same); In re Coleman, 66 So.3d 430 (La. 2011) (same); In re Milton, 48 So.3d 277 (La. 2010) (same).
This page was updated on January 19, 2018.
- Whether a lawyer’s failure to remit payroll taxes withheld from employees’ paychecks constitutes conversion or otherwise violates this rule is uncertain. See In re Wittenbrink, 849 So. 2d 18 (La. 2003) (finding the rule not violated because “under the unique facts of this case, respondent did not convert an identifiable sum of money to a third person”). ↵
- See In re Leitz, 728 So. 2d 835, 836 (La. 1999) (lawyer “stipulated that he failed to properly supervise [his partner ↵
- The predecessor lawyer, however, has no present ownership interest in the lawsuit. See Saucier v. Hayes Dairy Prods., Inc., 373 So. 2d 102, 117 (La.1979). ↵
- The United States Supreme Court has held that IOLTA programs do not run afoul of the Just Compensation Clause of Fifth Amendment to the United States Constitution. See Brown v. Legal Foundation of Wash., 538 U.S. 216 (2003). ↵
- The Louisiana Supreme Court has held, “[a ↵
- See, e.g., In re Duplechain, 131 So. 3d 843 (La. 2014) (suspending lawyer for three years for using client’s funds to pay business operating expenses, including employee salaries). ↵
- In so doing, the court cited the following cases: In re Spears, 72 So.3d 819 (La. 2011) (fully deferred one year and one day suspension, subject to a two-year period of supervised probation, in posed upon an attorney who failed to maintain the financial records of his trust account, which resulted in a negligent comingling and conversion of funds); In re Cicardo, 877 So.2d 980 (La. 2004) (fully deferred one year suspension, subject to a two-year period of probation with conditions, in posed upon an attorney who mishandled his client trust account by keeping personal funds in the account, which he occasionally borrowed to fund his operating account, but caused not actual harm to his clients or to third parties); In re Crooks, 762 So.3d 1077 (La. 2000) (fully deferred one year and one day suspension, subject to a two-year period of probation with conditions, in posed upon an attorney for the unintentional conversion of three clients’ funds stemming from negligent mismanagement of his trust account and failure to supervise his non-lawyer assistants). ↵