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Lawyers are responsible for trust funds up until the check clears.

A Bar Board of Governors committee is concerned that Florida lawyers aren't sufficiently aware of a recent Supreme Court ruling that they must issue stop payment orders on checks issued from their trust accounts if they are served with writs of garnishment seeking that money.

Disciplinary Procedure Committee Chair Murray Silverstein reported to the board at its October 3 meeting that the committee reviewed relevant Bar rules on the issue and decided no rule change was necessary to conform to the ruling. The committee did present on first reading an addition to the comment to Rule 5-1.1 referring to the decision, Arnold, Matheny, and Eagan v. First American Holdings, case no. SC07-1136.

But he said the DPC was concerned Bar members aren't aware of the opinion. (The opinion was released May 1 and a story appeared in the June 1 Bar News.)

"When case law comes along that interprets provisions of the rules, it's up to the lawyers to interpret the decision, but as a service to our members we should take additional steps to alert them to this significant ruling," Silverstein said.

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Committee members were concerned that Bar members might not realize the decision's implications, he told the board.

"If you have funds in trust that are subject to a garnishment and you have written a check and you are aware the check has not cleared, you must take steps to stop payment on it [when the writ is received]," Silverstein said. "It's a matter of the court acknowledging if it's possible to stop the funds from leaving, you've got to take one extra step and stop payment."

In the Matheny case, a law firm was presented with a writ of garnishment after it had presented a trust account check, disbursing proceeds of a case, to a client but before the client had presented the check to a bank for payment. The firm had argued that once it presented the check to the client, it no longer controlled the funds. The Supreme Court disagreed.

Justice Barbara Pariente wrote for a unanimous court that attorney trust accounts were no different than personal checking accounts held by banks, which would be subject to such garnishments.

She also said that under F.S. [section]77.01, attorneys were still in "possession or control" of funds until the check cleared.

"[A] payor of a check may issue a stop payment order after the check has been written in an attempt to prevent the check from being paid and the funds from being transferred to the payee," Pariente wrote. "This 'right to stop payment' is strongly indicative of the 'possession or control' one has over funds in an account. In other words, we would be hard-pressed to deny that a payor was still in control over funds in his or her account if the payor could actually take steps to stop payment of the check."

She also noted that "because attorneys and their trust accounts are subject to the same provisions of the garnishment statute as any other bank or nonbank garnishee, we cannot discern a principled basis for holding that funds located in an attorney's trust account warrant any greater protection from creditors than funds located in the client's personal account."

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Publication:Florida Bar News
Date:Nov 1, 2008
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