Mcle Article: Don't Be Tempted by the Fruit of the Alternative Payment App Tree!
| Publication year | 2021 |
| Author | By Erin Joyce |
By Erin Joyce
Erin Joyce has extensive experience in State Bar investigations and disciplinary proceedings, plus over twenty five years of civil litigation practice. Erin was admitted in 1990 and practiced for nearly eight years in an intellectual property boutique before joining the Office of Chief Trial Counsel as a prosecutor for the State Bar, from 1997 through 2016. Erin has almost twenty years of experience handling all aspects of discipline cases against attorneys in State Bar Court, from the filing of the complaint through trial and review. She has personally tried dozens of State Bar trials and several appeals. Erin has a comprehensive understanding of how State Bar investigations and proceedings unfold. Before going into private practice, Erin served as Chief Special Investigator for the Los Angeles Fire Department, as a prosecutor for the State Bar of California, and as a lawyer for multiple private practices.
"Everything you want in life has a price connected to it. There's a price to pay if you want to make things better, a price to pay just for leaving things as they are, a price for everything."
- Harry Browne
Have your tech-savvy clients demanded that if you don't let them send you their retainers through a smartphone app that they consider you a dinosaur and may take their work elsewhere? Have you been tempted to accept an alternate form of payment so that your retainer will instantly be in your possession? Are you tempted to make the client pay for the processing fees, if any, charged by one of the new smartphone payment processing app?
As technology to accept alternate forms of payment explodes, lawyers are asking if they can accept alternatives to the traditional check in the mail. With regard to services fully earned and costs already expended, the answer is clearly yes. However, when it comes to accepting money for future services, unearned flat rate fees or unearned costs, the answer is nearly always no.
The California Rules of Professional Conduct are some of the strictest in the nation when it comes to trust accounting. As such, lawyers must use extreme caution with client funds and banking. Even though the language of Rule of Professional Conduct 1.15 suggests that an attorney may keep some funds in a trust account to cover bank charges, this language is not a catch-all exception and should not be relied upon as a basis to accept PayPal or Venmo payments for advanced attorney fees or costs..
The 2018 commentary makes the application of Rule 1.15 very understandable, if harsh: Client funds shall not go into a business account under California law. Less than scrupulously perfect accounting of fees for unearned costs and fees in an IOLTA account may subject an attorney to discipline, lead to accusations of commingling and worse. Until alternative payment plans like Venmo can certify that they split out the advance fee payment component into the trust fund and all merchant charges to the operating account, California attorneys must beware.
In order to ensure that you are in full compliance with California's complex trust fund accounting rules, learning the do's and don'ts of alternative payment systems is crucial to your practice.
The most important rules governing attorney payments relate to safekeeping (formerly referred to as "preserving") of client funds and attorney-client privilege. Rule 1.15(a) states as follows:
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All funds received or held by a lawyer or law firm for the benefit of a client ... including advances for fees, costs and expenses, shall be deposited in one or more identifiable bank accounts labeled "Trust Accounts".1
The other impacted rules include confidentiality/attorney-client privilege,2 the duty to communicate3 and unconscionability of fees.4
This rule sounds simple enough, but the history of the application of this rule to credit cards has had a long and tortured history.
Before turning to that history, a brief explanation of the latest alternative payment structure, called in technical...
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