New lawyers generally have a basic understanding of professional responsibility law from their law school’s professional responsibility course and the “Berlitz” version used to prepare for the Multistate Professional Responsibility Exam (MPRE). They also may have a vague notion of the concept “client protection” but little understanding of what it is beyond lawyers’ broader mandate to “protect” or act in the interests of their clients.
But client protection is more than a concept. Client protection programs exist in every U.S. jurisdiction and are based on three simple premises: the practice of law is a profession, professionalism is a fundamental obligation of lawyers, and protection of client interests is at the heart of professionalism. Client protection plays a part in the everyday practice of all lawyers. Young lawyers, and those with more experience, would benefit from a better understanding of client protection mechanisms and their effect on the public, individual lawyers, and the profession.
To have an accurate understanding of client protection, one must first understand what it is not. It is neither an admonishment of the profession nor an assumption that lawyers are somehow prone to behave badly. In truth, most lawyers are honest professionals who provide clients with competent representation. But client protection does acknowledge that even a single bad actor can cause catastrophic damage to clients and the reputation of the profession.
Client protection mechanisms have three primary objectives: (1) to help honest lawyers understand their professional obligations (prevention); (2) to provide a remedy to clients who have been harmed by dishonest lawyers (remediation); (3) and to help preserve the client-lawyer relationship (maintenance).
Prevention. A large number of disciplinary claims brought against lawyers are not the result of the intentional mishandling of client funds, but rather the lack of a clear understanding of best practices when managing those funds. Every jurisdiction requires lawyers to maintain complete records of client funds held in trust and to render a full accounting for the receipt and distribution of those funds. The ABA Model Rules for Client Trust Account Records provide practical guidelines to help lawyers satisfy those requirements and avoid disciplinary action.
A lawyer following correct trust accounting procedures should never have an overdraft on a trust account. If an overdraft does occur, it is either because the lawyer or bank has made an innocent error or the lawyer is acting dishonestly. Trust account overdraft notification programs provide notice to disciplinary counsel when a lawyer’s trust account has been overdrawn. In the case of the lawyer who has made an inadvertent error, overdraft notification provides the opportunity to reassess and correct internal procedures to avoid repeating the error in the future. However, overdraft notification also serves as an early warning system to disciplinary counsel when a lawyer is engaged in trust account theft.
Another method of ensuring that lawyers are engaged in proper trust accounting and recordkeeping procedures is a random audit program. The random audit of lawyer trust accounts provides an opportunity for those most educated in trust accounting procedures to review lawyer or law firm trust account-related books to determine if proper procedures are being followed and to provide direction to improve internal procedures. Similar to overdraft notification, random audit has the added benefit of highlighting patterns of dishonest behavior.
When a third-party liability claim is settled, the client/payee is sometimes the last to know. Payee notification programs provide that the client be given notice when a payment has been distributed to the lawyer. Because payee notification requires insurance companies to forward the notice to the client, payee notification is often enacted by statute or insurance commission regulation. The reasoning behind payee notification is simple: if the client knows the money is there, the dishonest lawyer is less likely to forge an endorsement on the settlement check and misappropriate the funds. In fact, jurisdictions with payee notification have reported a marked decline in lawyer theft of insurance proceeds.
Remediation. Despite the profession’s best preventative efforts, a few lawyers will still misappropriate client funds, leaving the client with little recourse for recovery. Unfortunately when this happens, it taints the reputation of the entire profession. In response, every state and the District of Columbia has established a lawyers’ fund for client protection (lawyers’ fund) to reimburse losses to clients following lawyer misappropriation. Most lawyers’ funds are financed through mandatory assessments of the members of the bar.
Lawyers’ funds recognize the fundamental principle that the protection of client interests is the obligation of all lawyers. Lawyers should be especially proud to belong to one of the only professions that has established a method to reimburse clients who have suffered financial losses due to the conduct of its members.
Maintenance. Client protection extends beyond the prevention and remediation of the misappropriation of client funds. Fee arbitration and mediation programs provide the client and lawyer with the opportunity for fair, fast, and inexpensive resolution of disputes involving legal fees, instances of alleged lesser misconduct, or simple misunderstandings that may impede the ability of the client and lawyer to proceed. Dissatisfaction with legal fees is consistently one of the most frequent causes of complaints registered against lawyers (along with the oft‑related “failure to communicate”).
Client protection initiatives prevent and, when necessary, address harm caused during the practice of law. It is in all lawyers’ best interests to learn about the client protection programs in their jurisdictions. For more information on these and other client protection programs, visit the ABA Standing Committee on Client Protection website at http://ambar.org/ClientProtection.