Trust Account Woes

March 19, 2015 § 2 Comments

The facts in Mississippi Bar v. Ogletree, handed down March 5, 2015, are straightforward:

¶3. .  .  . In January 2011, John Buckley hired Ogletree to represent him in a child-support modification matter. Ogletree requested a $1,000 retainer, from which he would charge $250 per hour. Buckley gave Ogletree a check for $400 as partial payment of the retainer. While Ogletree maintained three trust accounts at the time, he did not deposit Buckley’s $400 check into any of them. Rather, the check was deposited into Ogletree’s general operating account. Ogletree subsequently terminated his representation of Buckley. Ogletree wrote Buckley a check for $400 from one of his trust accounts to refund Buckley’s partial payment of the retainer. The check was returned for insufficient funds. Ogletree then delivered $440 in cash to Buckley.

Buckley’s wife, apparently unhappy with the caliber of representation, filed a bar complaint against Ogletree. The Bar, in its investigation, asked for Ogletree’s trust account information, which Ogletree could not produce. Instead, what records he had showed that he had a practice of commingling funds and using client funds to pay his personal expenses, and, worse, that his trust accounts were overdrawn from time to time.

The bar filed a Formal Complaint, and the Complaint Tribunal recommended a six-month suspension. Aggrieved, the Bar appealed, taking the position that a three-year suspension was warranted by the facts and precedent. The MSSC affirmed the Complaint Tribunal. Justice Coleman dissented, joined by Justice Randolph.

You can read the opinion for your own edification, but here are a few thoughts, especially for the young lawyers who haven’t given this much thought:

  • Mr. Ogletree got off relatively light, if you can call not being able to practice the profession by which you earn a living for six months “light.” The fact is, as Justice Coleman’s dissent points out, misconduct involving trust accounts is serious misconduct, and disbarment is not out of the question.
  • The purpose of a trust account is to hold the client’s money in trust until it is either withdrawn by agreement after having been earned by the lawyer, or is paid out according to the directions of the client. The client funds must be deposited in an account separate from the lawyer’s firm and personal accounts. The trust account should be in an entirely separate bank from the client’s firm and personal accounts.
  • Before you withdraw any funds from a trust account, you should have authorization of the client. If the withdrawal is for fees or expenses, you should spell out how that will be done in a written agreement with your client.
  • You must keep meticulous records of your trust account transactions, itemizing records of specific client deposits and withdrawals. Failure to keep adequate records of your trust account transactions is a violation in and of itself.
  • Mr. Ogletree testified that he usually moved money and made personal deposits from his own funds to balance the accounts. That won’t work. You can’t “borrow” money from your trust account, no matter how badly you’re strapped, and “replacing” the funds before the transgression is discovered does not undo the wrong.
  • Mr. Ogletree pled in his defense that his wife had been seriously ill, and that her illness had taken an emotional and physical toll on him. No doubt that swayed the majority of the Tribunal and the MSSC to pare down his punishment. Still, what effect would it have on your practice to close your doors for six months, much less three years?

When it comes to your trust account, don’t cut corners, keep accurate records, and never, ever succumb to the temptation to dip into it as a rescue fund.

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§ 2 Responses to Trust Account Woes

  • reidkrell says:

    One of the things that I found helpful about using a completely different bank for my trust account (and that may be a rule rather than just a best practice; either way I do it) is that by having a completely different bank, it’s easier for me to emotionally separate the funds. In other words, even though my bank will only accept deposits into my trust account when the check is made out to me personally, and thus it is easy to look at the check and go, “This is my money too,” putting it in a different bank makes it much more out of sight, out of mind.

    I may be babbling. But it makes sense to me.

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