Proposed Rules Archives

• Proposed Changes to RPC 1.15A - Safeguarding Property (in Word Format)
• No comments were submitted.

Purpose: RPC 1.15A presently outlines the applicable procedures for maintenance of lawyer trust accounts. In the course of performing random audits on lawyer trust accounts, the WSBA Auditors sometimes encounter an issue for which there does not appear to be clear guidance under RPC 1.15A. The situation arises when lawyers invoice clients for services rendered and arrange to receive electronic payments directly from clients. The lawyers provide the routing numbers for the operating account in anticipation of being paid the amount owed for services rendered. In these situations, some clients overpay the invoice, resulting in client funds being deposited into the operating account.

RPC 1.15A(h)(1)(ii) states that funds belonging in part to a client or third person and in part presently or potentially to the lawyer must be deposited and retained in a trust account, but any portion belonging to the lawyer must be withdrawn at the earliest reasonable time. In other words, when a client overpays an invoice, the lawyer must deposit the whole amount into the trust account, and then remove the portion that is earned once the deposit has cleared.

In the situation described herein, the lawyer does not know that an overpayment is coming until it is already deposited into the operating account, resulting in a situation that could be characterized as not in compliance with RPC 1.15A.

In the experience of WSBA auditors, such clients are typically large corporations with numerous departments involved in the processing of accounts payable. Generally speaking, when these situations have been detected in random audits, the lawyers have taken reasonable steps to ensure the client only pays the amount invoiced. Nevertheless, regardless of the lawyers efforts, many are in technical violation of RPC 1.15A(h)(1) and (h)(1)(ii).

The suggested Comment [21] to RPC 1.15A would provide guidance to the membership when presented with this specific scenario while still requiring strict adherence to RPC 1.15A. A comment would have the advantage of a narrative format without further complicating the rule structure of RPC 1.15A, or creating a more general exception to the RPC 1.15A requirements. However, a safe harbor in those limited instances where the client initiates the electronic funds transaction and overpays would be appropriate where, through no fault of the lawyer, an overpayment has been made.

While it is not typical that a client would unilaterally and erroneously place funds belonging to the lawyer into a trust account by electronic deposit, with the increasing prevalence of electronic banking transactions there are scenarios in which this could occur. The suggested comment is designed to address this situation as well.