New Rule Requires Quarterly Reconciliation of Lawyer Trust Accounts

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reconcile-trustOn January 13, 2015, the Louisiana Supreme Court adopted a Louisiana State Bar Association recommendation to amend Rule 1.15 to require periodic reconciliations of client trust accounts. See La. Sup. Ct. Order of Jan. 13, 2015. The order provides as follows:

The following sentence shall be added to the end of Rule 1.15(f): “A lawyer shall subject all client trust accounts to a reconciliation process at least quarterly,1 and shall maintain records of the reconciliation as mandated by this rule.”

This rule becomes effective on April 1, 2015. See id.

While it is clear that the Rules will soon require quarterly trust account reconciliations, it is less clear who must perform these reconciliations. By its terms, however, the new rule does not require a lawyer to personally perform the reconciliation—the lawyer passively must “subject all client trust accounts to a reconciliation process.” It’s simply not realistic to expect every Louisiana lawyer to perform a personal quarterly reconciliation. Lawyers at large firms on Poydras Street currently don’t look over their firms’ trust account ledgers and bank statements every month. They aren’t likely to start doing so after April 1st. Instead, they do—and will—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.
  1. The recommendation presented to the court by the LSBA called for “monthly” rather than “quarterly” reconciliations.
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