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Attorney commingling of client funds: bad idea and unlawful

Many people contemplating conflict-of-interest scenarios involving California clients and their attorneys often focus upon a few core considerations.

Here’s a classic conflict situation that often plays out in reality many times a year in California and elsewhere across the country: an attorney having an interest in promoting a matter that conflicts directly with his or her client’s best interests. Perhaps, for example, a client retains a lawyer for help in a business matter. The attorney agrees to provide services while, unbeknownst to the client, having personal interests in the same matter that are at clear odds with those of the client.

And here’s another: You hire an attorney to promote your legal rights in a matter. You are unaware that your lawyer is also representing your business partner at the same time regarding the same matter, notwithstanding that your interests are disparate from those of your partner.

A conflict situation often revolves around money, which is clearly the case in many instances involving an attorney’s receipt of client funds that are to be earmarked for the benefit of the client (for example, an up-front retainer).

This question sometimes arises in regard to that money held in trust: Can it be deposited in an account maintained by the attorney for personal reasons?

The California Rules of Professional Conduct supply an eminently succinct and most emphatic answer to that question: No.

In fact, money held for the benefit of a client must, until earned, be held in a trust account maintained separately from any account held by the attorney.

Failure to comply with that dictate equates to an unlawful commingling of funds, which can result in strong disciplinary actions being taken against an offending lawyer by state authorities.

It can also — and rightfully so — subject that attorney to a conflict-of-interest charge and legal malpractice lawsuit.

Persons with questions or concerns regarding funds they have given an attorney can direct their inquiries to a proven California professional malpractice attorney.