The duty to deliver funds applies no matter how inconvenient it is to do so.

Another Thursday, another rerun.

Aside: maybe a Friday post should address reruns.  Specifically, which shows hold up against the test of time & which don’t.  Discussing this exact topic last weekend, a close friend and I realized that we’d both been reluctant to admit the same thing to each other:  The Wire, a show long-cemented in each of our pantheons, isn’t too rewatchable.

But I digress. Back to business.

Those of you with client trust accounts probably run into this scenario often:

• You represented Client.
• The representation is over.
• There is a very small amount of $$$ in your IOLTA that belongs to Client.  And by “small,” I mean a few dollars or less.
• You’re not certain it’s worth your time (or Client’s) to mail a check for 48 cents.
• Possible twist: you’ve mailed the check for 48 cents.  Client hasn’t cashed it.

What now?

Beware temptation.

Rule 1.15(d) is clear:

• “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.”

There’s no exception for amounts so small that they’re inconvenient to deliver.

Two years ago, I discussed this exact scenario here.  The post refers to a Louisiana case that resulted in a lawyer who had an unblemished record over 51 years of practice receiving a 2-year license suspension, all stayed but 6 months. 

Yes, the misconduct was more serious than in the hypo I used above.

Still, language from the Louisiana opinion is instructive. And, since this question continues to arise in inquiries, I thought I’d run the post again today.

As always, let’s be careful out there.

*************

Originally posted on April 19, 20222

The following inquiry is not uncommon:

• “Mike – I owe Former Client a small amount of money.  Between the time it’ll take me to prepare and send a check, and the time and hassle of Former Client having to go to the bank, it won’t be worth it for either of us.  What should I do?”

My response is always the same: “I can’t tell you what to do or not to do.  But if it were me, I’d send my former client what I owe them.”

As of today, I have a case to cite with my response.  Granted, it’s an extreme example, but in that it resulted in a recommendation to suspend a lawyer’s law license, it might serve as helpful guidance. Especially considering that the lawyer had never been disciplined in his previous 51 years of practice.

Last week, a hearing committee of the Louisiana Attorney Disciplinary Board recommended a 2-year suspension, all suspended but 6 months, after concluding that a lawyer violated the rules by failing to properly handle client funds.  The Legal Profession Blog reported the recommendation.  Here’s what happened.

The lawyer’s bank notified Louisiana’s Office of Disciplinary Counsel (ODC) that checks drawn on the lawyer’s trust account had been presented against insufficient funds.  The ensuing investigation grew beyond the overdraft notice and revealed that, for years, the lawyer had converted client funds. 

More specifically, ODC learned that, from 2012 thru 2018, the lawyer had received over $17,000 in refunds from various courts. (It’s not clear to me why the lawyer frequently received refunds from courts.)  Anyhow, the refunds represented amounts that clients had paid to the lawyer. Nevertheless, the lawyer did not inform the clients or send them their refunds.  Rather, the lawyer kept the funds in trust and tracked them in their own sub-account.  Intending to regularly maintain $100 in the sub-account, each month, the lawyer paid himself the balance that exceeded $100. 

Now, think back to the inquiry I described at the beginning of this post.  Got it in mind?

Okay. 

Now, consider a statement from the hearing panel’s recommendation.  The lawyer claimed that

• “the fees associated with reviewing the client file and writing letters to return the checks would have exceeded the amounts received.”

The hearing committee wasn’t moved.  It concluded that the lawyer violated the trust accounting rules and, by not informing clients of their refunds, the rule that prohibits dishonest conduct. Then, the committee discussed the appropriate sanction.

As outlined by the committee, the ultimate sanction turned on the lawyer’s state of mind. The lawyer argued that his conduct was negligent.  ODC argued that it was knowing or intentional.

In the end, the committee concluded that the lawyer’s conduct fell into “a grey area between negligent and knowing, and . . . was akin to gross negligence.”  Nevertheless, while concluding that the conduct was “more knowing than negligent,” the committee found that the lawyer did not have a “conscious desire to deprive clients or others of funds.”  Still, the committee recommended a significant suspension.

In so doing, the committee made two observations that made me want to share its decision. 

First, the committee criticized the fact that the lawyer “perceived the funds and having to deal with them as a nuisance or inconvenience.”  The committee wrote:

• “In the regular course of practicing law, many Louisiana practitioners encounter the inconvenient experience of receiving a refund from a clerk of court related to legal matter concluded years ago, sometime more than a decade. Most lawyers would agree that long delayed refunds to clients or third parties creates an unwelcome inconvenience. Even so, inconvenience does not excuse returning funds or property to persons to whom they belong, or at least making a diligent effort to do so.”

Second, while noting again that it did not believe that the lawyer was motived by “greed or a conscious, dishonest desire,” the committee remarked that, due to his own “laziness,” the lawyer “chose an easier, softer way than is required by the Rules of Professional Conduct and it was a violation of [the rules] to do so.”

The upshot: if you’re ever tempted to get lazy with your trust account or client funds, consider whether 6-months without practicing is worth the few minutes and dollars you’ll save.

As always, let’s be careful out there.

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