Supreme Court of Missouri
en banc

In re:

Repeal of subdivision 4-1.15, entitled “Safekeeping Property,” of Rule 4, entitled “Rules of Professional Conduct,” Comments [2] and [4] to said subdivision, and the Supplemental Missouri Comment to said subdivision and in lieu thereof adoption of a new subdivision 4-1.15, entitled “Safekeeping Property,” new Comments [2] and [4] to said subdivision, and a new Supplemental Missouri Comment to said subdivision.


1.  It is ordered that effective January 1, 2010, subdivision 4-1.15 of Rule 4, Comments [2] and [4] to said subdivision, and the Supplemental Missouri Comment to said subdivision be and the same are hereby repealed and a new subdivision 4-1.15, new Comments [2] and [4] to said subdivision, and a new Supplemental Missouri Comment to said subdivision adopted in lieu thereof to read as follows:

4-1.15  SAFEKEEPING PROPERTY

(a) As used in this Rule 4-1.15(a) to (l), the following terms mean:















(b) For purposes of Rule 4-1.15(a) to (l), “allowable reasonable fees” are per check charges, per deposit charges, a fee in lieu of minimum balance, sweep fees and a reasonable IOLTA account administrative fee. Allowable reasonable fees may be deducted from interest or dividends earned on an IOLTA account, provided that such charges or fees shall be calculated in accordance with an eligible institution's standard practice for non-IOLTA customers. Fees or charges in excess of the interest or dividends earned on the IOLTA account, for any month or quarter, shall not be taken from interest or dividends of any other IOLTA account. No fees or charges may be assessed against or deducted from the principal of any IOLTA account. All other fees are the responsibility of the lawyer or law firm and may be charged to the lawyer or law firm. Eligible institutions may elect to waive any or all fees on IOLTA accounts.
(c) 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. Client or third party funds shall be kept in a separate account designated as a “Client Trust Account” or words of similar import maintained in the state where the lawyer's office is situated or elsewhere if the client or third person consents. Every client trust account shall be either an IOLTA account or a non-IOLTA trust account. No earnings from an IOLTA account or a non-IOLTA trust account shall be made available to any lawyer or law firm, nor shall any lawyer or law firm have a right or claim to such earnings. Other property shall be identified as such and appropriately safeguarded.
(d) Complete records of client trust accounts shall be maintained and preserved for a period of at least five years:


Complete records include, but are not limited to, checkbooks, cancelled checks, check stubs, vouchers, ledgers, journals, closing statements, accountings or other statements of disbursements rendered to clients or other parties with regard to trust funds or similar equivalent records clearly and expressly reflecting the date, amount, source, and explanation for all receipts, withdrawals, deliveries and disbursements of the funds or other property of a client or other parties.

(e) 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, but only in an amount necessary for that purpose.
(f) 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.
(g) A client trust account, whether IOLTA or non-IOLTA, must be in an approved institution.  Every lawyer practicing or admitted to practice in this jurisdiction, as a condition thereof, shall be conclusively deemed to have consented to the overdraft reporting and production requirements mandated by the regulations adopted by the advisory committee.  The advisory committee shall promulgate regulations necessary to provide for overdraft reporting on lawyer trust accounts.
(h) The advisory committee may refuse to approve a financial institution and may revoke approval as provided in the regulations approved by this Court.


(i) 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.  Except as provided in this Rule 4-1.15 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.
(j) 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 lawyer shall keep the property separate until the dispute is resolved.  The lawyer shall promptly distribute all portions of the property as to which the interests are not in dispute.
(k) Unless exempt as provided in Rule 4-1.15(l), a lawyer or law firm shall establish and maintain one or more IOLTA accounts into which shall be deposited all funds of clients or third persons, but only in compliance with the following provisions:




(l) Every lawyer shall certify in connection with this Court's annual enrollment statement the financial institutions in which the lawyer has one or more trust accounts and that the lawyer or the law firm with which the lawyer is associated either maintains an IOLTA account with an eligible institution as provided in Rule 4-1.15(k) or is exempt because the:





(m) A lawyer shall securely store a client's file for 10 years after completion or termination of the representation absent other arrangements between the lawyer and client.  If the client does not request the file within 10 years after completion or termination of the representation, the file shall be deemed abandoned by the client and may be destroyed.

A lawyer shall not destroy a file pursuant to this Rule 4-1.15(m) if the lawyer knows or reasonably should know that:






[2] While normally it is impermissible to commingle the lawyer's own funds with client funds, Rule 4-1.15(e) 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 is the lawyer's.


[4] Rule 4-1.15(j) 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.


SUPPLEMENTAL MISSOURI COMMENT

In 2007, Rule 4-1.15 was amended to require lawyers to maintain IOLTA accounts if not exempted by Rule 4-1.15(l).  It is expected that a lawyer or law firm will exercise good faith judgment in determining whether funds of a client or third party are of such a nominal amount or are expected to be held by the lawyer for such a short period of time that the funds cannot earn interest or dividend income for the client or third party in excess of the costs incurred to secure such income.  All relevant factors should be considered in this determination, including, for example, the cost of establishing and maintaining accounts for the benefit of clients or third persons, service charges, accounting fees and tax reporting procedures, the nature of the transactions involved and the likelihood of delay.  It is also expected that placement of the funds will be reviewed at reasonable intervals if the funds remain on hand to determine if changed circumstances require further action with respect to such funds.  The amended Rule 4-1.15 conforms with the decision in Brown v. Legal Foundation of Washington, 538 U.S. 216 (2003).

Amended Rule 4-1.15 also requires that IOLTA funds be deposited with institutions paying interest and dividends comparable to rates paid to the institution's own other similarly-situated non-IOLTA customer.  This recognizes that additional options have developed and are being offered in the marketplace by financial institutions from which qualifying IOLTA balances should also benefit.  Apart from the important goal of fairness in the treatment of IOLTA funds, the comparability and other modifications in amended Rule 4-1.15 are important to the purposes of the IOLTA program:  providing a source of funds to support civil legal services to the poor, improve the administration of justice, and promote other programs for the benefit of the public as are specifically approved from time to time by this Court.

2.  It is ordered that notice of this order be published in the Journal of The Missouri Bar.

3.  It is ordered that this order be published in the South Western Reporter.

Day – to – Day

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WILLIAM RAY PRICE, JR. Chief Justice