Notice, Delivery, and Accounting

Safeguarding property that belongs to a client or a third person is a core fiduciary duty of the lawyer.¹ Rule 1.15 adds three duties that run to the owner, all in one passage. On receiving funds or other property in which a client or third person has an interest, the lawyer must promptly notify that person. Except as the rule states or as law or an agreement with the client permits, the lawyer must promptly deliver whatever the person is entitled to receive. And on request the lawyer must promptly render a full accounting regarding the property.²

The earlier sections showed the lawyer standing guard: property kept apart from the lawyer's own, identified, and secure. Guarding alone can still fail the owner. The owner may not know the property has arrived, may know and still not receive it, or may get no word on what has happened to it since. Notice answers the first failure, delivery the second, and accounting the third.

These duties run to clients and third persons alike. A lender whose funds pass through a closing and a medical provider with a claim on a settlement cannot see the lawyer's trust account. The lawyer is usually the only person who knows what has been received, so the rule makes the lawyer speak first: neither notice nor delivery waits for the owner to ask. Only the accounting does. Notice comes first for a plain reason. An owner who has not been told that property exists cannot ask for it or for an account of it.

These duties govern property already in the lawyer's custody, and they are a separate matter from the limits on seeking information from others. In civil discovery, a lawyer may ethically propound a request only when it is well-founded, meaning at least arguably relevant and not subject to a discovery limitation. A request crosses an ethical line only when it plainly seeks irrelevant, privileged, or otherwise protected information, or when its volume is so large and disproportionate to the case as to indicate harassment.³

Prompt Notice

The first command fixes when the duty arises and who is owed it: “Upon receiving funds or other property in which a client or third person has an interest, a lawyer shall promptly notify the client or third person.”⁴ Receipt triggers the duty, and notice goes to whoever holds an interest in what arrived. The text names a third person alongside the client, so a lender, or a medical provider with a claim on a settlement, is entitled to hear that property has come in.

The reason lies in who knows what. A settlement check goes into a trust account that an interested owner cannot see, and the lawyer is usually the only person who knows it arrived. A hospital with a claim on the proceeds has no ordinary way to learn of the payment. An owner who is not told cannot assert a claim, plan around the money, or object to how the lawyer handles it. An owner who is told can recognize a later delay for what it is.

The duty starts itself. Of the three commands, only the accounting depends on a request, since the lawyer must act “upon request by the client or third person.”⁵ Notice falls due at receipt. A lawyer who waits to be asked has already breached the duty, even if every later answer is truthful. The rule sets no number of days, so promptness is measured from receipt and against the purpose of the duty, which is to let the owner know.

Notice is also only the first of three commands. The rule lists delivery separately, so telling an owner that property has arrived does not discharge the duty to hand over what the owner is entitled to receive.

The two lawyers differ in one fact: whether anyone besides the client holds an interest. That fact decides whether the lawyer has one person to notify or two. The quoted text uses “interest” without defining it, so a lawyer who doubts a claimed interest still has to resolve the doubt. Ignoring the claim is a bet that it fails. Even in the second scene the duty remains, because the client is always an owner entitled to know that property has arrived.

Florida carries the same duty into its own rules. Its version, lettered (e) and headed “Notice of Receipt of Trust Funds; Delivery; Accounting,” repeats the Model Rule's operative language word for word.⁶

Prompt Delivery

Notice tells the owner that the lawyer holds something, and delivery ends the holding. The second command reads: “Except as stated in this rule or otherwise permitted by law or by agreement with the client, a lawyer shall promptly deliver to the client or third person any funds or other property that the client or third person is entitled to receive.”⁸ Three parts work in that sentence. The property must be something the person is entitled to receive, the lawyer must act promptly, and the duty yields only to the situations named in the opening clause.

Holding another person's property is a service, and the rule treats it as temporary. Money can lie safe in a well-kept trust account and still wrong its owner, because each day of delay keeps from the owner something that is the owner's. The owner cannot see the account, so the deadline supplies the pressure the owner cannot.

The rule fixes no number of days, so promptly takes its meaning from that purpose. Once the lawyer knows what the owner is entitled to receive and no exception applies, the lawyer may take only the time that making delivery actually requires. Safekeeping does not meet the command. The separation, identification, and recordkeeping duties answer the risks of loss and mixing, and a lawyer can perform every one of them while the owner waits for overdue money. Delivery is late or it is not, so an answer needs no shortfall and no bad motive.

Delivery reaches “funds or other property,” in whatever form the lawyer received it. Property from a client may include funds to be applied to a transaction, a payment in satisfaction of a judgment or settlement, an advance deposit against fees, valuable documents, or property of evidentiary value. Documents and securities in particular must be kept secure and eventually returned to the client.⁹

Not every owner is a client, and fee division shows how. The profession historically imposed strict restrictions on dividing a fee among lawyers who were not associated in the same firm, while lawyers inside a firm could divide fees among themselves on any basis they chose.¹⁰ Where a lawyer outside the receiving lawyer's firm is owed a share of money the receiving lawyer holds, that lawyer is a third person with an interest in the funds, and the delivery command reaches the share as it reaches a client's money. A receiving lawyer who sits on such a share for weeks, paying nothing and explaining nothing, has failed to deliver property someone else is entitled to receive, even if every dollar of it sits untouched in trust.

The opening clause of the command names three situations in which delivery may wait. Each rests on a different reason:

The rule itself may require it. Its dispute provision requires property in which two or more persons, the lawyer possibly among them, claim interests to be kept separate until the dispute is resolved, and it requires the lawyer to promptly distribute every portion in which the interests are not in dispute.¹¹
Other law may permit it. Where law allows the lawyer to wait, waiting is compliance.
An agreement with the client may permit it. The property is the client's, and the client may choose to leave part of it in trust for a time for the client's own reasons.

The first situation matters most for what follows. A dispute reaches only the contested portion, so a lawyer cannot invoke a quarrel over one item to hold back everything else, and the next major section builds out that rule. The third situation is easiest to see by comparing two closings that look alike.

The agreement exception does not stretch past its words. It speaks of agreement with the client, so by its terms it does not license holding back what belongs to a lender or another third person, and delay of that person's property needs support in the rule or in other law. The exception also changes only the timing of delivery. Nothing in it turns the held property into the lawyer's own, and the safekeeping duties described earlier continue until the agreed time arrives.

Accounting on Request

The third command differs from the first two because it waits for someone to ask. On “request by the client or third person,” the lawyer “shall promptly render a full accounting regarding such property.”¹³ Three parts work here: a trigger, which is a request; the people entitled to make it, who are the client and any third person with an interest; and what is owed, which is a full accounting rendered promptly. Notice operates at receipt, and delivery operates when the owner is entitled to the property. The accounting answers the owner's later question about what became of the property.

The rule does not list the contents of an accounting, but “full” and “regarding such property” point to a report on the property itself: what the lawyer received, what the lawyer holds, and what has gone out of it. A bare statement of the balance leaves out most of what an owner wants to know, especially when a larger gross sum became a smaller net one. Where the lawyer has taken fees or expenses from funds held for someone else, the lawyer is both custodian and possible claimant, and a full account is where the owner can test that handling.

The duty exists because the owner cannot see the trust account while the lawyer holds the information. Court rules on trust accounts typically address the maintenance of records and audits, so a lawyer who has followed them can answer from what is already in hand.¹⁴ Tying the duty to a request keeps the burden proportionate. Notice has already told each owner that property arrived, and delivery follows when the owner is entitled to it. An owner who still has doubts gets a right to a prompt answer, and a lawyer who has notified and delivered has no standing duty to report unasked.

Any person with an interest may ask, including a person who has never been the lawyer's client. A hospital with a claim on settlement proceeds and a lender whose money passed through a closing are third persons who cannot see the account, and the request is how they obtain the view.

Hypothetical Illustration

A hospital holds an interest in part of a client's settlement, and the lawyer deposits the funds in trust and tells the hospital. Some weeks later the hospital asks in writing for an itemized accounting of the amount received and every deduction. The lawyer never answers, and the hospital is still waiting after several months. The request came from a third person with an interest, and the response was neither full nor prompt, so the accounting duty is breached even though nothing is missing from the account. Another lawyer promptly notified the client and a lender with an interest in the proceeds and paid each what it was entitled to receive. Neither has asked for anything more, and the lawyer has sent no itemized statement. That lawyer has not breached the accounting duty, because no one has made a request.

The lawyers differ in one fact: whether an owner asked. Once an owner asks, silence is a violation. Until then, compliance with notice and delivery is the whole of the obligation.

The rule sets no number of days for promptness, so the word is read against its purpose. After a request arrives, the lawyer may take the time needed to assemble a report from records the lawyer should already hold, and months of silence cannot be justified on that basis. The quoted text names no required form for the request. Where the lawyer and another person both claim interests in funds held, the dispute provision keeps the contested part separate and requires the undisputed part to be promptly distributed.¹⁵ The next major section develops that rule in full.