Link to original WordPerfect Document

                                        120 N.J.L.J. 1113
                                        December 10, 1987


Appointed by the New Jersey Supreme Court


Postdating Trust
Account Settlement Checks

    The issue presented is whether it is ethical under RPC 1.15 and R. 1:21-6 for an attorney to postdate an attorney trust account check given to a client or to another attorney in a personal injury settlement.
    According to the inquirer, in tort cases the settlement draft which is ordinarily made payable to both the claimant and the attorney for the claimant [In re Conroy, 56 N.J. 279, 282 (1970)] is properly deposited in the attorney's trust account after endorsement. In order to minimize inconvenience to the client, the inquirer states that there is a practice of giving the client a postdated check for the claimant's net share of the recovery. Where a contingent fee is charged, a recovery statement must be issued to the client under R. 1:21-7(g). See also RPC 1.5(c), and it is convenient to accomplish all of these purposes when the client comes in to endorse the check for deposit.
    Of course, it would be improper to draw upon these funds until the check has cleared as we have expressly held in Opinion 454, 105 N.J.L.J. 441 (1980), and this is true even where the instrument is certified or is a cashier's or bank check representing the settlement proceeds of a negligence case.

    The inquirer suggests that the issuance of postdated checks to a point in time such as ten days or two weeks to allow time for clearance is permissible and ethical, perceiving the only "slight risk" as being the unauthorized negotiation of a postdated check prior to the date stated. We disagree. The Supreme Court has been especially sensitive to the matter of attorney record keeping and bank accounts, particularly attorney trust accounts. R. 1:21-6. The real hazard lies in the fact that the instrument may be dishonored or fail to clear for any one of a variety of reasons, and in such case the postdated check will, when presented, result in a draft upon the funds of others or, if such funds are not available, be itself dishonored. Unlike the narrow situation presented and passed upon in Opinion 454, supra, which is carefully limited to property transactions, there is no compelling commercial or social need of such overriding importance in the distribution of the proceeds of recovery in tort cases. Except for the maintenance of sound client relations, there is no reason why the client should be required to come to the lawyer's office twice. The claimant's check can be mailed after the deposit has cleared. We do not regard N.J.S.A. 12A:3-114 as evidence that the Legislature intended to sanction the use of postdated checks generally; that statute merely preserves the "negotiability" of such instruments.
    Accordingly, we hold that it is improper for an attorney to issue any checks drawn upon an attorney's trust account until the instrument representing the funds against which the check or checks are drawn has in fact cleared.
* * *

This archive is a service of Rutgers University School of Law - Camden