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SUPREME COURT OF LOUISIANA
ORDER
Acting in accordance with Article V, Sections 1 and 5 of the 1974 Louisiana Constitution,
and the inherent power of this Court, and considering the recommendation of the
Louisiana Bar Foundation to amend Rule 1.15 of the Rules of Professional Conduct,
as well as the IOLTA Rules,
IT IS HEREBY ORDERED, ADJUDGED, AND DECREED THAT:
PART I. Rule 1.15 of the Louisiana Rules of Professional Conduct be and is hereby
amended to read in its entirety as follows:
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.
Except as provided in (g) and the IOLTA Rules below, funds shall be kept in one
or more separate interest-bearing client trust accounts maintained in a bank or
savings and loan association: 1) authorized by federal or state law to do business
in Louisiana, the deposits of which are insured by an agency of the federal government;
2) in the state where the lawyer’s primary office is situated, if not within Louisiana;
or 3) elsewhere with the consent of the client or third person. No earnings on a
client trust account may be made available to or utilized by a lawyer or law firm.
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 five 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 or obtaining a waiver
of those charges, 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have been paid in advance, to be withdrawn by the lawyer only as fees are earned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. The lawyer shall deposit legal fees and expenses into the
client trust account consistent with Rule 1.5(f).
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. For purposes
of this rule, the third person’s interest shall be one of which the lawyer has actual
knowledge, and shall be limited to a statutory lien or privilege, a final judgment
addressing disposition of those funds or property, or a written agreement by the
client or the lawyer on behalf of the client guaranteeing payment out of those funds
or property. 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) Every check, draft, electronic transfer, or other withdrawal instrument or authorization
from a client trust account shall be personally signed by a lawyer or, in the case
of electronic, telephone, or wire transfer, from a client trust account, directed
by a lawyer or, in the case of a law firm, one or more lawyers authorized by the
law firm.
g) A lawyer shall create and maintain an “IOLTA Account,” which is a pooled interest-bearing
client trust account for funds of clients or third persons which are nominal in
amount or to be held for such a short period of time that the funds would not be
expected to earn income for the client or third person in excess of the costs incurred
to secure such income.
(1) IOLTA Accounts shall be of a type approved and authorized by the Louisiana Bar
Foundation and maintained only in “eligible” financial institutions, as approved
and certified by the Louisiana Bar Foundation. The Louisiana Bar Foundation shall
establish regulations, subject to approval by the Supreme Court of Louisiana, governing
the determination that a financial institution is eligible to hold IOLTA Accounts
and shall at least annually publish a list of LBFapproved/ certified eligible financial
institutions. Participation in the IOLTA program is voluntary for financial institutions.
IOLTA Accounts shall be established at a bank or savings and loan association authorized
by federal or state law to do business in Louisiana, the deposits of which are insured
by an agency of the federal government or at an open-end investment company registered
with the Securities and Exchange Commission authorized by federal or state law to
do business in Louisiana which shall be invested solely in or fully collateralized
by U.S. Government Securities with total assets of at least $250,000,000 and in
order for a financial institution to be approved and certified by the Louisiana
Bar Foundation as eligible, shall comply with the following provisions:
(A) No earnings from such an account shall be made available to a lawyer or law
firm.
(B) Such account shall include all funds of clients or third persons which are nominal
in amount or to be held for such a short period of time the funds would not be expected
to earn income for the client or third person in excess of the costs incurred to
secure such income.
(C) Funds in each interest-bearing client trust account shall be subject to withdrawal
upon request and without delay, except as permitted by law.
(2) To be approved and certified by the Louisiana Bar Foundation as eligible, financial
institutions shall maintain IOLTA Accounts which pay an interest rate comparable
to the highest interest rate or dividend generally available from the institution
to its non-IOLTA customers when IOLTA Accounts meet or exceed the same minimum balance
or other eligibility qualifications, if any. In determining the highest interest
rate or dividend generally available from the institution to its non-IOLTA accounts,
eligible institutions 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 such factors do not discriminate between IOLTA
Accounts and accounts of non-IOLTA customers, and that these factors do not include
that the account is an IOLTA Account. The eligible institution shall calculate interest
and dividends in accordance with its standard practice for non-IOLTA customers,
but the eligible institution may elect to pay a higher interest or dividend rate
on IOLTA Accounts.
(3) To be approved and certified by the Louisiana Bar Foundation as eligible, a
financial institution may achieve rate comparability required in (g)(2) by:
(A) Establishing the IOLTA Account as:
(1) an interest-bearing checking account; (2) a money market deposit account with
or tied to checking; (3) a sweep account which is a money market fund or daily (overnight)
financial institution repurchase agreement invested solely in or fully collateralized
by U.S. Government Securities; or (4) an open-end money market fund solely invested
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 be invested
solely in U.S. Government Securities or repurchase agreements fully collateralized
by U.S. Government Securities, must hold itself out as a “money-market fund” as
that term is defined by federal statutes and regulations under the Investment Company
Act of 1940, and, at the time of the investment, must have total assets of at least
$250,000,000. “U.S. Government Securities” refers to U.S. Treasury obligations and
obligations issued or guaranteed as to principal and interest by the United States
or any agency or instrumentality thereof.
(B) Paying the comparable rate on the IOLTA checking account in lieu of establishing
the IOLTA Account as the higher rate product; or
(C) Paying a “benchmark” amount of qualifying funds equal to 60% of the Federal
Fund Target Rate as of the first business day of the quarter or other IOLTA remitting
period; no fees may be deducted from this amount which is deemed already to be net
of “allowable reasonable fees.”
(4) Lawyers or law firms depositing the funds of clients or third persons in an
IOLTA Account shall direct the depository institution:
(A) To remit interest or dividends, net of any allowable reasonable fees on the
average monthly balance in the account, or as otherwise computed in accordance with
an eligible institution’s standard accounting practice, at least quarterly, to the
Louisiana Bar Foundation, Inc.;
(B) to transmit with each remittance to the Foundation, a statement, on a form approved
by the LBF, showing the name of the lawyer or law firm for whom the remittance is
sent and for each account: the rate of interest or dividend applied; the amount
of interest or dividends earned; the types of fees deducted, if any; and the average
account balance for each account for each month of the period in which the report
is made; and
(C) to transmit to the depositing lawyer or law firm a report in accordance with
normal procedures for reporting to its depositors.
(5) “Allowable reasonable fees” for IOLTA Accounts are: per check charges; per deposit
charges; a fee in lieu of minimum balance; sweep fees and a reasonable IOLTA Account
administrative fee. All other fees are the responsibility of, and may be charged
to, the lawyer or law firm maintaining the IOLTA Account. Fees or service charges
that are not “allowable reasonable fees” include, but are not limited to: the cost
of check printing; deposit stamps; NSF charges; collection charges; wire transfers;
and fees for cash management. Fees or charges in excess of the earnings accrued
on the account for any month or quarter shall not be taken from earnings accrued
on other IOLTA Accounts or from the principal of the account. Eligible financial
institutions may elect to waive any or all fees on IOLTA Accounts.
(6) A lawyer is not required independently to determine whether an interest rate
is comparable to the highest rate or dividend generally available and shall be in
presumptive compliance with Rule 1.15(g) by maintaining a client trust account of
the type approved and authorized by the Louisiana Bar Foundation at an “eligible”
financial institution.
PART II. The IOLTA Rules be and are hereby amended to read in their entirety as
follows:
IOLTA RULES
(1) The IOLTA program shall be a mandatory program requiring participation by lawyers
and law firms, whether proprietorships, partnerships, limited liability companies
or professional corporations.
(2) The following principles shall apply to funds of clients or third persons which
are held by lawyers and law firms:
(a) No earnings on the IOLTA Accounts may be made available to or utilized by a
lawyer or law firm.
(b) Upon the request of, or with the informed consent of a client or third person,
a lawyer may deposit funds of the client or third person into a non- IOLTA, interest-bearing
client trust account and earnings may be made available to the client or third person,
respectively, whenever possible upon deposited funds which are not nominal in amount
or are to be held for a period of time long enough that the funds would be expected
to earn income for the client or third person in excess of the costs incurred to
secure such income; however, traditional lawyer-client relationships do not compel
lawyers either to invest such funds or to advise clients or third persons to make
their funds productive.
(c) Funds of clients or third-persons which are nominal in amount or to be held
for such a short period of time that the funds would not be expected to earn income
for the client or third person in excess of the costs incurred to secure such income
shall be retained in an IOLTA Account at an eligible financial institution as outlined
above in section (g), with the interest or dividend (net of allowable reasonable
fees) made payable to the Louisiana Bar Foundation, Inc., said payments to be made
at least quarterly.
(d) In determining whether the funds of a client or third person can earn income
in excess of costs, a lawyer or law firm shall consider the following factors:
(1) The amount of the funds to be deposited;
(2) The expected duration of the deposit, including the likelihood of delay in the
matter for which the funds are held;
(3) The rates of interest or yield at financial institutions where the funds are
to be deposited;
(4) The cost of establishing and administering non-IOLTA accounts for the benefit
of the client or third person including service charges, the costs of the lawyer’s
services, and the costs of preparing any tax reports required for income accruing
to the benefit of the client or third person;
(5) The capability of financial institutions, lawyers or law firms to calculate
and pay income to individual clients or third persons;
(6) Any other circumstances that affect the ability of the funds of the client or
third person to earn a positive return for the client or third person.
The determination of whether funds to be invested could be utilized to provide a
positive net return to the client or third person rests in the sound judgment of
each lawyer or law firm. The lawyer or law firm shall review its IOLTA Account at
reasonable intervals to determine whether changed circumstances require further
action with respect to the funds of any client or third person.
(e) Although notification of a lawyer’s participation in the IOLTA Program is not
required to be given to clients or third persons whose funds are held in IOLTA Accounts,
many lawyers may want to notify their clients or third persons of their participation
in the program in some fashion. The Rules do not prohibit a lawyer from advising
all clients or third persons of the lawyer’s advancing the administration of justice
in Louisiana beyond the lawyer’s individual abilities in conjunction with other
public-spirited members of the profession. The placement of funds of clients or
third persons in an IOLTA Account is within the sole discretion of the lawyer in
the exercise of the lawyer’s independent professional judgment; notice to the client
or third person is for informational purposes only.
(3) The Louisiana Bar Foundation shall hold the entire beneficial interest in the
interest or dividend income derived from client trust accounts in the IOLTA program.
Interest or dividend earned by the program will be paid to the Louisiana Bar Foundation,
Inc. to be used solely for the following purposes:
(a) to provide legal services to the indigent and to the mentally disabled;
(b) to provide law-related educational programs for the public;
(c) to study and support improvements to the administration of justice; and
(d) for such other programs for the benefit of the public and the legal system of
the state as are specifically approved from time to time by the Supreme Court of
Louisiana.
(4) The Louisiana Bar Foundation shall prepare an annual report to the Supreme Court
of Louisiana that summarizes IOLTA income, grants, operating expenses and any other
problems arising out of administration of the IOLTA program. In addition, the Louisiana
Bar Foundation shall also prepare an annual report to the Supreme Court of Louisiana
that summarizes all other Foundation income, grants, operating expenses and activities,
as well as any other problems which arise out of the Foundation’s implementation
of its corporate purposes. The Supreme Court of Louisiana shall review, study and
analyze such reports and shall make recommendations to the Foundation with respect
thereto.
These rule changes shall become effective on April 1, 2008 and shall remain in full
force and effect thereafter until amended or changed through future Order of this
Court.
New Orleans, Louisiana, this 3rd day of January, 2008.
FOR THE COURT: Pascal F. Calogero, Jr., Chief Justice
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