May an attorney ethically keep escrow funds or his trust account in an interest bearing account and retain the interest himself?
No. To do so would violate Disciplinary Rule 9-102 which reads as follows:
DR 9-102 Preserving Identity of Funds and Property of a Client.
A. All funds of clients paid to a lawyer or law firm, other than advances for costs and expenses, shall be deposited in one or more identifiable bank accounts maintained in the state in which the law office is situated and no funds belonging to the lawyer or law firm shall be deposited therein except as follows:
B. A lawyer shall:
While DR 9-102 does not contain a specific prohibition on retaining the interest from client money, implicit in the rule is a recognition that an attorney, both as an attorney and a fiduciary, has no right to client money and is held to a high standard of accountability. In such a relationship, the attorney accepts the client's funds in trust and remains strictly accountable for his or her own conduct in administering that trust. See, Bar Ass'n v. Marshall, 269 Md. 510, 307 A.2d 677, 682 (1973). And, while the argument has been advanced that money should not lie fallow, it has long been a well-recognized rule of fiduciary relationships that a fiduciary may not personally profit from funds or property entrusted to his control or custody. Furthermore, nothing can change the fact that the money simply does not belong to the attorney.
DR 9-102(A) does not specify that the interest earned on the funds in the client's trust account belongs to the client, however. Commentators have criticized this omission, noting that it might allow attorneys to misappropriate such interest. Note, "Attorney Misappropriation of Clients' Funds: A Study in Professional Responsibility," 10 U. Mich. J.L. Ref., 415, 436 (1977). But, since no question is presented as to whether an attorney has an obligation to earn interest for the client, the Committee expresses no opinion. The holding of this opinion is that an attorney may not use client money to earn interest for himself by placing it in an interest bearing account.
Were this committee to take any other view, it would be authorizing attorneys to use other people's money to benefit themselves. Such a holding would be inconsistent with the nature of the attorney-client relationship as well as approving a situation fraught with possibilities for conflicts of interest and overreaching.