The Florida Bar
OPINION 76-37When receiving payment through an approved credit plan an attorney must absorb the discount. Under such a plan an attorney may receive drafts for past or future services and expenses, but any money received for future services and expenses must be kept in a trust account along with an amount, from the attorney's own funds, equal to the discount on the draft.
November 16, 1976
November 16, 1976
Integration Rule: Rule 11.02(4)
CPR: DR 2-106(D), DR 3-102(B), DR 5-103(A)(3), DR 5-108, DR 9-102(A), (C)
Chairman Sullivan stated the opinion of the committee:
This inquiry involves the use of Approved Credit Plans allowed by amendments to the Code of Professional Responsibility, 1 and in particular to the Master Charge agreement approved by the Supreme Court of Florida. 2 A member of The Florida Bar poses three hypothetical situations:
1. A client gives his lawyer a Master Charge draft for $500 as an advance for costs or expenses in a matter the lawyer is handling for the client.
2. A client gives his lawyer a Master Charge draft for $500, half of which is for a fee to which the lawyer is already entitled and half of which is for an advance for costs in a matter the lawyer is handling for the client.
3. A client gives his lawyer a Master Charge draft for $500. An undetermined part of that draft is for an as-yet-unearned fee and the remainder is for an advance for costs in a matter the lawyer is handling for the client.
We are asked to suggest procedures in each of those situations which would comply with the Code. We are asked particularly about the use of a lawyer's trust account, regular account or both and the way a lawyer should handle the discount, i.e., the difference between the amount of the Master Charge draft and the amount the lawyer receives from the bank which buys the draft.
The provisions of the Code dealing with the approved credit plans are DR2-106(D), DR 3-102(B), DR 5-103(A)(3), DR 5-108 and DR 9-102(C). Also involved in the present inquiry are Rule 11.02(4) of the Integration Rule and the approved agreement.
Before dealing with the three situations outlined above, we come first to the question of the discount.
DR 2-106(D) provides:
Charges made by any lawyer or law firm under an approved credit plan shall be only for services actually rendered or cash actually paid on behalf of the client. No higher fee shall be charged and no additional charge shall be imposed by reason of the lawyer's or law firm's participation in an approved credit plan.
DR 3-102(B) provides:
A lawyer or law firm may pay the discount charge incident to the use of an approved credit plan for financing legal fees, costs and expenses. The fact that reasonable fees charged a client may provide the funds with which to pay the discount charge for the plan shall not constitute a violation of this rule, provided that no separate or additional charge may be made for the purpose.
We interpret that language as requiring the lawyer to pay or absorb the discount, whether the Master Charge draft which is discounted is for fees or costs or expenses or a combination of these.
In other words, the lawyer who uses this plan gets paid or reimbursed now instead of later. The quid pro quo is that the lawyer absorbs the discount the bank charges.
Next, we consider DR 9-102(A), which seems to allow advances for costs and expenses to be deposited in a lawyer's regular account, and Rule 11.02(4) of the Integration Rule, which states that such money is held in trust. We discussed this apparent inconsistency in Opinion 76-27 and concluded that because Rule 11.02(4) had been amended after the enactment of the Code the language in the Rule governs and such money should be deposited in a separate trust account.
Third, we consider whether DR 2-106(D) ("Charges made by any lawyer or law firm under an approved credit plan shall be only for services actually rendered or cash actually paid on behalf of the client.") prohibits use of the plan where any or all of the Master Charge draft is for payment of fees to be earned or costs and expenses to be incurred.
We note that Paragraph 5 of the form of agreement which the Supreme Court approved after the amendments to the Code allowing approved credit plans refers to drafts drawn by clients to whom the participating lawyer "has rendered, or agreed to render, legal services." We read that language as including drafts for legal services to be performed in the future and are of the opinion that DR2-106(D) does not limit such Master Charge drafts to payment for legal services already performed or for reimbursement for costs and expenses already incurred for which the lawyer has advanced the money.
Turning now to the three hypothetical situations, the Committee offers these guidelines:
1. The lawyer should deposit the proceeds of a draft intended as an advance for costs or expenses in his trust account and should additionally deposit in the trust account an amount equal to the discount on that draft. That supplemental amount should come from the lawyer's own funds.
2. When one-half of the draft is in payment of fees already earned and the remainder is an advance for costs and expenses, the lawyer should deposit the entire proceeds in his trust account and then transfer to the regular account the amount representing the fee already earned less the proportional amount of the discount attributable to that fee. The lawyer should pay into the trust account from his own funds (or by transferring a lesser amount of the earned fee to his regular account and leaving that additional amount in the trust account) an amount equal to the proportion of the discount attributable to the advance for costs.
3. Where the draft is intended as a deposit for fees still to be earned and costs and expenses still to be incurred-all in undetermined amounts-the lawyer should deposit the entire proceeds of the draft in his trust account and, in addition, from his own funds, an amount equal to the discount on the draft. If and when the lawyer becomes entitled to any part of that money as an earned fee, he can withdraw from the trust account the total amount of that earned fee and in effect receive back a proportion of the amount of the discount he paid into the trust account.
In responding to this inquiry, we have not attempted to suggest the details of any arrangements between a lawyer and a bank other than that there should be both trust account and regular account. Depending upon the banking costs and services available at any time or place, there may be and probably are a number of banking procedures that will comply with the requirements of the Code, the Integration Rule and the approved agreement.
1 In the Matter of The Florida Bar, Petitioner, In re Petition for Amendment of the Code of Professional Responsibility and the Integration Rule of the Florida Bar, Fla. 1975, 316 So.2d 52.
2 The Florida Bar, Petitioner. In re Petition for Amendment of the Code of Professional Responsibility and the Integration Rule of the Florida Bar, Fla. 1976, 329 So.2d 1.