In Re: Amendments to Rule Regulating the Florida Bar 5-1.1(g) ( 2021 )

Supreme Court of Florida
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No. SC20-1543
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IN RE: AMENDMENTS TO RULE REGULATING THE FLORIDA
BAR 5-1.1(g).
June 18, 2021
PER CURIAM.
The Task Force on the Distribution of IOTA Funds (Task Force)
petitions the Court to amend rule 5-1.1(g) (Trust Accounts; Interest
on Trust Accounts (IOTA) Program) of the Rules Regulating the
Florida Bar (Bar Rules). We have jurisdiction. See art. V, § 15, Fla.
Const. With the substantial modifications discussed below, we
adopt the amendments to rule 5-1.1(g) proposed by the Task Force.
BACKGROUND
In 1978, this Court adopted the nation’s first Interest on Trust
Accounts Program. In re Interest on Trust Accounts, 356 So. 2d 799(Fla. 1978). The program became fully operational in 1981, see In
re Interest on Trust Accounts, 402 So. 2d 389 (Fla. 1981), and
currently operates pursuant to the provisions of rule 5-1.1(g). All
funds generated by the IOTA program flow to The Florida Bar
Foundation, Inc. (Foundation) to “fund programs which are
designed to improve the administration of justice or to expand the
delivery of legal services to the poor.” In re Interest on Trust
Accounts, 538 So. 2d 448, 450 (Fla. 1989); see also R. Regulating
Fla. Bar 5-1.1(g)(1)(C) (defining IOTA account as an interest or
dividend-bearing trust account benefiting the Foundation).
In the years since the IOTA program became operational,
Florida’s population, along with the need among its low-income
citizens for direct civil legal services, has grown significantly. Of
Florida’s approximately 7.5 million households, over 1 million live
in poverty, and over 4.2 million Floridians have an income that is
below 125% of the Federal Poverty Level, making them eligible for
services from one of Florida’s civil legal aid organizations. See Task
Force on Distrib. of IOTA Funds, Final Report of the Task Force on
Distribution of IOTA Funds, app. D (2020) (on file with Clerk, Fla.
Sup. Ct.). Further, an estimated 5.87 million low-and-moderate
income Floridians are likely to experience a civil legal issue each
year, while roughly only 80,399 low-income Floridians are assisted
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annually by civil legal aid organizations. Id. At the same time, the
amount of funds generated by the IOTA program on an annual
basis has decreased sharply in recent years from a precipitous
decline in interest rates and a host of other economic factors.
Against this backdrop, the Court formed the Task Force in
October 2019 to examine whether rule 5-1.1(g) should be amended
“to better ensure the most effective use of IOTA funds.” In re Task
Force on Distribution of IOTA Funds, Fla. Admin. Order No. AOSC19-
70 (Fla. Oct. 24, 2019) (on file with Clerk, Fla. Sup. Ct.). The Court
directed the Task Force to “give priority consideration to the need
for funding direct legal services for low-income litigants,” and to
examine and make recommendations on: (1) alternative models for
the distribution of IOTA funds; (2) whether specific priorities should
be established for the use of IOTA funds; (3) whether specific
requirements or limitations should be imposed on the use of IOTA
funds; (4) whether reporting requirements on the distribution and
use of IOTA funds should be adopted; and (5) any other matters
related to the effective use of IOTA funds. Id.The Task Force conducted a thorough review of the IOTA
program, held multiple public hearings, and solicited input from
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various stakeholders. Afterward, it submitted a final report
proposing amendments to rule 5-1.1(g). The proposed
amendments, which were unanimously approved by the Task Force,
restrict the use of IOTA funds to the provision or facilitation of
direct legal services to low-income persons, and impose various
annual reporting requirements on the Foundation and the grantee
organizations that receive IOTA funds.
The Court treated the Task Force’s final report as a petition to
amend the Bar Rules and published its proposal for comment.
Fourteen comments were received. The Task Force filed a response,
and a reply was filed by the Florida Civil Legal Aid Association, in
which many of the other commenters joined. Having considered the
proposed amendments, the comments filed, the Task Force’s
response, and the joint reply, as well as having had the benefit of
oral argument, we adopt the amendments to Bar Rule 5-1.1(g)
proposed by the Task Force with the modifications discussed below.
AMENDMENTS
First, subdivision (g)(1) (Definitions) is amended to include new
subdivisions (G) through (J). The new subdivisions contain
definitions for the phrases “qualified grantee organization,”
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“qualified legal services,” “qualified legal services provider,” “direct
expenses required to administer the IOTA funds,” and “the court.”
We modify the Task Force’s proposed definition in subdivision
(g)(1)(G) for “qualified legal services” to clarify that such services
include “post-conviction representation, programs that assist low-
income clients in navigating legal processes, and the publication of
legal forms or other legal resources for use by pro se litigants.” We
also add subdivision (g)(1)(I)(iv) to the Task Force’s proposed
definition for “direct expenses required to administer the IOTA
funds” to clarify that such expenses include “direct costs to
administer the Loan Repayment Assistance Program and to
distribute funds in connection with the program (but not the
program funds themselves).” In making this latter modification, we
emphasize that funds distributed to eligible attorneys as part of the
Loan Repayment Assistance Program are not “direct expenses
required to administer the IOTA funds” as defined in subdivision
(g)(1)(I).
Next, new subdivisions (g)(8) through (g)(12) are added to rule
5-1.1. New subdivision (g)(8) (Distribution of IOTA Funds by the
Foundation) requires the Foundation to maintain IOTA funds
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separate from all other funds, and sets out when and under what
circumstances the distribution of such funds is to occur. We
modify the Task Force’s proposed subdivision to clarify that the
Foundation, no later than six months after the fiscal year, must
distribute to one or more qualified grantee organizations all IOTA
funds collected that fiscal year, minus direct expenses required to
administer the IOTA funds, funds required to fund the Loan
Repayment Assistance Program, and any additional reserves
specifically authorized by the Court. This modification ensures that
the Foundation continues its current practice of awarding grants on
an annual basis, allowing grantee organizations to effectively
conduct annual budgeting and long-term planning. We also modify
the Task Force’s proposed subdivision to make clear that the
objective standards the Foundation is required to adopt for the
selection of qualified grantee organizations must require that IOTA
funds be used to “facilitate or directly provide qualified legal
services by qualified legal services providers.”
We acknowledge that the adoption of subdivisions (g)(1)(I) and
(g)(8) will limit the amount of IOTA funds the Foundation is able to
devote to reserves on an annual basis. However, none of the
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amendments we adopt today affect the extensive reserves already in
the Foundation’s possession, or precludes the Foundation from
using any of its other revenue streams to supplement its reserves or
to fund activities unrelated to the facilitation or provision of
qualified legal services. Further, if the Foundation’s reserves
become insufficient for any reason to ensure the stable distribution
of IOTA funds—e.g., after providing vital support to legal
organizations in the wake of a natural disaster or other unforeseen
event—the Foundation can always seek approval from the Court to
retain additional funds for reserves under subdivision (g)(1)(I) that
exceed the 15% cap on “direct expenses required to administer the
IOTA funds.”
New subdivision (g)(9) (Use of IOTA Funds by Qualified
Grantee Organizations) sets out how much and for what purposes a
qualified grantee organization may expend IOTA funds. We modify
the Task Force’s proposed subdivision to require a qualified grantee
organization to expend at least 85% of the IOTA funds it receives “to
facilitate qualified legal service providers providing or facilitating the
provision of qualified legal services,” and to expend no more than
15% of the IOTA funds received on “general administrative expenses
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not directly supporting the provision of qualified legal services and
establishing reserves.” We also modify the Task Force’s proposed
subdivision to require a qualified grantee organization to provide
the Foundation with a written justification if it expends more than
15% of the IOTA funds it receives on general administrative
expenses. To clarify what types of expenditures are included under
“expenses that otherwise directly facilitate providing qualified legal
services,” we modify the Task Force’s proposed subdivision (g)(9)(D)
to make clear that such expenses include “training, legal research,
and technology necessary to the provision of qualified legal
services.”
New subdivision (g)(10) (Reporting by the Foundation) requires
the Foundation to annually certify to the Court its compliance with
rule 5-1.1(g) and to include certain information with its
certification. We modify the Task Force’s proposed subdivision to
require the Foundation to also include with its certification “the
total amount distributed under the Loan Repayment Assistance
Program and the number of qualified legal services providers to
whom distributions were made.”
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Lastly, we decline to adopt the Task Force’s proposed
subdivision (g)(13) (Effective Date and Transitional Rule). The
subdivision is not necessary in light of our modifications to the
Task Force’s proposal.
CONCLUSION
Throughout these proceedings, many have urged us to
maintain the status quo with respect to the use and distribution of
IOTA funds. But the status quo, as the above cited statistics
suggest, is becoming increasingly untenable, as a significant
number of Floridians continue to go without access to civil justice.
This Court is committed to improving access to justice throughout
the state, and the amendments we adopt today are a step in that
direction, as the bulk of IOTA funds collected will now be used to
facilitate or provide direct legal services to low-income Floridians.
Accordingly, we thank the members of the Task Force for their
hard work and express our appreciation to all of those who either
filed comments or aided the Task Force in the development of its
proposal. The Rules Regulating the Florida Bar are hereby
amended as reflected in the appendix to this opinion. New
language is indicated by underscoring; deletions are indicated by
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struck-through type. The amendments become effective on July 1,
2021, at 12:01 a.m.
It is so ordered.
CANADY, C.J., and POLSTON, LAWSON, MUÑIZ, COURIEL, and
GROSSHANS, JJ., concur.
LABARGA, J., concurs in part and dissents in part with an opinion.
THE FILING OF A MOTION FOR REHEARING SHALL NOT ALTER
THE EFFECTIVE DATE OF THESE AMENDMENTS.
LABARGA, J., concurring in part and dissenting in part.
The Florida Bar Foundation (Foundation) is a public charity
that provides funding for legal services to the needy and funds
programs designed to improve the administration of justice. Its goal
is simply to provide greater access to justice. Indeed, as noted by
the majority, “all funds generated by the IOTA program flow to the
[Foundation] to fund programs which are designed to improve the
administration of justice or to expand the delivery of legal services
to the poor.” Majority op. at 2 (quoting Matter of Interest on Trust
Accounts, 538 So. 2d 448, 450 (Fla. 1989)).
As noted by the Florida Civil Legal Aid Association in its
comments in response to the Task Force’s final report, Florida does
not provide any state funding to cover legal aid expenses. In this
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respect, Florida is unlike forty-seven other states, which do provide
some level of civil legal aid funding. In the absence of funding at
the state level, the Foundation has provided core operating support
to Florida’s civil legal aid organizations. Such support has filled in
the gaps in funding obtained from other sources.
Simply stated, access to civil justice for low-income Floridians
would be catastrophically diminished without funds generated by
the IOTA program and the Foundation’s strategic grantmaking and
investment assessment, training, and technology and technical
assistance to help grantees build capacity and operate efficiently
and effectively. Given this contribution to the goal of providing
greater access to civil justice, it should come as no surprise that
thirty-four past presidents of The Florida Bar and twenty-six past
presidents of the Foundation collectively opposed the Task Force’s
proposal.
I welcome the improvements made by the majority to various
proposals submitted by the Task Force which, if left unchanged,
would have inflicted a grappling hold on the ability of grantees to
deliver legal services to the needy. However, because I do not agree
that a number of these proposals are necessary to begin with, I
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cannot concur with their inclusion. I will begin with the proposals I
agree with.
Reporting by the Foundation
New subdivision (g)(10) requires the Foundation to provide the
Court with an annual audit of IOTA funds and to certify that it is in
compliance with the requirements of rule 5-1.1(g). The certification
must include: (1) the amount of IOTA funds received; (2) a detailed
breakdown of direct expenses required to administer IOTA funds;
(3) the name of each qualified grantee organization that received a
distribution; (4) the amount each qualified grantee organization
received; (5) a description of the process for selecting each qualified
grantee organization, including the objective standards developed
for that purpose; (6) the total amount of funds received from
sources other than IOTA; (7) a detailed summary of the information
provided to the Foundation from qualified grantee organizations as
required by subdivision (11) of this rule; (8) the total amount
distributed under the Loan Repayment Assistance Program and the
number of qualified legal services providers to whom distributions
were made; and (9) any other information the Court determines is
relevant.
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Reporting by Qualified Grantee Organizations
In addition, subsection (g)(11) requires qualified grantee
organizations to annually certify to the Foundation their compliance
with rule 5-1.1(g)’s requirements on the use of IOTA funds. This
subsection includes an exhaustive list of detailed requirements of
information grantee organizations must provide, in addition to “any
other information the court determines is relevant.” The
certification must include: (1) the number of qualified legal services
providers compensated or facilitated by the use of IOTA funds;
(2) the number of clients receiving qualified legal services paid for or
facilitated by the use of IOTA funds; (3) the number of low-income
Floridians who, while not directly compensated, are nevertheless
impacted by qualified legal services paid for or facilitated by the use
of IOTA funds; (4) the number of hours expended delivering
qualified legal services paid for or facilitated by the use of IOTA
funds; (5) the types of matters for which clients received qualified
legal services paid for or facilitated by the use of IOTA funds; (6) an
accounting of the use of IOTA funds, including the amount used to
establish reserves and pay for overhead and administrative
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expenses; and (7) the total amount received from sources other than
IOTA funds by the qualified grantee organization.
Required Review by the Court and Catch-all Provision
What is more, subsection (g)(12) requires “the court [to] cause
a review of these amendments to be conducted to advise the court
regarding their overall efficacy 2 years after their effective date.”
This review includes the following catch-all provision: “the scope of
this review may also include any other matters related to the IOTA
program.” Thus, should the audits, reporting, and certification
requirements of subsections (g)(10) and (11) miss any suspected
misuse of IOTA funds, the Court has added a third layer of review to
look further.
Because the exhaustive auditing, reporting, certification, and
court review requirements of subsections (g)(10), (11), and (12)
ensure a high level of supervision, oversight, and transparency, I
concur with their inclusion in rule 5-1.1(g).
The Innocence Project of Florida
According to the comments of The Innocence Project of Florida
(IPF) in response to the proposals of the Task Force, IPF has
assisted in obtaining the release of twenty-five innocent individuals
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since its inception in 2003. It received its first IOTA grant in 2006,
which allowed IPF to hire its first two staff lawyers. Since that time,
IPF has received a competitive grant award each year to support its
efforts to find and represent indigent innocent individuals in Florida
prisons. The comments describe IPF’s use of IOTA funding as
follows:
The availability of IOTA funding has enabled IPF to
expand access to the type of vital scientific testing that is
essential to proving innocence of a crime many years
after conviction.
It has also enabled IPF’s advocacy for broader
access to postconviction relief mechanisms where new
evidence of innocence exists. And it has helped IPF to
create, through successful appellate litigation, justice-
driven processes for resolving postconviction claims.
IPF observes that because of the award of IOTA funds, these
successes have further led to improvements in the fair and effective
administration of justice.
Subsection (g)(1)(G) of the Task Force’s proposal included a
definition of “qualified legal services” that could have been
interpreted to exclude funding for projects such as The Innocence
Project of Florida. It basically limited such funding to “free legal
services provided directly to low-income clients for their civil legal
needs in Florida.” Thankfully, the majority removed any doubt
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concerning IPF’s eligibility to receive IOTA funds by simply
modifying the definition. The new modified definition of “qualified
legal services” provides:
“Qualified legal services” are free legal services
provided directly to low-income clients for their civil legal
needs in Florida, and includes post-conviction
representation and programs that assist low-income
clients in navigating legal processes and the publication
of legal forms or other legal resources for use by pro se
litigants.
(Emphasis added.) I wholeheartedly agree with the majority’s
substantial modification in this instance and concur with its
inclusion in rule 5-1.1(g).
Use of IOTA Funds by Qualified Grantee Organizations
The Task Force’s final report proposed a 10% cap on the
amount qualified grantee organizations may expend for
administrative expenses and establishing reserves from IOTA funds.
According to subsection (g)(9) of the Task Force’s proposed rules
governing the distribution of IOTA funds, “[a] qualified grantee
organization must expend at least 90% of the IOTA funds received
to facilitate qualified legal service providers providing qualified legal
services. A qualified grantee organization must spend no more than
10% of the IOTA funds received for administrative expenses and
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establishing reserves.” Subsection (g)(9) included rent, training,
and technology in its definition of administrative expenses and
limited “expenditures to facilitate qualified legal service providers
providing qualified legal services” to compensation for legal service
providers; staff who directly assist legal service providers, such as
paralegals; staff necessary to coordinate volunteer legal service
providers; or expenses that directly facilitate providing qualified
legal services.
Conspicuously missing from this list were expenses for
training and technology necessary to the provision of qualified legal
services. Thankfully, the majority modified subdivision (g)(9)(D) to
include “expenses that otherwise directly facilitate providing
qualified legal services, including training and technology necessary
to the provision of qualified legal services.” (Emphasis added.)
I agree with this modification and concur with its inclusion. I
cannot, however, concur with the remainder of the majority’s
modified subdivision (g)(9).
The majority accepted the Task Force’s premise that qualified
grantee organizations receiving IOTA funds must be required to
limit expenditures on general administrative expenses such as rent,
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training, and technology. The Task Force chose a 10% cap—a
choice that can only be reasonably described as arbitrary.
According to the Florida Civil Legal Aid Association’s comments, the
10% cap proposed by the Task Force would have severe
implications for the ability of civil legal organizations to cover direct
and indirect expenses associated with hiring an attorney. These
expenses include legal staff training, the purchase of technology
such as case management software and legal research
subscriptions, building rental and related expenses, and attorney
travel and training.
The comment further explained that to compensate for the
loss of IOTA funds, civil legal organizations would have to either
“operate on the hope that it could somehow” obtain additional
funding from another source, or take resources away from some
projects to fund others. The Task Force’s proposal thus places civil
legal aid organizations in an untenable position that will likely
require them to limit rather than expand the services they provide.
The majority modified the cap by raising it from 10% to 15%
and, perhaps most importantly, by loosening the Task Force’s strict
cap and permitting qualified grantee organizations to provide a
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written justification if the 15% cap is exceeded. This is a much
softer landing than the strict prohibition proposed by the Task
Force, and while these modifications are a step in the right
direction, there is no need for such strict limitations on overhead.
As noted earlier, subsection (g)(11)(F) requires qualified grantee
organizations to annually certify to the Foundation their compliance
with rule 5-1.1(g)’s requirements on the use of IOTA funds,
including an accounting of the use of IOTA funds and the amount
used to establish reserves and pay for overhead and administrative
expenses. Clearly, if a grantee organization is unnecessarily
spending too much on general administrative expenses, the
Foundation will see it upon reviewing the grantee organization’s
annual report required by subsection (g)(11). The Court will have
an opportunity to see it upon reviewing the Foundation’s annual
audit of IOTA funds required by subsection (g)(10), and it will have
a second opportunity to look for any pattern of overspending during
the review required by (g)(12). Given the requirements of these
thorough oversight provisions, and the lack of any factual findings
of rampant unnecessary spending by grantees, I see no need to
impose any limitation on expenditures on general administrative
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expenses—subsections (g)(10), (11), and (12) provide more than
sufficient oversight.
Ironically, the majority’s mandate imposes on the Foundation
and on grantee organizations an exhaustive labor-intensive annual
accounting, reporting, and certification requirement that will surely
necessitate the hiring of qualified staff capable of performing such
tasks, while simultaneously imposing a 15% limitation on
administrative expenses. I respectfully dissent to the inclusion of
this unnecessary and perhaps punitive provision in rule 5-1.1(g).
Distribution of IOTA Funds by the Foundation
The majority’s modified subdivision (g)(8) requires the
Foundation to maintain IOTA funds separate from all other funds
and sets forth when and under what circumstances the distribution
of such funds may occur. Majority op. at 6. Specifically,
subdivision (g)(8) requires the Foundation to distribute to qualified
grantee organizations all IOTA funds collected that fiscal year,
minus direct expenses, within six months of the end of the fiscal
year. Majority op. at 6.
According to the comments submitted by the Florida Civil
Legal Aid Association, this requirement will negatively impact the
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Foundation in two significant ways. First, this requirement will
eliminate the current ability of qualified grantee organizations to
conduct annual budgeting. Requiring the disbursement of funds
within six months of receipt creates uncertainty as to funding, and
in particular, this requirement will make it difficult to retain staff.
Second, this requirement will eliminate the Foundation’s
reserve policy. The Association warns that this requirement will
destabilize funding and undermine organizations’ abilities to
maintain a “modicum of funding stability in a volatile economy.”
Of particular concern—especially in the hurricane-prone state of
Florida—is that eliminating the reserve policy will undermine the
Foundation’s ability to provide vital support to legal organizations in
the wake of a disaster. Without such reserves, the Foundation will
be unable to help vulnerable communities recover from these
disasters by providing necessary education and outreach.
Again, despite the exhaustive oversight requirements of new
subdivisions (g)(10), (11), and (12), the majority imposes another
unnecessary budgetary requirement that will undoubtedly lead to
difficult financial, planning, and staffing consequences for grantees
that deliver legal services to the needy. Because I cannot agree to
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such an unnecessary exercise, I dissent to this provision being
included.
Conclusion
As should be expected of any organization receiving public
funding to fulfill its mission, financial and budgetary oversight is a
necessary and integral part of the transparency process. Here,
subsections (10) and (11) of rule 5-1.1(g) impose annual auditing,
reporting, certification, and review requirements that more than
suffice to ensure fiscal responsibility and transparency. In
addition, subsection (g)(12) provides for an additional layer of review
by the Court two years after the effective date of these amendments,
the scope of which “may also include any other matters related to
the IOTA program.” There is plenty of oversight. The amendments
to rule 5-1.1(g) should have stopped there. Instead, unfortunately,
the majority adopted the Task Force’s proposal and needlessly
included, with some modifications, a series of unnecessary
budgetary constraints that will undoubtedly hinder the delivery of
legal services to the needy. As observed by the collective comment
of twenty-six past presidents of the Foundation in response to the
Task Force’s proposal:
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The Task Force has not presented any evidence—or
made any findings—of any flaws in the present, long-
standing structural arrangement for the deployment of
IOTA funds. Task Force Report, Appendix J, at J-532.
This Court should not discard the model developed by
this Court, the Bar, and the Foundation over a 50-year
period—that other jurisdictions have imitated—based on
the Task Force’s tenuous evidentiary record, lacking any
expert analysis.
Granted, the Task Force did conduct a survey of
sixty-eight bar associations and groups, twenty-five of
which responded. Task Force Report, Appendix K. None
of the survey responses provide any data on how the
Task Force’s proposed changes will impact Florida’s IOTA
program, the provision of legal services to the poor, or the
administration of justice. Id. To the contrary, the survey
shows that many jurisdictions are following Florida’s
present IOTA program . . . .
The Florida Bar Foundation, through its grantees and
programs designed to improve the administration of justice, has
been successful in advancing the delivery of civil legal services to
the needy since its inception. As noted by the comment of past
Foundation presidents, the Task Force has not identified any
problems or flaws with the arrangement for the deployment of IOTA
funds, nor has it presented any evidence or developed any analysis
on what impact its proposal will have on legal aid organizations.
Thus, the drastic changes proposed by the Task Force, and
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substantially adopted by the majority, raise the question: if
something is working well, why not just leave it alone.
I join the majority in thanking the members of the Task Force
for their hard work and dedication to this task. I also thank those
who filed comments, which I found very helpful.
I concur and respectfully dissent as noted above.
Original Proceeding – Florida Rules Regulating The Florida Bar
Mayanne Downs, Chair, Orlando, Florida, Karen J. Ladis, Miami,
Florida, Laird A. Lile, Naples, Florida, Hala A. Sandridge, Tampa,
Florida, Honorable Edwin A. Scales, III, Miami, Florida, John M.
Stewart, Vero Beach, Florida, M. Scott Thomas, Task Force on
Distribution of IOTA Funds, Jacksonville, Florida, Joshua E. Doyle,
Executive Director, and Elizabeth Clark Tarbert, Ethics Counsel,
The Florida Bar, Tallahassee, Florida,
for Petitioner
Chris W. Altenbernd of Banker Lopez Gassler P.A., Tampa, Florida,
and Raymond T. Elligett Jr. of Buell & Elligett, P.A., on behalf of
Bay Area Legal Services, Inc., Tampa, Florida; Sylvia H. Walbolt and
Peter D. Webster of Carlton Fields Jorden Burt, P.A., Miami,
Florida, and Joshua Herington Roberts and George E. Schulz, Jr. of
Holland & Knight, LLP, on behalf of The Florida Bar Foundation,
Jacksonville, Florida; Christopher V. Carlyle of The Carlyle
Appellate Law Firm, on behalf of Texas Access for Justice
Foundation, Orlando, Florida; Bryan S. Gowdy of Creed & Gowdy,
P.A., on behalf of Past Presidents of The Florida Bar Foundation,
Jacksonville, Florida; Raoul G. Cantero of White & Case LLP,
Jacksonville, Florida, and John A. DeVault III of Bedell, Dittmar,
DeVault, Pillans & Coxe, on behalf of 34 Former Presidents of The
Florida Bar, Miami, Florida; Michael March Brownlee of The
Brownlee Law Firm, Orlando, Florida, and Jodi Siegel, on behalf of
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Southern Legal Counsel, Inc., Gainesville, Florida; John B.
Macdonald, on behalf of the Business Law Section of The Florida
Bar, Jacksonville, Florida; Elliot H. Scherker of Greenberg Traurig,
P.A., on behalf of The Innocence Project of Florida, Inc. Miami,
Florida; Katherine E. Giddings and Kristen M. Fiore of Akerman
LLP, Tallahassee, Florida, Christine B. Gardner of Akerman LLP,
West Palm Beach, Florida, Gerald B. Cope Jr. of Akerman LLP,
Miami, Florida, and Samantha Howell of Southern Legal Counsel,
Inc., on behalf of the Florida Pro Bono Coordinators Association,
Gainesville, Florida; Anthony Charles Musto, on behalf of The
Florida Bar Public Interest Law Section, Hallandale Beach, Florida;
Dineen Pashoukos Wasylik of DPW Legal, on behalf of the Pro Bono
Legal Services Committee of The Florida Bar, Tampa, Florida;
Steven L. Brannock and Torri D. Macarages of Brannock
Humphries & Berman, on behalf of Florida’s Children First, Tampa,
Florida; John S. Mills and Thomas D. Hall of Bishop & Mills, PLLC,
Jacksonville, Florida, Bailey Howard of Bishop & Mills, PLLC,
Tallahassee, Florida, and Robert Bradley Jr. of Bradley, Garrison &
Komando, P.A., on behalf of Florida Civil Legal Aid Association,
Orange Park, Florida; and Radhika M. Singh on behalf of the
National Legal Aid & Defender Association, Washington, District of
Columbia;
Responding with comments
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Appendix
RULES REGULATING THE FLORIDA BAR
CHAPTER 5 RULES REGULATING TRUST ACCOUNTS
5-1 GENERALLY
RULE 5-1.1 TRUST ACCOUNTS
(a)-(f) [NO CHANGE]
(g) Interest on Trust Accounts (IOTA) Program.
(1) Definitions. As used in this rule, the term:
(A) [NO CHANGE]
(B) “Foundation” means The Florida Bar Foundation, Inc.
which serves as the designated IOTA fund administrator and
monitors and receives IOTA funds from eligible institutions
and distributes IOTA funds consistent with the obligations
and directives in this rule.
(C)-(E) [NO CHANGE]
(F) A “qualified grantee organization” is a charitable or
other nonprofit organization that facilitates or directly
provides qualified legal services by qualified legal services
providers and that has experience in successfully doing so.
(G) “Qualified legal services” are free legal services
provided directly to low-income clients for their civil legal
needs in Florida, and includes post-conviction representation,
programs that assist low-income clients in navigating legal
processes, and the publication of legal forms or other legal
resources for use by pro se litigants.
(H) A “qualified legal services provider” is a member of The
Florida Bar or other individual authorized by the Rules
Regulating The Florida Bar or other law to provide qualified
legal services.
(I) “Direct expenses required to administer the IOTA funds”
means those actual costs directly incurred by the foundation
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in performing the obligations imposed by this rule. Direct
expenses required to administer the IOTA funds must not
exceed 15% of collected IOTA funds in any fiscal year without
the court’s prior approval. These costs include preparation of
the foundation’s annual audit on IOTA funds, compensation
of staff who exclusively perform the required collection,
distribution, and reporting obligations imposed by this rule
and overhead expenses of the foundation directly related to
fulfilling its obligations under this rule. Direct expenses
required to administer the IOTA funds also include:
(i) actual costs and expenses incurred by the
foundation to increase the amount of IOTA funds available
for distribution;
(ii) funding of reserves deemed by the foundation to be
reasonably prudent to promote stability in distribution of
IOTA funds to qualified grantee organizations;
(iii) direct costs related to providing training and
technology to qualified grantee organizations, as specified
below; and
(iv) direct costs to administer the Loan Repayment
Assistance Program and to distribute funds in connection
with the program (but not the program funds themselves).
(J) “The court” means the Florida Supreme Court.
(2)-(7) [NO CHANGE]
(8) Distribution of IOTA Funds by the Foundation. No later
than 6 months after the fiscal year, the foundation must
distribute to 1 or more qualified grantee organizations all IOTA
funds collected that fiscal year except for direct expenses
required to administer the IOTA funds, funds required to fund
the Loan Repayment Assistance Program, and an additional
reserve amount if requested by the foundation and approved by
the court. Prior to distribution, the foundation must maintain
IOTA funds separate from other foundation funds. The
foundation may not condition distribution of IOTA funds to a
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qualified grantee organization on payment to the foundation for
any purpose, including training or technology. The foundation
must select qualified grantee organizations based on objective
standards it develops. When adopted, the foundation must
provide those standards to both The Florida Bar and the court
and also prominently publish those standards on the
foundation’s website. The standards must require that IOTA
funds be used to facilitate or directly provide qualified legal
services by qualified legal services providers and, to ensure fair
distribution of IOTA funds across Florida, must consider
relevant data, including:
(A) demographic data provided by an appropriate
governmental agency, such as the U.S. Bureau of Labor
Statistics; and
(B) data provided by the qualified grantee organization on
the use of any IOTA funds previously received.
(9) Use of IOTA Funds by Qualified Grantee Organizations. A
qualified grantee organization must expend at least 85% of the
IOTA funds received to facilitate qualified legal service providers
providing or facilitating the provision of qualified legal services
or, if such expenditures in any given year constitute less than
85% of the IOTA funds received, provide to the foundation a
written justification. A qualified grantee organization must
expend no more than 15% of the IOTA funds received for general
administrative expenses not directly supporting the provision of
qualified legal services and establishing reserves or, if such
expenditures in any given year constitute more than 15% of the
IOTA funds received, provide to the foundation a written
justification. Except as provided below, general administrative
expenses include rent, training, and technology. Expenditures
to facilitate qualified legal service providers providing or
facilitating the provision of qualified legal services are limited to:
(A) compensation paid to qualified legal service providers;
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(B) compensation paid to support staff who are directly
assisting qualified legal services providers, such as
paralegals;
(C) compensation paid to staff necessary for coordinating
volunteer qualified legal service providers; or
(D) expenses that otherwise directly facilitate providing
qualified legal services, including training, legal research, and
technology necessary to the provision of qualified legal
services.
Compensation includes benefits such as health insurance
and bar membership fees.
(10) Reporting by the Foundation. In addition to providing
the court with a copy of the annual audit of IOTA funds, the
foundation must annually certify to the court its compliance
with this rule’s requirements on the use of IOTA funds. This
certification must include, but not be limited to:
(A) the amount of IOTA funds received;
(B) a detailed breakdown of direct expenses required to
administer the IOTA funds;
(C) the name of each qualified grantee organization to
which distributions were made;
(D) the amount of distribution received by each qualified
grantee organization;
(E) a description of the process for determining eligibility
and selection of each qualified grantee organization, including
the objective standards developed for that purpose;
(F) the total amount received from sources other than
IOTA funds;
(G) a detailed summary of the information provided to the
foundation from qualified grantee organizations as required
by subdivision (11) of this rule;
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(H) the total amount distributed under the Loan
Repayment Assistance Program and the number of qualified
legal services providers to whom distributions were made;
and
(I) any other information the court determines is relevant.
(11) Reporting by Qualified Grantee Organizations. Qualified
grantee organizations must annually certify to the foundation
their compliance with this rule’s requirements on the use of
IOTA funds. This certification must include, but not be limited
to:
(A) the number of qualified legal services providers
compensated or facilitated by the use of IOTA funds;
(B) the number of clients receiving qualified legal services
paid for or facilitated by the use of IOTA funds;
(C) the number of low-income Floridians who, while not
directly represented, are nevertheless assisted by qualified
legal services paid for or facilitated by the use of IOTA funds;
(D) the number of hours expended delivering qualified
legal services paid for or facilitated by the use of IOTA funds;
(E) the types of matters for which clients received
qualified legal services paid for or facilitated by the use of
IOTA funds;
(F) an accounting of the use of IOTA funds, including the
amount used to establish reserves and pay for overhead and
other general administrative expenses;
(G) the total amount received from sources other than
IOTA funds by the qualified grantee organization; and
(H) any other information the court determines is
relevant.
(12) Required Review. The court will cause a review of the
amendments to rule 5-1.1(g) finally adopted by the court on
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June 18, 2021, to be conducted to advise the court regarding
their overall efficacy 2 years after their effective date. The scope
of this review may also include any other matters related to the
IOTA program.
(h)-(k) [NO CHANGE]
Comment
A lawyer must hold property of others with the care required of
a professional fiduciary. This chapter requires maintenance of a
bank or savings and loan association account, clearly labeled as a
trust account and in which only client or third party trust funds are
held.
Securities should be kept in a safe deposit box, except when
some other form of safekeeping is warranted by special
circumstances.
All property that is the property of clients or third persons
should be kept separate from the lawyer’s business and personal
property and, if money, in 1 or more trust accounts, unless
requested otherwise in writing by the client. Separate trust
accounts may be warranted when administering estate money or
acting in similar fiduciary capacities.
A lawyer who holds funds for a client or third person and who
determines that the funds are not nominal or short term as defined
elsewhere in this subchapter should hold the funds in a separate
interest-bearing account with the interest accruing to the benefit of
the client or third person unless directed otherwise in writing by the
client or third person.
Lawyers often receive funds from which the lawyer’s fee will be
paid. The lawyer is not required to remit to the client funds that
the lawyer reasonably believes represent fees owed. However, a
lawyer may not hold funds to coerce a client into accepting the
lawyer’s contention. The disputed portion of the funds must be
kept in a trust account and the lawyer should suggest means for
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prompt resolution of the dispute, such as arbitration. The
undisputed portion of the funds must be promptly distributed.
Third parties, such as a client’s creditors, may have lawful
claims against funds or other property in a lawyer’s custody. A
lawyer may have a duty under applicable law to protect these third-
party claims against wrongful interference by the client. When the
lawyer has a duty under applicable law to protect the third-party
claim and the third-party claim is not frivolous under applicable
law, the lawyer must refuse to surrender the property to the client
until the claims are resolved. However, a lawyer should not
unilaterally assume to arbitrate a dispute between the client and
the third party, and, where appropriate, the lawyer should consider
the possibility of depositing the property or funds in dispute into
the registry of the applicable court so that the matter may be
adjudicated.
The Supreme Court of Florida has held that lawyer trust
accounts may be the proper target of garnishment actions. See
Arnold, Matheny and Eagan, P.A. v. First American Holdings, Inc.,
982 So. 2d 628 (Fla. 2008). Under certain circumstances lawyers
may have a legal duty to protect funds in the lawyer’s trust account
that have been assigned to doctors, hospitals, or other health care
providers directly or designated as Medpay by an insurer. See The
Florida Bar v. Silver, 788 So. 2d 958 (Fla. 2001); The Florida Bar v.
Krasnove, 697 So. 2d 1208 (Fla. 1997); The Florida Bar v. Neely,
587 So. 2d 465 (Fla. 1991); Florida Ethics Opinion 02-4.
The obligations of a lawyer under this chapter are independent
of those arising from activity other than rendering legal services.
For example, a lawyer who serves only as an escrow agent is
governed by the applicable law relating to fiduciaries even though
the lawyer does not render legal services in the transaction and is
not governed by this rule. However, where a lawyer is an escrow
agent and represents a party to a transaction involving the
escrowed funds, the Supreme Court of Florida has held that lawyers
acting as escrow agents have a fiduciary duty to protect the
interests of all parties having an interest in escrowed funds whether
the funds are in a lawyer’s trust account or a separate escrow
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account. The Florida Bar v. Golden, 566 So. 2d 1286 (Fla. 1990);
see also The Florida Bar v. Hines, 39 So. 3d 1196 (Fla. 2010); The
Florida Bar v. Marrero, 157 So. 3d 1020 (Fla. 2015).
Each lawyer is required to be familiar with and comply with
the Rules Regulating Trust Accounts as adopted by the Supreme
Court of Florida.
Money or other property entrusted to a lawyer for a specific
purpose, including advances for fees, costs, and expenses, is held in
trust and must be applied only to that purpose. Money and other
property of clients coming into the hands of a lawyer are not subject
to counterclaim or setoff for attorney’s fees, and a refusal to
account for and deliver over the property on demand must be a
conversion. This does not preclude the retention of money or other
property on which a lawyer has a valid lien for services or to
preclude the payment of agreed fees from the proceeds of
transactions or collections.
Advances for fees and costs (funds against which costs and
fees are billed) are the property of the client or third party paying
same on a client’s behalf and are required to be maintained in trust,
separate from the lawyer’s property. Retainers are not funds
against which future services are billed. Retainers are funds paid
to guarantee the future availability of the lawyer’s legal services and
are earned by the lawyer on receipt. Retainers, being funds of the
lawyer, may not be placed in the client’s trust account.
The test of excessiveness found elsewhere in the Rules
Regulating The Florida Bar applies to all fees for legal services
including retainers, nonrefundable retainers, and minimum or flat
fees.
Foundation Provision of Training and Technology;
Grantees’ Funds from Non-IOTA Sources
While the foundation may use IOTA funds to provide training
and technology to qualified grantee organizations, and qualified
grantee organizations may use disbursed IOTA funds to pay the
- 33 -
foundation for that training and technology, the foundation may not
condition a grant on payment for these, or any, services provided by
the foundation to the qualified grantee organization. For instance,
the foundation may arrange for bulk purchasing of technology
which can then be provided to a qualified grantee organization at a
lower cost than would be otherwise available to the qualified
grantee organization, but the foundation may not, as a grant
condition, require the grantee to pay the foundation for such
services. A qualified grantee organization should, but is not
required to, receive funds from sources other than IOTA funds to
support its overall mission.
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