Alabama Rules of Professional Conduct
Client-Lawyer Relationship
Rule 1.15.
Safekeeping Property.
Definitions. As used in this rule, the terms below shall have the following
meanings:
"IOLTA account" means a pooled interest- or dividend-bearing trust account
benefiting the Alabama Law Foundation or the Alabama Civil Justice Foundation
established in an eligible institution for the deposit of nominal or short-term funds of
clients or third persons.
"Eligible institution" means any bank or savings and loan association authorized
by federal or state laws to do business in Alabama, whose deposits are insured by an
agency of the federal government, or any open-end investment company registered with
the Securities and Exchange Commission and authorized by federal or state laws to do
business in Alabama. Eligible institutions must meet the requirements set out in
subsection (k).
"Interest- or dividend-bearing trust account" means a federally insured checking
account or a business checking account with an automated investment feature, such as
an overnight sweep and investment in a government money-market fund or daily
(overnight) financial-institution repurchase agreement invested solely in or fully
collateralized by U.S. Government Securities. A daily financial-institution repurchase
agreement may be established only with an eligible institution that is "well capitalized" or
"adequately capitalized" as those terms are defined by applicable federal statutes and
regulations. An open-end money-market fund must hold itself out as a money-market
fund as defined by applicable federal statutes and regulations under the Investment
Company Act of 1940, and, at the time of the investment, have total assets of at least
$250,000,000. The funds covered by this rule shall be subject to withdrawal upon
request and without delay except as permitted by law.
"Allowable reasonable fees" means: (1) per check charges, (2) per deposit
charges, (3) a fee in lieu of minimum balance, (4) Federal deposit insurance fees, (5)
sweep fees, and (6) a reasonable IOLTA account administrative fee.
"U.S. Government Securities" means U.S. Treasury obligations and obligations
issued or guaranteed as to principal and interest by the United States or any agency or
instrumentality thereof.
(a) A lawyer shall hold the property of clients or third persons that is in the
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 consent of the client or third person. No
funds of a lawyer shall be deposited in such a trust account, except (1) unearned
attorney fees that are being held until earned, and (2) funds sufficient to pay bank
service charges on that account or to obtain a waiver thereof. Any funds while in the
lawyer's trust account that the lawyer is entitled to receive as a fee, reimbursement, or
costs shall not be used by the lawyer for any personal or business expenses until such
funds are removed from the trust account.
Interest or dividends, if any, on funds, less fees charged to the account, other
than overdraft and returned item charges, shall belong to the client or third person,
except as provided in Rule 1.15(k), and the lawyer shall have no right or claim to the
interest. 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 six (6) years after termination of the representation.
A lawyer shall designate all such trust accounts, whether general or specific, as
well as deposit slips and all checks drawn thereon, as either an "Attorney Trust
Account," an "Attorney Escrow Account," or an "Attorney Fiduciary Account." A lawyer
shall designate all business accounts, as well as other deposit slips and all checks
drawn thereon, as a "Business Account," a "Professional Account," an "Office Account,"
a "General Account," a "Payroll Account," or a "Regular Account." However, nothing in
this rule shall prohibit a lawyer from using any additional description or designation for a
specific business or trust account, including, for example, fiduciary accounts maintained
by the lawyer as executor, guardian, trustee, receiver, or agent or in any other fiduciary
capacity.
(b) Upon receiving funds or other property in which a client or third person has an
interest from a source other than the client or the third person, 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 that 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 a 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) A lawyer shall not make disbursements of a client's funds from separate
accounts containing the funds of more than one client unless the client's funds are
collected funds; provided, however, that if a lawyer has a reasonable and prudent belief
that a deposit of an instrument payable at or through a bank representing the client's
funds will be collected promptly, then the lawyer may, at the lawyer's own risk, disburse
the client's uncollected funds. If collection does not occur, then the lawyer shall, as soon
as practical, but in no event more than five (5) working days after notice of non-
collection, replace the funds in the separate account.
(e) A lawyer who practices in Alabama shall maintain current financial records as
provided in these Rules and as required by Rule 1.15 of these Rules and shall retain the
following records for a period of six (6) years after termination of the representation:
1. Receipt and disbursement journals containing a record of deposits to and
withdrawals from client trust accounts, specifically identifying the date,
source, and description of each item deposited, as well as the date, payee,
and purpose of each disbursement;
2. Ledger records for all client trust accounts showing, for each separate trust
client or third person, the source of all funds deposited, the names of all
persons for whom the funds are or were held, the amount of such funds, the
descriptions and amounts of charges or withdrawals, and the names of all
persons to whom such funds were disbursed;
3. Copies of retainer and compensation agreements with clients as required by
Rule 1.5 of these Rules;
4. Copies of accountings to clients or third persons showing the disbursement of
funds to them or on their behalf;
5 Copies of bills for legal fees and expenses rendered;
6. Copies of records showing disbursements on behalf of clients;
7. The physical or electronic equivalents of all trust-account checkbook
registers, bank statements, records of deposit, prenumbered canceled
checks, and substitute checks provided by a financial institution;
8. Records of all electronic transfers from client trust accounts, including the
name of the person authorizing the transfer, the date of transfer, the name of
the recipient, and confirmation from the financial institution of the trust-
account number from which money was withdrawn and the date and the time
the transfer was completed;
9. Copies of monthly trial balances and quarterly reconciliations of the client
trust accounts maintained by the lawyers; and
10. Copies of those portions of client files that are reasonably related to client
trust-account transactions.
(f) With respect to client trust accounts required by Rule 1.15 of these Rules:
1. Only a lawyer admitted to practice in this jurisdiction or a person under the
direct supervision of the lawyer shall be an authorized signatory or shall
authorize transfers from a client trust account;
2. Receipts shall be deposited intact, and records of deposit should be
sufficiently detailed to identify each item; and
3. Withdrawals shall be made only by check payable to a named payee, and not
to cash, or by authorized electronic transfer.
(g) Records required by Rule 1.15 may be maintained by electronic,
photographic, or other media, provided that they otherwise comply with these Rules and
that printed copies can be produced. These records shall be readily accessible to the
lawyer.
(h) Upon dissolution of a law firm or of any legal professional corporation, the
partners shall make reasonable arrangements for the maintenance of client trust-
account records specified in these Rules.
(i) A lawyer shall request that the financial institution where the lawyer maintains
a trust account file a report to the Office of General Counsel of the Alabama State Bar in
every instance where a properly payable item or order to pay is presented against a
lawyer's trust account with insufficient funds to pay the item or order when presented
and either (1) the item or payment order is returned because there are insufficient funds
in the account to pay the item or order or (2) if the request is honored by the financial
institution and the overdraft created thereby is not paid within three (3) business days of
the date the financial institution sends notification of the overdraft to the lawyer. The
report of the financial institution shall contain the same information, or a copy of that
information, forwarded to the lawyer who presented the item or order.
A lawyer shall enter into an agreement with the financial institution that holds the
lawyer's trust account pursuant to which the financial institution agrees to file the report
required by this rule. Every lawyer shall have the duty to assure that his or her trust
accounts maintained with a financial institution in Alabama are pursuant to such an
agreement. This duty belongs to the lawyer and not to the financial institution. The filing
of a report with the Office of General Counsel pursuant to this paragraph shall constitute
a proper basis for an investigation by the Office of General Counsel of the lawyer who is
the subject of the report, pursuant to the Alabama Rules of Disciplinary Procedure.
Nothing in this rule shall preclude a financial institution from charging a lawyer or a law
firm a fee for producing the report and maintaining the records required by this rule.
Every lawyer and law firm maintaining a trust account in Alabama shall hereby be
conclusively deemed to have consented to the reporting and production requirements
mandated by this rule and shall hold harmless the financial institution for its compliance
with the aforesaid reporting and production requirements. Neither the agreement with
the financial institution nor the reporting or production of records by a financial institution
made pursuant to this rule shall be deemed to create in the financial institution a duty to
exercise a standard of care or a contract with third parties that may sustain a loss as a
result of a lawyer's overdrawing a trust account.
A lawyer shall not fail to produce any of the records required to be maintained by
these Rules at the request of the Office of General Counsel, the Disciplinary
Commission, or the Disciplinary Board. This obligation shall be in addition to, and not in
lieu of, any other requirements of the Rules of Professional Conduct or Rules of
Disciplinary Procedure for the production of documents and evidence.
(j) A lawyer, except a lawyer not engaged in active practice pursuant to Alabama
Code 1975, §§ 34-3-17 and -18, shall maintain a separate account to hold funds of a
client or third person. Every lawyer admitted to practice in this State shall annually
certify to the Secretary of the Alabama State Bar that all IOLTA eligible funds are held in
an IOLTA Account, or that the lawyer is exempt because the lawyer: does not have an
office within the State of Alabama; does not hold funds for clients or third persons; is not
engaged in the active practice of law; is a judge, attorney general, public defender, U.S.
attorney, district attorney, on duty with the armed services or employed by a local, state,
or federal government, and is not otherwise engaged in the private practice of law; or is
a corporate or other in-house counsel or teacher of law and is not otherwise engaged in
the private practice of law. Certification may be made by a firm on behalf of all lawyers
in a firm.
(k) Lawyers shall hold in IOLTA accounts all funds of clients or third persons that
are nominal in amount or that the lawyer expects to be held for a short period and from
which no income could be earned for the client or third person in excess of the costs
incurred to secure such income. In no event shall a lawyer receive the interest on an
IOLTA account.
In determining whether to deposit funds into an IOLTA account, a lawyer shall
consider the following factors: the amount of interest or dividends likely to be earned
during the period the funds are expected to be deposited; the estimated cost of
establishing and administering a non-IOLTA trust account for the benefit of the client or
third person, including the cost of the lawyer's services and the cost of preparing any tax
reports required for interest accruing to the benefit of a client or third person; the ability
of financial institutions or lawyers or law firms to calculate and pay interest to individual
clients or third persons; and any other circumstances that affect the ability of the client
or third-person funds to earn income in excess of the costs incurred to secure such
funds. A lawyer shall review the IOLTA account at reasonable intervals to determine
whether changed circumstances require further action with respect to the funds of any
client or third person.
The determination whether the funds of a client or third person can earn income
in excess of costs as provided in (k) above shall rest in the sound judgment of the
lawyer or law firm, and no lawyer shall be charged with an ethical impropriety or breach
of professional conduct based on the good-faith exercise of such judgment.
Offering IOLTA accounts is voluntary for financial institutions. Lawyers may place
trust accounts only in eligible institutions that meet the requirements of this rule,
including:
Interest Rates: Eligible institutions shall pay on IOLTA accounts the highest
interest rate or dividend the financial institution offers to its non-IOLTA customers when
the IOLTA account meets or exceeds the same minimum balance and other eligibility
requirements, if any.
A financial institution shall pay on IOLTA accounts the highest interest rate or
dividend generally available among the following product types or any comparable
product type (if the product type is available from the financial institution to its non-
IOLTA customers) by either using the identified product type as an IOLTA account or
paying the equivalent interest rate or dividend on the existing IOLTA account in lieu of
actually establishing the highest interest rate or dividend product:
1. An interest-bearing checking account, such as a negotiable order of
withdrawal (NOW) account, or business checking account with interest.
2. A business checking account with an automated investment feature, such as
an overnight sweep and investment in repurchase agreements or money-
market funds as described in the definitions.
3. A government (such as for municipal deposits) interest-bearing checking
account.
4. A checking account paying preferred interest rates, such as money-market or
indexed rates.
5. Any other suitable interest- or dividend-bearing deposit account offered by the
institution to its non-IOLTA customers.
As an alternative, the financial institution may pay:
6. An amount on funds, net of allowable reasonable fees, that would otherwise
qualify for investment options described in 1 through 4 above equal to 55% of
the Federal Funds Target Rate as of the first business day of the quarter or
other IOLTA remitting period.
The following considerations will apply to determinations of comparability:
1. Accounts that have limited check-writing capability required by law or
government regulation may not be considered as comparable to IOLTA
accounts in Alabama. Such accounts, however, are distinguished from
checking accounts that pay money-market interest rates on account balances
without the check-writing limitations. Such accounts are included in the option
4 class identified above. Additionally, rates that are not generally available to
other account holders, such as special promotional rates used to attract new
customers, are not considered for comparability in Alabama.
2. For the purpose of determining compliance with the above provisions, all
participating financial institutions shall report in a form and manner prescribed
by the Alabama Law Foundation and Alabama Civil Justice Foundation the
highest interest or dividend rate for each of the accounts they offer within the
above-listed account types. The foundations will certify participating financial
institutions' compliance with this rule on an annual basis.
3. In determining the highest interest rate or dividend generally available from
the institution to its non-IOLTA customers, the eligible institution may consider
factors, in addition to the IOLTA account balance, customarily considered by
the institution when setting interest rates or dividends for its customers,
provided that those factors do not discriminate between IOLTA accounts and
accounts of non-IOLTA customers and provided further that those factors do
not include that the account is an IOLTA account.
Pursuant to a written agreement between the lawyer and the eligible institution,
interest on the IOLTA account shall be remitted at least quarterly to the Alabama Law
Foundation or the Alabama Civil Justice Foundation, as the lawyer shall designate.
Interest or dividends shall be calculated in accordance with the institution's
standard practice for non-IOLTA account customers, less reasonable fees, if any, in
connection with the deposited funds.
Allowable reasonable fees, as defined in this rule, are the only service charges or
fees permitted to be deducted from interest or dividend earned on IOLTA accounts.
Allowable reasonable fees may be deducted from interest or dividends on an IOLTA
account only at such rates and under such circumstances as is the eligible institution's
customary practice for its non-IOLTA customers. All other fees and charges shall not be
assessed against the interest or dividends earned on the IOLTA account, but rather
shall be the responsibility of, and may be charged to, the lawyer maintaining the IOLTA
account.
Fees or charges in excess of the interest or dividend earned on the account for
any month or quarter shall not be taken from interest or dividend earned on other IOLTA
accounts or from the principal of the account.
Financial institutions may elect to pay higher rates than required by this rule or to
waive any or all fees on IOLTA accounts.
A statement should be transmitted to the Alabama Law Foundation or the
Alabama Civil Justice Foundation with each remittance showing the period for which the
remittance is made, the name of the lawyer or law firm from whose IOLTA account the
remittance is being sent, the IOLTA account number, the rate of interest applied, the
gross interest or dividend earned during the period, the amount and description of any
service charges or fees assessed during the remittance period, if any, the average
account balance for the remittance period, and the net amount of interest or dividend
remitted for the period. A copy of the statement shall also be sent to the lawyer.
(l) All interest or dividends transmitted to and received by the Alabama Law
Foundation pursuant to Rule 1.15(k) shall be distributed by it for one or more of the
following purposes:
1. To provide legal aid to the poor;
2. To provide law-student loans;
3. To provide for the administration of justice;
4. To provide law-related educational programs to the public;
5. To help maintain public law libraries; and
6. For such other programs for the benefit of the public as the Supreme Court of
the State of Alabama specifically approves from time to time.
(m) All interest or dividends transmitted to and received by the Alabama Civil
Justice Foundation pursuant to Rule 1.15(k) shall be distributed by it for one or more of
the following purposes:
(1) to provide financial assistance to organizations or groups providing aid or
assistance to:
(A) underprivileged children;
(B) traumatically injured children or adults;
(C) the needy;
(D) handicapped children or adults; or
(E) drug and alcohol rehabilitation programs;
(2) to be used in such other programs for the benefit of the public as the
Supreme Court of the State of Alabama specifically approves from time to
time.
(n) A lawyer shall not fail to produce, at the request of the Office of General
Counsel, the Disciplinary Commission, or the Disciplinary Board, any of the records
required to be maintained by these Rules. This obligation shall be in addition to, and not
in lieu of, any other requirements of the Rules of Professional Conduct or the Rules of
Disciplinary Procedure for the production of documents and evidence.
(o) Beginning with the calendar quarter ending June 30, 2019, and continuing for
each and every quarter thereafter, the foundations receiving interest or dividends
pursuant to Rule 1.15(k), Alabama Rules of Professional Conduct, shall report to the
Supreme Court of Alabama the total funds received from IOLTA accounts, the total
funds distributed by the foundation, and a certification that the information reported to
the Supreme Court is correct. Such report shall be filed with the Clerk of the Supreme
Court of Alabama within 30 days after the end of each such calendar quarter. The
quarterly report and the certification shall be in a form substantially similar to the form
appended to this Rule 1.15.
[Amended 8-21-92; Amended 8-28-92; Amended 8-1-97; Amended 4-14-2003;
Amended 9-27-2007, eff. 1-1-2008; Amended 7-16-2012, eff. 1-1-2013; Amended 1-12-
15; Amended 5-22-2019.]
Comment
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 moneys, in one or more trust accounts. Separate trust
accounts may be warranted when administering estate moneys or acting in similar
fiduciary capacities.
Lawyers often receive funds from third parties from which the lawyers' fees 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 "clients' 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.
A lawyer engaged in active practice is required to maintain a separate account to
hold funds of a client, unless the lawyer gives written notice to the Secretary of the
Alabama State Bar. A lawyer is engaged in active practice unless the lawyer has
obtained membership in the Alabama State Bar pursuant to the provisions of Alabama
Code 1975, §§ 34-3-17 and 34-3-18.
A lawyer who maintains a separate account to hold funds of a client must comply
with the Interest on Lawyers' Trust Accounts provisions, commonly known as IOLTA.
A lawyer may maintain more than one interest-bearing account to hold clients'
funds in compliance with IOLTA (commonly known as an IOLTA account) and may
open an IOLTA account at any time during the year. The depository for an IOLTA
account shall remit interest either to the Alabama Law Foundation or to the Alabama
Civil Justice Foundation, as the lawyer designates. A lawyer may change the
beneficiary of an IOLTA account at any time.
Rule 1.15(e) enumerates the basic financial records that a lawyer must maintain
with regard to all trust accounts of a law firm. These include the standard books of
account and the supporting records that are necessary to safeguard and account for the
receipt and disbursement of client or third-person funds as required by Rule 1.15. This
rule requires that lawyers maintain client trust account records for a period of six (6)
years after termination of each particular legal engagement or representation.
Rule 1.15(e)7 requires that the physical or electronic equivalents of all trust-
account checkbook registers, bank statements, records of deposit, pre-numbered
canceled checks, and substitute checks be maintained for a period of six (6) years after
termination of each legal engagement or representation. The "Check Clearing for the
21st Century Act" or "Check 21 Act," codified at 12 U.S.C. § 5001 et seq., recognizes
"substitute checks" as the legal equivalent of an original check. A "substitute check" is
defined at 12 U.S.C. § 5002(16) as "a paper reproduction of the original check that
contains an image of the front and back of the original check; bears a MICR ('magnetic
ink character recognition') line containing all the information appearing on the MICR line
of the original check ...; conforms ... with generally applicable industry standards for
substitute checks; and is suitable for automated processing in the same manner as the
original check." Banks, as defined in 12 U.S.C. § 5002(2), are not required to return to
customers the original canceled checks. Most banks now provide electronic images of
checks to customers who have access to their accounts on Internet-based Web sites. It
is the lawyer's responsibility to download electronic images. Electronic images shall be
maintained for the requisite number of years and shall be readily available for printing
upon request or shall be printed and maintained for the requisite number of years.
The Automated Clearing House ("ACH") Network is an electronic-funds transfer
or payment system that primarily provides for the interbank clearing of electronic
payments between originating and receiving participating financial institutions. ACH
transactions are payment instructions to either debit or credit a deposit account. ACH
payments are used in a variety of payment environments, including bill payments,
business-to-business payments, and government payments (e.g., tax refunds). In
addition to the primary use of ACH transactions, retailers and third parties use the ACH
system for other types of transactions including electronic check conversion ("ECC").
ECC is the process of transmitting MICR information from the bottom of check,
converting check payments to ACH transactions depending upon the authorization
given by the account holder at the point of purchase. In this type of transaction, the
lawyer should be careful to comply with the requirements of Rule 1.15(e)8.
There are five types of check conversions with regard to which a lawyer should
be careful to comply with the requirements of Rule 1.15(e)8. First, in a "point-of-
purchase conversion," a paper check is converted into a debit at the point of purchase
and the paper check is returned to the issuer. Second, in a "back-office conversion," a
paper check is presented at the point of purchase and is later converted into a debit and
the paper check is destroyed. Third, in an "account-receivable conversion," a paper
check is converted into a debit and the paper check is destroyed. Fourth, in a
"telephone-initiated debit" or "check-by-phone conversion," bank-account information is
provided via the telephone and the information is converted to a debit. Fifth, in a "Web-
initiated debit," an electronic payment is initiated through a secure Web environment.
Rule 1.15(e) applies to each electronic-fund transfer hereinabove described. All
electronic-fund transfers shall be recorded, and a lawyer should not reuse a check
number that has been previously used in an electronic-transfer transaction.
The potential for these records to serve as safeguards is realized only if the
documentation set forth in Rule 1.15(e)9 is regularly performed. The trial balance is the
sum of balances of each client's ledger card (or the electronic equivalent). Its value lies
in comparing it on a monthly basis to a control balance. The control balance starts with
the previous month's balance, then adds receipts from the Trust Receipts Journal and
subtracts disbursements from the Trust Disbursements Journal. Once the total matches
the trial balance, the reconciliation readily follows by adding amounts of any outstanding
checks and subtracting any deposits not credited by the bank at month's end. This
balance should agree with the bank statement. Quarterly reconciliation is recommended
only as a minimum requirement; monthly reconciliation is the preferred practice, given
the difficulty of identifying an error (whether by the lawyer or by the bank) among three
months of transactions.
In some situations, documentation in addition to that listed in subparagraphs 1
through 9 of Rule 1.15(e) is necessary for a complete understanding of a trust-account
transaction. The type of document a lawyer must retain under subparagraph 10
because it is "reasonably related" to a client trust transaction will vary depending on the
nature of the transaction and the significance of the document in shedding light on the
transaction. Examples of documents that typically must be retained under the paragraph
include correspondence between the client and the lawyer relating to a disagreement
over fees or costs or the distribution of proceeds, settlement agreements contemplating
payment of funds, settlement statements issued to the client, documentation relating to
sharing litigation costs and attorney fees for subrogated claims, agreements for division
of fees between lawyers, guarantees of payment to third parties out of proceeds
recovered on behalf of a client, and copies of bills, receipts, or correspondence related
to any payments to third parties on behalf of a client (whether made from the client's
funds or from the lawyer's funds advanced for the benefit of the client).
Rule 1.15(f) enumerates minimal accounting controls for client trust accounts. It
also enunciates the requirement that only a lawyer admitted to the practice of law in the
jurisdiction or a person who is under the direct supervision of the lawyer shall be the
authorized signatory or shall authorize electronic transfers from a client trust account.
Although it is permissible to grant non-lawyer access to a client trust account, such
access should be limited and closely monitored by the lawyer. The lawyer has a non-
delegable duty to protect and preserve the funds in a client trust account and can be
disciplined for failure to supervise subordinates who misappropriate client funds. See
Rules 5.1, 5.2, and 5.3 of these Rules.
Authorized electronic transfers shall be limited to (1) money required for payment
to a client or third person on behalf of a client; (2) expenses properly incurred on behalf
of a client, such as filing fees or payment to third persons for services rendered in
connection with the representation; (3) money transferred to the lawyer for fees that are
earned in connection with the representation and are not in dispute; or (4) money
transferred from one client trust account to another client trust account.
The requirement in subparagraph (f)2 that receipts shall be deposited intact
means that a lawyer cannot deposit one check or negotiable instrument into two or
more accounts at the same time, a practice commonly known as a "split deposit."
Rule 1.15(g) allows the use of alternative media for the maintenance of client
trust-account records if printed copies of necessary reports can be produced. If trust
records are computerized, a system of regular and frequent (preferably daily) back-up
procedures is essential. If a lawyer uses third-party electronic or Internet-based file
storage, the lawyer must make reasonable efforts to ensure that the company has in
place, or will establish, reasonable procedures to protect the confidentiality of client
information. See ABA Formal Ethics Opinion 398 (1995). Records required by Rule
1.15(e) shall be readily accessible and shall be readily available to be produced upon
request by the client or third person who has an interest as provided in Rule 1.l5, or by
the official request of a disciplinary authority, including, but not limited to, a subpoena
duces tecum. Personally identifying information in records produced upon request by
the client or third person or by disciplinary authority shall remain confidential and shall
be disclosed only in a manner to ensure client confidentiality as otherwise required by
law or by court rule.
Rule 29 of the Alabama Rules of Disciplinary Procedure provides for the
preservation of a lawyer's client trust-account records in the event the lawyer is
transferred to disability-inactive status, has disappeared or died, has been suspended
or disbarred, or has surrendered his or her law license.
Rule 1.15(h) provides for the preservation of a lawyer or firm's client trust-
account records in the event of dissolution of the law practice. Regardless of the
arrangements the partners or shareholders make among themselves for maintenance of
the client trust records, each partner may be held responsible for ensuring the
availability of these records. For the purposes of these Rules, the terms "law firm,"
"partner," and "reasonable" are defined in the Terminology section preceding these
Rules.
Comparison with Former Alabama Code of Professional Responsibility
With regard to paragraph (a), DR 9-102(A) provided that “funds of clients” are to
be kept in an identifiable bank account in the state in which the lawyer's office is
situated. DR 9-102(B)(2) provided that a lawyer shall “identify and label securities and
properties of a client... and place them in... safekeeping...” DR 9-102(B)(3) required that
a lawyer “[m]aintain complete records of all funds, securities, and other properties of a
client...” Paragraph (a) extends these requirements to property of a third person that is
in the lawyer's possession in connection with the representation.
Paragraph (b) is substantially similar to DR 9-102(B)(1), (3) and (4).
Paragraph (c) is 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.
Paragraph (d) is similar to a provision of DR 9-102, which was unique to
Alabama. This provision is carried forward into the Rules.
Paragraphs (e), (f), and (g) implement the provisions of Alabama's Interest on
Lawyers' Trust Accounts (IOLTA) Rules.
Comment to Rule 1.15 as Amended
Effective July 1, 1997
In addition to making stylistic changes, the amendment added the second
paragraph in section (a) and added section (e) and section (k). It also added a sentence
to the first paragraph of section (a) to set out the conditions under which a lawyer can
deposit personal funds into a trust account.
Comment to Rule 1.15 as Amended
Effective April 14, 2003
In addition to stylistic changes, the amendment added the “Definitions” section to
the rule and amended section (g) to provide that a lawyer shall hold those funds of a
client or a third person that are nominal or that the lawyer expects to be held for only a
short period in IOLTA accounts.
Note from the reporter of decisions: The order amending Rule 1.15 of the
Alabama Rules of Professional Conduct, effective April 14, 2003, and adopting a
comment to that rule, is published in that volume of Alabama Reporter that contains
Alabama cases from 842 So.2d.”
Note from the reporter of decisions: The order amending Rule 1.15 of the
Alabama Rules of Professional Conduct, effective January 1, 2008, is published in that
volume of Alabama Reporter that contains Alabama cases from 966 So.2d.
Note from the reporter of decisions: The order amending Rule 1.15 and the
Comment thereto and Rule 4.2, Alabama Rules of Professional Conduct, is published in
that volume of Alabama Reporter that contains Alabama cases from 91 So. 3d.
Note from the reporter of decisions: The order amending Rule 1.15(e),
effective January 12, 2015, is published in that volume of Alabama Reporter that
contains Alabama cases from 154 So. 3d.
Note from the reporter of decisions: The order adopting Rule 1.15(o), effective
May 22, 2019, is published in that volume of Alabama Reporter that contains Alabama
cases from __ So. 3d.
