Statement of the ABA Standing Committee on Client Protection - Center for Professional Responsibility

AMERICAN BAR ASSOCIATION ETHICS 2000 COMMISSION

Statement of the ABA Standing Committee on Client Protection

San Diego, California
February, 2001

The ABA’s Standing Committee on Client Protection ("Committee") thanks the members of the Ethics 2000 Commission for the opportunity to provide the Commission with the Committee’s comments regarding the proposed changes to the Model Rules of Professional Conduct.

The Committee is charged with addressing issues involving client protection, including most often, client protection funds, fee arbitration, and other laws addressing lawyer accountability to clients. The Committee has created Model Rules for Lawyers’ Funds for Client Protection, Model Rules for Trust Account Overdraft Notification, a Model Rule on Financial Recordkeeping, a Model Rule for Random Audit of Trust Accounts, a Model Rule for Payee Notification, Model Rules for Mediation of Client-Lawyer Disputes, and Model Rules for Fee Arbitration, all in an effort to provide guidance and uniformity to state programs. Most significantly, the Committee has supported state efforts to establish programs in each state to address these client protection matters and is pleased to note that right now in the United States, there is a client protection fund established in every single state.

Client Protection Funds are designed to provide compensation to clients that have lost money or property due to their lawyer’s dishonest conduct. Such dishonest conduct usually takes the form of misappropriation or theft of proceeds/property that come into the possession of the lawyer or conversion of unearned fees. As a self-regulating profession, it is each lawyer’s obligation to support funding for such client protection funds. Whether the fund is mandatory or voluntary, lawyers must maintain such funds in order to maintain public confidence in the profession.

The Committee further encourages the establishment of fee arbitration programs in each state to provide a low-cost, less confrontational method of resolving billing issues between clients and their lawyers. By maintaining fee arbitration programs, our profession again acknowledges its obligation, as a self-regulating profession, to provide mechanisms to resolve clients’ monetary disputes with their legal representations.

Additionally, the Committee supports public confidence in the accountability and competence of the lawyers they retain. A lawyer hired to perform legal services in a specific state must be competent to provide the legal services in that state and accountable to the client under the Rules of Professional Conduct, the client protection fund, and fee arbitration programs.

The Committee has reviewed the proposed amendments to the Model Rules of Professional Conduct from this client protection perspective and has three comments: 1) support for the new writing requirement in Rule 1.5; 2) one proposed change to the amendments to the revised commentary to Rule 1.15; and 3) one cautionary note to Rule 5.5.

1. Written fee agreements in Rule 1.5

The Standing Committee supports the Commission’s recommendation that Rule 1.5(b) require that lawyers inform clients, in writing, about the scope of representation and fees to be charged.

2. Commentary to Rule 1.15

The Standing Committee on Client Protection appreciates Ethics 2000’s acknowledgement of the importance of maintaining client protection funds by adding the following language to end of paragraph 6 of the Commentary to Rule 1.15 regarding client protection funds: "a lawyer must participate where it is mandatory, and, even when it is voluntary, the lawyer should participate."

The Committee respectfully suggests that the proposed language could be changed to the following to clarify that lawyers must maintain the financial well-being of client protection funds:

Client protection funds assure public confidence in the profession by compensating clients that have lost money or property due to their lawyers’ dishonest conduct. Every lawyer has a professional obligation to participate in the collective efforts of the bar to reimburse clients who have lost money or property as the result of dishonest conduct in the practice of law. A lawyer’s financial contribution to a lawyers’ client protection fund is an acceptable method of fulfilling this obligation.

This proposed change is consistent with the recommendations of the National Client Protection Organization.

3. Rule 5.5

The Standing Committee is not recommending any specific changes to Ethics 2000’s proposed amendments to Rule 5.5 regarding the unauthorized practice of law. The Committee notes, however, its concern that the four "safe-harbors" set forth in the revised Rule may need to include commentary that specifies a lawyer may be obligated to participate in a states’ client protection fund and/or fee arbitration programs if the lawyer practices in a state through any of these safe harbors.

The two most significant concerns with lawyers engaging in the practice of law in a state where they are not admitted are: 1) whether they are competent to provide legal advice under the laws of that state; and 2) whether they are accountable to clients in that state. If a lawyer wants the privilege of practicing in a state, the lawyer must be willing to comply with the rules in that state – including participating in client protection programs.

Respectfully submitted,

Lynda C. Shely
Chair, ABA Standing Committee on Client Protection

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