RI-67

December 28, 1990

SYLLABUS

A legal services organization may provide in its retainer agreement that funds belonging to clients who cannot be located at the time disbursement is to be made will be used to fund the organization's services to other indigent clients.

References: MRPC 1.4, 1.8(a), 1.15(a) and (b); RI-2, RI-38, RI-58.

TEXT

A lawyer employed by a legal services association seeks advice concerning a recurring problem of clients who deposit funds or who are credited with small deposits of funds but who cannot be located for return or distribution of the funds at the time of case closing. The lawyer asks:

1. Where the retainer agreement does not specifically address the disposition of trust funds when the client cannot be located, may the legal services organization implement a policy which transfers unclaimed client trust funds of $300.00 or less to the legal services program's general fund for the provision of legal services to the poor, provided that if the client is later located the client is fully reimbursed from the program's general fund?
2. Where the retainer agreement does not provide for disposition of trust funds when the client cannot be located, may the legal services organization implement a policy which transfers to the program's general fund that portion of unclaimed trust funds which were advanced for anticipated costs and expenses?
3. Does it matter whether the advances for costs and expenses under Question 2 were deposited into the program's general fund when collected or deposited into a trust account?
4. May the client and legal services organization enter into a retainer agreement in which the client specifies: "I understand that at the conclusion of my case any remaining client trust funds will be returned to me if I have provided the program with my current mailing address. I further understand that if the program is unable to locate me to return these funds, such funds will become the property of the program after six months from the date my case is closed."

A lawyer's duty to safekeep a client's property is found in MRPC 1.15(a), which 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."

Other opinions have discussed lawyers' obligations to funds of missing clients, RI-38, RI-58. RI-38 sets forth the minimum steps a lawyer should take to locate the client. If the client cannot be located, the lawyer must safekeep the funds until they escheat to the state. Although the facts of both RI-38 and RI-58 concerned client funds which were held in a trust account, the reasoning and results in those opinions did not depend upon where the funds were held, but rather on the lawyer's fiduciary and ethical duty to safekeep all property of a client in the lawyer's possession. Nor did those opinions turn on what kind of client funds the lawyer was holding. Therefore there is no difference in a lawyer's duties to safekeep client property when that property is an advance of costs and expenses or other money, or whether the advance of costs and expenses are deposited upon receipt by the lawyer in a trust account or in another type of account. Although advances of costs and expenses need not be deposited in a trust account, the lawyer must still make an accounting and promptly deliver the property to the client pursuant to MRPC 1.15(b). Accordingly in the absence of client consent the legal services corporation cannot use unclaimed client funds to provide legal representation to the poor even if the organization adopts a reimbursement policy in the event the mission client is later located.

Although the Committee cannot authorize the use of client funds for purposes to which the client has not consented, we find nothing improper in a lawyer proposing a contract term providing for disposition of unclaimed funds by making them available for a purpose the Michigan Supreme Court has determined is appropriate in a substantially similar situation where the funds cannot be delivered to the client, i.e., MRPC 1.15(d).

Finally, with regard to the proposed contract language, the lawyer must make all reasonable efforts to maintain contact with the client under MRPC 1.4, and must comply with the minimum steps to locate the client as set forth in RI-38 and RI-58, above and beyond writing to the last address provided by the client.