Ethics Opinions

Payment of Fees by Electronic Transfer

 

Opinion provides guidelines for receipt of payment of earned and unearned fees by electronic transfers.

 

Inquiry #1:

 

Under Rule 10.1(c) of the Rules of Professional Conduct, mixed funds, unearned fees, and money advanced for costs must be deposited directly into a lawyer's trust account. Earned fees, nonrefundable retainers, and reimbursements for expenses advanced by the lawyer on behalf of a client must be deposited into the lawyer's general or operating account to avoid the commingling of the lawyer's funds with the clients' funds.

 

Lawyers may accept payment of fees by credit card. CPR 129. However, when a bank processes any payments by electronic transfer, the bank will only deposit funds into one bank account maintained by the bank's customer. There is no method whereby funds representing an earned fee can be deposited into the operating account and funds representing an advance payment for legal services yet to be rendered, or an unearned fee, may be deposited into the trust account. May a lawyer establish a third account to handle all payments by electronic transfer—including payments of earned and unearned fees? Or should the bank be instructed to send all payments by electronic transfer to the lawyer's trust account although a particular transfer may be for a fee that has already been earned?

 

Opinion #1:

 

An interim account should not be established. If a payment by electronic transfer of an earned fee cannot be distinguished by the bank from a payment by electronic transfer of an unearned fee, all payments by electronic transfer should be deposited into the lawyer's trust account and the earned fees should be withdrawn from the trust account promptly. See Rule 10.1(c). A lawyer may also deposit into the trust account funds sufficient to pay the bank's service charges for electronic transfers. Rule 10.1(c)(1). A ledger should be maintained for the service charges posted against such funds. Rule 10.2(c)(3).

 

Inquiry #2:

 

May a client charge legal expenses as well as legal fees to his credit card?

 

Opinion #2:

 

Yes. These funds should be deposited directly to the trust account and held there until used to pay expenses on behalf of the client.

 

Inquiry #3:

 

May a lawyer offset the discount rate charged by the bank for electronic transfers? For example, may the lawyer surcharge the client? If so, may the lawyer levy a surcharge on the whole amount or just that portion of the payment that constitutes the attorney's fee?

 

Opinion #3:

 

With full disclosure to the client, the lawyer may charge the client the expense associated with payment by electronic transfer.

 

Inquiry #4:

 

What procedure should a lawyer follow to return an unearned fee to a client if the fee was originally paid by electronic transfer?

 

Opinion #4:

 

A trust account check should be sent to the client in the amount of the unearned fee. Rule 10.2(c) and (e).

 

Inquiry #5:

 

May lawyers in different law firms share the use of electronic transfer equipment if the funds of the clients of different law firms will be temporarily commingled in one deposit account?

 

Opinion #5:

 

No, this procedure will jeopardize the integrity of the record keeping required for trust accounts. Rule 10.2.