Multistate Professional Responsibility Examination (MPRE) Fees, Client Property, and the Lawyer as Fiduciary Syllabus

What is an IOLTA account?

Interest on Lawyers' Trust Accounts: a pooled trust account for client funds that are nominal in amount or held short-term; the interest is remitted to a state foundation (usually for legal aid). Funds large enough to earn net interest for the client should be in a separate interest-bearing account for that client.

Under Rule 1.15(d), what must a lawyer do upon receiving funds or property in which a client or third person has an interest?

Promptly notify the client or third person, promptly deliver any funds or property the client/third person is entitled to receive, and upon request render a full accounting.

How must a lawyer handle funds in the trust account that are DISPUTED between the lawyer and the client (e.g., over a fee)?

Under Rule 1.15(e), the disputed portion must remain in the trust account until the dispute is resolved. The lawyer may withdraw only the undisputed portion to which the lawyer is entitled and must promptly distribute undisputed portions.

If a third party (not the client) claims an interest in funds the lawyer holds, what is the lawyer's obligation?

The lawyer must safeguard the disputed funds and may not unilaterally disburse them to the client if the third party has a matured legal/contractual claim (e.g., a perfected lien or doctor's lien). The lawyer keeps the disputed amount in trust until the claim is resolved.

What does 'prompt delivery' under Rule 1.15(d) require when only part of the funds is disputed?

The undisputed portion must be promptly delivered to the person entitled to it; only the genuinely disputed amount may be withheld and held in trust.

What is misappropriation of client funds?

The unauthorized use of client funds for the lawyer's own purposes, whether or not the lawyer intends to return them. It includes 'borrowing' from the trust account.

What is conversion in the trust-account context, and what discipline does misappropriation typically draw?

Conversion is the wrongful exercise of dominion over client funds inconsistent with the client's ownership. Intentional misappropriation/conversion is among the most serious ethics violations and frequently results in disbarment, even on a first offense and even if funds are later restored.

Does it matter for discipline whether a lawyer who misappropriated client funds later repaid them?

Repayment may mitigate but does not cure the violation. Misappropriation is complete upon the unauthorized use; restitution does not erase the misconduct.

What is the general rule of Rule 1.8(a) on business transactions with a client?

A lawyer may not enter a business transaction with a client or knowingly acquire an interest adverse to a client unless: (1) the terms are fair, reasonable, and fully disclosed in writing the client can understand; (2) the client is advised in writing to seek and given a chance to get independent counsel; and (3) the client gives informed consent in a signed writing to the essential terms and the lawyer's role.

What proprietary interest in a client's cause of action or litigation is a lawyer forbidden to acquire under Rule 1.8(i)?

A lawyer shall not acquire a proprietary interest in the subject matter of litigation, EXCEPT the lawyer may (1) acquire a lien authorized by law to secure the lawyer's fee or expenses, and (2) contract for a reasonable contingent fee in a civil case.

Under Rule 1.8(c), may a lawyer prepare an instrument giving the lawyer a substantial gift from a client?

No. A lawyer shall not solicit a substantial gift or prepare an instrument giving the lawyer (or a person related to the lawyer) a substantial gift, unless the lawyer is related to the client. Unsolicited gifts are permitted but a substantial one may be voidable under undue influence law.

May a lawyer provide financial assistance to a client in connection with litigation under Rule 1.8(e)?

Generally no, except: (1) advancing court costs and litigation expenses, repayment of which may be contingent on outcome; (2) for indigent clients, paying court costs and expenses outright; and (under the 2020 amendment) (3) modest gifts for basic living expenses to indigent pro bono clients in limited circumstances.

Under Rule 1.8(d), may a lawyer acquire media or literary rights based on the representation?

No. Prior to the conclusion of the representation, a lawyer shall not make or negotiate an agreement giving the lawyer literary or media rights to a portrayal based substantially on information relating to the representation.

What does Rule 1.8(h) say about limiting malpractice liability and settling malpractice claims?

A lawyer may not prospectively limit liability for malpractice unless the client is independently represented in making the agreement; and may not settle a claim or potential claim with an unrepresented or former client unless the lawyer first advises that person in writing to seek independent counsel and gives a reasonable opportunity to do so.

What is the general prohibition of Rule 5.6 on restrictions on the right to practice?

A lawyer shall not participate in offering or making (a) a partnership, employment, or other agreement that restricts a lawyer's right to practice after the relationship ends (except retirement-benefit agreements); or (b) an agreement restricting the right to practice as part of settling a client controversy.

Why does Rule 5.6 prohibit non-compete agreements among lawyers?

Such restrictions limit the professional autonomy of lawyers and, more importantly, restrict clients' freedom to choose the lawyer they want; the exception for retirement benefits is the narrow carve-out.

Under Rule 5.6(b), may a settlement of a client's case include a term barring the plaintiff's lawyer from representing others against the same defendant?

No. A lawyer may not propose or agree to a settlement term that restricts the lawyer's right to practice (such as not suing the defendant again or not using information learned). Such 'practice-restriction' settlement terms are prohibited for both the offering and accepting lawyer.

What is the retirement-benefits exception to Rule 5.6(a)?

A practice restriction is permitted if it is part of an agreement concerning benefits upon retirement (e.g., a non-compete tied to a lawyer's retirement/pension package).

How are fee disputes between a lawyer and client typically resolved, and what does the ABA encourage?

Through negotiation, mandatory or voluntary fee-arbitration programs, or a lawsuit. The ABA and many states encourage lawyers to participate in established fee-arbitration programs; some jurisdictions make fee arbitration mandatory for the lawyer if the client requests it.

What is quantum meruit, and when does it apply to a lawyer's fee?

Quantum meruit ('as much as deserved') allows recovery of the reasonable value of services rendered. A lawyer who is discharged, withdraws for good cause, or whose fee agreement is unenforceable may recover the reasonable value of work performed rather than the contract fee.

How much may a contingent-fee lawyer recover in quantum meruit if discharged without cause before the case settles?

In most jurisdictions, the discharged lawyer recovers the reasonable value of services performed (quantum meruit), not the full contract percentage; some jurisdictions hold that recovery does not accrue until the contingency (recovery) occurs.

What is a charging lien versus a retaining lien?

A charging lien is a right to payment out of the judgment or recovery the lawyer helped obtain. A retaining lien (where allowed) lets the lawyer retain the client's papers/property until fees are paid—though many jurisdictions and Rule 1.16(d) limit withholding when it would prejudice the client.

When a representation ends, what must a lawyer do with unearned fees and client property under Rule 1.16(d)?

Refund any advance payment of fees or expenses not yet earned or incurred and surrender papers and property to which the client is entitled, taking reasonable steps to protect the client's interests.

What is a 'reverse contingent fee' and is it permissible?

A fee for a defense lawyer calculated as a percentage of the money saved for the client (the difference between the amount demanded and the amount actually paid). It is permissible if reasonable and the savings can be reliably measured.

May a lawyer charge interest or a late-payment charge on overdue fees?

Yes, if the client is advised in advance and the charge is reasonable; it is treated like any other commercial term and must comply with applicable law.

What is the rule about an 'earned upon receipt' flat fee deposited outside the trust account?

Jurisdictions split: some allow a true flat fee to be treated as the lawyer's property if disclosed; but the client retains a right to a refund of any unearned portion if the lawyer is discharged before completing the work (Rule 1.16(d)), so labeling alone is not controlling.

Compare 'proportional services' versus 'joint responsibility' as the basis for splitting fees with an outside lawyer under Rule 1.5(e).

Either alone satisfies the first prong: the split may be proportional to the work each lawyer actually performs, OR (even if not proportional, e.g., a referral) each lawyer may assume joint responsibility, meaning financial and ethical responsibility for the matter as if partners. In both cases the client must agree in writing and the total fee must be reasonable.

May a referring lawyer who does no work receive part of the fee?

Yes, but only if that lawyer assumes joint responsibility for the representation, the client agrees in writing (including the share each lawyer receives), and the total fee is reasonable (Rule 1.5(e)). A pure 'naked' referral fee for no work and no responsibility is prohibited.

Who may pay a lawyer's fee on behalf of a client (third-party payment), and what conditions apply?

Under Rule 1.8(f), a lawyer may accept payment from someone other than the client only if (1) the client gives informed consent, (2) there is no interference with the lawyer's independent professional judgment or the client-lawyer relationship, and (3) confidential information is protected per Rule 1.6.

What must a lawyer do when funds deposited in the trust account include both earned fees and client money?

The lawyer must promptly withdraw the earned-fee portion (to avoid commingling) once the fee is earned and undisputed, while leaving client funds and any disputed amounts in the trust account.