Dear Friends and Colleagues –
I hope you are well. The Bar Council held the annual meeting in Raleigh October 18-21. As it was the Annual Meeting, we installed new officers and received reports from various bar-related entities.
The new officers are:
- Marcia Armstrong, President. Marcia is a board-certified family lawyer from Smithfield.
- Todd Brown, President-Elect. Todd is a lawyer in Charlotte practicing complex civil litigation.
- Matthew W. Smith, Vice-President. Matt practices in a variety of areas of law in Eden.
- Darrin D. Jordan of Salisbury completed his excellent tenure as our President, and is now Past President.
General Bar Business:
- Ethics Committee:
The Council Approved Proposed 2022 FEO 5, Client Paying Public Adjuster-Witness a Contingency Fee. The opinion provides a lawyer may call as an expert witness a public adjuster who will collect a statutorily authorized contingency fee paid by the client.
Regarding Proposed 2022 FEO 4, Billing Considerations for Overlapping Legal Services: This opinion remains in subcommittee for another quarter. The Committee received only one comment in the entire State, and it came from one of our Buncombe Bar members. This one comment is the only reason it was sent back to the subcommittee for further consideration. I mention this to illustrate the power of the comment. Please know that they do read the comments, and they take them very seriously. If you are a lawyer who travels for work and uses your downtime while traveling (say while you are driving in the car or waiting in the airport) to conduct business for clients for which you are not travelling, you may want to read the proposed rule and consider commenting.
It is probable the subcommittee will meet at least once over the next quarter. If it does, the meeting will be streamed on our YouTube page if you would like to see it.
Random Audit Report
I thought it might be interesting to see the recent results of the 2022 Third Quarter Random Audit Report. As you see, it does not apply to our District, but could provide some valuable insight as to areas of common concern. The report provides as follows:
Judicial Districts 30 and 35 were randomly selected for random audit for the third quarter of 2022. Lawyers randomly selected for audit are drawn from a list generated from the State Bar’s database based upon judicial district membership designations in the database. District 30, composed of Union County was previously audited in 1988, 1993, 1997, 2001, 2005, 2013 and 2019. District 30 has a listing of 314 lawyers. 25 audits were conducted collectively representing 47 lawyers.
District 35, composed of Avery, Madison, Mitchell, Watauga, and Yancey counties, was previously audited in 1990, 1993, 1996, 2001, 2006, 2012 and 2016. District 35 has a listing of 177 lawyers. 14 audits were conducted collectively representing 38 lawyers.
The Ethics Committee recommended to open grievance investigations on four lawyers/firms based on the audit results and the significance of the violations found.
Areas of common rule deficiencies include:
(a) 22% failed to maintain images of cleared checks or maintain them in the required format;
(b) 21% failed to perform quarterly transaction reviews;
(c) 19% failed to review bank statements and cancelled checks each month;
(d) 17% failed to sign, date and/or maintain reconciliation reports;
(e) 14% failed to identify the client on confirmations of funds received/disbursed by wire/electronic/online transfers;
(f) up to 10% failed to:
- perform monthly bank statement reconciliations;
- perform quarterly reconciliations;
- prevent over-disbursing funds from the trust account resulting in negative client balances;
- prevent bank service fees being paid with entrusted funds;
- maintain a ledger of lawyer’s funds used to offset bank service fees;
- take the required one-hour trust account management CLE course;
- identify the client and source of funds, when the source was not the client, on the original deposit slip;
- properly deposit funds received with a mix of trust and non-trust funds into the trust account;
- properly record the bank date of deposit on the client’s ledger;
- indicate on the face of each check the client from whose balance the funds were withdrawn;
- promptly remit to clients funds in possession of the lawyer to which clients were entitled;
- provide written accountings to clients at the end of representation or at least annually if funds were held more than twelve months;
- escheat unidentified/abandoned funds as required by GS 116B-53;
- provide a copy of the Bank Directive regarding checks presented against insufficient funds;
- use business size checks containing the Auxiliary On-Us field.
Areas of consistent rule compliance:
- properly maintained a ledger for each person or entity from whom or for whom trust money was received;
- removed signature authority from employee(s) responsible for performing monthly or quarterly reconciliations;
- promptly removed earned fees or cost reimbursements;
- signed trust account checks (no signature stamp or electronic signature used);
- properly maintained records that are retained only in electronic format.
Judicial Districts randomly selected for audit for the fourth quarter of 2022 are District 12, composed of Harnett and Lee counties, and District 22 composed of Caswell and Rockingham counties.
- Grievance Committee:
During the third quarter of 2022, the Attorney Client Assistance Program staff responded to 2,034 phone calls from members of the public and placed 78 calls to lawyers. Staff also responded to 1,046 emails from members of the public and attorneys and responded to 579 letters from inmates. In addition, there were 11 translations completed of fee dispute petitions submitted in Spanish. Intake logged 4,170 entries this quarter.
The State Bar opened 124 requests for fee dispute resolution during the first quarter, all of which were assigned to the two State Bar facilitators.
In 2018, 1,247 grievance files were opened. In 2019, 1,254 grievance files were opened. In 2020, 927 grievance files were opened. In 2021, 986 grievance files were opened. As of October 10, 1,061 grievance files have been opened in 2022.
As of October 10, 1,577 grievances were pending. One hundred ninety-eight grievances were stayed. Thirty-one pending files were in judicial district grievance committees or had been returned by district grievance committees within the past 30 days. The OOC had made its recommendation in 83 of the pending cases and the cases were ready for the Grievance Committee’s decision. Of the remaining 1,265 files in which no recommendation has yet been made, 259 were more than six months old. In the third quarter of 2022, 248 files were dismissed by the Grievance chair or by the Grievance chair and a vice chair. There were no inquiries about lawyer advertising in the third quarter of 2022.
Ninety-four lawyers have completed the Trust Account Compliance Program since its inception. Six lawyers accepted offers to participate in the TAC Program after the July 2022 Quarterly Meeting. The Bar currently supervises forty-five participants. The Bar also monitors four DHC defendants whose stayed suspensions include trust account compliance conditions and oversees compliance with random audit corrections.
- Below please find selected parts of presented annual reports:
The Board of Law Examiners Annual Report
1,376 applications were received for the 2022 North Carolina Bar Examinations, a decrease from the 1,449 applications filed for the 2021 North Carolina Bar Examinations.
The February 2022 bar examination was administered to 348 applicants. The overall pass rate for the examination was 50.29%, and the examination proceeded without incident. Of the 114 first-timers from North Carolina law schools, 69 passed for a rate of 60.53%. 61 of the 96 first-timers from out-of-state law schools passed for a rate of 63.54%. Of the 138 applicants who had taken the examination previously, 45 passed for a 32.61% pass rate. The July 2022 bar examination was administered to 835 applicants. The overall pass rate for the examination was 68.02%. Of the 492 first-timers from North Carolina law schools, 377 passed for a rate of 76.63%. 144 of the 198 first-timers from out-of-state law schools passed for a rate of 72.73%. Of the 145 applicants who had taken the examination previously, 47 passed for a 32.41% pass rate.
The Board continues to receive a significant number of requests for special testing accommodations for the 2022 bar examinations. At the February 2022 bar examination, the Board received 37 requests for special testing accommodations and provided special testing accommodations for 29 applicants due to a disability. For the July 2022 examination, the Board received 67 such requests and granted 54 of these petitions.
North Carolina continues to be the first among states to let applicants know the results of their examination. Most jurisdictions release their July results between late October and mid-November, and some come even later. The Board released results to applicants for the July 2022 bar examination on September 1, 2022. The Board expects to issue licenses to applicants meeting all requirements in late September. This is a great help to applicants whose jobs hinge on licensure.
North Carolina continues to remain a popular place to practice law and seek legal employment. Numbers of comity applications have increased over the course of 2022. Since January 1, 2022, the Board has received 151 comity applications.
Annual Report of Board of Continuing Legal Education
Lawyers continue to meet and exceed their mandatory continuing legal education requirements. By mid-March 2022, 27,491 annual report forms had been filed electronically for the 2021 compliance year. Ninety-nine percent of the active members of the North Carolina State Bar complied with the mandatory CLE requirements for 2021. The report forms show that North Carolina lawyers took a total of 376,085 hours of CLE in 2021, or 14 CLE hours on average per active member of the State Bar. This is two hours above the mandated 12 CLE hours per year.
The CLE program operates on a sound financial footing and has done so almost from its inception over thirty years ago. Funds raised from attendee and non-compliance fees not only support the administration of the CLE program but also supplement three programs that are fundamental to the administration of justice and the promotion of the professional conduct of lawyers in North Carolina. The program’s total 2021 contribution to the operation of the Lawyers Assistance Program (LAP) was $334,844.73. As of September 30, 2022, the board has also collected and distributed $283,488.46 to support the work of the Equal Access to Justice Commission and $283,488.46 to supplement the work of the Chief Justice’s Commission on Professionalism. In addition, the CLE program generated $70,378.93 to cover the State Bar’s costs for administering the CLE-generated funds for the LAP and the two commissions.
This year the CLE Board has proposed sweeping changes to its rules and procedures to improve the program. We are hopeful to have final recommendations to submit to the Council in early 2023
Annual Report of the Board of Legal Specialization
North Carolina’s Legal Specialization program exists for two reasons: first, to assist in the delivery of legal services to the public by identifying lawyers who have demonstrated special knowledge, skill, and proficiency in a specific field, so that the public can more closely match its needs with available services; and second, to improve the competency of the Bar. Under the guidance of the Board of Legal Specialization, and with the tireless efforts of the specialty committees and staff, our program is stronger than ever and continually achieving the very purpose for which the State Bar Council created the program in 1985. On top of that, our program is entirely self-sufficient. With the addition of 57 new specialists last November, there are nearly 1,100 certified legal specialists in North Carolina. The State Bar’s specialization program certifies lawyers in thirteen specialties. This spring, we received 111 applications from lawyers seeking certification. Of these applicants, 98 met the substantial involvement, CLE, and peer review standards for certification and were approved to sit for their respective specialty exams. In 2020 and 2021, due to public health considerations stemming from the COVID-19 pandemic, we administered our specialty certification exams using remote proctoring through ExamSoft, the software program our Board has employed in administering our exams for the past 7 years. Our experience with remote proctoring has been a resounding success, both from the
examinees’ and staff’s perspective. This year, we are offering our exams both in-person and via remote proctoring based upon the examinee’s and/or the specialty committee’s preference. We expect to continue to offer the option to take the certification exams remotely in the future, thereby increasing access to our program across the state by eliminating the barriers of time and travel that may have previously prevented lawyers from pursuing certification. To assist lawyers interested in becoming certified specialists but who are not yet qualified, in 2018 we successfully created and implemented a new process allowing lawyers to fill out a Declaration of Intent form. We continue to utilize this form to track, communicate with, and assist interested lawyers regarding the lawyer’s eligibility under the applicable certification standards.
Last year, the board, with the Council’s support, made significant strides in clarifying an existing specialty area of law and in creating a new specialty certification. First, the board approved important amendments to the administrative rules governing the criminal law specialty – these amendments clarify the criminal law specialty by creating a new sub-specialty focused on federal criminal law practice and ensure consistency among what will be three sub-specialties within criminal law: state criminal law, federal criminal law, and juvenile delinquency. Second, the board approved the creation of a new specialty in child welfare law. This area of law was identified to the board as a developing and increasingly important area of law in need of a resource for the public to identify lawyers who have objectively demonstrated their proficiency in the field. Both efforts were considered and adopted by the Supreme Court, and the board has certified the first individuals under these new specialties.
Annual Report of the Board of Paralegal Certification
Seventeen years after the first application for paralegal certification was accepted by the board in 2005, there are today over 3,700 North Carolina State Bar certified paralegals. In 2020, and as a product of the COVID pandemic, our program successfully pivoted to administer our certification exams via remote proctoring. Our proactive measures paid off – we continued to administer our exams despite the ever-present uncertainties brought by the COVID pandemic, and we have seen an overall increase in the number of examinees over the past eighteen months due to the exam being more accessible to paralegals across the state. Importantly, the software used to remote proctor the exams has produced minimal, if any, technological issues for examinees and assists us in ensuring the integrity of our exam. On April 23, 2022, we administered our paralegal certification exam to 140 applicants via remote proctoring; of those applicants, 83 achieved passing scores and were so certified by the board. On October 15, 2022, we will administer our paralegal certification exam via remote proctoring to approximately 200 applicants. We anticipate designating a total of over 200 new certified paralegals in 2022. We had one of our highest application years in 2021, and the total number of applicants 2022 was equally impressive. We had hoped the switch to remote proctoring would enable more paralegals to pursue paralegal certification, particularly those who ordinarily could not afford the time or the travel expense of taking the exam at one of our traditional testing locations. I am delighted to report that our hope has become our experience, and I am proud that our program converted the difficulties of 2020 and 2021 into opportunities to evolve our program for the betterment of legal services offered by paralegals in all parts of our state. Also, in 2022, the board will have considered over 3,700 recertification applications. To maintain certification, a certified paralegal must complete six hours of continuing paralegal education (CPE) credits annually, including one hour of ethics.
Client Security Fund Annual Report
Pursuant to the Rules of Administration and Governance of the Client Security Fund of The North Carolina State Bar (the “Fund”), the Board of Trustees submits this annual report covering the period October 1, 2021, through September 30, 2022.
The Fund was established by order of the Supreme Court dated October 10, 1984 and commenced operations January 1, 1985. As stated by the Supreme Court, the purpose of the Fund is “. . . to reimburse, in whole or in part in appropriate cases and subject to the provisions and limitations of the Supreme Court and [the] Rules, clients who have suffered financial loss as a result of dishonest conduct of lawyers engaged in the private practice of law in North Carolina … .” Claims Procedures The Fund reimburses clients of North Carolina attorneys where there was wrongful taking of the clients’ money or property in the nature of embezzlement or conversion, which money or property was entrusted to the attorney by the client by reason of an attorney/client relationship or a fiduciary relationship customary in the practice of law. Applicants are required to show that they have exhausted all viable means to collect those losses from sources other than the Fund as a condition to reimbursement by the Fund. Specific provisions in the Rules declare that certain types of losses are non-reimbursable. All reimbursements are a matter of grace in the sole discretion of the Board and not a matter of right. Reimbursement may not exceed $100,000 to any one applicant based on the dishonest conduct of an attorney.
During the period October 1, 2021 – September 30, 2022, the Board decided 65 claims, compared to 61 claims decided the preceding fiscal year. For a variety of reasons under its rules, the Board denied 40 of the 65 claims in their entirety. Of the 25 remaining claims, some were paid in part and some in full. Reimbursements authorized by the Board totaled $349,722.88.
NC IOLTA Annual Report
NC IOLTA funded organizations providing legal assistance and representation. In 2021, NC IOLTA provided funding of more than $4.8 million to 15 organizations that provide legal aid to individuals, families, and children. Grants support access to housing and shelter, family safety, and healthcare, and protect the basic human rights of North Carolinians. NC IOLTA supported conversations about unmet civil legal needs in North Carolina. With support from NC IOLTA, the NC Equal Access to Justice Commission released the 2020 Legal Needs Assessment in April 2021, the first comprehensive assessment of civil legal needs in North Carolina in more than two decades. NC IOLTA continues to support conversations about how we can improve the availability of legal services.
NC IOLTA grantees continued service to those most in need. Grantees closed more than 31,000 cases impacting 91,000 household members. Of 38,000 clients served, nearly 7,000 were seniors, 2,200 were children, and 2.000 were veterans. Pro bono volunteers contributed 16,000 of service.
NC IOLTA released the 2023 IOLTA grant application and information in August. In anticipation of the grant cycle, the Board approved several changes to grant policies and criteria. The deadline for submission of grant requests was on September 23. 37 requests were submitted for funding exceeding $7.83 million. Staff are reviewing applications and meeting with applicants to collect additional information prior to the Board’s review of applications later this year. 2023 awards will be finalized and announced in mid-December.
The next quarterly meeting will take place January 17-20, 2023.
Thank you, and please let me know if you have any questions, concerns, or criticisms. I will do my best to help.