Formal Opinion 174
(1981)
Trust Account Funds Held for One Client May Not Be Used for Advancing Costs on Behalf of Another Client

Our opinion has been requested with respect to the usage by a law firm or lawyer of funds placed in their trust account to pay costs on behalf of a client prior to the time that client deposits funds in trust with that law firm or lawyer. In effect, what occurs is the lawyer dips into the trust account where the funds of client "A" are held in order to advance costs on behalf of client "B" who will eventually make a payment to the lawyer or law firm to reimburse them for the advance from the trust account.

The issue presented by the request falls within the scope of Canon 9 of the Code of Professional Responsibility which mandates that a lawyer should avoid "even the appearance of impropriety" on the part of the lawyer or law firm. The appearance of what is done by the lawyer is questionable especially insofar as the lawyer’s duty to preserve the identity of funds and property of a client placed in the lawyer’s hands. The facts indicate a knowledge on the part of the lawyer or law firm that client "B" will be making a deposit; thus there is no attempt to make client "A" ultimately liable or responsible for the expenses of client "B". Notwithstanding this "intention" on the part of the lawyer or law firm, the use of trust funds to accomplish this purpose is contrary to DR 9-102.

DR 9-102 requires a lawyer to preserve the identity of funds and property of a client placed in the lawyer’s control or possession. Under DR 9-102 the lawyer or law firm is required to maintain a separate, identifiable trust account. Once a client’s property is deposited in that account, the lawyer is under an obligation not to deposit the lawyer’s funds in that account and it is also the lawyer’s responsibility to maintain complete records of those funds. Any act that takes on the appearance of commingling of lawyer funds with funds belonging to a client constitutes a violation of this disciplinary rule (see EC 9-5).

A lawyer or law firm can ethically advance costs for a client (see DR 5-103(B)); however, in doing so a lawyer is under a responsibility to use the lawyer’s own funds and not the funds of another client. In effect, the use of a client’s trust funds to advance costs for another client constitutes the use of a trust for an improper purpose. If a lawyer desires to advance costs or pay for expenses in anticipation of payment by a client the lawyer or law firm must do so from their own account and not from a trust account. The use of one client’s trust account funds to advance costs for another client is and would be in all cases improper.

[See Opinion 177]