Disciplinary Board Publishes Proposed Rule 1.15 Amendments

The Disciplinary Board has published for comment a set of major revisions to Rule 1.15 of the Pennsylvania Rules of Professional Conduct, which governs the handling of property of others, including money, by Pennsylvania lawyers. The proposal was published in the Legal Intelligencer on Monday, March 29, 2004, and will appear in the Pennsylvania Bulletin imminently. The Disciplinary Board invites any interested person to submit comments by Friday, May 7, 2004.

The following is a brief summary of the proposed changes:

  • The following changes to the current RPC 1.15(a) are proposed:
    • The rule applies to funds held in a fiduciary capacity, as well as in connection with a representation;
    • The requirement of maintaining “Complete records” is applied to “receipt, maintenance, and disposition” of funds;
    • Any fee writing required under RPC 1.5(b) or (c) is included under the records which must be maintained;
    • The time for which records must be kept is five years after termination of the representation or distribution of the property, whichever is later;
    • The lawyer must also maintain another account which is not used for entrusted funds.
  • A new Section 1.15(b) allows a lawyer to deposit his/her own funds into a trust account for the sole purpose and in the amount necessary to pay bank charges on the account.
  • A new Section 1.15(c) requires a lawyer to deposit legal fees and expenses paid in advance in a trust account and remove them only as earned or incurred, unless the client consents otherwise.
  • The current RPC 1.15(b) is unchanged, but is renumbered as RPC 1.15(d).
  • The current RPC 1.15(c) is renumbered RPC 1.15(e), and the following changes are proposed:
    • The language “both the lawyer and another person” is changed to “two or more persons, one of whom may be the lawyer.” Therefore, the requirement now applies to a situation where more than one person has an interest in the property, not just to situations where the lawyer has an interest.
    • The language “until there is an accounting and severance of interests” is eliminated, and replaced by a provision requiring the lawyer to hold the funds separate until the dispute is resolved.
    • The proposal makes it explicit that the lawyer is to distribute all portions of the property not in dispute.
  • The current RPC 1.15(d) through (h), regarding Interest on Lawyer Trust Accounts (IOLTA), are renumbered but unchanged, except for renumbering of references.
  • A new Section 1.15(l) specifies books and records which must be maintained on all trust accounts. Required records consist of:
    • Bank statements and check registers;
    • All transaction records returned by the bank; and
    • Records of deposits and a ledger of deposits, itemized by client.
  • A new Section 1.15(m) addresses electronic recordkeeping.
  • A number of new points are made in the Comments to the rule:
    • Parties whose funds must be safeguarded include prospective clients;
    • Disputed funds kept pending resolution must be kept in a trust account;
    • When a third party has a lawful claim to property, the lawyer must (as opposed to may) refuse to distribute it to a client pending resolution of a dispute, and may file an action to obtain a court determination as to ownership of the property;
    • Rule 1.15 does not govern a lawyer’s independent fiduciary obligations as an escrow agent;
    • A lawyer must participate in the Pennsylvania Lawyers Fund for Client Security;
    • Specific reference to the IOLTA regulations is made;
    • If records are kept electronically, a backup copy must be printed on a regular basis;
    • The records required by Rule 1.15 are subject to subpoena in connection with disciplinary proceedings, and failure to comply with a subpoena may result in suspension proceedings under Rule 208(f)(5) of the Pennsylvania Rules of Disciplinary Enforcement; and
    • Failure to keep required records or to comply with requests for information or production shall be deemed to violate Rule 1.15(a) and (e), and also Rule 8.1(a).

    The complete text of the proposal to amend Rule 1.15 may be viewed online here.