Can a lawyer take attorney's fees out of escrowed funds the lawyer is holding for a client without the client's consent?

Plain-English summary

An attorney held $2,500 in escrow under a temporary lease that ran ahead of a real estate closing, with the money to be credited to the purchase price. After the closing, the seller asked for the funds; months later the attorney sent only $460, a check drawn on the trust account, saying the balance was "net proceeds" after deducting legal fees. The seller denied owing the attorney anything and said the attorney had already been paid in full.

The opinion concluded that under Rule 1.15(a) the attorney had to deposit the funds in a separate trust account and could not commingle them with the attorney's own property. It concluded that under Rule 1.15(d) nominal or short-term client funds must go into a pooled interest-bearing trust account with the Lawyers Trust Fund of Illinois as income beneficiary, while substantial funds held for an extended period may be placed in a separate account earning interest for the client; the rule leaves the nominal-or-short-term judgment to the lawyer without risk of an ethics charge.

The opinion concluded that the attorney could not deduct fees from the trust funds here because the attorney had neither notified the seller of an intent to do so nor obtained consent. Drawing on Opinion No. 88-15 and In re Ushijima, it concluded that a lawyer may transfer trust funds toward fees only after written notice and the client's affirmative written consent, and that the Supreme Court has repeatedly disciplined lawyers for commingling and converting client funds (In re Kitsos; In re Joyce). Because the seller disputed the fee and did not consent, the conduct was improper; under Rule 1.15(b) and (c) the attorney should have promptly delivered the undisputed funds and kept the disputed portion separate until resolution. The opinion recognized a common-law retaining lien (Upgrade Corp. v. Michigan Carton Co.) but noted that courts weigh whether invoking it prejudices the client or others.

Currency note

This opinion was issued in 1994, before Illinois adopted the 2010 Illinois Rules of Professional Conduct. The ISBA Board of Governors affirmed the opinion in May 2010 as generally consistent with the 2010 Rules (referring to Rule 1.15(a) through (f)), while noting the specific standards referenced may differ from the 2010 Rules. Subsequent rule amendments or later opinions may have changed the analysis. Treat this page as historical context, not current guidance. Verify against current rules before relying on any specific rule or requirement mentioned here.

Common questions

Q: Can a lawyer pay their own fee out of funds held in the client trust account?

A: The opinion concluded a lawyer may transfer trust funds toward fees only after giving the client written notice and obtaining the client's affirmative written consent, citing Opinion No. 88-15 and In re Ushijima.

Q: What happens when the client disputes the fee the lawyer wants to take?

A: The opinion concluded that under Rule 1.15(b) and (c) the lawyer must promptly deliver the undisputed portion and keep the disputed portion separate in trust until the dispute is resolved.

Q: Does a retaining lien let the lawyer hold the money?

A: The opinion recognized a common-law retaining lien over client property in the lawyer's possession, but noted courts consider whether invoking it prejudices the client or others; it did not excuse withdrawing disputed funds without consent here.

Background and rules framework

The opinion interpreted Rule 1.15 (safekeeping property): subsection (a) (separate trust account, no commingling), (d) (pooled interest-bearing accounts with the Lawyers Trust Fund of Illinois as beneficiary for nominal or short-term funds), and (b) and (c) (prompt delivery of undisputed funds and segregation of disputed funds) (Model Rule 1.15).

Citations and references

Rules of Professional Conduct:

• Model Rule 1.15 (safekeeping property) / Illinois Rule 1.15(a)-(d)

Cases:

• In re Ushijima, 119 Ill. 2d 51, 518 N.E.2d 73 (1987), notice-and-consent before withdrawing fees
• In re Kitsos, 127 Ill. 2d 1, 535 N.E.2d 792 (1989), commingling and conversion warranted suspension
• In re Joyce, 133 Ill. 2d 16, 549 N.E.2d 232 (1990), appropriating client funds as fees warranted suspension
• Upgrade Corp. v. Michigan Carton Co., 87 Ill. App. 3d 662, 410 N.E.2d 159 (1980), common-law retaining lien

Other opinions cited:

• ISBA Opinion No. 88-15: fee withdrawal from trust requires written notice and client consent

See also

• ISBA Ethics Op. 20-06: A Lawyer's Possession of Dispute Settlement Funds
• ISBA Ethics Op. 15-02: Disposition of Unclaimed and Unidentified Client Funds
• ISBA Ethics Op. 02-02: Transfer of a Dissolved Corporate Client's Trust Funds

Source

• Landing page: https://www.isba.org/ethics/opinions/9317