Case ID: so2d_396/html/0719-01.html
Source: Caselaw Access Project
Author: {"author": "PER CURIAM.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

IN the Matter of INTEREST ON TRUST ACCOUNTS. Petition of THE FLORIDA BAR FOUNDATION, INC.
    Nos. 51182, 60350 and 60351.
    Supreme Court of Florida.
    March 30, 1981.
    Russell Carlisle, President, Florida Bar Foundation, Fort Lauderdale, on behalf of the Florida Bar Foundation, Inc. and twenty-five active members of the Florida Bar.
    John F. Harkness, Jr., Executive Director, Tallahassee, Leonard H. Gilbert, President, Tampa, and John A. Boggs, Asst. Staff Counsel, Tallahassee, of The Florida Bar; and Bill Wagner, Chairman, Florida Bar Integration Rule and Bylaws Committee, Tampa, on behalf of the Board of Governors of The Florida Bar.
   PER CURIAM.

Pursuant to article XIII of the Integration Rule, the Florida Bar Foundation, Inc. and twenty-five active members of The Florida Bar have petitioned the Court for modifications of the Integration Rule with respect to interest on lawyers’ trust accounts. Simultaneously, the Board of Governors of The Florida Bar has petitioned the Court to suspend the operation of existing Integration Rule 11.02(4)(d) pending revisions thereto, and to add to Rule 11.02(4) an express authorization for the investment of individual clients’ funds on their behalf.

In 1978 we amended the Integration Rule to permit lawyers to earn interest on their trust accounts. In re Interest on Trust Accounts, 356 So.2d 799 (Fla.1978). The bar foundation now requests amendments designed to reflect changes in the banking laws, which permit interest bearing checking accounts in Florida, and to overcome income tax problems expressed by the Internal Revenue Service regarding the applicability to income producing trust accounts of the “assignment of income” doctrine. The bar does not take a position with respect to these amendments, but requests that we delete the existing rule because of the confusion it has created among Florida attorneys during the time it has remained inoperative. The bar’s position is well taken.

In order to obtain comments and views from affected and interested parties, petitioners request that we publish the proposed amendments, and that we set a time period to receive written views and comments.

The bar foundation’s amendments to our trust account opinion and to Integration Rule 11.02(4)(d), which have been represented to satisfy conditions of the Internal Revenue Service prerequisite to IRS’ approval of trust account plans in Florida, are appended to this order. The bar’s proposed amendment to Rule 11.02(4), creating a new subsection (f), is also appended.

We hereby publish these proposals for comment, and we direct interested persons to submit their views in writing not later than May 15, 1981. Petitioners shall have until May 25 to respond to any written submissions, following which we will hear oral arguments on the proposals at 9:30 a. m. on June 2, 1981.

In the meantime, the operation of Integration Rule 11.02(4)(d) in its present form is suspended until further order of the Court. That Rule shall not be used by attorneys in Florida either to create or to maintain trust savings accounts.

It is so ordered.

SUNDBERG, C. J., and ADKINS, BOYD, OVERTON, ENGLAND, ALDERMAN and McDONALD, JJ., concur.

(a) A modification in the procedures outlined in the 1978 Opinion is requested.

In place of paragraph 6, on page 15 of the Opinion (356 So.2d at 807) the following language is requested:
6. Interest earned on trust accounts, as defined in paragraph 5 above, containing client balances that are nominal in amount or held for short periods of time shall be paid to the Florida Bar Foundation, Inc., for its charitable purposes. Maintenance of such trust account balances in non-interest-bearing trust accounts will not be permitted. Attorneys will remain free to exercise their discretion to arrange special investments not limited to savings accounts for advances not described in the preceding sentences for the funds of their clients when appropriate;

(b) A modification of section 11.02(4)(d) of the Integration Rule is proposed as follows:

(d) Trust Savings Accounts. A member of the Florida Bar who elects to create-or maintain a trust savings account shall comply--with- the following provisions, who in the course of the professional practice of law receives or disburses trust funds, shall create and maintain an interest-bearing demand trust account and shall deposit therein all client funds to the extent permitted bv applicable banking laws, that are nominal in amount or are on deposit for a short period of time. The attorney shall comply with the following provisions:

(i) A trust savings the interest bearing demand trust account may be established with any bank or savings and loan association authorized by federal or state law to do business in Florida and insured by the Federal Deposit Insurance Corporation or the Federal Savings and Loan Insurance Corporation.

(ii) Except as otherwise-required by law, funds in each trust savings account shall-be subjeet-to withdrawal,-or-to transfer to a trust-checking account--upon request and without delay. — Any depository institution permitted by law -to require advance notification-^!) or 60- days)- before- allowing-withdrawal of savings deposits is.nonetheless eligible — to act as a depository — for-trust savings accou-nts-under this rule if-it-meets the requirements of paragraph — (i)--above,provided the institution — has not acted-to delay-the withdrawal of — deposited funds (other-than for the clearance of deposited fund^ or-for-good-cause attributable -to-the circumstances of the particular depositar rather than-the-institution’s financial needs or general policy) at any time during the past five years, An otherwise qualified-institution which has not-been in existence for five full-years may serve as-a — trust savings-account-depository if it has met the requirements of this subsection throughout its existence.

(iii)An institution shall cease to be eligible for-the receipt of trust savings-funds-at such time as-it-fails to qualify under paragraphs ■(i)-or-(-ii-), — Any lawyer -or- -law-firm maintaining trust savings-aocount against which-immediate withdrawal rights-are-refused shall immediately notify- the-F-lorida Bar Foundation, Inc. of - the name-and-address of the depository institution-and-the date of-such-refusal,

(i-y) If, pursuant to governing-.law — or banking-regulations, a depository institution-requires-notice in — writing for an intended-withdrawal not less than 30-days before-such withdrawal is made, the lawyer or law- firm may-certify to The Florida Bar Foundation»--Inc- that-the-client’s funds detained as a result of the depository institution’s notification requirement-are-needed immediately-for-the client’s affairs.-

(A) Upon receiving such certification, the Foundation shall be authorized-to-advanee to-the-certifying lawyer or law firm» from the — interest—earned—on—trust—savings accounts» an amount of -money-mecessa-ry-to meet the client’s emergency-needs-subject; however, to limitations ex-pressed-in-subpar-agraph (C).

(B)-Simultaneously with certification»-the lawyer or law firm shall direct the-depository institution in writing-»--w-ith-a-copy to the Foundation»--that-upon the expiration of- the notification period detained-funds-equal-to the amount advanced-by — the Foundation shall-be-remitted directly-to the Founda-tionr

(C) The Board of Directors- of-the-Foundation may adopt-r-ules of procedure reasonably necessar-y — feo-implement the authority provided-in subparagraph (A) and to assure full reimbursement of sums advanced; — Periodically the Board may-set dollar-limitations on the amount of money which may be advanced to meet the emergency -needs of any client in the-event--a — notification requirement is -imposed-by- a depository in-stitu-tion-,-

(iil (v) The rate of interest payable on any interest-bearing demand trust savings account shall not be less than the rate paid by the depository institution to regular, nonattorney savings depositors. Higher rates offered by the institution to customers whose deposits exceed certain time or quantity minima, such as those offered in the form of certificates of deposit, may be obtained by a lawyer or law firm so long as there is no impairment of the right to withdraw or transfer principal immediately (except as accounts generally may be subject to statutory notification requirements), even though interest may be sacrificed thereby.

(Mi) (vi) Lawyers or law — firms-electing to deposit client funds in a trust savings account-shall-direct the- depository institutions. The depository institution shall be directed:

(A) to remit interest or dividends, as the case may be, on the average monthly balance in the account, at least quarterly, to the Florida Bar Foundation, Inc.;

(B) to transmit with each remittance to the Foundation a statement showing the name of the lawyer or law firm for whom the remittance is sent and the rate or interest applied; and

(C) to transmit to the depositing lawyer or law firm at the same time a report showing the amount paid to the Foundation, the rate of interest applied, the average account balance for each month of the period for which the report is made, and any remittances to the Foundation made during that period pursuant to subpara-graph (iv)(B).

(vi) lawyers and-law firms electing to deposit client funds in a trust savings account shall transmit to each-client- for whom trust funds are-now-held, and to each new client-for-whom funds are to be held a copy-of-the notice reproduced below. — The Florida Bar shall print and maintain a supply--of — this notice, and distribute-copies without charge to -these-who-ma-y-request them, — The.Bar’s-costs for printing and distribution shall be treated as a cost of administering the program, and shall be reimbursed-te-the-Bar-by- the -Foundation from interest earned on trust accounts.

“Important Notice -to-Clients

For-your -protection the Florida Supreme Court - requires that all funds of a client which are held by an attorney must be deposited in a trust account separate from the-attorney’-s-and-must be-kept-available for immediate withdrawal- — Because- most clients’ funds which come into-the-hands of attorneys are relatively-small-in-amoant-or are to be held -for relatively short periods of timet it is impracticai-for-attorneys to establish-^ separate account for each olient-or to invest each client’s funds to earn interest. For-this-reason-client-funds are held in a common-trast-checking account on which the-depository-bank pays no interest,

Under a new program approved by — the Florida-Supreme-Court-,-attor-neys-are-now permitted to deposit clients’ common-trust funds-in-sa-vings accounts, — Due to the expense-and- complexity which would attend any attempt to compute or-distribute-the interest attributable to each client’s funds, it-is-not -feasible to-pay -to-individual clients the -ear-nings-on-their proportionate share of common-trust-savings accounts, — Of course,no -attorney is permitted to receive the earnings on-a client’s funds, either. Rather, under-the Supreme Court’s new directive,the interest income from clients’ deposits will be used to fund programs designed to benefit the general public.

The-goals of-the court’s program are to improve the administration of justice in this state-and-to expand -the-deli very-of- legal services to the poor.

We have sent you-this-explanation, at the direction of the Florida Supreme Court, to advise-you that we are participating in. the court-’s-new program and that the funds-yoa have entrusted to us for-your affairs (other than attorney’s fees) will be deposited in an interest bearing-trast-savings account unless you-speoifically fflve-us-written-instruc-tions to the oontrary. — A directive-aot-to allow-suoh use of your funds will not produce income-for-you. Your funds will simply be placed in a noninterest bearing trust checking account until needed.”

(vii) In those instances where the amount of the client balance or the duration of deposit render it financially practicable, the attorney mav exercise discretion to arrange special investments, not limited to savings accounts, for deposit of client funds with anv interest obtained payable to the client.

(viii) In the event that anv client asserts a claim against an attorney based upon such attorney’s determination to place client advances in the interest bearing demand trust account because such balance is nominal in amount or held for a short period of time, the Foundation shall, upon written request bv such attorney, review such claim and either:

(A) Approve such claim and remit directly to the claimant anv sum of interest remitted to the Foundation on account of such funds: or

(B~) Reject such claim and advise the claimant in writing of the grounds therefor. In the event of anv subsequent litigation involving such a claim, the Foundation shall interplead anv such sum of interest and shall assume the defense of the action.

(c) The Board of Governors of The Florida Bar at its January 1981, meeting, voted to recommend to this court adoption of an amendment to Florida Bar Integration Rule, article XI, Rule 11.02(4). The proposed amendment to the Rule will require the addition of a new subsection, (f) as follows:

(f) With the consent of the client, the client’s funds mav be deposited in interest-bearing trust accounts provided the interest on funds so deposited shall be paid to the client. If the client is unavailable or unable for other reason to knowingly give such consent, then the attorney mav deposit such funds in an interest-bearing trust account if such deposit would be in the best interest of the client. 
      
      . The rules were later modified to accommodate initial limitations imposed by the Internal Revenue Service, and to simplify the proposal in other respects. Matter of Interest on Trust Accounts, 372 So.2d 67 (Fla. 1979).