What must a North Carolina lawyer do to protect trust-account funds from a year 2000 computer failure at the bank?

Plain-English summary

The inquiry described the "year 2000 problem," in which older computer systems that store a year as two digits could misread "00" as 1900 and fail when the date rolled over at the end of 1999, with potential failures across industries including banking. Because a lawyer has a fiduciary obligation under Rule 1.15-1(d) to segregate and protect client funds by depositing them in a trust account with a North Carolina bank, the committee was asked what steps a lawyer should take to safeguard those funds from a year 2000 failure at the depository bank.

The opinion concluded that a lawyer must exercise due care in selecting a depository bank, including consideration of how the bank has addressed the year 2000 problem. The opinion's end notes added that the discussion was not a thorough explanation of the year 2000 problem and that lawyers should research it and address in advance any potential malfunctions that might interrupt their practices.

Currency note

This opinion was issued in 1999, before North Carolina's adoption of the 2003 revisions to the Rules of Professional Conduct, and it addresses a one-time, date-specific concern (the rollover to the year 2000) under the trust-accounting rule then numbered Rule 1.15-1(d). The specific year 2000 risk has passed, and the rule numbering has since changed. Treat this page as historical context, not current guidance. The durable principle, due care in selecting a depository bank to protect client funds, should be verified against the current trust-accounting rules.

Common questions

Q: What did the State Bar tell lawyers to do about the year 2000 problem and trust accounts?

A: The opinion held that a lawyer must exercise due care in selecting a depository bank for the trust account, including considering how the bank has addressed the year 2000 problem, as part of the fiduciary duty to protect client funds.

Q: What rule grounds the duty?

A: The opinion grounded the duty in Rule 1.15-1(d), the lawyer's fiduciary obligation to segregate and protect client funds by depositing them in a trust account with a North Carolina bank.

Background and rules framework

The opinion applied North Carolina Rule 1.15-1 (safekeeping of client property, specifically the duty in 1.15-1(d) to deposit client funds in a trust account), the analogue to Model Rule 1.15, to the choice of a depository bank in light of the year 2000 computer problem.

Citations and references

Rules of Professional Conduct:

• MR 1.15 (safekeeping property) / NC Rule 1.15-1(d)

See also

• NC State Bar Op. 99 FEO 9: Obligation to Disburse Closing Funds
• NY State Bar Op. 1127: Settlement Funds in the Attorney Trust Account

Source

• Landing page: https://www.ncbar.gov/for-lawyers/ethics-and-governing-rules/ethics-opinions/opinions/98-formal-ethics-opinion-15/

Original opinion text

Reproduced from the official source for research purposes. The linked source is authoritative.

Inquiry:

Many older computer software and hardware systems record data and make calculations using only the last two digits of a year. Because computers with this limitation will interpret "00" as "1900,"1 there may be serious system failures in numerous industries, including the banking industry, when the clock strikes midnight on December 31, 1999. The computer problems associated with the approach of the next millennium are commonly referred to collectively as "the year 2000 problem."2

A lawyer has a fiduciary obligation to segregate and protect client funds by depositing them in a trust account with a North Carolina bank. Rule 1.15-1(d). What steps should a lawyer take to safeguard client funds in a trust account from potential loss due to a year 2000 problem at the depository bank for the lawyer's trust account?

Opinion:

A lawyer must exercise due care in selecting a depository bank including consideration of how the year 2000 problem is addressed by the bank.

End Notes

• 1. Most computer operating systems do not recognize "1900." Therefore, they will report the earliest possible date they support. This is usually January 1, 1980. Dollars & Cents at 4, American Society of Association Executives, (August 1998).
• 2. This is not intended to be a thorough explanation of the year 2000 problem. Lawyers are advised to research the problem thoroughly and to address in advance any potential malfunctions that may interrupt their practices.