NY: Holding Client Money with or without Interest?
Lafasciano v. Lorber, 823 N.Y.S.2d 427, (2006)
NY Underlying matrimonial action; holding marital assets in trust
Student Contributor: Jason Zemsky
Facts: During a matrimonial action between the Lafascianos, the Supreme Court determined that the proceeds of the sale of certain real property owned by a closely held family corporation, was marital property. Lorber, the attorney who represented the sale placed the proceeds in a non-interest bearing escrow account. The court then ruled that the money Lorber placed in the trust account should be divided equally among the Lafascianos. The wife, Carla M. Lafasciano, sued Lorber for legal malpractice claiming that he had failed to put that money in an interest bearing account. Lorber moved for Summary Judgment which the trial court granted.
Issue: Does a lawyer commit legal malpractice by not placing sale proceeds in an interest bearing account?
Ruling: Affirmed. The plaintiff failed to prove that the court directed Lorber to place the sale proceeds in an interest bearing account and Judiciary Law § 497(4) allowed Lorber to place the proceeds in a non-interest bearing escrow account.
Lesson: It might have been prudent for the lawyer to deposit the proceeds into an interest bearing escrow account pending resolution of any dispute. But would that have avoided the legal malpractice action? Maybe yes. Maybe no. RPC 1.15 "Safekeeping of Property" provides guidance. Otherwise, Court Rules generally do not require Attorney Trust Accounts to be interest bearing.
