The Florida Bar

April 30, 1973
A lawyer should diligently investigate a former partner's misappropriation of, or failure to account for, the funds of the firm's clients, and in other investigations of such matters he should fully disclose all information relating thereto that is available to him. A lawyer is ethically responsible for funds received by a partner even though those funds were never deposited in a partnership account. However, if the statute of limitations has run, the partnership may assert that defense. The partnership's lawyers may decline to repay amounts they are not required by law to pay.

Opinion: 65-37; ABA Informal 871

Vice Chairman Zehmer stated the opinion of the committee:

This inquiry concerns the ethical obligation of the inquirer and his law partners to be responsible for the acts of a former partner in misappropriating and failing to account for certain clients' funds that came into his custody. According to the inquirer, some of those funds were never reflected in the partnership records because the misappropriating lawyer cashed checks payable to him without making any deposit to the clients' trust account or the partnership account. All of the known instances of misappropriated funds have been resolved and restitution made by the former partner. Several years have elapsed since the former partner was expelled from the partnership. The inquirer is concerned about the partnership's ethical responsibility for unknown misappropriations and poses three questions:

1. What ethical responsibility does a lawyer have concerning the investigation of a former law partner's misappropriations or failure to account for trust money received by the lawyer during the term of the partnership?

2. May a lawyer ethically plead the statute of limitations when a demand is made on him for repayment of funds that were delivered to a former partner who misappropriated or failed to account for the funds without the knowledge of the lawyer?

3. Is a lawyer ethically responsible for a former partner's misappropriation or failure to account for trust funds that were not paid into any partnership account, trust or otherwise?

It is often difficult to distinguish between questions of law and questions of professional responsibility for ethics, and inquiries to this Committee sometimes involve both. Under standing policy, the Committee does not advise on questions of law or legal liability and this opinion is limited to ethical considerations only.

1. In answer to the first question, a lawyer has the ethical responsibility of fully disclosing all information available to him in the investigation of a former law partner's misappropriation or failure to account for the monies of that law firm's clients. The lawyer should make sufficient investigation of his former law partner's activities to satisfy himself that he has diligently searched for and probably discovered all occasions of misappropriation or failure to account for trust money received by the lawyer during the term of the partnership.

2. The second question is answered by this Committee's Opinion 65-37, decided under the former Canons of Ethics. There is no ethical prohibition on a lawyer's asserting defenses recognized by law, including the statute of limitations. Nothing in the present Code of Professional Responsibility alters the principles upon which that decision was predicated. See also ABA Informal Opinion 871.

3. The answer to the third question must be in the affirmative. The technicality that the client's property never reached the law firm's trust or partnership account does not avoid the ethical responsibility that attaches when the lawyer received the funds from the client in connection with his law practice. However, it is equally clear that, under the circumstances stated above, the Code of Professional Responsibility does not impose upon the inquiring lawyer a professional obligation to cure the defalcations of their former partner which is greater than the duty imposed on him by law. Stated another way, the inquiring lawyers would not violate any of the canons or disciplinary rules in the CPR by failing to repay amounts that they are not legally obligated to pay.

[Revised: 08-24-2011]