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Thompson Hine LLP, a full-service business law firm with approximately 400 lawyers in 11 offices, was ranked number 1 in the category “Most innovative North American law firms: New working models” by The Financial Times and was 1 of 7 firms shortlisted for The American Lawyer’s inaugural Legal Services Innovation Award. The firm has been recognized by the National Law Journal as a Legal Technology Trailblazer and featured by Bloomberg for its innovative service delivery models, which drive accuracy and predictability. The firm’s commitment to innovation is embodied in Thompson Hine SmartPaTHTM – a smarter way to work – predictable, efficient and aligned with client goals. For more information, please visit ThompsonHine.com and ThompsonHine.com/SmartPaTH.

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<img style="max-width: 100%;height: auto;max-width: 100%;height: auto" loading="lazy" class="alignright size-medium wp-image-5477" src="https://www.thelawforlawyerstoday.com/wp-content/uploads/sites/754/2021/04/Money-dispute-300x231.jpg" alt="" width="300" height="231">Remember your first days in law school, when you were introduced to a whole Black&rsquo;s Law Dictionary-worth of exotic legalese?&nbsp; Words like &ldquo;estop,&rdquo; &ldquo;arguendo&rdquo; and &ldquo;gravamen&rdquo;?&nbsp; (If you&rsquo;re like us, you&rsquo;ve spent your post-school days learning how to avoid this jargon and write plain English; but we digress.)&nbsp; Remember &ldquo;escheatment&rdquo;?&nbsp; The term of course refers to the process by which, after a specified dormancy period, unclaimed property eventually can become the state&rsquo;s property.
<a href="https://www.journalofaccountancy.com/issues/2020/nov/unclaimed-property-laws-risks.html">All U.S. jurisdictions</a> have some form of escheatment statute.&nbsp; Effective earlier this month, our home-state of Ohio tweaked its <a href="https://codes.ohio.gov/ohio-revised-code/chapter-169">unclaimed-funds law</a> to clarify its application to unclaimed client funds that lawyers hold, and to direct those funds to a <a href="http://courtnewsohio.gov/happening/2021/legalAidLaw_041521.asp#.YIbyR7CSk2w">legal assistance foundation</a> aimed at increasing access to justice.&nbsp; The Buckeye State&rsquo;s statutory change is a good opportunity to brush up on ethics duties regarding client property that lawyers hold &mdash; including if we are unable to return it to the client.
Safekeeping client property
<a href="https://www.americanbar.org/groups/professional_responsibility/publications/model_rules_of_professional_conduct/rule_1_15_safekeeping_property/">Model Rule 1.15</a>, &ldquo;Safekeeping Property,&rdquo; has been adopted in some form in <a href="https://www.americanbar.org/content/dam/aba/administrative/professional_responsibility/mrpc_1_15.pdf">all U.S. jurisdictions</a>.&nbsp; The rule emphasizes our role as a fiduciary in safekeeping all forms of client property that come into our possession and codifies the prohibition against commingling funds belonging to the client with our own funds.&nbsp; Typically (and subject to some exceptions), this calls for holding in a trust account (&ldquo;IOLTA&rsquo;s&rdquo; or &ldquo;IOTA&rsquo;s&rdquo;) money such as pre-paid fees, retainers, flat fees paid in advance and pre-distribution settlement funds.
But what to do with money that remains in a lawyer trust account for more than the dormancy period specified by a state&rsquo;s unclaimed-funds statute?&nbsp; It may be that you have settlement funds that can&rsquo;t be distributed because you&rsquo;ve lost contact with the client.&nbsp; Or you may receive a refund of court fees that a business client is entitled to &mdash; but the business has been dissolved without leaving a successor.
Such situations are rare (most jurisdictions specify that IOLTA&rsquo;s are for holding funds only over a short term), but they do happen.
Here&rsquo;s a clue:&nbsp; You and/or your firm don&rsquo;t become the owners of the unclaimed funds.&nbsp; Rather, after the applicable dormancy period, the funds escheat to the state.&nbsp; Your jurisdiction might also have record-keeping and reporting requirements relating to both lawyer trust accounts and unclaimed funds &mdash; either in ethics rules, bar governance regulations or by statute.
Buckeye State provisions
Ohio lawyers have always been under a statutory duty to report and remit unclaimed funds to the state department of commerce.&nbsp; The new provision creates a new statutory category, however, called &ldquo;attorney unclaimed funds,&rdquo; defined as unclaimed funds in IOLTA&rsquo;s, nondirected escrow accounts (IOTA&rsquo;s) and residual settlement funds.
The <a href="https://codes.ohio.gov/ohio-revised-code/section-169.052">new provision</a> requires lawyers to report and to remit all such unclaimed funds, which the commerce department can then direct to the <a title="Click to go to the website. Link opens new window." href="https://www.ohiojusticefoundation.org/" target="_blank" rel="noopener">Ohio Access to Justice Foundation</a>.&nbsp; The foundation can use unclaimed funds to provide financial assistance to legal aid societies and enhance access to justice by underserved legal services consumers.
The new Ohio law does not affect an owner&rsquo;s ability to make claims on the funds; under current law, all holders, including lawyers, <a href="https://codes.ohio.gov/ohio-revised-code/section-169.07">are protected</a> from any claims by an owner after the holder remits the funds as unclaimed.&nbsp; Therefore, if a client were to come forward later, the Ohio lawyer would be immune, and the client would be required to file a claim with the state&rsquo;s division of unclaimed funds.
Ohio&rsquo;s foundation is the largest funder of civil legal aid in Ohio, and like many such state organizations, depends on income generated from court filing fees and IOLTA and IOTA streams. Due to the pandemic, both sources have been significantly diminished in 2020-21 as interest rates fell and case filings declined.
Oregon initiated a <a href="https://www.osbar.org/resources/abandonedfunds.html">similar amendment</a> to its unclaimed funds statute in 2010, and it may become a trend.
Takeaways
Unclaimed fund statutes help lawyers by letting them &ldquo;clear the books&rdquo; of unclaimed funds after the dormancy period, usually with indemnification against later claims by the owners.&nbsp; But as always, the devil is in the details, and you should check your jurisdiction&rsquo;s requirements for safekeeping client property, as well as specific unclaimed fund laws.&nbsp; More jurisdictions in the future may adopt Ohio&rsquo;s approach in order to increase revenue to beleaguered legal assistance foundations.

Lawyer trust accounts and unclaimed funds: what are your duties?

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