Vt. R. Prof. Cond. 1.15B
Vt. R. Prof. Cond. 1.15B
V.R.P.C. 1.15 B has no equivalent in the Model Rules. The present amendments to this rule and the abrogation of former Rule 1.15 C are intended to make clear that every lawyer or law firm holding client funds in a trust account pursuant to Rule 1.15 A(a) must maintain a pooled interest-bearing account for "IOLTA" (Interest on Lawyers' Trust Accounts) funds-client or third-party funds that would not earn interest or dividends net of administrative costs if separately accounted for because they are of a small amount or are held for a period of short duration. These provisions are based in part on Maine Bar Rule 3.6(e), which, with minor changes, will become Maine Rule of Professional Conduct 1.15 effective August 1, 2009.
The interest or dividends on the pooled account, which may be significant, are to be paid to the Vermont Bar Foundation pursuant to Rules 1.15 B(b) and (c) to support legal services for the poor or for public education on the legal system. In Brown v. Legal Foundation of Washington, 538 U.S. 216 (2003), the Supreme Court in a five to four decision upheld an IOLTA program against a Fifth Amendment Takings Clause challenge because only client funds that would individually earn no net interest were involved.
Rule 1.15 B makes clear that, in contrast to trust accounts that do not meet the "net interest" requirement, and to fiduciary accounts, pooled interest-bearing accounts must be maintained only in Vermont institutions that have been approved by the Professional Responsibility Board on the basis of an agreement that the institution will notify the Board of an overdraft on any such account held by it. The provisions of former Rule 1.15 C(b)-(f) spelling out the details for implementation of this requirement have been adapted as Rule 1.15 B(d)-(i).
The overdraft notification requirement is necessary for pooled interest-bearing accounts both because an overdraft necessarily affects the funds of clients other than the one to whose benefit an overdrawn instrument may have been written and because no single client has sufficient interest in or knowledge of the account to police its use. By contrast, a non-pooled trust account may be readily monitored and overseen by the client, and a fiduciary account is similarly subject to scrutiny by the beneficiary and other private and public parties with an interest in the funds. Compliance review and audit of such accounts pursuant to Rule 1.15 B(b) or (c) provide further safeguards. From the perspective of the client or beneficiary, it is clearly preferable that the lawyer have the widest possible discretion to deposit or invest funds at the best possible terms regardless of the location and nature of the institution.