Dear Members of the Buncombe County Bar –
I hope everyone is well and enjoying the Fall.
The NCSB Council recently held its final 2019 quarterly meeting. You will get a more detailed report from the Bar, but in the meantime here are some brief updates:
*We have a new leader. Colon Willoughby was sworn in over this meeting as our newest President. For many years he was the elected district attorney in Wake County, and he is currently in private practice with McGuire Woods in Raleigh. He originally hails from Tabor City, which is also my nickname for him. Colon is a kind, generous, smart, modest person. He will do a wonderful job for us in the coming year.
*Under the leadership of our former President, Gray Wilson, the Bar sponsored an Opioid Summit which was the first of its kind. The full video of the Opioid Summit will be uploaded next week. Lawyers will be able to watch it if they want, but to get CLE credit they’ll need to watch it in an organized CLE setting. The only exception will be for lawyers who attended the live stream event but left early due to technical difficulties. Those lawyers will be able to watch it on their own to complete the program and get full CLE credit.
*Happily for everyone, the Supreme Court approved our rule amendment eliminating the 6 hour cap on online CLE. That change will become effective for the 2020 CLE year.
*The Bar’s PMBR Committee continues its work on a program that will assist lawyers to manage their law practices in compliance with the Rules of Professional Conduct. As background, in early 2019, President Gray Wilson appointed a special committee of the State Bar Council to study the concept of “Proactive Management-Based Regulation,” or PMBR. At that time, the concept had been implemented in several foreign jurisdictions and two states. The general purpose of PMBR is to proactively provide lawyers (and potentially others connected to the practice of law) with education and resources on maintaining a lawyer’s high standards of professional responsibility in managing a law practice. The PMBR committee recommended the State Bar should continue to study proactive based management regulation and consider implementation of a PMBR program in North Carolina, and the State Bar Council should continue the PMBR Special Committee for the next year.
*The Council adopted a resolution endorsing an administrative order to be entered by local judiciary that will facilitate entry to courthouses by lawyers, the judiciary, and lawyers with business in the courthouse.
*The Advertising Rules Committee continues to study ABA amendments to the Model Rules on Advertising. A report and recommendation from the committee is expected in April 2020.
*Some statistics for your consideration: The ACAP staff responded to 2,491 phone calls from members of the public and contacted 384 lawyers in efforts to resolve concerns expressed by members of the public. Staff also responded to 2,119 emails and 707 letters from inmates. During the same quarter of 2018, staff responded to 2,801 phone calls, contacted 650 lawyers, and responded to 971 emails and 637 letters from inmates. The office received 108 requests for fee dispute resolution during the quarter. No fee disputes were assigned to district bar committees. During the same quarter in 2018, the office received 133 requests for fee dispute resolution, of which 114 files were assigned to the two State Bar facilitators and 19 files were assigned to district bar committees.
*In my ongoing effort to increase transparency about the Bar, I would like to spend some time on the North Carolina State Bar Client Security Fund.
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.
The Board of Trustees
The Board is composed of five trustees appointed by the Council of the State Bar to five-year terms. Four of the trustees must be attorneys admitted to practice law in North Carolina and one must be a person who is not a licensed attorney. Current members of the Board are:
- Ranee Singleton, Vice-Chair, is an attorney in private practice in Washington, North Carolina.
- Calvin E. Murphy, Vice-Chair, a former President of the North Carolina State Bar and is a former Special Superior Court Judge for Complex Business cases in Mecklenburg County, North Carolina.
- Erwin Fuller, Jr., a former Councilor and member of the Client Security Fund Board is retired from the firm of Brooks Pierce in Greensboro, North Carolina.
- John E. Burns is Executive Vice President and Chief Banking Officer at UnionBank in Oxford, North Carolina.
- Thomas Lunsford, II is the retired Executive Director of the North Carolina State Bar and lives in Chapel Hill, NC.
Subrogation Recoveries
It is standard procedure to send a demand letter to each attorney or former attorney whose misconduct results in any payment, making demand that the attorney either reimburse the Fund in full or confess judgment and agree to a reasonable payment schedule. If the attorney fails or refuses to do either, suit is filed seeking double damages pursuant to N.C.G.S. §84-13 unless the investigative file clearly establishes that it would be useless to do so.
In North Carolina criminal cases involving embezzlement of client funds by attorneys, our Counsel, working with the district attorney, is sometimes able to have restitution ordered as part of the criminal judgment. Another method of recovering amounts the Fund pays to clients of a dishonest attorney is by being subrogated to the rights of clients whose funds have been “frozen” in the attorney’s trust account during the State Bar’s disciplinary investigation. When the Court disburses the funds from the trust account, the Fund gets a pro-rata share.
During the year covered by this report, the Fund recovered $89,295.49 because of these efforts. Hopefully, our efforts to recover under our subrogation rights will continue to show positive results.
Funds Received From Court Orders
In the FY ending September 30, 2017, judges in Wake County Superior Court ordered funds frozen by the State Bar during disciplinary investigations to be paid to the Fund if the clients to whom those funds belonged could not be determined. In that year, the Fund received $7,176.52. In the following year, the Fund received $41,107.49. This year, judges who appointed trustees to wind down a lawyer’s practice also ordered funds to be paid to the Fund if the trustee could not determine the clients to whom those funds belonged. The total paid to the Fund by court orders this year was $256,556.64.
Claims Decided
During the period October 1, 2018 – September 30, 2019, the Board decided 107 claims compared to 128 claims decided the previous reporting year. For various reasons under its rules, the Board denied 68 of the 107 claims in their entirety. Of the 39 remaining claims, some were paid in part and some in full. Authorized reimbursements totaled $92,740.51. One $680.00 claim that had been paid was rescinded after the applicant could no longer be located. The most common basis for denying a claim in its entirety is that the claim is a “fee dispute” or “performance dispute.” That is, there is no allegation or evidence that the attorney embezzled or misappropriated any money or property of the client. Rather, the client feels that the attorney did not earn all or some part of the fee paid or mishandled or neglected the client’s legal matter. However meritorious the client’s contentions may be, the Fund’s rules do not authorize reimbursement under those circumstances.
Funding
The 1984 order of the Supreme Court that created the Fund contained provisions for an assessment of $50.00 to provide initial funding for the program. In subsequent years, upon being advised of the financial condition of the Fund, the Court in certain years waived the assessment and in other years set the assessment in varying amounts to provide for the anticipated needs of the Fund.
In 2007, the Supreme Court approved a $25 assessment per active lawyer that was to continue from year to year until circumstances require a modification. No modification of the continuing $25 annual assessment will be necessary for FY 2020.
Claims: Reimbursements over the last ten years have averaged $628,215.72 per year.
ANALYSIS
The Fund’s balance at the end of FY 2019, $2,157,023.84, plus projected income for FY 2020, $820,155.00, minus projected expenses, $239,489.21, and FY 2020 claims paid at the average of the past ten years, $628,215.72, would leave a projected balance in the Fund at the end of FY 2020 of $2,109,473.91.
CONCLUSION
In 2007, the Supreme Court entered an order imposing an annual assessment of $25 per active member which, by its terms, was to continue in effect from year to year unless superseded. Even though the Fund’s current financial condition has improved, given the high awards totals for years just prior to last year, it is recommended that no superseding order be entered this year, leaving the $25 assessment in place.
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Thank you for the opportunity to serve as your State Bar Councilor. Please let me know if there is any way I can be of help to you in State Bar related matters, or if you have any questions, concerns, or criticisms. My email is Hamrick@gtalaw.net.
Sincerely, Anna R. Hamrick