[textbook]Traversing the Ethical Minefield Problems, Law, and Professional Responsibility by Susan R. Martyn (z-lib.org)(1) (1)

We also agree with the board’s determination that Sather violated Colo. 8.4(c) by
materially misrepresenting to Perez the nature of the fee he paid. Colo. RPC 8.4(c)
prohibits attorneys from engaging in conduct that involves “dishonesty, fraud, deceit, or
misrepresentation.” The fee agreement Sather drafted clearly expressed that the $20,000
was non-refundable, irrespective of the number of hours Sather spent on the case, and that
“In All Events, No Refund Shall Be Made Of Any Portion” of the $20,000. (Emphasis in
original.) Despite this strong language of the contract he drafted, Sather testified that he
understood his ethical obligation to return any unearned portion of the fees in the event of
discharge. . . .
[The court suspended Sather from the practice of law for six months.]
Practice Pointers:
Trust Fund Management
The Colorado Supreme Court disciplined lawyer Sather for failing to repay his client’s
advance fee after being discharged and for materially misrepresenting the nature of the fee
as “nonrefundable.” Sather could not return the money because he failed to segregate it in a
client trust account.
Until the turn of the twentieth century, lawyers commonly commingled their clients’
funds with their own, and could have repaid these amounts from any account. Stock
market crashes in both England and America led to a reexamination of professional
accounting requirements, then to requirements that lawyers could not commingle client
funds with lawyer operating accounts, 1 and eventually to specific regulations such as those
in Model Rule 1.15, discussed in Sather.
These provisions obviously are intended to protect client funds and property, but they
also prohibit lawyers from using trust accounts to shield their own money from personal or
business creditors. 2 In short, lawyers may not deposit their own funds in a client trust
account (except to cover bank charges), nor may they deposit client funds, such as advance
payment of fees and retainers, in their own business account. Lawyers also must notify
clients and third parties whenever the lawyer receives property or funds to which the client
or third party has an interest, promptly deliver the funds to the appropriate party, and
provide an accounting of funds upon request. 3
These rules mandate separation of client and lawyer funds, identification and
safeguarding of other client property, complete and accurate recordkeeping, as well as the
retention of any disputed fees or funds in the trust account, 4 and prompt distribution of all
portions of the property not in dispute. Violating these provisions creates strict liability.
Sather represents the view shared by nearly every jurisdiction: Knowing violations of rules
that require segregation of client funds will result in severe discipline, even when client’s
interests are not otherwise compromised. 5 Courts also agree that inadvertent commingling
violates these rules, even if temporary and without harm to a client. 6
Yet, in spite of these requirements, so many clients have been the victims of lawyers
who have “borrowed” or stolen client funds that most jurisdictions have created a client
388