Originally from Dispute Resolution Journal

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Rarely do lawyers avoid the reach of ethics obligations. Yet here is one for lawyer neutrals: they need not segregate advance deposits that parties to the disputes give them for future work. The nature of the neutral’s relationship with the disputants makes the difference.

The Model and state Rules of Professional Conduct generally require lawyers to hold funds of clients and third parties in separate client trust accounts. Model Rule 1.15(a) on “Safekeeping Property” states that a lawyer “shall hold property of clients or third persons that is in a lawyer’s possession … separate from the lawyer’s own property.” It continues: “Funds shall be kept in a separate account maintained in the state where the lawyer’s office is situated”, unless the client or third person consents to a different location. (See also similar Illinois Rule 1.15(a) that specifically requires deposit into “interest- or dividend-bearing client trust accounts”.) Both Rules have ancillary requirements of record keeping and reporting. (See Model Rule 1.15(a) and (d); Illinois Rule 1.15(a) and (d).) There are certain exceptions to these Rules, at least in Illinois, such as where the lawyer gets a payment that the client and lawyer treat as the lawyer’s property at the time of payment. (See Illinois Rule 1.15(c).) 

A complete carve-out exists under Rule 1.15 for lawyer arbitrators and mediators who get deposits for future work. The exemption is not stated expressly; rather, it is the logical inference from other express language in Rule 1.15 – that the Rule applies to property delivered “in connection with a representation.” (See Rules 1.15(a), (e).) Since lawyer arbitrators and mediators are not client representatives, the Rule has no application to them.