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85-F-90 - Interest on separate Client Trust Accounts

 

BOARD OF PROFESSIONAL RESPONSIBILITY OF THE SUPREME COURT OF TENNESSEE

FORMAL ETHICS OPINION 85-F-90


Inquiry is made concerning the ethical responsibilities of an attorney in the settlement of a matter on behalf of his client, and the handling of settlement proceeds, when the attorney is unable to communicate with the client and the client's whereabouts is unknown.

The client was injured as a result of a slip and fall at a public business establishment and admitted to the hospital for treatment of his injuries. The client employed the attorney to assert his claim for damages. The client executed a general power of attorney authorizing the attorney to negotiate a settlement, execute any necessary documents or releases, to execute or negotiate any draft or check paid in his behalf and to act as his attorney in the matter. The attorney is now unable to locate the client. All efforts, including hiring an investigator, have been fruitless.

The statute of limitations on the client's claim is about to run and the attorney inquires as to his ethical responsibilities, specifically concerning (i) settlement of the case without communication from the client; (ii) payment of medical bills and attorney's fees; and (iii) disposition of the client's funds.

Canon 7 of the Code of Professional Responsibility provides:

A Lawyer Should Represent a Client Zealously Within the Bounds of Law

In this instance, there is no prohibition against the inquiring attorney asserting the lawful claim of his client to a conclusion by settlement of the matter. In fact, the attorney is ethically obligated to pursue the matter to a conclusion.

In the event there is no reasonable expectation of objection by the client, the attorney, under the general power of attorney and as agent of the client, may pay reasonable and necessary medical and legal contractual obligations of the client arising from the legal matter. In the event of a reasonable expectation of objection by the client, then the attorney is ethically prohibited from disbursement of such funds from the settlement proceeds.

Formal Ethics Opinion 84-F-68, citing 2 Scott, The Law of Trusts, Sections 180.3, 181 (3d ed. 1967 and Supp. 1981) states:

... where the amount of funds held for a specific client and the expected holding period make it obvious that the interest which would be earned would exceed the lawyer's administrative costs and the bank charges, the lawyer should consult the client and follow the client's instructions as to investing.

In this instance, the lawyer is unable to consult with the client and, therefore, in the event it appears that the interest would exceed the costs, the attorney is ethically obligated to deposit the funds in an interest-bearing account on behalf of the client.

This 13th day of March, 1985.

ETHICS COMMITTEE:

W. J. Flippin, Chairman
Henry H. Hancock
Edwin C. Townsend

APPROVED AND ADOPTED BY THE BOARD

2022-02