Tuesday, November 24, 2009
Important news for Ohio lawyers from the web page of the Ohio Supreme Court:
The Supreme Court of Ohio has adopted amendments that concern a lawyer’s duty to safeguard client funds and property in which third persons claim an interest. The amendments become effective Jan. 1, 2010. Justices concurred 7-0 in adopting the amendments.
The amendments to Prof. Cond. R. 1.15(d) and Comment  are based on a 2007 Advisory Opinion issued by the Board of Commissioners on Grievances & Discipline and recommendations issued in late 2008 by a special Ohio State Bar Association committee.
The current rule requires a lawyer to protect the interest of a third-party in client funds and property held by the client, unless the claim is frivolous. The amendments specify that a lawyer must have “actual knowledge” of a third person’s interest and that the claimed interest must be “a statutory lien, a final judgment addressing disposition of the funds or property, or a written agreement by the client of the lawyer on behalf of the client guaranteeing payment from the funds or property.”
Changes to the comment portion of the rule offer guidance about a lawyer’s ethical duties depending on whether the funds or property is in dispute and whether the client or third person’s claim to the funds or property is lawful. Where there is a dispute over interest in the funds or property, a lawyer must hold the funds or property in a trust account separate from the lawyer’s funds, until the dispute is resolved.
Based on the 16 public comments submitted during the public comment period, the Supreme Court approved three revisions:
- The word “lawful” was inserted in the first sentence of division (d) in light of the Supreme Court’s decision in W. Broad Chiropractic v. Am. Family Ins. This change also conforms the rule and Comment .
- The word “specific” was inserted in the second sentence of division (d) to clarify that an otherwise lawful claim must provide for payment from specific funds or property in the lawyer’s possession, and not from any client funds or property that the lawyer may possess. This change also conforms the rule and Comment .
- Use of the word “resolve” rather than “arbitrate” in the next-to-last sentence of Comment . Some viewed the use of “arbitrate” in the former rule and proposed amendment as referring to the process of arbitration.
View the final rule to access the final rule.
As disciplinary counsel will tell you, there few things more dangerous to an attorney's license than non-compliance with the duty to safeguard entrusted funds. (Mike Frisch)