Brass Tacks Post: Known Unknowns

image

Illinois
lawyers should be aware that the Supreme Court recently amended Rule
1.15
to address the problem of what to do with unidentifiable funds
residing in an IOLTA. There has long been an answer to the question
of what to do with unclaimed funds: follow the procedures
outlined in the Uniform Disposition of Unclaimed Property Act, 765
ILCS 1025/1. But until now, unidentifiable funds – whose
owner is not known or able to be determined – represented a
knottier problem.

Now,
under new Rule 1.15(i), a lawyer must remit unidentifiable funds to
the Lawyers Trust Fund, the agency that administers the IOLTA program
and uses funds for the benefit of Illinois legal services programs. A
remittance under Rule 1.15(i) may come as a lawyer winds down a
practice, or as she closes out one IOLTA while opening another. These
are times when lawyers could conceivably notice the presence of
unidentified funds in an IOLTA, having not specifically accounted for
them before. The press release announcing the amendment of the rule
explains that unidentified funds may exist because of “mathematical
errors, faulty recordkeeping…mistaken deposits by banks of IOLTA
interest…[or] past legal fees that lawyers did not collect and now
lack sufficient records to claim.” Implicit in that quote is the
idea that there can be innocuous reasons why a lawyer might not have
been aware of the funds prior to a final reconciliation, or why the
funds’ owner cannot be determined. That seems logical.

But
how could the situation unfold in a disciplinary context?

Assume
that a lawyer is winding down a solo law practice and planning to
retire. She has $2,500 that she could not account for in her IOLTA,
and she remits those funds to the Lawyers Trust Fund as Rule 1.15(i)
directs. In the process of winding down the firm and closing out the
IOLTA, the lawyer’s bank erroneously charges a service fee to the
lawyer’s IOLTA, resulting in an overdraft which is then reported to
the ARDC. An investigation is initiated, and the lawyer must respond
to an inquiry regarding the circumstances of the overdraft. She does
so, explaining the bank error and providing the records the ARDC
requested, including records relating to the $2,500 remittance to the
Lawyers Trust Fund.

Will
the ARDC inquire further about why the lawyer couldn’t identify the
owner of the funds? Will it require her to produce other records that
might lead to further information about the owner? How far back will
that inquiry go? Could the inquiry ever lead to a charge that the
lawyer handled the funds improperly, or that she kept insufficient
records under Rule 1.15(a)?

It’s
likely that at a minimum, the ARDC will inquire further and require a
detailed explanation of the lawyer’s inability to determine the owner
of the funds. Beyond that, it’s hard to predict exactly what would
happen or how the lawyer’s conduct would be viewed. But in any event,
the hypothetical situation above shows that the disposition of
unidentifiable property may not always be easy or uncomplicated.

Not
every lawyer should expect to deal with these matters, and I do not
intend to state or imply that disposing of unidentifiable funds in
the way contemplated by new Rule 1.15(i) is some kind of discipline
trap. But in this – as in every instance in which they handle funds
–  lawyers should be very careful, keep the best records they can,
and seek help when necessary.

photo
credit: MicroAssist (CC)

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s