JPMorgan Chase Bank Funds from IOLTA Account Illinois Class Action

Lawyers are not permitted to commingle client funds with their own money. To hold client funds they are administering, they must open Interest on Lawyer Trust Accounts (IOLTAs), which are heavily regulated. The complaint for this class action alleges that JPMorgan Chase Bank, NA broke the rules by taking by taking money from an attorney’s client IOLTA to cover a shortfall in his business operating account.

The class for this action is all lawyers and law firms that maintain Interest on Lawyer Trust Accounts (IOLTAs) in Illinois at Chase.

Attorneys cannot commingle clients’ funds with their own. The complaint quotes findings in an earlier court case as saying that “it is absolutely impermissible for an attorney to commingle his funds with those of his client or with money he holds as a fiduciary.”

Attorneys are also not allowed to take any interest earned on client funds for themselves. IOLTAs enable them to keep separate both the money they are holding for clients and the earned interest on the accounts. The interest may go to designated nonprofit organizations.

In Illinois, IOLTAs may only be established at financial institutions that have agreed to follow the Illinois Rules of Professional Conduct. The institution must also be approved by the Illinois Attorney Registration & Disciplinary Commission (ARDC) and it must report any overdrafts on these accounts to the ARDC. The complaint notes that “banks acting as custodians of IOLTAs are prohibited from accessing funds placed in an IOLTA in order to benefit any other account.”

Plaintiff Michael E. Rediger has been a lawyer for thirty years. He has maintained an IOLTA with Chase.

The complaint alleges, “On February 8, 2021, Chase committed an intentional breach of [Rediger’s] authority over his IOLTA by converting funds held by [Rediger] in his IOLTA.”

This came about because of a $5,000 check Rediger had deposited in his business account on February 3. Chase discovered on February 8 that the check had come from a closed account, rejected it, and charged Rediger a $12 returned-check fee. These actions caused Rediger’s business account to become overdrawn. The following day, Chase withdrew funds from the IOLTA to set off the overdraft.

Rediger claims he did not provide authorization to do this and was not given any notice before Chase did it. According to the complaint, it “was a flagrant violation of the Illinois Rules of Professional Conduct…” Chase, however, claimed it was permitted to do this under its Deposit Account Agreement.

Rediger had written two checks upon the IOLTA to clients related to personal injuries. As a result of Chase’s actions, the checks bounced. Chase then notified the ARDC that the IOLTA account was overdrawn.

Article Type: Lawsuit
Topic: Conversion
Tags: Banking Regulations, Conversion