Louisiana Supreme Court Amends Rule 1.15
On March 23, 2016, the Louisiana Supreme Court amended the Louisiana Rules of Professional Conduct 1.15 concerning how lawyers and law firms should handle unidentified funds accumulated in their IOLTA accounts. The amended rule directs lawyers who discover unidentified funds defined as funds in an IOLTA account for at least one year that after reasonable due diligence cannot be documented as belonging to a client, a third person or the lawyer or law firm, to be remitted to the Louisiana Bar Foundation.
The heart of the changes to the rule is in new paragraphs (g7) and (h), which instruct lawyers about what to do after discovering unidentified funds in an IOLTA account. The rule provides that "no charge of misconduct shall attend to a lawyer's exercise of reasonable judgment under this paragraph (h). Paragraph (h) also includes a provision regarding the refund of unidentified funds remitted to the Louisiana Bar Foundation in error.
Unidentified funds in IOLTA accounts commonly result from bookkeeping errors, mistaken bank interest payments, or failures to collect earned fees in a timely manner. The resulting unidentified fund balances cannot be traced to a client or third party owner. The amendments to Rule 1.15 provide a mechanism for lawyers or their successors to remove unidentified funds from IOLTA accounts after making diligent efforts to identify the owner and secure their return. Funds remitted to the Louisiana Bar Foundation will support grants made to non-profit organizations providing civil legal aid to the poor throughout Louisiana.
The rule does not provide for the remittance of unclaimed funds, whose owner is known but to whom payment cannot be effected (typically because the owner cannot be located or will not cash a check). Unclaimed funds should be handled in accordance with the provisions of the Louisiana Unclaimed Property Act.
Unidentified funds should be remitted to the LBF by (1) submitting a completed Unidentified Funds Remittance Report (PDF) and (2) sending a check for the amount of the funds payable to the Louisiana Bar Foundation. Use of the reporting form is required in all cases.