Case Title: IN RE: OKLAHOMA RULE OF PROFESSIONAL CONDUCT 1.15

Citation: 2004 OK 32

Docket Number: 

State: oklahoma

Court: Oklahoma Supreme Court

Date: 2004-05-10T00:00:00Z

Document:
IN RE: OKLAHOMA RULE OF PROFESSIONAL CONDUCT 1.152004 OK 32Case Number: SCBD-3490Decided: 05/10/2004As Corrected: May 12, 2004THE SUPREME COURT OF THE STATE OF OKLAHOMA

CORRECTION 
ORDER 

The order in the above style and 
numbered cause which was adopted on May 10, 2004, is revised to reflect the 
following additions:                      

2004 OK 32  

FOR OFFICIAL 
PUBLICATION  

In all other respects, the order 
of May 10, 2004, shall remain unaffected by this correction order.                

DONE BY ORDER OF THE SUPREME COURT THIS 12TH DAY OF MAY, 2004.    

/S/CHIEF JUSTICE 
IN RE: OKLAHOMA RULE OF PROFESSIONAL CONDUCT 1.15,
OKLAHOMA BAR FOUNDATION, INC. Movant.
    
ORDER

Upon Motion by the 
Oklahoma Bar Foundation, Inc., the Court approves the proposed amendments to 
Rule of Professional Conduct 1.15, as attached hereto.                      

DONE BY ORDER OF 
SUPREME COURT IN CONFERENCE THIS 10th DAY OF May, 2004.             

/S/CHIEF JUSTICE, 
JOSEPH M. WATT    

Watt, C.J., Hodges, Lavender, 
Hargrave, Boudreau, Winchester, Edmondson, JJ. - concur.          

Kauger, J. - concurs in 
result.     

Opala, V.C.J. - not 
participating.    

Amendment to Rule 
1.15   

Rule 1.15 of the Oklahoma Rules of Professional Conduct is hereby amended as follows: additions are in bold and underscored and deletions are shown by strike-throughs.

Rule 1.15. 
Safekeeping Property   

(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. Funds 
shall be kept in a separate account maintained in the state where the lawyer's 
office is situated, or elsewhere with the written consent of the client or third 
person. 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.                                                                                                 

(b) Upon receiving 
funds or other property in which a client or third person has an interest, a 
lawyer shall promptly notify the client or third person. Except as stated in 
this Rule or otherwise permitted by law or by agreement with the client, a 
lawyer shall promptly deliver to the client or third person any funds or other 
property that the client or third person is entitled to receive and, upon 
request by the client or third person, shall promptly render a full accounting 
regarding such property.                                                                                       

(c) When in the 
course of representation a lawyer is in possession of property in which both the 
lawyer and another person claim interests, the property shall be kept separate 
by the lawyer until there is an accounting and severance of their interests. If 
a dispute arises concerning their respective interests, the portion in dispute 
shall be kept separate by the lawyer until the dispute is resolved.                                                                  

(d) Trust Accounts. Beginning July 1, 2004, Aa lawyer or law firm that holds funds of clients or third parties in connection with a representation may shall create and maintain an interest-bearing demand trust account and may shall deposit therein all such funds of clients to the extent permitted by applicable banking laws, that are nominal in amount or are on deposit to be held for a short period of time. Maintenance of such trust account balances in noninterest-bearing trust accounts will still be permitted. The attorney electing to utilize interest bearing trust accounts shall comply in compliance with the following 
provisions:    

(1) the Interest-Bearing Demand Trust Aaccount may be established with any bank or savings and loan association authorized by federal or state law to do business in Oklahoma and insured by the Federal Deposit Insurance Corporation or the Federal Savings and Loan Insurance Corporation;

(2) the rate of interest payable on any interest-bearing demand trust the account shall not be less than the rate paid by the depository institution to regular, nonattorney non-lawyer 
depositors. Higher rates offered by the institution to customers whose deposits 
exceed certain time or quantity minimums, 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;                                                                       

(3) 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 Oklahoma Bar Foundation, Inc. ("Foundation"); and 

(B) to transmit with each remittance to the Foundation a statement showing the name of the lawyer or the law firm for whom the remittance is sent, the account number, the period of time covered by the statement, and the rate of interest applied and the average daily balance of the account; and

(4) the lawyer or 
law firm shall not deposit funds belonging to the lawyer or law firm in the 
account, except that funds necessary to comply with the depository institution's 
minimum balance requirements for the maintenance of the account or funds needed 
to pay applicable fees and service charges may be deposited therein;                                                    

(5) in determining 
whether to use the interest-bearing account herein specified, the lawyer shall 
consider whether the funds to be invested could be utilized to provide a 
positive net return to the client, taking into consideration the following 
factors:                                      

(A) the amount of 
interest that the funds would earn during the period they are expected to be 
deposited;                  

(B) the cost of 
establishing and administering the account, including the cost of the lawyer's 
services and the cost of preparing any tax reports required for interest 
accruing to a client's benefit; and                                

(C) the capability 
of financial institutions to calculate and pay interest to individual 
clients;             

(46) in the event that any client asserts a claim against an attorney a lawyer based upon such attorney's lawyer's determination to place client advances in the interest-bearing demand trust account because such balance is nominal in amount or to be held for a short period of time, the Foundation shall, upon written request by such attorney lawyer, review 
such claim and either:     

(A) approve such 
claim (if such balances are found not to be nominal in amount or short in 
duration) and remit directly to the claimant any sum of interest remitted to the 
Foundation on account of such funds; or                                      

(B) reject such a claim (if such balances are found to be nominal in amount or short in duration) and advise the claimant in writing of the grounds therefor. In the event of any subsequent litigation involving such a claim, the Foundation shall interplead any such sum of interest and shall assume the defense of the action.;

(7) The 
requirements of subparagraph (d) shall not apply if:         

(A) it is not 
feasible for the lawyer or law firm to establish an interest-bearing trust 
account for reasons beyond the control of the lawyer or law firm, such as the 
unavailability of a financial institution which offers such an account in the 
community where the principal office of the lawyer or law firm is situated, 
or                                                        

(B) those financial 
institutions which offer such an account in the community where the principal 
office of the lawyer or law firm is situated impose fees and service charges 
that routinely exceed the interest generated by the account; and                                      

(8) Information 
necessary to determine compliance or justifiable reason for noncompliance with 
the requirements of subparagraph (d) shall be included in the annual statement 
or response required by Rule 1.4(a) of the Rules Governing Disciplinary 
Proceedings (5 O.S. 2001, Ch. 1, App. 1-A). If it appears that a lawyer or law 
firm has not complied where it is feasible to do so, the matter may be referred 
to the office of the General Counsel of the Oklahoma Bar Association for 
appropriate investigation and proceedings.                                                                                   
COMMENT

2001 Main 
Volume  

A lawyer should 
hold property of others with the care required of a professional fiduciary. 
Securities should be kept in a safe deposit box, except when some other form of 
safekeeping is warranted by special circumstances. All property which is the 
property of clients or third persons should be kept separate from the lawyer's 
business and personal property and, if monies, in one or more trust accounts. 
Separate trust accounts may be warranted when administering estate monies or 
acting in similar fiduciary capacities.                                                                                  

Lawyers often 
receive funds from third parties from which the lawyer's fee will be paid. If 
there is risk that the client may divert the funds without paying the fee, the 
lawyer is not required to remit the portion from which the fee is to be paid. 
However, a lawyer may not hold funds to coerce a client into accepting the 
lawyer's contention. The disputed portion of the funds should be kept in trust 
and the lawyer should suggest means for prompt resolution of the dispute, such 
as arbitration. The undisputed portion of the funds shall be promptly 
distributed.                                                                                                  

Third parties, such 
as a client's creditors, may have just claims against funds or other property in 
a lawyer's custody. A lawyer may have a duty under applicable law to protect 
such third-party claims against wrongful interference by the client, and 
accordingly may refuse to surrender the property to the client. However, a 
lawyer should not unilaterally assume to arbitrate a dispute between the client 
and the third party.                                                                    

The obligations of 
a lawyer under this Rule are independent of those arising from activity other 
than rendering legal services. For example, a lawyer who serves as an escrow 
agent is governed by the applicable law relating to fiduciaries even though the 
lawyer does not render legal services in the transaction.                                                  

A "client's 
security fund" provides a means through the collective efforts of the bar to 
reimburse persons who have lost money or property as a result of dishonest 
conduct of a lawyer. Where such a fund has been established, a lawyer should 
participate.                                          

CODE 
COMPARISON 

2001 Main 
Volume  

With regard to Rule 
1.15(a), DR 9-102(A) provides that "funds of clients" are to be kept in a trust 
account in the state in which the lawyer's office is situated. DR 9-102(B)(2) 
provides that a lawyer shall "identify and label securities and properties of a 
client ... and place them in ... safekeeping ...." DR 9-102(B)(3) requires that 
a lawyer "maintain complete records of all funds, securities and other 
properties of a client ...."                                                                         

Rule 1.15(a) 
extends these requirements to property of a third person that is in the lawyer's 
possession in connection with the representation.                     

Rule 1.15(b) is 
substantially similar to DR 9-102(B)(1) and (4).         

Rule 1.15(c) is 
substantially similar to DR 9-102(A)(2), except that the requirement regarding 
disputes applies to property concerning which an interest is claimed by a third 
person as well as by a client.                                

Rule 1.15(d) is was substantially identical similar to DR 9-102(c) before the July 1, 2004 modification discussed below.

OKLAHOMA 
MODIFICATION 

2001 Main 
Volume