A. THE BASICS
The fundamental ethical standards for lawyers in Florida are set out in Chapter 4 (Rules of Professional Conduct) and Chapter 5 (Rules Regulating Trust Accounts) of the Rules Regulating the Florida Bar. In the past, these rules were called the ?Cannons of Ethics,? and are still referred to by this name in some states. The Rules Regulating the Florida Bar are no longer published in the September directory issue of THE FLORIDA BAR JOURNAL, but are available online at www.FLABAR.org (under the ?Lawyer Regulation? heading in the left column on the home page of the web site) and are published in a Florida Bar publication, PROFESSIONAL ETHICS OF THE FLORIDA BAR. In addition to the Rules Regulating the Florida Bar, the American Bar Association publishes a model code of professional conduct which is available at www.abanet.org. While the ABA rules do not have binding effect on Florida lawyers, they cover some areas of ethics which are not necessarily covered in the Florida Rules and reflect national trends in ethical conduct for attorneys. While fine tuning of these rules takes place frequently, the basic ethical concepts have remained the same for the last century. This chapter provides an overview of the type of ethical behavior that is expected from a lawyer.
1.
Competency. Rule 4-1.1 provides: ?A lawyer shall provide competent representation to a Client. Competent representation requires the legal knowledge, skill, thoroughness, and preparation reasonably necessary for the representation.?
Dealing with most problems faced by practicing attorneys requires a diverse knowledge of several areas of law. Many of these problems require specialized knowledge that is not necessarily available to every lawyer admitted to the Florida Bar. Before a lawyer becomes involved in a new type of transaction, the lawyer should be certain that he or she has the knowledge and skill in this area necessary to provide his client with adequate representation. This does not mean that a lawyer must be experienced before representing such a client. According to the official comment to this rule, ?A lawyer can provide adequate representation in a wholly novel field through necessary study. Competent representation can also be provided through the association of a lawyer of established competence in the field in question.?
For example, a lawyer who has handled real estate transactions may be asked by a client to handle eminent domain matter. Although the lawyer has no experience in eminent domain, he or she can ethically undertake this representation by either familiarizing himself or herself with the evolving issues of internet law or by associating a lawyer with expertise in this area.
In The Florida Bar v. Walton, 952 So. 2d 510 (Fla. 2006), an attorney who failed to accept payment to satisfy a judgment that was 23 cents short, delayed by six months getting the money to his clients and was disciplined for failing to competently represent his clients.
Traditionally, competence under this rule has been limited to legal ability and knowledge of the law and legal procedures. However, with the advent of the increased use of technology in the practice of law, some jurisdictions are considering expanding the competency requirement to include technological competence. See, ?R U Competent,? THE WASHINGTON LAWYER (November 2008).
2. Promptness and Diligence. Rule 4-1.3 provides: ?A lawyer shall act with reasonable diligence and promptness in representing a client.?
Litigators face statutes of limitation and court deadlines in representing their clients. However, even real estate transactional lawyers, who try to keep their clients out of litigation must act promptly in many situations. Purchase and sale contracts contain deadlines, and passage of time may affect the client?s rights or alter the client?s bargaining position or force a client or may limit a client?s right to take advantage of conditions precedent under the contract. According to the official comment on this section: ?Perhaps no professional shortcoming is more widely resented than procrastination. A client?s interests often can be adversely affected by the passage to time or the change of conditions; in extreme instances, as when a lawyer overlooks a statute of limitations, the client?s legal position may be destroyed. Even when the client?s interests are not affected in substance, however, unreasonable delay can cause a client needless anxiety and undermine confidence in the lawyer.?
3. Communication. Rule 4-1.4(a) provides: ?
A lawyer shall:
(1) promptly inform the client of any decision or circumstance with respect to which the client?s informed consent, as defined in terminology, is required by these rules;
(2) reasonably consult with the client about the means by which the client?s objectives are to be accomplished;
(3) keep the client reasonably informed about the status of the matter;
(4) promptly comply with reasonable requests for information; and
(5) consult with the client about any relevant limitation on the lawyer?s conduct when the lawyer knows or reasonably should know that the client expects assistance not permitted by the Rules of Professional Conduct or other law.
Rule 4-1.4(b) provides : ?A lawyer shall explain a matter to the extent reasonably necessary to make informed decisions regarding the representation.?
Lack of communication ? the failure to return telephone calls or keep clients informed of the developments of their case ? generates more client complaints to the Florida Bar than any other single cause. According to the official comment to this rule: ?The guiding principle is that the lawyer should fulfill reasonable client expectations for information consistent with the duty to act in the client?s best interests and the client?s overall requirements as to the character of representation.
1. Criminal or Fraudulent Conduct. Rule 4-1.2(d) provides: ?A lawyer shall not counsel a client to engage, or assist a client, in conduct that the lawyer knows or reasonably should know is criminal or fraudulent. However, a lawyer may discuss the legal consequences of any proposed course of conduct with a client and may counsel or assist a client to make a good faith effort to determine the validity, scope, meaning, or application of the law.?
Most of the reported cases dealing with Rule 4-1.2(d) involve lawyers condoning, or instructing their clients to give, perjured testimony. See Baker v. Myers Tractor Services, 765 So. 2d 149 (Fla. 1st DCA 2000); The Florida Bar v. Rood, 622 So. 2d 974 (Fla. 1993). However, this rule has application to transactional representations of small businesses as well as to litigation practice. For example, if an attorney prepares an affidavit which the attorney knows to be false, for use in a limited liability company transaction, the attorney has violated this rule. The attorney might prepare or allow his client to execute a no-lien affidavit when the attorney knows that a construction lien has been recorded after the effective date of the title commitment. See The Florida Bar v. Roland, 702 So. 2d 974 (Fla. 1997). According to the official comment on this rule: ?A lawyer is required to give an honest opinion about the actual consequences that appear to be likely to result from a client?s conduct. The fact that a client uses advice in a course of action that is criminal or fraudulent does not, of itself, make a lawyer a party to the course of action. However, a lawyer may not assist a client in conduct that the lawyer knows or reasonably should know to be criminal or fraudulent. There is a critical distinction between presenting an analysis of legal aspects of questionable conduct and recommending the means by which a crime or fraud might be committed with impunity.?
2. Reporting Professional Misconduct. Rule 4-8.3(a) provides: ?A lawyer having knowledge that another lawyer has committed a violation of the Rules of Professional Conduct that raises a substantial question as to that lawyer?s honesty, trustworthiness, or fitness as a lawyer in other respects shall inform the appropriate professional authority.?
This rule is explained in Florida Ethics Opinion 94-5. The Professional Ethics Committee was asked ?whether an attorney may threaten to file a disciplinary complaint against counsel in order to obtain an advantage in a civil matter.? The Committee concluded that ?if an attorney is obligated to report another attorney?s professional misconduct pursuant to Rule 4-8.3, then it is ethically impermissible for the attorney to threaten the other attorney with the filing of a disciplinary complaint. Even if an attorney is not obligated to report the other attorney?s misconduct, threatening to file a disciplinary complaint often will violate one or more of the Rules of Professional Conduct.?
In addition to this finding, the Committee discussed Rule 4-8.3(a) saying: ?Under the ?Reporting Professional Misconduct? rule, Rule 4-8.3, an attorney is obligated to report another attorney?s misconduct that raises a substantial question as to the offending attorney?s ?honesty, trustworthiness, or fitness as a lawyer in other respects.? Rule 4-8.3(a). An attorney, however, may not report the violation if the information is protected by the confidentiality rule, Rule 4-1.6, unless the attorney has the consent of the client. As a result, in situations where an attorney is required to report a violation, the attorney?s failure to do so would constitute misconduct under Rule 4-8.4(a). Similarly, an agreement not to file a grievance complaint would violate Rule 4-8.4(a) where the filing of a complaint would otherwise be required by Rule 4-8.3(a). See The Florida Bar v. Fitzgerald, 541 So.2d 602, 605 (Fla. 1989) (client?s agreement to bring attorney?s unethical conduct to the attention of the Bar is unenforceable). Therefore, if an attorney is obligated to report another?s professional misconduct, the attorney must report it rather than threaten to do so.?
B. CONFLICTS OF INTEREST
The general standard for conflicts of interest is set out in sections Rule 4-1.7. These sections provide:
(a) Representing Adverse Interests. Except as provided in subdivision (b), a lawyer shall not represent a client if:
1.
(1) the representation of 1 client will be directly adverse to another client; or
(2) there is a substantial risk that the representation of 1 or more clients will be materially limited by the lawyer?s responsibilities to another client, a former client or a third person or by a personal interest of the lawyer.
(b) Notwithstanding the existence of a conflict of interest under subdivision (a), a lawyer may represent a client if:
(1) the lawyer reasonably believes that the lawyer will be able to provide competent and diligent representation to each affected client;
(2) the representation is not prohibited by law;
(3) the representation does not involve the assertion of a position adverse to another client when the lawyer represents both clients in the same proceeding before a tribunal; and
(4) each affected client gives informed consent, confirmed in writing or clearly stated on the record at a hearing.
(c) Explanation to Clients. When representation of multiple clients in a single matter is undertaken, the consultation shall include explanation of the implications of the common representation and the advantages and risks involved.
(d) Lawyers Related by Blood or Marriage. A lawyer related to another lawyer as parent, child, sibling, or spouse shall not represent a client in a representation directly adverse to a person who the lawyer knows is represented by the other lawyer except upon consent by the client after consultation regarding the relationship.
(e) Representation of Insureds. Upon undertaking the representation of an insured client at the expense of the insurer, a lawyer has a duty to ascertain whether the lawyer will be representing both the insurer and the insured as clients, or only the insured, and to inform both the insured and the insurer regarding the scope of the representation. All other Rules Regulating The Florida Bar related to conflicts of interest apply to the representation as they would in any other situation.
Multiple Party Representation
In most real estate and corporate transactions, there are multiple parties. In corporate transactions, there are the corporation, the officers, the directors, and the shareholders. In a real estate transaction, there are the buyer, the seller, the real estate broker for the buyer, the real estate broker for the seller, the mortgage broker, the title company, and the surveyor. Each of these parties have their own interests which differ from and may be in conflict with the interests of the other parties. The buyer and the seller have frequently met and agreed on a price before either contacts an attorney. Sometimes buyers and sellers think that they can both be represented by the lawyer for the bank that is lending the money for the purchase. Rule 4-1.7(b) implies that, in certain situations, it would be ethical for an attorney to represent multiple parties in a transaction. While this is the position of both the Florida rule and the ABA model rules, court cases in Florida and other states have limited this rule.
In The Florida Bar v. Reed, 644 So. 2d 1355 (Fla. 1994), the Court found that an attorney?s attempt to represent both the buyer and the seller in a real estate transaction and to attempt to resolve differences between them was unethical and suspended the attorney for six months. Similarly in The Florida Bar v. Teitelman, 261 So. 2d 140 (Fla. 1972), the Court reprimanded an attorney who represented both the mortgage company and the title insurer in real estate closings but, without prior agreement, charged a fee for his services to the seller. In The Florida Bar v. Crabtree, 595 So. 2d 935 (Fla. 1992), the Court disbarred an attorney for failing to obtain informed consent for a dual representation.
Other states have further limited dual representation. In Colorado (People v. McDowell, 718 P.2d 541 (Colo. 1986)), Ohio (Stark County Bar Ass?n. v. Ergazos, 442 N.E.2d 1286 (Ohio 1982)), and New Jersey (Baldasarre v. Butler, 625 A.2d 458 (N.J. Sup. Ct. 1993), for example, attorneys are prohibited from representing both buyers and sellers. In New York (Ethics Opinion 611), Massachusetts (Ethics Opinion 1990-3), and Maryland (Ethics Opinion 84-85), there is a mixed rule relating to transactional practice: Attorneys may represent both buyers and sellers in the sale of real estate but not in the sale of entire businesses.
Occasionally, a lawyer will be requested to act as a ?closing agent,? receiving a portion of the attorney?s fee from the buyer and a portion from the seller for preparing the paper work necessary to complete the transaction. The Florida Bar Committee on Professional Ethics dealt with this situation, as it relates to the sale of a business, in Florida Ethics Opinion 97-2. According to that opinion, ?Where there is a disagreement or material terms of an agreement have not been addressed between buyer and seller as to financing, security, consulting agreements with the seller, title defects, or any other material matter relating to the sale, conflicts may exist or develop. Under the foregoing circumstances, it would be unethical for a Florida attorney to represent both the buyer and seller in closing the sale of a business in Florida, acting as ?closing agent? for the transaction.?
1. Self-Dealing. Self-dealing is a special type of conflict of interest for which there is a specific rule. Rule 4-1.8(a) provides:
A lawyer shall not enter into a business transaction with a client or knowingly acquire an ownership, possessory, security, or other pecuniary interest adverse to a client, except a lien granted by law to secure a lawyer?s fee or expenses, unless:
(1) the transaction and terms on which the lawyer acquires the interest are fair and reasonable to the client and are fully disclosed and transmitted in writing to the client in a manner that can be reasonably understood by the client;
(2) the client is advised in writing of the desirability of seeking and is given a reasonable opportunity to seek the advice of independent legal counsel on the transaction; and
(3) the client gives informed consent, in a writing signed by the client, to the essential terms of the transaction and the lawyer?s role in the transaction, including whether the lawyer is representing the client in the transaction.
There is abundant case law on a lawyer?s self-dealing in the context of an attorney/client relationship. In The Florida Bar v. Cox, 718 So. 2d 788 (Fla .1998), a lawyer, who was a shareholder in a corporation which he represented as an attorney, was disciplined for failing to obtain written consent from the other shareholders approving his ownership interest in the business. In The Florida Bar v. Clement, 662 So. 2d 690 (Fla. 1995), the attorney was disciplined for borrowing money from a client to finance a rock and roll concert that the attorney was helping to produce. In Banmac, Inc. v. Grady, 500 So. 2d (Fla. 2nd DCA 1986), the court found that it was improper for an attorney to refer clients to a business in which the attorney had an ownership interest without disclosing that interest to the clients in writing. In The Florida Bar v. Simonds, 376 So. 2d 852 (Fla. 1979), the attorney was disciplined for inducing two clients to make a loan to a clothing store in which the attorney had an ownership interest which he failed to disclose.
The standard for applying Rule 4-1.8(a) was set out in The Florida Bar v. Black, 602 So. 2d 1298 (Fla. 1992). In that case, which involved a lawyer who borrowed money from a client, the Florida Supreme Court said: ?Lawyers must be extremely careful in their personal dealings with clients. Lawyers act in a special fiduciary capacity with their clients and must avoid using that relationship for personal gain.?
1. Business Conflicts v. Ethical Conflicts
Clients will at times raise what they see as conflicts because of their competitive business situation. A client may try to dictate to a firm which other clients that firm can represent. For example, one television station in a particular market may believe that it is a conflict of interest for its law firm to represent a competing television station in the same market. Such a conflict is not a legal conflict of interest because the two stations are not adversaries in a particular legal matter. In such a case, the law firm may ethically represent both television stations.
However, if the two stations represented by the same law firm become involved in an adversarial matter, such as a law suit or the purchase of some equipment by one station from the other, the law firm cannot represent either station. See Kern Air Corp. v. Gainesville-Alachua County Regional Airport Authority, 593 So. 2d 1219 (Fla. 1st DCA 1992); Campbell v. American Pioneer Savings Bank, 565 So. 2d 417 (Fla. 4th DCA 1990).
Similarly, when you are involved in a transaction involving other professionals, there may be a conflict between the ethical standards required of a lawyer and those required of an accountant, a real estate broker, or an engineer. You must be guided by the Rules Regulating the Florida Bar not by the ethical perceptions of other professionals involved. If conflicts develop between your client and the other professionals with whom you are working, you must remember that your first loyalty in to your clients ? not to the members of other professions who are working with you. Rule 4-1.7(a)(2) provides that ?a lawyer shall not represent a client if . . . there is a substantial risk that the representation of 1 or more clients will be materially limited by the lawyer?s responsibilities another client, a former client or a third person or by a personal interest of the lawyer.?
C. UNREPRESENTED PARTIES
Rule 4-4.3 provides: ?In dealing on behalf of a client with a person who is not represented by counsel, a lawyer shall not state or imply that the lawyer is disinterested. When the lawyer knows or reasonably should know that the unrepresented person misunderstands the lawyer?s role in the matter, the lawyer shall make reasonable efforts to correct the misunderstanding. The lawyer shall not give legal advice to an unrepresented person, other than the advice to secure counsel..?
The Florida Supreme Court clarified this rule in The Florida Bar v. Belleville, 591 So.2d 170 (Fla. 1991). In that case the court said: ?When faced with this factual scenario, we believe an attorney is under an ethical obligation to do two things. First, the attorney must explain to the unrepresented opposing party the fact that the attorney is representing an adverse interest. Second, the attorney must explain the material terms of the documents that the attorney has drafted for the client so that the opposing party fully understands their actual effect. When the transaction is as one-sided as that in the present case, counsel preparing the documents is under an ethical duty to make sure that the unrepresented party understands the possible effect of the transaction and the fact that the attorney?s loyalty lies with the client alone.? Id at 172.
The opinion of the Florida Supreme Court in the Belleville case echoes a long standing ethical opinion. In Opinion 65-58 (October 18, 1965), the Florida Bar Committee on Professional Ethics opined that: ?A lawyer who closes mortgage loans in behalf of a mortgage lender should disclose to a purchaser-borrower title defects or clouds known to the lawyer (and to the title insurer), even though the lender is protected by insurance, when the purchaser-borrower is not represented by an attorney and has direct dealings with the closing attorney.?
D. ATTORNEY?S OPINION LETTERS
Since the 1970?s, the use of attorney?s opinion letters has become more prevalent. Litigators are frequently asked to provide written opinions predicting how a court will rule on a particular matter of lat. Transactional attorneys are frequently asked to write letters expressing their opinion as to certain aspects of the transaction. Special standards for attorney?s opinion letters are set out in Reports on Standards for Opinions of Florida Legal Counsel for Business and Real Estate Transactions (the ?Report?) which was published by the Business Law Section and the Real Property, Probate & Trust Law Section of the Florida Bar in September 1998. The Report expands and exemplifies Rule 4-2.3 (Evaluation for Use by Third Persons) which provides:
(a) A lawyer may undertake an evaluation of a matter affecting a client for the use of someone other than the client if:
(1) the lawyer reasonably believes that making the evaluation is compatible with other aspects of the lawyer?s relationship with the client; and
(2) the client consents after consultation
(b) In reporting the evaluation, the lawyer shall indicate any material limitations that were imposed on the scope of the inquiry or on the disclosure of the information.
(c) Except as disclosure is required in connection with a report of an evaluation, information relating to the evaluation is otherwise protected by rule 4-1.6 [Confidentiality of Information].
There are five ethical issues raised in issuing attorney?s opinion letters:
1. Duty of Loyalty. According to the Report: ?Attorneys owe their clients a duty of loyalty. As long as the client?s informed consent is obtained, rendering an opinion to a third party is not a breach of that duty. Before an attorney renders an opinion, the attorney should explain to the attorney?s own client the scope of the opinion and the requirements and consequences which may arise from its issuance. For example, the attorney should advise the client that once the opinion is given, it may be difficult for the client to argue positions contrary to the legal conclusions contained in the opinion.?
2. Conflict Between an Attorney and the Attorney?s Client. According to the Report: ?If delivery of a particular opinion appears to be in the best interests of a client (where, for example, the addressee will not close the transaction without the opinion), but the attorney is reluctant to deliver the opinion out of concern about the attorney?s potential liability for the opinion (because of uncertainty about a legal issue, or for other reasons), a conflict can exist between the ?zealous representation? obligation of the attorney and the attorney?s own self-interest. In such a situation, the attorney should discuss with the client the issues which cause the attorney to be unwilling to give the requested opinion.?
3. Confidentiality. According to the Report: ?The contents of an opinion rendered to a third party are not protected by the attorney-client privilege. Accordingly, attorneys should consider this before rendering opinions and confirm that the client understands this fact and its ramifications.?
4. Good Faith. According to the Report: ?An attorney should neither ask for, nor advise the client to demand, opinions that an attorney qualified to render such an opinion would reasonably be willing to give.?
5. Candor. According to the Report: ?If any attorney involved in the delivery, negotiations or receipt of an opinion knows that the assumptions, facts or law upon which the opinion is based are incorrect, that attorney should advise the attorney rendering the opinion of these matters so that they can be addressed. Similarly, if an attorney involved in the transaction for which the opinion is being delivered knows of facts or circumstances that compel this attorney to conclude that the information or assumptions on which opining counsel proposes to rely are false, the attorney must bring this conclusion to the attention of the opining attorney, and the opining attorney may not rely on the false information or assumptions in rendering the opinion except with the informed consent of the addressee. Similarly, if the opining counsel concludes that an area of law that otherwise would be excluded from the scope of the opinion clearly affects the legality of the transaction, the opining attorney should bring this fact to the attention of counsel for the addressee.?
Although the substantive content of each attorney?s opinion letter will vary with the transaction it is describing, there are certain elements that are common to most such opinion letters:
1. Date. An opinion letter speaks as of the date on which it is issued. This date should clearly be set forth in the letter. The letter should also make clear whether the letter speaks to legislation which has been passed but which is not effective as of the effective date of the letter. In addition, the letter should state whether the opining attorney has any continuing obligation to update the letter based on facts learned by the attorney after the date of the letter.
2. Addressee. Each opinion letter should be addressed to a specific entity. The letter should also specify whether it can be relied upon by any persons who are not specifically listed as addressees.
3. Role of Counsel. The opining attorney should delineate his or her relationship to the client on whose behalf the letter is being issued.
4. Brief Description of the Transaction.
5. Requirement for the Opinion. According to the Report: ?The opinion should state the reason it is being given. Generally, the delivery of the opinion will be required by one of the principal transactional documents as a condition precedent to consummation of the transaction.?
6. Definitions. Terms and phrases of art used in the opinion should be clearly defined, so that they will not be misconstrued by the addressee of the report.
7. Limitations on Law. The opining attorney should place limits on jurisdictional and substantive areas of the law. Excluded areas of the law should be specified.
8. Factual Certificates. Frequently, the opining attorney does not have personal knowledge of all of the facts necessary to render the requested opinion. In such cases, the attorney relies on factual representations made to him by others. Any such factual representations should be specified in the opinion letter.
9. Investigation and Knowledge. The opining attorney should state in the letter what, if any, investigative steps he has taken prior to issuing the opinion.
10. Assumptions. An opining attorney cannot investigate all matters relating to an opinion letter. In most opinions, the attorney assumes that, for example, the signatures on documents he reviews are not forgeries and that each natural person executing a document has legal capacity to do so. All such assumptions should be listed in the letter.
11. Opinion. This portion of the letter should state: ?Based on the foregoing, and subject to the qualifications and limitations stated in this letter and in the Report, we are of the opinion that . . .?
12. Reasoned Opinions. According to the Report: ?If legal uncertainty exists about the conclusion that the highest court in a jurisdiction would reach on a particular issue, only a ?reasoned? opinion can be given. . . . Typically, a reasoned opinion identifies the uncertain legal issue at hand, articulates the reasons for the uncertainty, analyzes the various plausible conclusions a court could reach in deciding the issue and offers a prediction as to which conclusion is most likely to be reached by the highest court.?
13. Signature. The signature should identify the lawyer or firm that is taking responsibility for the opinions expressed in the letter.
The Report is particularly helpful in drafting opinion letters for several reasons. First, the report defines terms to be used in opinion letters. Second, the report lists common assumptions on which attorneys usually rely in drafting opinion letters. For this reason, the Report should be incorporated by reference into a Florida attorney?s opinion letter.
In addition, the Report contains sample opinion letters of several types and numerous sample provisions which specify in appropriate ways the matters on which opinions are usually requested. These sample provisions can usually be substituted for similar provisions in requested opinions.
E. TRUST ACCOUNTS
Florida Attorney?s Trust Accounts are regulated by Chapter 5 (Rules Regulating Trust Accounts) of the Rules Regulating the Florida Bar which can be found in the September issue of THE FLORIDA BAR JOURNAL. All Florida attorneys should be familiar with these rules.
1. Basic Requirements. Trust accounts are accounts maintained by attorneys for holding ?separate from the lawyer?s own property, funds and property of clients or third persons that are in a lawyer?s possession in connection with a representation.? See Rule 5-1.1(a), THE RULES REGULATING THE FLORIDA BAR. Such accounts must be identified ?trust accounts? and must name the lawyer or law firm for whom the trust account is maintained. See Rule 5-1.2(b)(1), THE RULES REGULATING THE FLORIDA BAR. The trust accounts must be maintained in interest bearing accounts in which the interest paid on the accounts goes to the Florida Bar Foundation under the Interest on Trust Accounts (?IOTA?) program of the Florida Bar. See Rule 5.1.1(e), THE RULES REGULATING THE FLORIDA BAR.
2. Accounting Procedures. Trust funds must be maintained in separate bank accounts. Originals or copies of deposit slips and canceled checks must be kept. A separate cash receipts and disbursements journal must be kept, and individual ledger cards for each client must be maintained. See Rule 5-1.2(b), THE RULES REGULATING THE FLORIDA BAR. These records must be kept for a minimum of six years. See Rule 5-1.2(c)(3), THE RULES REGULATING THE FLORIDA BAR. There are both monthly and annual accounting requirements on attorneys maintaining trust accounts. Each month, all trust accounts must be reconciled and comparisons made between reconciled balances of trust accounts and the total of individual client trust ledgers. See Rule 5-1.2(c)(1), THE RULES REGULATING THE FLORIDA BAR. According to Rule 5-1.2(c)(2): ?At least annually, the lawyer shall prepare a detailed listing identifying the balance of the unexpended trust money held for each client or matter.? In addition, each attorney must annually certify to The Florida Bar, that he or she is in compliance with the trust accounting rules. See Rule 5-1.2(c)(5), THE RULES REGULATING THE FLORIDA BAR. Failure to maintain adequate trust accounting records and to follow minimum accounting procedures can subject an attorney to discipline. See The Florida Bar v. Williams, 753 So. 2d 1258 (Fla. 2000).
3. Disbursements Against Uncollected Funds. Disbursement of uncollected funds is a major issue in the sale and purchase of businesses. Sellers who relinquish control of a business want to receive their funds immediately at closing. However, the general rule is that ?a lawyer may not disburse funds held for a client or on behalf of that client unless the funds held for that client are collected funds.? Rule 5-1.1(j), THE RULES REGULATING THE FLORIDA BAR. There are six exceptions to this general rule:
(1) when the deposit is made by certified check or cashier?s check;
(2) when the deposit is made by a check or draft representing loan proceeds issued by a federally or state-chartered bank, savings bank, savings and loan association, credit union, or other duly licensed or chartered institutional lender;
(3) when the deposit is made by a bank check, official check, treasurer?s check, money order, or other such instrument issued by a bank, savings and loan association, or credit union when the lawyer has reasonable and prudent grounds to believe the instrument will clear and constitute collected funds in the lawyer?s trust account within a reasonable period of time;
(4) when the deposit is made by a check drawn on the trust account of a lawyer licensed to practice in the state of Florida or on the escrow or trust account of a real estate broker licensed under applicable Florida law when the lawyer has a reasonable and prudent belief that the deposit will clear and constitute collected funds in the lawyer?s trust account within a reasonable period of time;
(5) when the deposit is made by a check issued by the United States, the State of Florida, or any agency or political subdivision of the State of Florida;
(6) when the deposit is made by a check or draft issued by an insurance company, title insurance company, or a licensed title insurance agency authorized to do business in the state of Florida and the lawyer has a reasonable and prudent belief that the instrument will clear and constitute collected funds in the trust account within a reasonable period of time.
4. Misappropriation of Trust Funds. One of the principal reasons for the disbarment of attorneys in Florida is the misappropriation of trust funds. According to the Florida Supreme Court, ?[t]he misuse of client funds is one of the most serious offenses a lawyer can commit. Upon a finding of misuse or misappropriation, there is a presumption that disbarment is the appropriate punishment.? See The Florida Bar v. Schiller, 537 So.2d 992, 993 (Fla. 1989). Overcoming this presumption is difficult, and in most cases of misappropriation of trust account funds, disbarment is the discipline imposed by the Florida Supreme Court. See The Florida Bar v. Travis, 765 So. 2d 689 (Fla. 2000); The Florida Bar v. Kovones, 752 So. 2d 586 (Fla. 2000); The Florida Bar v. Tillman, 682 So. 2d 542 (Fla. 1996). However, in occasional cases in which there is a lack of a selfish or dishonest motive and in which restitution has been made, the Court has imposed a lesser discipline. See, The Florida Bar v. Barbone, 679 So. 2d 1179 (Fla. 1996).
F. FEES
Written fee contracts, while advisable, are required by the Florida Rules only in contingent fee cases.
Rule 4-1.5(e) provides: ?Duty to Communicate Basis or Rate of Fee to Client. When the lawyer has not regularly represented the client, the basis or rate of fee shall be communicated to the client, preferably in writing, before or within a reasonable time after commencing the representation.?
Rule 4-1.5(a) provides: ?Illegal, Prohibited, or Clearly Excessive Fees. An attorney shall not enter into an agreement for, charge, or collect an illegal, prohibited, or clearly excessive fee or a fee generated by employment that was obtained through advertising or solicitation not in compliance with the Rules Regulating The Florida Bar. . . .?
In Florida Bar v. Carlon, 820 So. 2d 891 (Fla. 2002), The Florida Supreme Court disciplined an attorney for charging excessive fees in two separate situations. In the first situation, the attorney charged the client $3,340 for looking up an Arizona attorney in Martindale Hubbell. The disciplined attorney did nothing other than providing the client with a list that the client did not use. On his own, the client found an attorney in Arizona who charged only $404 for the actual legal work. In the second situation, the disciplined attorney charged over $11,000 for handling a simple estate (for which the statutory fees under ?733.6171 of the Florida Statutes was $3,435.). The attorney billed at a rate of $200 per hour and the bill included several 20 minute time charges for telephone calls placed by the attorney which were unanswered.
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February 25, 2012 - Posted by deasonlaw | Legal Research
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