R.I. Sup. Ct. R. 1.15

As amended through April 4, 2024

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 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 seven years after termination of the representation.

(b) A lawyer may deposit the lawyer's own funds in a client trust account for the sole purpose of paying bank service charges on that account, but only in an amount necessary for that purpose.

(c) A lawyer shall deposit into a client trust account legal fees and expenses that have been paid in advance, to be withdrawn by the lawyer only as fees are earned or expenses incurred.

(d) 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.

(e) When in the course of representation a lawyer is in possession of property in which two or more persons (one of whom may be the lawyer) claim interests, the property shall be kept separate by the lawyer until the dispute is resolved. The lawyer shall promptly distribute all portions of the property as to which the interests are not in dispute.

(f) A lawyer or law firm shall deposit clients' funds, which are nominal in amount or to be held for a short period of time, in one or more interest bearing trust accounts in accordance with the following provisions. For purposes of this rule, such accounts are referred to as Interest on Lawyers' Trust Accounts (IOLTA):

(1) Earnings from such IOLTA accounts shall not be available to a lawyer or law firm.

(2) Whether clients' funds are nominal in amount or to be held for a short period of time shall be determined solely by each attorney or law firm.

(3) Notification to clients whose funds are deposited in IOLTA accounts shall not be necessary.

(4) Such IOLTA accounts may be established with any financial institution authorized by federal or state law to do business in Rhode Island, the deposits in which are insured by insurance entities regulated by the United States and/or the State of Rhode Island or any agency or instrumentality thereof. Funds deposited in such accounts shall be available for withdrawal immediately upon demand.

(5) The rate of interest payable on any IOLTA account shall not be less than the highest interest rate or dividend available from the financial institution to its non-IOLTA customers when the IOLTA account meets the same minimum balance or other eligibility qualifications. Lawyers or law firms making such deposits shall direct the depository institution:

(i) To remit interest or dividends on such deposits, net of any service or fees, at least quarterly, to the Rhode Island Bar Foundation (the "Foundation").

(ii) To transmit to the Foundation and the depositor with each remittance statements showing the name of the depositor, the amount remitted, and the rate(s) at which the interest was computed.

(g)

(1) If, after the exercise of reasonable diligence, a lawyer is unable to identify or locate the owner(s) of funds deposited in that lawyer's IOLTA account, the lawyer shall remit those funds to the Foundation to be used consistent with the purposes listed in Rule 1.15(h). Provided the lawyer has exercised reasonable diligence, the lawyer's act of remitting IOLTA account funds that have remained unclaimed or the owner(s) unidentified shall not be deemed a violation of the Rules of Professional Conduct. Upon remission of such funds, the lawyer shall provide to the Foundation a statement of the last known address of the owner(s) of the funds, if known to the lawyer; the amount remitted; a description of the efforts taken by the lawyer to find the owner(s) of the remitted funds; and, if the lawyer is unable to determine and identify the owner of the funds, a description of the efforts taken by the lawyer to identify the owner of the remitted funds.

(2) In the event an attorney is suspended, disbarred, or deceased and another attorney or Disciplinary Counsel is appointed pursuant to Supreme Court Rules, Art. III, Rule 18, as substitute counsel or other similar designation to inventory the files and accounts of the suspended or disbarred attorney, and such substitute counsel discovers an existing IOLTA account in the name of the suspended or disbarred attorney, the substitute counsel shall exercise reasonable diligence to identify or locate the owner(s) of funds deposited in the suspended or disbarred attorney's IOLTA account. If, after the exercise of reasonable diligence, the substitute counsel is unable to identify or locate the owner(s) of funds deposited in the suspended or disbarred lawyer's IOLTA account, the substitute counsel shall remit those funds to the Foundation to be used consistent with the purposes listed in Rule 1.15(h). With the remission of the funds to the Foundation, the substitute counsel shall provide the information set forth in (g)(l ), to the extent such information is known to the substitute counsel.

(3) If the personal representative (executor, administrator, trustee, guardian) of the estate or trust of a deceased attorney or the attorney for the personal representative, discovers an open IOLTA trust account in the name of the deceased attorney:

(i) The personal representative of the deceased lawyer or the attorney for the personal representative shall hold the account in the personal representative's name and capacity or in the name of the attorney for the personal representative for the purposes of this rule only and only for such time as the personal representative shall reasonably take to comply with this rule. The funds in such account are not the property of the estate or trust of the deceased lawyer.

(ii) The personal representative of the deceased lawyer or the attorney for the personal representative shall exercise reasonable diligence to identify the owner(s) of the funds held in the IOLTA account. If, after the exercise of reasonable diligence, the personal representative or the attorney is unable to identify the owner(s) of the funds held in the IOLTA account, those funds shall be remitted to the Foundation by the personal representative or the attorney to be used consistent with the purposes listed in Rule 1.15(h). With the remission of the funds to the Foundation, the personal representative or the attorney shall provide the information set forth in (g)(l), to the extent such information is known to the personal representative.

(4) The Foundation shall maintain a record of each remittance received pursuant to this rule for at least three years.

(i) If, within three years of the remission of the funds to the Foundation, the lawyer who remitted the funds learns of the original owner of the funds or a claim to the funds is made to the lawyer, and the lawyer believes the claimant is the original owner of the funds, the lawyer shall notify the Foundation and shall provide to the Foundation the name of such claimant and the amount being claimed. The lawyer shall notify the claimant that the funds have been remitted to the Foundation and the claimant's right to seek repayment from the Foundation. The lawyer, on behalf of the claimant, or the claimant may make a claim for return of the amount of the remitted funds.

(ii) If, within three years of the remission of the funds to the Foundation, the personal representative of a deceased lawyer or the attorney representing the personal representative learns of the original owner of the funds or a claim to the funds is made to the personal representative or the attorney, and the personal representative or the attorney believes the claimant is the original owner of the funds, the personal representative or the attorney shall notify the Foundation and shall provide to the Foundation the name of such claimant and the amount being claimed. The personal representative shall also notify the claimant that the funds have been remitted to the Foundation and the claimant's right to seek repayment from the Foundation. The personal representative or the attorney, on behalf of the claimant, or the claimant may make a claim for return of the amount of the remitted funds.

(iii) If, within three years of the remission of the funds to the Foundation, the substitute counsel who remitted the funds learns of the original owner of the funds or a claim to the funds is made to the substitute counsel, and the substitute counsel believes the claimant is the original owner of the funds, the substitute counsel shall notify the Foundation and shall provide to the Foundation the name of such claimant and the amount being claimed. The substitute counsel shall also notify the claimant that the funds have been remitted to the Foundation and the claimant's right to seek repayment from the Foundation. The substitute counsel, on behalf of the claimant, or the claimant may make a claim for return of the amount of the remitted funds.

(iv) Within three years of the remission of the funds to the Foundation, a putative owner may make a direct claim against the Foundation for return of the amount of the remitted funds.

(5) Upon receipt of a claim from the lawyer, substitute counsel, the personal representative or the attorney for the personal representative, or a direct-claimant:

(i) The President of the Board of Directors of the Foundation shall appoint one or more members of the Board of Directors of the Foundation to review the claim and report to the board whether the claim should be accepted or rejected, in whole or in part. Upon receiving the report, the board shall consider the report and determine whether to accept or reject the claim, in whole or in part.

(A) If the claim is accepted, the lawyer, substitute counsel, the personal representative or the personal representative's attorney, or a direct-claimant shall be notified and, unless the lawyer, substitute counsel, the personal representative or the attorney, or a directclaimant rejects the Foundation's proposal for resolution, within a reasonable period of time not to exceed 45 days, the Foundation shall pay over to the lawyer, substitute counsel, the personal representative or the attorney, or a direct-claimant the amount so determined.

(B) If the claim is rejected or the lawyer, substitute counsel, the personal representative, or a direct-claimant disputes the amount of the claim proposed by the Foundation, the lawyer, substitute counsel, personal representative, or direct-claimant may make a request to initiate an arbitration.

(ii) If the lawyer, substitute counsel, the personal representative or attorney, or a direct-claimant requests to arbitrate the claim, the President shall appoint an arbitrator to hold a hearing, evaluate the claim, and determine whether the lawyer, substitute counsel, the personal representative or attorney, or a direct-claimant has adequately established the owner(s) of the funds. The lawyer, substitute counsel, the personal representative or attorney, or a direct-claimant shall bear the burden of establishing entitlement to the remitted funds. If the lawyer, substitute counsel, the personal representative or attorney, or a direct-claimant establishes to the satisfaction of the arbitrator that the lawyer, substitute counsel, the personal representative or attorney, or a direct-claimant is the owner of the funds and the amount of the funds belonging to that lawyer, substitute counsel, the personal representative or the attorney, or a direct-claimant, the Foundation shall pay over to the lawyer, substitute counsel, the personal representative or the attorney, or a direct-claimant the amount of such funds, without interest or attorney fees, within a reasonable period of time not to exceed 45 days.

(6) If no claim is made to the remitted funds within three years of the funds having been remitted to the Foundation, the Foundation may treat the remission as final and shall not be obligated to arbitrate such claim or to pay over any amount to any claimant.

(h) Interest paid to the Foundation shall be used for any of the following purposes: providing legal services to the poor of Rhode Island; improving the delivery of legal services; promoting knowledge and awareness of the law; improving the administration of justice; and for the reasonable costs of administration of IOLTA accounts under this Rule.

(i) Nothing in this Rule shall preclude a lawyer or law firm from depositing any funds of a client other than those funds described in paragraph (f) of this Rule in an interest bearing account and accounting for the interest to such client.

R.I. Sup. Ct. R. 1.15

As adopted by the court on February 16, 2007, eff. 4/15/2007; as amended 12/11/2008; amended effective 6/16/2023.

COMPILER'S NOTES. The 2008 amendment, by Supreme Court order dated December 11, 2008, in subdivision (f), deleted "subject to paragraph (h) of this Rule" near the beginning, and added the last sentence; inserted "IOLTA" in subdivision (f)(1); substituted "IOLTA accounts" for "interest bearing trust accounts" in subdivisions (f)(3) and (f)(4); inserted "not" in subdivision (f)(3); deleted the former provisions of subdivision (f)(5) which read: "The rate of interest payable on any interest bearing trust account shall not be less than the rate paid by the depository institution on similar deposits. Lawyers or law firms making such deposits shall direct the depository institution"; substituted "IOLTA accounts" for "interest earned on clients' trust accounts" in subdivision (g); deleted former subdivision (h) which read: "A lawyer or law firm may elect not to deposit clients' funds in an interest bearing account as authorized in paragraph (f) of this rule by notifying the Clerk of the Supreme Court in writing of such election during the month of January in each year."; and redesignated former subdivision (i) as subdivision (h).

COMMENTARY

[1] 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 that is the property of clients or third persons, including prospective clients, must 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. A lawyer should maintain on a current basis books and records in accordance with generally accepted accounting practice and comply with any recordkeeping rules established by law or court order. See, e.g., ABA Model Financial Recordkeeping Rule.

[2] While normally it is impermissible to commingle the lawyer's own funds with client funds, paragraph (b) provides that it is permissible when necessary to pay bank service charges on that account. Accurate records must be kept regarding which part of the funds are the lawyer's.

[3] Lawyers often receive funds from which the lawyer's fee will be paid. The lawyer is not required to remit to the client funds that the lawyer reasonably believes represent fees owed. However, a lawyer may not hold funds to coerce a client into accepting the lawyer's contention. The disputed portion of the funds must be kept in a trust account 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.

[4] Paragraph (e) also recognizes that third parties may have lawful claims against specific funds or other property in a lawyer's custody, such as a client's creditor who has a lien on funds recovered in a personal injury action. A lawyer may have a duty under applicable law to protect such third-party claims against wrongful interference by the client. In such cases, when the third-party claim is not frivolous under applicable law, the lawyer must refuse to surrender the property to the client until the claims are resolved. A lawyer should not unilaterally assume to arbitrate a dispute between the client and the third party, but, when there are substantial grounds for dispute as to the person entitled to the funds, the lawyer may file an action to have a court resolve the dispute.

[5] 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 only 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 and is not governed by this Rule.

[6] A lawyers' fund for client protection 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 must participate where it is mandatory, and, even when it is voluntary, the lawyer should participate.

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