February 15, 1991
A lawyer who actively practices in Michigan and in another state where ethics rules are inconsistent with ethics rules in Michigan must abide by Michigan ethics rules in legal matters conducted in Michigan or matters governed by Michigan law.
When a lawyer participates in an IOLTA program in another state where the law office is situated, the lawyer's ethical obligation is satisfied by compliance with the IOLTA rule of the state in which the office is situated.
References: MRPC 1.15, 8.5; CI-709.
The Committee has received a number of inquiries from Michigan lawyers who are actively practicing and residing outside of Michigan regarding their obligations under MRPC 1.15(d), the "IOLTA Rule." For purposes of this opinion, we are generally identifying an "IOLTA Rule" as a program to capture interest on lawyer trust accounts to finance law-related public interest projects.
MRPC 8.5 states:
"A lawyer admitted to practice in this jurisdiction is subject to the disciplinary authority of this jurisdiction although engaged in practice elsewhere. A lawyer who is admitted to practice in another jurisdiction and who is practicing in this jurisdiction is subject to the disciplinary authority of this jurisdiction."
Since the "disciplinary authority" in Michigan investigates and prosecutes complaints concerning violation of the Michigan Rules of Professional Conduct, being "subject to the disciplinary authority" must mean bound by the Michigan Rules of Professional Conduct.
There is no provision in the Michigan Rules of Professional Conduct concerning conflicts of laws when a lawyer is licensed and actively practicing in more than one state. The Comment to MRPC 8.5 states in part:
"If the rules of professional conduct in the two jurisdictions differ, principles of conflict of laws may apply. Similar problems can arise when a lawyer is licensed to practice in more than one jurisdiction.
"Where the lawyer is licensed to practice law in two jurisdictions which impose conflicting obligations, applicable rules of choice of law may govern the situation. A related problem arises with respect to practice before a federal tribunal, where the general authority of the states to regulate the practice of law must be reconciled with such authority as federal tribunals may have to regulate practice before them."
In CI-709 the Committee was asked how a lawyer should resolve conflicts between the ethics rules of the states in which the lawyer was licensed. The Committee held:
"Where a member of the Michigan Bar practices in a sister State as a member of the Bar of such sister State, in a firm all of whose other members are members of the Bar of such sister State only, where such member carries on no activities under or by virtue of his Michigan license, and does not hold himself out as a member of the Michigan Bar, and where neither he, his firm, nor its other individual members represents Michigan residents, and the practice of neither the member, his firm nor the other individual members of the firm has any significant connection or relationship with the State of Michigan, and where the applicable standards of ethics of Michigan and such sister State differ on a certain subject, the conduct of such Michigan Bar member, his firm and the firm's other individual members with respect to such subject will not subject such Michigan Bar member to discipline under the applicable Michigan standards, if such conduct conforms to the applicable standards of such sister State."
More directly stated, a lawyer licensed and practicing in another state, who wishes to maintain active membership in the Michigan Bar, may safely follow the home state's ethics rules as long as the lawyer or the lawyer's firm does not become involved in any matter governed by Michigan law. To the extent, however, that a portion of the lawyer's practice or the practice of the lawyer's firm involves legal services in Michigan or governed by Michigan law [hereinafter referred to as "Michigan matters"], that portion of the practice would be controlled by Michigan ethics rules.
MRPC 1.15(a) requires a lawyer to hold funds of clients or third persons that are in the lawyer's possession in interest-bearing trust accounts in financial institutions in the state in which the law office is located. MRPC 1.15(d)(1)(E) states:
"(E) The lawyer or law firm shall direct the bank, savings and loan association, or credit union to:
"(i) remit the interest, less reasonable service charges, at least quarterly to the Michigan State Bar Foundation;
"(ii) transmit, with each remittance to the Michigan State Bar Foundation, a report which shall identify each lawyer or law firm and the amount of the remittance attributable to each account maintained by each lawyer or law firm; and
"(iii) transmit to the depositing lawyer or law firm, in accordance with normal procedures for reporting to depositors, a report which shall indicate account balances, the rate of interest applied, interest earned, service charges, and the amount remitted to the Michigan State Bar Foundation." Emphasis added.
Read literally, the Rule requires Michigan lawyers, wherever residing and wherever practicing, to have their local banks transmit interest on the IOLTA lawyer trust account and required reports to the Michigan State Bar Foundation.
Thus, a law firm with offices in Michigan and other states, with lawyers licensed in Michigan and in other states, is bound by MRPC 1.15. Where the firm handles Michigan matters which result in the firm having possession of funds of clients or third parties which will generate less than $50.00 in interest during the time held, the firm is required to establish interest-bearing trust accounts in Michigan pursuant to MRPC 1.15(a), process through the Michigan trust account funds of clients and third persons relating to Michigan matters, and require the depository institution to forward the IOLTA interest to the Michigan State Bar Foundation.
A law firm with offices solely outside of Michigan, with lawyers licensed in Michigan and in other states, satisfies the Michigan IOLTA requirement by establishing an IOLTA trust account pursuant to an IOLTA Rule of the state in which the law office is situated. If the law firm does not participate in an IOLTA program in the forum state, the law firm which handles Michigan matters which result in the firm having possession of funds of clients or third parties which will generate less than $50.00 in interest during the time held, would similarly be required to establish an MRPC 1.15(d)(1) IOLTA account.
We are aware that payment of interest to the Michigan State Bar Foundation is not the only significant difference between the trust account rules of the various states. MRPC 1.15(a) requires all trust accounts to be interest-bearing; some states do not. MRPC 1.15(a) applies to funds of clients and third parties; some states may apply IOLTA Rules only to client funds. MRPC 1.15(a) allows, but does not require, advances of costs and expenses to be deposited into the trust account; some states prohibit such deposits, and other states require such a deposit. Different rules may apply to handling advances of attorney fees. MRPC 1.15(d)(1) requires the establishment of an IOLTA account only if the lawyer is holding funds of clients or third parties which are likely to generate less than $50.00 in interest; other states may have a different threshold.
Regardless of the specific differences, we believe the general rule described is applicable and workable, i.e., for Michigan matters, a lawyer is bound by the Michigan Rules of Professional Conduct, including the establishment of an IOLTA account. Where, however, the lawyer participates in an IOLTA program of another state, the lawyer's ethical obligation is satisfied by participation in the IOLTA program of the state where the law office is situated.