Garnishment of an Attorney IOLTA Account, Hadassah v. Schwartz, 2011-Ohio-5247

June 29, 2012 in Ohio Courts, Post Judgment Execution by Brad Council

A recent opinion out of the Ohio First District Court of Appeals affirms a trial court’s order determining funds held in an attorney’s IOLTA account may be garnished by a creditor. In Hadassah v. Schwartz, 2011-Ohio-5247, appellant Robert L. Schwartz argued that Hadassah, in bad faith, demanded that he place $150,000 in the custody of his attorney to help further settlement negotiations, but Hadassah instead garnished the funds. Schwartz also argued that the garnishment would deprive him of his right to representation as the funds represented a retainer for ongoing legal services.

The Ohio First District Court of Appeals found that, while his arguments were practical, funds generally are not exempt simply because they are placed with an attorney. Further, Schwartz could not produce a retainer agreement or any other records indicating that his attorney had acquired an ownership interest in the retainer, or that the retainer was non-refundable.

According to the Ohio Rules of Professional Conduct property belonging to a client or a third party is to be kept separate from the attorney’s property.  The placement of Schwartz’s $150,000 into an IOLTA account, instead of an operating account, indicated that Schwartz retained ownership rights over the funds, consequently making it subject to garnishment.

The Court also made clear that attorney retainers do not fall under the list of property exempt from garnishment, found under R.C. 2329.66.  Since garnishments are a statutory procedure, the Court is not in a position to create additional exemptions not fully delineated by the statute.

Additionally, the Court suggested that “[a] client in Schwartz’s position could avoid this result by reaching a representation agreement with the attorney that gives the attorney an ownership interest in some or all of the legal fee upon receipt…”  In the absence of such an agreement, the money placed with his attorney was subject to garnishment.

A full text copy of the opinion is available at: http://www.supremecourt.ohio.gov/rod/docs/pdf/1/2011/2011-ohio-5247.pdf

Slovin & Associates Co., LPA is a regional law firm serving clients in Ohio, Kentucky, and Indiana, which provides legal services to commercial and consumer credit grantors. Our client’s needs include commercial litigation, collection of past due accounts, landlord tenant matters, bankruptcy services, and compliance with and litigation involving federal and state consumer laws.

Many thanks to Amy Holston for her contributions to this article.  Amy is a paralegal with Slovin & Associates Co., L.P.A.