A lot more thought was needed by bar associations, justices, governors and mayors, in terms of the shutdown's impact on the legal profession.

What is going to happen to lawyers with all of the closings and shutdowns due to the coronavirus?

Samuel C. Stretton.

That's a good question. The decisions about courts are being made by judges who are still receiving their paychecks. Their overhead is still being paid. Therefore, it is hard, at times, for judicial officers who have not practiced for a while to understand the plight of most law firms.

In essence, at least for small law firms, there is no real money out there. Everyone is unemployed, or out of work, so very few people have any money to even consider hiring an attorney. Second, courts are closed. For lawyers in small firms who make a living by going to preliminary hearings, district judge hearings, Common Pleas hearings, and arguing appellate matters, there are currently no cases to go into court for in order to make any monies.

Unless someone is working out of their house on a kitchen table, lawyers have overhead. They have secretaries, computers, malpractice insurance, resource programs, etc., which creates an overhead of a couple hundred thousand dollars.

There are small business loans allegedly available but trying to get through seems impossible because they are totally overwhelmed with work. It seems like even to get these loans might be months away, which won't do much for a business if it goes under. The court system does not realize the chaos that could cause. If a lawyer's firm goes under, they are not usually in a position to keep handling cases. For cases where lawyers are court appointed, they would have to withdraw. That leaves a huge void. For private cases, similar things have to happen.

For court-appointed cases, some of the courthouses are not paying court appointed counsel under the theory they are too busy, don't have the staffing, or whatever. That further compounds problems. Most court-appointed lawyers, at least in the Philadelphia area, get a pittance for their time and effort, and even that is not being paid timely.

Most cases have been continued, and no one checks with lawyers on new dates and times. Arbitrarily, dates are assigned. That creates further chaos, particularly for the lawyers who practice in multiple counties. Though government officials ask everyone to be understanding, most landlords are not going to be, credit card companies are not going to be, Westlaw or LexisNexis payments are still expected. Very few small firms have the resources to go one or two months without any revenue.

In 2008 and 2009, when there was a financial crisis, though it cannot compare to the present situation, many firms had serious problems, and went under. This writer remembers representing many lawyers who unfortunately had misused funds or were unable to return fees when demands were made because of the economic crisis creating professional licensing problems for these lawyers.

Unlike health providers, there is absolutely no sympathy for attorneys. Though attorneys provide a vital role, that is not the perception in the mind of the public.

As small firms fold, lawyers are unable to continue to practice because they can't pay their bills, and that will be a real blow to the bar. The strength of the bar is not in the big firms, or in institutions like the ACLU, or other pro bono groups. The strength of the bar are the small firms who stand up for clients, whether it is criminal or civil, unconstitutional or statutory, in the trial courts or the appellate courts. The independence of the bar counts on lawyers who take on tough and difficult cases, aids people, really try to make society better and change laws.

With these many problems, the bar associations are pretty much missing in action. Though they do send out notices for some of the court orders, there is nothing in place to help the small firms, nothing in place to help the sole practitioners, and nothing in place to help firms that need assistance in getting loans.

There does not appear to be any indication that when everything starts up again, in May or whenever it does, that the courts are going to give any consideration for the smaller firms in terms of large extensions, continuances, whatever is needed to get these firms back into financial shape.

One of the biggest concerns is that pro bono or quasi pro bono work may well suffer because many lawyers are not going to be in a position to do it for some time as this problem unfolds.

This crisis has the potential to truly undermine the strength of the bar and small firms, and the purpose of the bar and its independence. That clearly would be a very sad thing, but many lawyers are just not in a position to go without regular revenue or hearings for six to eight weeks.

The other concern, of course, is what happens to the new lawyers. There might not be any jobs for those graduating. For many, the bar exams have been pushed back until the fall, and for some states, maybe longer. That creates terrible financial pressures. In New York, those who passed the bar can't get timely meetings or interviews so they can be licensed. None of that is acceptable. The handling of this crisis at all levels leaves a lot to be desired. In the short run, there is a serious threat to the legal profession, and really, the backbone of the legal profession, which are these small firms who have traditionally carried the burden of the courts.

There needs to be a lot more thought by bar associations, Pennsylvania justices, and governors and mayors, in terms of the impact it is having on the legal profession, and really, all businesses. This current approach, no matter how many lives it might save, is not an acceptable approach. It is one driven purely by scientists without any understanding or regard for how society works. The consequences of this approach are going to create far more problems down the line. Let's hope the legal profession might show some wisdom in dealing with it in the future.

Lawyers really should have an IOLTA account, and use it.

I am a lawyer and don't do personal injury work. I do work where I get paid a fee. My fee agreements are nonrefundable. Therefore, it appears I don't need to have an IOLTA/escrow account. Am I right?

Surprisingly, many lawyers don't think they need to have an IOLTA account. They are wrong. Depending on how a lawyer runs his or her practice, there is a very real need for an IOLTA account. For instance, a lawyer who does just district judge work who appears at a landlord/tenant hearing, and a traffic type of hearing, could probably easily avoid having monies that would go into an IOLTA account. The lawyer would get a fee, and the lawyer would have a nonrefundable fee agreement, and earn the fee a couple of days later when they went to the hearing. The money would not have to be put into an IOLTA account because of the nonrefundable nature.

There are always exceptions. At times, lawyers are given funds either by clients or third parties, and those monies have to be put into an IOLTA account, at least, initially. A lawyer might handle a small estate and not open an estate account, but then the money would need to go into an IOLTA account, and if held for more than several weeks, would have to go into a qualified escrow account where interest is paid.

Also, when lawyers get nonrefundable fees, they sometimes receive costs. In other words, if one has to file a complaint for a landlord/tenant matter, or a complaint in any court, there is a cost involved. Sometimes, there is a service fee. The client gives those monies to a lawyer, and those monies have to go into an IOLTA account because they are not the lawyer's funds. It is hard to imagine a lawyer could run a law practice where he or she didn't receive costs either for court expenses, reimbursing doctors, hiring Investigators, etc. Those monies must go into the IOLTA/escrow account, and then be paid out through that account for the costs that are involved.

Rule 1.15(a)(5), sets forth when one uses the IOLTA account. Rule 1.15(a)(7), discusses when to use a non IOLTA account, where only nonqualified funds are to be placed there. Qualified funds have to be placed in the IOLTA account, at least, initially.

Qualified funds are defined in Rule 1.15(a)(9). "Qualified funds are Rule 1.15 funds, which are nominal amounts or reasonably expected to be held for such a short period of time that sufficient income will not be generated to justify the expanse of administering a segregated account." Nonqualified funds are defined in Rule 1.15(8). "Nonqualified funds are Rule 1.15 funds, whether cash, check, money order, or other negotiable instrument, which are not qualified funds."

In other words, monies one gets from a third party or client, are qualified and need to go into an IOLTA account. Otherwise, they are nonqualified funds, which can be placed in an interest-bearing escrow account. If there is a nonrefundable fee, at least in theory, that would take it out of the qualified funds, but a wise lawyer, particularly if the amount paid is a large amount, would be wise to hold most nonrefundable fees in the IOLTA account, in any event, until earned. Lawyers sometimes get discharged sooner than they expect. If they are discharged then, of course, it becomes whether the nonrefundable fee should be returned, particularly when the lawyer did not spend a lot of time on the case, and the amount of the fee is substantial.

One thing of importance is that only lawyers admitted to practice law in Pennsylvania, or a person under that lawyer's direct supervision, can be an authorized signer of an escrow or trust account, Rule 1.15(g). Too many times a lawyer's trusted secretary or bookkeeper is found to have been embezzling money over the years. It is tragic, but it unfortunately occurs more often than one likes to think.

Therefore, the answer to the question is, lawyers really should have an IOLTA account, and use it. Every lawyer, at some point, is going to need monies to be placed in the IOLTA account. Nonrefundable fee agreements are great, but the better practice is to hold some of that in the IOLTA account, particularly if it is a substantial fee.

The practice of law is not like it was in the 1960s, 1970s or before. The Pennsylvania Supreme Court has required specific record keeping under Rule 1.15 of the Rules of Professional Conduct, and Pennsylvania Rules of Disciplinary Enforcement 221. A lawyer should, at a minimal, have an operating account and an IOLTA account. If they are holding monies for long periods of time, they need a separate escrow interest bearing account. There must be ledger sheets for each client, which must keep a running balance, and there must be reconciliations each month.

Chester County lawyer Samuel C. Stretton has practiced in the area of legal and judicial ethics for more than 35 years. He welcomes questions and comments from readers. If you have a question, call Stretton directly at 610-696-4243 or write to him at 301 S. High St. P.O. Box 3231, West Chester, Pennsylvania, 19381.