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Pennsylvania Legal Ethics
1.15:100 Comparative Analysis of Pennsylvania Rule
The language of PA-R 1.15(a-c) incorporates MR 1.15(a-c). The Pennsylvania rule, however, expands the rule and requires that notwithstanding the prior provisions that a lawyer shall place almost all client and third party funds in an interest bearing account pursuant to Pennsylvania statutory rules.
DR 9-102(A) provides that "[a]ll funds of clients... shall be deposited in one or more identifiable bank accounts maintained in the state in which the law office is situated..." DR 9-102(B)(2) provides that a lawyer shall "[i]dentify and label securities and properties of a client . . . and place them . . . in safekeeping". DR 9-102(B)(3) requires that a lawyer "[m]aintain complete records of all funds, securities and other properties of a client." Rule 1.15(a) extends these code protections to the property of a third party that is in the lawyer's possession in connection with the representation.
Rule 1.15(b) is substantially similar to DR 9-102(B)(1) and (4) and Rule 1.15(c) is substantially similar to DR 9-102(A)(2) except that the requirement regarding disputes applies to property concerning which an interest is claimed by a third party. There is no counterpart to the remainder of the Pennsylvania Rule in the Disciplinary Rules of the Code.
Pennsylvania has codified the requirements on Lawyers Trust accounts as follows:
INTEREST ON LAWYERS' TRUST ACCOUNTS ACT
§ 4021. Short title
This act shall be known and may be cited as the Interest on Lawyers' Trust Accounts Act.
1988, April 29, P.L. 373, No. 59, §1, effective in 6 months.
Historical and Statutory Notes
Title of Act: As act providing that attorney trust funds may be placed in interest-bearing accounts and that the interest generated on such accounts be used to provide legal services for the indigent; and establishing a mechanism for the funding. 1988, April 29, P.L. 373, No. 59.
§ 4022. Legislative findings
The General Assembly hereby finds that:
(1) There is a need to provide equal access to the system of justice for individuals who seek redress of grievances.
(2) The availability of civil legal services to indigent persons is essential to the due administration of justice.
(3) Due to a reduction in Federal funds, the programs providing legal assistance in civil matters to indigent persons lack resources to adequately meet the needs of these persons, and it is necessary to provide a supplemental funding mechanism to accomplish this purpose.
(4) The funding of legal assistance programs for those who are unable to afford legal counsel will serve the ends of justice and the general welfare of all Pennsylvania citizens.
(5) In current practice, attorneys do not deposit certain funds held in a fiduciary capacity in interest-bearing accounts because insufficient interest would be earned to justify the expense of administration. When pooled, funds which would be unproductive as individual accounts will generate income, the beneficial interest in which may be made available through this act for charitable purposes.
(6) It is the purpose of this act to create a supplemental funding mechanism for providers of civil legal assistance to the indigent in order to ensure effective access to the legal process of all citizens of the Commonwealth to the extent practicable. Nothing in this act shall be construed as affecting or impairing the disciplinary powers, responsibilities or prerogative of the Supreme Court of Pennsylvania with respect to the conduct of attorneys admitted to practice in this Commonwealth.
1988, April 29, P.L. 373, No. 59, §2, effective in 6 months.
The following words and phrases when used in this act shall have the meanings given to them in this section unless the context clearly indicates otherwise.
"Attorney." An individual attorney, partnership, professional association or professional corporation engaged in the practice law.
"Board." The Lawyer Trust Account Board.
"Depository institution." A bank, bank and trust company, trust company, savings bank, savings and loan association, credit union or foreign banking corporation, whether incorporated, chartered, organized or licensed under the laws of this Commonwealth or the United States, doing business in Pennsylvania and insured by the Federal Deposit Insurance Corporation, the Federal Savings and Loan Insurance Corporation or the National Credit Union Administration or an alternate share insurer.
"Eligible client." Any person unable to afford the cost of private legal assistance who satisfies the financial eligibility standards established in the Federally funded Statewide legal services system.
"Interest on Lawyer Trust Account" or "IOLTA." An unsegregated interest-bearing deposit account with a depository institution for the deposit of qualified funds by an attorney.
"Legal assistance." Civil legal services for eligible clients, including advice, counsel, direct representation, training, research coordination with private attorneys and other activities necessary to insure the cost-effective delivery of quality legal services.
"Qualified funds." Moneys received by an attorney in a fiduciary capacity which, in the good faith judgment of the attorney, are nominal in amount or are reasonable expected to be held for such a short term that sufficient interest income will not be generated to justify the expense of administering a segregated account. Qualified funds include moneys received from any client or beneficial owner which are too small in amount or are expected to be held for too short a period of time to generate at least $50 of interest annually.
"Qualified recipients." Not-for-profit entities incorporated in Pennsylvania, tax-exempt under section 501(c)(3) of the Internal Revenue Code of 1986 (Public Law 99-514, 26 U.S.C. §501(c)(3)), or any successor provision, which operate within this Commonwealth for the primary purpose of providing civil legal services without charge, and which:
(1) operate to provide such civil legal services to eligible clients and victims of abuse under contract with the Department of Public Welfare for the expenditure of funds appropriated by the General Assembly for the provision of legal services; or
(2) provide direct specialized legal services primarily to individuals who are elderly, disabled or homeless; are seasonal farmworkers; or are victims of crime or abuse.
1988, April 29, P.L. 373, No. 59, §3, effective in 6 months.
§4024. Establishment of Lawyer Trust Account Board
(a) Establishment.--There is hereby established the Lawyer Trust Account Board as an independent not-for-profit corporation. The board shall be responsible for administering the IOLTA fund and shall receive and distribute moneys in the IOLTA fund to qualified recipients as further specified in this act.
(b) Source of fund revenues.--The IOLTA fund will receive the interest generated by qualified funds deposited by attorneys in unsegregated interest-bearing accounts designated IOLTA accounts.
(c) Ownership.--The board shall hold the beneficial interest in trust accounts participating in the IOLTA program.
(d) Open meeting law.--The
meetings of the board shall be subject to the act of July 3, 1986 (P.L. 388,
1988, April 29, P.L. 373, No. 39, §4, imd. effective.
§4025. Attorney participation
(a) Participation.--Each attorney shall participate under the provisions of this act and shall place all qualified funds in an IOLTA account, unless an election not to participate is submitted in writing to the board at times and under conditions as specified by the board.
(b) Liability.--No attorney shall be liable in damages or held to have breached any fiduciary duty or responsibility because of a deposit of moneys to an IOLTA account pursuant to a judgment in good faith that the moneys were qualified funds.
(c) Other investments.--Nothing in this act shall be construed as regulating the ability of an attorney to invest nonqualified funds in any other investment vehicle specified by the client or beneficial owner or as they and the attorney may agree upon.
1988, April 29, P.L. 373, No. 59, §5, effective in 6 months.
§4026. Establishment of funding mechanism
(a) Establishment.--An attorney may establish and maintain an IOLTA account by designating the account as "(name of attorney or law firm IOLTA account)" and notifying the board in such manner as may be prescribed in the bylaws.
(b) Interest.--The rate of interest payable on any IOLTA account shall not be less than the rate paid by the depository institution on Negotiable Order of Withdrawal (NOW) or Super Negotiable Order of Withdrawal Accounts as permitted under 12 United States Code (relating to withdrawals by negotiable or transferable instruments for transfers to third parties) or any successor provision and maintained at that institution.
(c) Duties of depository institution.--With respect to each IOLTA account, the depository institution shall:
(1) Remit at least quarterly any interest earned on the account to the IOLTA fund.
(2) Transmit to the IOLTA fund with each remittance a statement showing at least the name of the account, service charges or fees deducted, if any, and the amount of interest remitted from the account.
(3) Transmit to the attorney who maintains the IOLTA account a statement showing at least the name of the account, service charges or fees deducted, if any, and the amount of interest remitted from the account.
(4) Be permitted to impose reasonable service charges for administration of such accounts.
(5) Have no duty to inquire or determine whether deposits consist of qualified funds.
(d) Payment from account.--Payment from an IOLTA account to or upon the order of the attorney maintaining the account shall be a valid and sufficient release of any claims by any person or entity against any depository institution for any payments so made.
(e) Payment of interest.--Any remittance of interest to the IOLTA funds by a depository institution under this section shall be a valid and sufficient release and discharge of any claims of any person or entity against the depository institution for any payment so made, and no action shall be maintained against any depository institution solely for opening, offering or maintaining an IOLTA account, for accepting any funds for deposit to any IOLTA account, or for remitting any interest to the IOLTA fund.
(f) Limitation of liability.--The depository institution shall not be subject to any action solely by reason of its opening, offering or maintaining an IOLTA account, accepting any funds for deposit to any such accounts or remitting any interest to the IOLTA fund.
(g) Confidentiality.--All papers, records, documents or other information identifying an attorney, client or beneficial owner of an IOLTA account shall be confidential and shall not be disclosed by a depository institution except with the consent of the attorney maintaining the account or as permitted by law of Supreme Court rule.
1988, April 29, P.L. 373, No. 59, §6, effective in 6 months.
§4027. Uses of funds; restrictions
(a) Uses.--The IOLTA fund may be used only for the following purposes:
(1) Delivery of legal assistance to eligible clients.
(2) Delivery of legal assistance to individuals who are elderly, disabled, homeless, seasonal farmworkers, or victims of crime or abuse.
(3) Administration and development of the IOLTA program.
(b) Restrictions.--Funds made available to grantees under this act may not be used to:
(1) Provide legal assistance with respect to any fee-generating case as defined by the board.
(2) Provide legal assistance with respect to the defense of any criminal prosecution.
(3) Provide legal assistance in civil actions to persons who have been convicted of a criminal charge where the civil action arises out of alleged acts or failures to act and the action is brought against an official of the court or against a law enforcement official for the purpose of challenging the validity of the criminal conviction.
(4) Contribute to or be made available to any political party or association, or the campaign of any candidate for public or party office or similar political activities or to support or oppose candidates for public or party office or to support or oppose any ballot questions.
(5) Provide for capital expenditures.
(c) Lobbying.--In addition to the restrictions listed in subsection (b), no IOLTA funds may be used, directly or indirectly, to support activities intended to influence the issuance, amendment or revocation of any executive or administrative order or regulation of a Federal, State or local agency, or to influence the introduction, amendment, passage or defeat of any legislation by the Congress of the United States or by any State or local legislative body, except that:
(1) A qualified recipient of IOLTA funds may engage in such activities in response to a request from a governmental agency, legislative body, committee, member or staff thereof made to the qualified recipient, consistent with the Code of Professional Responsibility.
(2) A qualified recipient may engage in such activity in the provision of legal services to an eligible client on a particular application, claim or case, which directly involves that client's legal rights and responsibilities. This shall not be construed to permit a qualified recipient to solicit a client, in violation of the Code of Professional Responsibility, for the purpose of making such representation possible.
(1) In addition to the restrictions listed in subsections (b) and (c), no IOLTA funds may be used, directly or indirectly, to do any of the following:
(i) Advocate the freedom to choose abortion or the prohibition of abortion.
(ii) Provide legal assistance with respect to any proceeding or litigation which seeks to procure or prevent, or procure or prevent public funding for, any abortion.
(iii) Provide legal assistance with respect to any proceeding or litigation which seeks to compel or prevent the performance or assistance in the performance of any abortion, or the provision of facilities for the performance of any abortion.
(2) Nothing contained in this subsection shall be construed to prevent the rendering of advice to a client with respect to that client's legal rights. Nothing contained in this subsection shall preclude representation in a proceeding to procure or prevent public funding for abortion where the funding is allowed by law.
1988, April 29, P.L. 373, No. 59, §7, effective in 6 months.
§4028. Lawyer Trust Account Board of Directors
(a) Members.--The board shall consist of 13 members, all of whom shall be knowledgeable and supportive of the delivery of civil legal services to the indigent. Two members shall be appointed by the Governor; one must be a representative of a depository institution and one must be a public member who is not an attorney. One member shall be appointed by each of the following: the Speaker and Minority Leader of the House of Representatives, and the President pro tempore and Minority Leader of the Senate; two shall be attorneys and two shall be public members who are not attorneys. One member shall be appointed by each of the chief executive officers of the Pennsylvania Bar Association, the Philadelphia Bar Association and the Allegheny County Bar Association. Four members shall be appointed by the President of the Board of Directors of the Pennsylvania Legal Services Corporation, at least two of whom must be eligible clients. The members of the board shall elect a chairperson at their first meeting.
(b) Term of office.--The term of office and the manner of filling vacancies shall be as provided in the bylaws, which shall be adopted by a majority vote of the board within six months of the effective date of this act, except for the legislative and gubernatorial appointees, whose terms shall be concurrent with the term of the appointing officer.
(c) Compensation.--The members shall receive no compensation for their services as members but shall be reimbursed for their actual and necessary expenses incurred in the performance of their duties.
1988, April 29, P.L. 373, No. 59, §8, imd. effective.
§4029. Powers and duties of board
(a) Powers.--The board shall exercise the powers conferred upon not-for-profit corporations under Title 15 of the Pennsylvania Consolidated Statutes (relating to corporations and unincorporated associations).
(b) Management of funds.--The board shall have the power to receive, hold and manage any moneys and property received under this act. It shall enter into contracts or make grants with qualified recipients on a regular and periodic basis.
(c) Executive director.--The board may appoint an executive director to carry out the purposes of this act and to be paid compensation as the board shall fix which shall be reasonable in relation to other expenses incurred consistent with the administration expense limitation established by section 10(c). The director may employ persons or contract for services as the board approves. Employees will serve at the pleasure of the board. All expenses of the operation of the board shall be paid from moneys the board receives from the IOLTA fund.
(d) Adoption of bylaws.--The board shall adopt bylaws for the administration of the IOLTA fund to carry out the purposes and provisions of this act.
(e) Confidentiality of records.--Notwithstanding any statute or rule to the contrary, the board shall maintain all papers, records, documents or other information identifying an attorney, client or beneficial owner of an IOLTA account on a private and confidential basis and shall not disclose such information except with the consent of the attorney maintaining the account or as permitted by law or Supreme Court rule.
(f) Government interest.--Moneys
received in the IOLTA fund are not State or Federal funds and are not subject
to Article VI of the act of April 9, 1929 (P.L. 177, No. 175), known as The
Administrative Code of 1929,
audits and hearings.--The board shall conduct, or cause to be conducted,
such investigations, audits and hearings as are necessary to assure that the
funds allocated from the IOLTA fund are expended in accordance with section
§4030. Distribution of IOLTA funds
(a) Allocation of funds generally.--After deducting allowable administrative costs, the funds available to the board for grants in any fiscal year shall be allocated to qualified recipients for the purpose of delivering legal assistance to eligible clients, the elderly, the disabled, the homeless, victims of abuse and seasonal farmworkers. Such funds shall be allocated according to the geographical distribution of persons eligible for such legal assistance throughout this Commonwealth.
(b) Allocation to qualified recipients.--After computing allocation of local option funds for bar foundations, the funds available to the board shall be allocated to assure that at least 75% of the total IOLTA funds raised, after deducting administrative costs, are allocated to qualified recipients who operate to provide civil legal services to eligible clients and victims of abuse under contract with the Department of Public Welfare for the expenditure of funds appropriated by the General Assembly for the provision of legal services. No more than 25% of the total IOLTA funds raised, after deducting administrative costs, shall be allocated to provide direct specialized legal services primarily to individuals who are elderly, disabled or homeless; are seasonal farmworkers; or are victims of crime or abuse.
(c) Allocation for administration.--The board shall determine an appropriate allocation, not to exceed 10% of the funds available in any fiscal year, for administration of the program, including, but not limited to, payment of the personnel expenses of an executive director, board employee and the development of the program throughout this Commonwealth, except that in the first year of implementation, the board may use such additional funds as are reasonably necessary to initiate the program.
(d) Local option.--An attorney or law firm may designate a bar foundation to receive no more than 20% of the total funds which that attorney or firm generates, if the following conditions are met:
(1) The bar foundation is approved by the board.
(2) No funds are used for administrative purposes or support services.
(3) All funds collected are distributed as grants to qualified recipients and are timely reported to the board as required.
(4) All grants are awarded in a manner which is consistent with the purposes of this act.
All bar foundations which establish funds shall make an annual report to the board and are subject to audit by the board.
1988, April 29, P.L. 373, No. 59, §10, effective in 6 months.
§4031. Audit; report to General Assembly
(a) Audits.--The IOLTA fund, administered by the board, shall be audited annually. These audits shall be performed in accordance with generally accepted auditing standards by independent certified public accountants.
(b) Report to General Assembly.--The board shall make an annual report to the Supreme Court, the Governor, the President of the Pennsylvania Bar Association, both houses of the General Assembly and the Chairman of the Board of Pennsylvania Legal Services Corporation on the status of the IOLTA fund, reflecting the number of eligible clients served, the number and status of all audits, investigations and hearings conducted pursuant to section 9(g), the attorney participation rate and the development of the program. A summary of the findings of the audit shall be included in this report.
1988, April 29, P.L. 373, No. 59, §11, effective in 6 months.
FUND FOR CLIENT SECURITY
RULE 501. DEFINITIONS
The following words and phrases, when used in this subchapter shall have, unless the context clearly indicates otherwise, the meaning given to them in this section:
"Board." The Pennsylvania Lawyers Fund for Client Security Board.
"Covered attorney." An individual defined in Rule 512 (relating to covered attorney).
"Claimant." A person who makes application to the Board for a disbursement from the fund.
"Dishonest conduct." Conduct defined in Rule 513 (relating to dishonest conduct).
"Fund." The Pennsylvania Lawyers Fund for Client Security.
"Reimbursable losses." Losses defined in Rule 514 (relating to reimbursable losses).
Adopted April 30, 1982, effective May 15, 1982; amended March 11, 1993, effective May 22, 1993.
RULE 502. PENNSYLVANIA LAWYERS
FUND FOR CLIENT SECURITY
(a) General Rule. There is hereby established in the Administrative Office of Pennsylvania Courts a separate fund to be known as the "Pennsylvania Lawyers Fund for Client Security." The fund shall consist of such amounts as shall be transferred to the fund pursuant to this subchapter. The fund is created by contributions of the members of the Bar to aid in ameliorating the losses caused to clients and others by defalcating members of the Bar acting as attorney or fiduciary. No claimant or other person shall have any legal interest in such fund or right to receive any portion thereof, except for discretionary disbursements therefrom directed by the Board or the Supreme Court, all payments from the fund being a matter of grace and not of right. The Supreme Court reserves the right to amend or repeal this subchapter.
(b) Additional Assessment. Every attorney who is required to pay an annual assessment under Enforcement Rule 219 (relating to periodic assessment of attorneys; voluntary inactive status) shall pay an additional annual fee of $45.00 for the use of the fund. Such additional annual assessment shall be added to, and collected with and in the same manner as, the basic annual assessment, but the statement mailed by the Administrative Office pursuant to Enforcement Rule 219 shall separately identify the additional assessment imposed pursuant to this subdivision. All amounts received pursuant to this subdivision shall be credited to the fund.
(c) Transfers to Fund. The Administrative Office shall transfer to the fund all bequests and gifts hereafter made for the use of the fund.
(d) Audit. The Board shall annually obtain an independent audit of the fund by a certified public accountant, and shall file a copy of such audit with the Supreme Court.
Adopted April 30, 1982, generally effective May 15, 1982; paragraph (b) effective for assessment years beginning July 1, 1982. Amended April 14, 1983, effective July 1, 1983; Dec. 18, 1987, effective July 1, 1988; March 11, 1993, effective May 22, 1993; amended effective March 27, 1995; April 25, 1997 amendment effective for the 1997-1998 assessment and rescinded for the 1998-1999 assessment and thereafter.
RULE 503. PENNSYLVANIA LAWYERS
FUND FOR CLIENT SECURITY BOARD
(a) General Rule. The Supreme Court shall appoint a board to be known as the "Pennsylvania Lawyers Fund for Client Security Board" which shall consist of five members of the bar of this Commonwealth and two non-lawyer public members. One of the members shall be designated by the Court as Chair and another as Vice-Chair.
(b) Terms; Manner of Action. The regular terms of members of the Board shall be for three years, and no member shall serve for more than two consecutive three-year terms. The terms of one-third of the members of the Board, as nearly as may be, shall expire in each year. The terms of members shall commence on April 1. The Board shall act with the concurrence of not less than a majority of the members in office. A majority of the members in office shall constitute a quorum.
(c) Powers. The Board shall have the power and duty:
(1) To appoint hearing committees. Each committee shall consist of three members who are members of the bar of the Supreme Court or who are current members of the Board of the Pennsylvania Lawyers Fund for Client Security.
(2) To investigate applications by claimants for disbursements from the fund.
(3) To authorize disbursements from the fund and to fix the amount thereof.
(4) To determine in January of each year, and to report to the Supreme court, whether the fund is of sufficient amount to pay adjudicated claims and other anticipated claims.
(5) To adopt rules of procedure not inconsistent with these rules. Such rules may provide for the delegation to the Chairman or the Vice-Chairman of the power to act for the Board on administrative and procedural matters.
(6) To exercise the powers and perform the duties vested in and imposed upon the Board by the Supreme Court.
(7) With prior approval of the Supreme Court to give financial assistance to Pennsylvania non-profit corporations whose purpose it is to assist alcohol or drug impaired Pennsylvania lawyers and judges to regain their health and to restore them to professional competence.
(d) Assistance and Expenses. The Administrative Office shall provide necessary clerical assistance to the Board and shall pay the cost thereof and the necessary travel and other expenses of members of the Board and hearing committees out of the fund.
Adopted April 30, 1982, effective May 15, 1982. Amended effective Nov. 1, 1991; amended March 11, 1993, effective May 22, 1993; Aug. 19, 1993, effective Sept. 4, 1993; amended effective May 8. 1997.
RULE 504. IMMUNITY
(a) Claims submitted to the Board shall be confidential. Members of the Board, members of hearing committees, General Counsel and staff shall be immune from civil suit for any conduct in the course of their official duties. All communications to the Board, a hearing committee, General Counsel or staff relating to dishonest conduct by a covered attorney and all testimony given in a proceeding conducted pursuant to this subchapter shall be absolutely privileged and the person making the communication or giving the testimony shall be immune from civil suit based upon such communication or testimony, except that such immunity shall not extend to any action that violates Rule 402 (relating to confidentiality).
(b) Claims based upon alleged dishonest conduct by members of the Board shall be submitted directly to the Supreme Court. Claims based upon alleged dishonest conduct by General Counsel or staff shall be submitted directly to the Board for disposition.
The provisions of subdivision (a) of the rule recognize that the submission and receipt of applications by claimants for disbursements from the fund, and the investigation, hearing, decision and disposition of such claims, are all parts of a judicial proceeding conducted pursuant to the inherent power of the Supreme Court of Pennsylvania. The immunity from civil suit recognized to exist in subsection (a) is that which exists for all participants in judicial proceedings under Pennsylvania law, so long as their statements and actions are pertinent, material and during the regular course of a proceeding. Communications made or revealed in violation of the confidentiality requirement of Rule 402 are not pertinent to the proceeding and, thus, do not entitle the person who publishes them to absolute immunity.
Adopted March 4, 1993, effective March 20, 1993.
RULE 511. REIMBURSEMENT OF CERTAIN LOSSES AUTHORIZED
The Board in its discretion may authorize a disbursement from the fund in an amount not exceeding the reimbursable loss caused by the dishonest conduct of a covered attorney.
Adopted April 30, 1982, effective May 15, 1982.
RULE 512. COVERED ATTORNEY
This subchapter covers conduct of an active member of the bar of the Supreme Court which conduct forms the basis of the application to the Board. The conduct complained of need not have taken place in this Commonwealth for application to the Board to be considered by the Board and an award granted.
Adopted April 30, 1982, effective May 15, 1982.
RULE 513. DISHONEST CONDUCT
For the purposes of this subchapter dishonest conduct consists of wrongful acts or omissions committed by a covered attorney in the manner of defalcation or embezzlement of money, or the wrongful taking or conversion of money, property or other things of value.
Adopted April 30, 1982, effective May 15, 1982.
RULE 514. REIMBURSABLE LOSSES
(a) General Rule. For the purposes of this subchapter reimbursable losses consist of those losses of money, property or other things of value which meet all of the following requirements:
(1) The loss was caused by the dishonest conduct of a covered attorney when acting:
(i) as an attorney-at-law;
(ii) in a fiduciary capacity customary to the practice of law, such as administrator, executor, trustee of an express trust, guardian or conservator; or
(iii) as an escrow agent or other fiduciary, having been designated as such by a client in the matter in which the loss arose or having been so selected as a result of a client-attorney relationship.
(2) The loss was that of money, property or other things of value which came into the hands of the covered attorney by reason of having acted in the capacity described in paragraph (1) of this subdivision.
(3) The loss, or the reimbursable portion thereof, was not covered by any insurance or by any fidelity or similar bond or fund, whether of the covered lawyer, or the claimant or otherwise.
(4) The loss was not incurred by:
(i) the spouse or other close relative, partner, associate, employer or employee of the covered attorney, or a business entity controlled by the covered attorney, or any entity controlled by any of the foregoing;
(ii) an insurer, surety or bonding agency or company, or any entity controlled by any of the foregoing; or
(iii) any government unit.
(5) A payment from the fund, by way of subrogation or otherwise, will not benefit any entity specified in paragraph (4) of this subdivision.
(b) Maximum Recovery. The maximum amount which may be disbursed from the fund to any one claimant with respect to the dishonest conduct of any one covered attorney shall be $50,000.
Adopted April 30, 1982, effective May 15, 1982. Amended Dec. 18, 1987, effective July 1, 1988.
RULE 521. INVESTIGATION AND PAYMENT OF CLAIMS
(a) Cooperation With Disciplinary Board. At the request of the Board, the Disciplinary Board of the Supreme Court of Pennsylvania shall make available to the Board all reports of investigations and records of formal proceedings conducted under these rules with respect to any attorney whose conduct is alleged to amount to dishonest conduct causing reimbursable loss to a claimant, and shall otherwise cooperate fully with the Board. The Board shall cooperate fully with the Disciplinary Board of the Supreme Court of Pennsylvania and shall preserve the confidential nature of any information which is required to be kept confidential under these rules.
(b) Hearing Committees. The Board may utilize a hearing committee to conduct any hearings under this subchapter for the purpose of resolving factual issues. Imposition of discipline under Rule 204 (relating to types of discipline) or otherwise shall not a prerequisite for favorable action by the Board with respect to a claim against the fund, but the covered attorney involved shall be given notice of and an opportunity to contest any claim made with respect to his or her alleged dishonest conduct.
(c) Subpoenas. At any stage of an investigation under this subchapter the Board, a claimant and a contesting covered attorney shall have the right to summon witnesses before a hearing committee and require production of records before the same by issuance of subpoenas in substantially the same manner, and with the effect provided by Rule 213(b), (e), (f), (g) and (h), and if applicable, (c) and (d) (relating to subpoena power, depositions and related matters).
(d) Factors to Be Considered. In exercising its discretion under Rule 511 (relating to reimbursement of certain losses authorized) the Board may consider, among other things:
(1) The amount available and likely to become available to the fund for payment to claimants.
(2) The size and number of claims which are likely to be presented in the foreseeable future.
(3) The total amount of losses caused by dishonest conduct by any one covered attorney or associated group of covered attorneys.
(4) The degree of hardship the claimant has suffered by the loss.
(e) Conditions. In addition to such other conditions and requirements as it may impose, the Board shall:
(1) require each claimant, as a condition of payment, to execute such instruments, to take such action, and to enter into any agreements, including assignments of claims and subrogation agreements, as may be feasible in order to maximize the possibility that the fund will be appropriately reimbursed for payments made from it. Amounts recovered pursuant to any such arrangements shall be paid to the Administrative Office for reimbursement of the fund; and
(2) require each claimant, as a condition of payment, to file a formal complaint with the Disciplinary Board of the Supreme Court of Pennsylvania against the covered attorney and to cooperate in the fullest with the Disciplinary Board or other authorities in connection with other investigations of the alleged dishonest conduct.
Adopted April 30, 1982, effective May 15, 1982; amended Jan. 13, 1993, effective Jan. 30, 1993.
RULE 531. RESTITUTION A CONDITION FOR REINSTATEMENT
The Board shall file with the Supreme Court a list containing the names of all formerly admitted attorneys with respect to the dishonest conduct of which the Board has made unrecovered disbursements from the fund. No person will be reinstated by the Supreme Court under Rule 218 (relating to reinstatement), Rule 219(h) (relating to periodic assessment of attorneys; voluntary inactive status) or Rule 301(h) (relating to proceedings where an attorney is declared to be incompetent or is alleged to be incapacitated) until the fund has been repaid in full, plus 10% per annum interest, for all disbursements made fund with respect to the dishonest conduct person.
Adopted April 30, 1982, effective May 15, 1982. Amended March 11, 1983, effective April 2, 1983.
1.15:200 Safeguarding and Safekeeping Property
Regulatory requirements and sanctions. See Office of Disciplinary Counsel v. Kanuck (Pa. 1987) (lawyer disciplined for withdrawing client's trust funds for payment of another client's obligations).
Scope of responsibility to safeguard.
While PA-R 1.15 is generally directed at the retention by an attorney of a client's funds or other tangible property, the Rule is broadly drafted and, in the opinion of the Committee, is not intended to be limited to the safeguarding of monies. Phila. Eth. Op. 92-6 (1992).
Lawyer's duty to notify and account.
Where attorney is owed fees and wishes to retain certain funds held in escrow for a former client (now deceased), Rule 1.15 mandates upon receipt of such funds, attorney must notify the representative of the estate of former client of the existence of the funds, and the basis of the attorney's claim or judgement. Thereafter, attorney must segregate the funds until attorney entitlement vis a vis the estate and possible third parties is determined. Phila. Eth. Op. 88-6 (1988).
1.15:210 Status of Fee Advances [see also 1.5:420]
Any advance on fees or refundable retainer should be deposited into a client escrow account and as fees are earned the earned fees should be transferred to attorney's account. Office of Disciplinary Counsel v. Anonymous, No. 98 DB 2; Phila B.A. Guid. Comm. Pa. Op. 96-7 (1996). But see Pa. Eth. Op. 95-100 (1995) (allowing advances to be deposited to attorney's account pursuant to a specific written agreement between lawyer and client as to how such funds will be treated).
Prompt delivery of property of client or third person.
If a client or third person is entitled to receive funds, the lawyer must forthwith deliver the funds. Phila. Eth. Op. 89-4 (1989).
Where a third party seeks to be paid a general debt it is owed by the client but does not claim a specific interest in the property of the client held by attorney, attorney must return property to client. Phila. Eth. Op. 92-11 (1992).
Lawyer's duty to safeguard documents.
Files are usually deemed to be the property of the client. Phila. Eth. Op. 95-6 (1995). The lawyer may not withhold a former client's files if it will in any way prejudice the client. Phila. B.A. Guid. Comm. Op. 88-17 (1988). Generally, a former client's file should be returned to the client, destroyed if the client so directs, or stored as long as it is necessary to protect the client's interest. Id.
1.15:300 Holding Money as a Fiduciary for the Benefit of Clients or Third Parties
The comment to PA-R 1.15 states that "[t]he obligations of a lawyer under this Rule are independent of those arising from activity other than rendering legal services." A lawyer, for example, who serves as an escrow agent is governed by the applicable law relating to fiduciaries even though the lawyer does not render legal services in the transaction. Phila. Eth. Op. 89-4 (1989). PA-R 1.15 generally directs attorneys to notify and deliver to third persons funds "or other property" of the third person in the attorney's possession. PA-R 1.15(b) specifically contemplated that the attorney's obligation to a third party's property may arise outside the course of representation. Phila. Eth. Op. 95-6 (1995). Where the client is mentally competent, assuming the attorney adequately counsels the client concerning the risks of client holding the surrendered property herself, rather than in attorney's safekeeping, attorney is required by PA-R 1.15(b) to accede to the client's direction to return the property. Phila. Eth. Op. 92-11 (undated).
1.15:400 Dispute Over Lawyer's Entitlement to Funds Held in Trust
Pennsylvania law permits the assertion of a charging lien against the appropriate funds of a client; assertion of such a lien, however, creates a conflict of interest between the lawyer and the client and the lawyer must advise the client to seek other counsel and allow the client reasonable time to find such counsel. Pa. Eth. Op. 94-35 (1994).
Where the lawyer has not been paid for his services, the lawyer may retain files and other property of the client relating to the unpaid services provided that the retention of such files or property will not result in substantial prejudice to the client. Id. In contingency matters, unless the contingency upon which payment is predicated has occurred, the lawyer may not retain the client's property upon termination of the representation. Pa. Eth. Op. 94-35 (1994).