December 3, 1991
Lawyers who are not in fact in the same law firm may not share an IOLTA trust account. Persons designated as signatories on a law firm's IOLTA trust account must be lawyer members or employees of the law firm.
References: MRPC 1.6, 1.7, 1.9, 1.15, 5.1, 5.3, 7.1, 7.5; R-7.
A lawyer asks (a) whether an IOLTA trust account may be shared by lawyers or groups of lawyers who are sharing office space, but who are not members of the same firm, and (b) whether an IOLTA account signatory may be someone who is not a member of the depositing firm.
The so-called IOLTA account is an interest bearing trust account established pursuant to MRPC 1.15(d)(1) to pay interest on commingled deposits to the Michigan State Bar Foundation. MRPC 1.15(a) states:
"(a) A lawyer shall hold property of clients or third persons that is in a lawyer's possession in connection with a representation separate from the lawyer's own property. All funds of the client paid to a lawyer or law firm, other than advances for costs and expenses, shall be deposited in an interest-bearing account in one or more identifiable banks, savings and loan associations, or credit unions maintained in the state in which the law office is situated, and no funds belonging to the lawyer or the law firm shall be deposited therein except as provided in this rule. Other property shall be identified as such and appropriately safeguarded. Complete records of such account funds and other property shall be kept by the lawyer and shall be preserved for a period of five years after termination of the representation."
Thus a lawyer is required to deposit funds of clients and third parties into interest-bearing trust accounts separate from the lawyer's or law firm's own funds.
MRPC 1.15 does not speak to who is an eligible signator on a trust account. R-7 speaks briefly about the controls that should be in place regarding signators, but does not address whether a trust account may be shared, or whether signators may be someone outside the firm. Therefore we must look to the practical consequences of sharing trust accounts in order to answer the questions posed.
First, lawyers are required to protect confidences and secrets of clients. If a trust account is shared between two or more law firms, authorized persons from each firm must have deposit and withdrawal access to the account in order to comply with MRPC 1.15(a) and (b). Each firm would be required to keep records of account funds. Fulfillment of these duties would necessarily require each law firm to have information regarding each account deposit and withdrawal, even those of clients and third parties handled by the other participating firms. Under certain circumstances, the identity of a client is a confidence or secret protected from disclosure by MRPC 1.6. Without the clients' consent, the law firms could not routinely share information regarding the clientele of other participating firms.
Second, unless the participating firms are privy to each other's fee agreements, case status, and dispute resolution, it would not be possible to comply with fiduciary and ethical responsibilities to review and reconcile bank statements [R-7, Section VII].
Third, even where clients may consent to the limited sharing of information necessary for participating in a joint trust account, in some cases such information may be sufficient to trigger conflicts of interest among participating firms. A firm representing a client in a collection matter or where asset identification is relevant may become aware of asset availability through the shared trust account. MRPC 1.7, 1.9.
Fourth, trust accounts traditionally are named with the name of the lawyer or law firm. The trust account name may not state or imply that the participating lawyers practice together when that is not the fact, i.e., that they are mere office sharers. MRPC 7.1, 7.5(d).
Therefore we conclude that it is not ethical for mere office sharers to establish a joint IOLTA trust account, and that signatories on a law firm trust account must be members or employees of the firm. Pursuant to MRPC 5.1 and 5.3, the law firm has responsibility to supervise and monitor the handling of the trust account whether the signatories are lawyer or nonlawyer employees.