Model Rules for Lawyers' Funds for Client Protection - Rule 1

RULE 1 - PURPOSE AND SCOPE

A. The purpose of the Lawyers' Fund for Client Protection is to promote public confidence in the administration of justice and the integrity of the legal profession by reimbursing losses caused by the dishonest conduct of lawyers licensed or otherwise authorized to practice law in the courts of this jurisdiction occurring in the course of the client-lawyer or other fiduciary relationship between the lawyer and the claimant.

B. For purposes of these Rules, "lawyer" shall include a person:
(1) licensed to practice law in this jurisdiction, regardless of where the lawyer's conduct occurs;
(2) admitted as in-house counsel;
(3) admitted pro hac vice;
(4) admitted as a foreign legal consultant;
(5) admitted only in a non-United States jurisdiction but who is authorized to practice law in this jurisdiction; or
(6) recently suspended or disbarred whom clients reasonably believed to be licensed to practice law when the dishonest conduct occurred.

C. Every lawyer has an obligation to the public to participate in the collective effort of the bar to reimburse persons who have lost money or property as a result of the dishonest conduct of another lawyer. Contribution to the Lawyers' Fund for Client Protection is an acceptable method of meeting this obligation.

Comment

[1] Paragraph A expresses the general purpose of a Lawyers' Fund for Client Protection: promoting public confidence in the administration of justice and the integrity of the legal profession. The term "dishonest conduct" is defined in Rule 10.

[2] The definition of lawyer, found in Paragraph B, includes not only persons licensed or otherwise authorized to practice law in the jurisdiction, but also lawyers practicing law in the jurisdiction by virtue of in-house counsel admission, pro hac vice admission, foreign legal consultant admission, authorization for temporary practice of law by a foreign lawyer and by former or suspended lawyers reasonably believed by clients to have been authorized to practice law. Lawyers admitted as in-house counsel, pro hac vice, or as foreign legal consultants should both pay into the Fund as provided under Rule 3 and have their conduct covered by the Fund.

[3] The Fund is part of this jurisdiction's system of lawyer regulation. The Fund therefore has jurisdiction to recognize claims filed against lawyers licensed to practice law in this jurisdiction regardless of where the lawyer's conduct occurs. This is consistent with the jurisdictional authority set forth in Rule 8.5 (a) of the ABA Model Rules of Professional Conduct: "A lawyer admitted in this jurisdiction is subject to the disciplinary authority of this jurisdiction, regardless of where the lawyer's conduct occurs." Pursuant to Paragraph B, if necessary, this Fund is authorized to "follow" the lawyer and compensate eligible claimants who have suffered losses as a result of the lawyer's dishonest conduct.

[4] It is particularly equitable to require that this Fund, into which lawyers have paid annual assessments, have the primary responsibility to compensate clients who have suffered losses. Such lawyers would include those admitted as in-house counsel, by pro hac vice admission and foreign legal consultants. Lawyers admitted only in a non-United States jurisdiction may have their conduct covered by the Fund because the highest court in this jurisdiction has authorized them to provide legal services on a temporary basis in this jurisdiction.

[5] Rule 10(E) provides for an equitable balancing test to determine whether the Fund, another jurisdiction's Fund, or both Funds should pay claims filed against lawyers not admitted or authorized to practice law exclusively in this jurisdiction.

[6] Paragraph C, drawn from the Comment to Rule 1.15 of the ABA Model Rules of Professional Conduct, recognizes that lawyers individually and the bar collectively, have the obligation to participate in a Lawyers' Fund for Client Protection.


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