This
annual summary update is mainly positive and only slightly
negative. The positive news is that the overwhelming
majority of Arkansas lawyers continue to be ethical
counselors and champions for their clients, what we
at the Office of Professional Conduct call our "silent
majority." Thanks to all of you in this category!
However, while the number of informal complaints received
from all sources in 2002 remained about the same as
in 2001, formal disciplinary complaints filed in 2002
jumped by 25 percent to 186. Twenty-four attorneys each
had more than one public sanction imposed in 2002. Our
filings of formal complaints in 2003 to date are on
pace with 2002. Disbarment complaints appear to be trending
upward, and we expect to have at least seven in process
by mid-year. We can only hope that educational efforts
by this office and the bar, appropriate disciplinary
vigilance, and self-policing by the bench and bar keep
this from becoming a long-term trend. As in previous
years, the largest area of complaints from the public
involves what we call "neglect of clients and their
legal matters" and "failure to communicate"
situations.
Attorney Trust Accounts.
Effective July 1, 2002, a new Supreme Court rule requires
banks to report to this office all instances of attorney
trust account "insufficiencies," whether the
bank refused to honor the check or did pay it, if the
transaction created a negative balance in the account
at the time. Our first 10 months' experience with this
new program has been surprisingly positive! The overwhelming
majority of reports have been caused by unintentional
errors-by attorneys and even by banks. The most common
mistakes are failure to make timely deposits, bookkeeping
errors at law offices, and client checks that "bounce,"
causing problems in the trust account into which each
was deposited by an unsuspecting lawyer. Out of over
60 notices received at the time this article was written,
probably only a handful will result in formal complaints.
The most disturbing revelation to come from this new
rule is the apparent lack of knowledge by many lawyers
of the basics of attorney trust accounting. This office
has presented many CLE programs since last July in an
attempt to provide basic information to lawyers on this
subject.
Basic lawyer trust accounting
is simple. (1) There must never be a negative balance
in any account-an individual client's separate account,
the cumulative common clients trust account (IOLTA account),
or the trust account bank statement. If a three-way
monthly reconciliation among these three items is faithfully
performed, mistakes are minimized and any are caught
early on. (2) Receipt of funds is promptly reported
to those with an interest in the funds-clients and third
persons. (3) Trust account funds are promptly disbursed,
including any earned attorney fees. A lawyer does not
"park" or "hide" earned fees in
the trust account! (4) All trust account funds are fully
accounted for in writing to the respective clients.
Each separate client trust account is just like your
personal checkbook register. Post timely, completely,
and properly and you have taken care of the basics.
(4) Be "descriptive" on each item in your
trust account, so the deposit slip or check can be easily
identified by an auditor-do not write checks out to
"cash" or use ATM machine withdrawals with
your trust account. Each trust account deposit slip
or check should have sufficient description on it to
link it back, for audit purposes, to a specific client
and a specific legal matter. (5) Do not "commingle"
client and personal funds by either leaving earned fees
in your trust account or by depositing personal funds
into your trust account.
Model Rule 1.15(a)(3)
clearly requires that attorney trust account records
be preserved for five (5) years after the termination
of the representation. A request or subpoena from the
Committee for a lawyer's trust account records, if not
challenged legally by the lawyer, should not be met
with the answer that the records no longer exist at
the lawyer's office. Because Arkansas has no statute
of limitations for lawyer disciplinary actions, a wise
lawyer might consider maintaining trust account records
permanently, especially considering the expense to obtain
duplicate records from the bank several years after
the fact.
Several attorneys have
run into problems by failing to disburse settlement
funds from personal injury cases to health care and
other providers, often after medical liens were properly
filed and "letters of protection" even given
by the attorney. Unless the lawyer is negotiating a
reduction in a provider bill, there would seem to be
little reason to not write and distribute all checks
for funds from a settlement at roughly the same time.
In at least one instance, this failure to pay a clearly
acknowledged bill resulted in a suspension for the lawyer.
Even if it is the "claims staff" making the
mistake, the lawyer is ultimately responsible.
A special note about theft
and embezzlement may save you the pain and embarrassment
suffered by more than one lawyer. The lawyer is the
fiduciary for any funds of clients or others that come
into the lawyer's possession or control. When there
is a loss, almost always uninsured, it is the lawyer
who generally is responsible. If you are allowing others
to have access to, or even sole daily control over,
your trust account, and other accounts, you run a big
risk of financial disaster. Theft happens! Three weeks
after I gave a CLE program late last year, an attorney
in attendance called me to report he had been the victim
of trust account theft just as I had described in the
program. He had not personally supervised his trust
account for many months, and that was all the head start
his now-former employee needed to skim off a substantial
amount of funds and destroy the records. Please go check
your situation today!
Ethics and Disciplinary
Developments. Our first full year's experience under
the revised Supreme Court's 2002 revisions to the disciplinary
Procedures is positive. Most notably, the use of separate
Committee panels for the ballot vote, public hearing,
and "discipline by consent" stages appears
to afford respondent attorneys the "fairness"
the changes were designed to bring about. Secondly,
the use of "consent," really a risk management
tool for both sides, seems to be working well, and growing
in use by respondent attorneys. Of 178 formal complaint
files closed in 2002, 35 were by consent. To dispel
any notion that the Committee panels are "rubber
stamps" for just about anything the Office of Professional
Conduct chooses to file, panels voted "no action"
on 30 cases in 2002. A copy of the 2002 Annual Report
is now available on-line at the Committee's website
http://courts.state.ar.us/courts/cpc.
html. The office has started mailing a copy of each
final "public" disciplinary opinion to the
hometown newspaper of the publicly sanctioned lawyer.
In several notable instances, this public information
has led to the filing of additional complaints by other
clients and our discovery of additional, and more serious,
problems than we knew about originally.
The Committee and this
Office are funded solely from attorney annual license
fees to the Supreme Court, and not by tax revenues.
Since January 1, 2002, the Committee has collected over
$46,000 in fines and over $1,200 in case costs from
assessed sanctions, in addition to restitution for clients
in some cases. The revenue from fines and costs goes
back into the general Court fund from which attorney
discipline, professional programs, the lawyer assistance
program, the client security fund, the unauthorized
practice of law committee, and other Court entities
are funded.
One disturbing trend has
been the number of lawyers receiving multiple public
sanctions in the space of one year. The Committee's
2002 Annual Report, at page seven, reveals that three
lawyers had four or more public sanctions in 2002. Many
others had at least two public sanctions. For purposes
of discussion only, if the lawyers who receive four
or more public sanctions in one year do not also get
suspended somewhere in this process with such a record,
then we may need to think about the system, especially
if these lawyers had sanctions from previous years.
Strictly as a personal comment, although I have heard
it recently at two CLE programs in which I participated,
if the message is not getting through to such lawyers,
maybe we need to consider a rule change that more directly
takes into account the cumulative weight of all public
sanctions over a certain time period, or even a career.
Perhaps it could function much like the driver's license
"points" system-a certain number of total
points and the lawyer automatically gets a suspension
of some length. One interesting suggestion made is that
the sanctions might count as follows: Warning - one
point, Caution - two points, Reprimand - three points,
Suspension - four points. Using such a scheme, three
lawyers whose records I am familiar with would have
the following records: Lawyer A , since 1983, four cautions
(eight points) and five reprimands (15 points), for
a total of 23 points, but never suspended; Lawyer B,
since 1987, two warnings (two points), four cautions
(eight points), and three reprimands (nine points),
for a total of 19 points, but never suspended; Lawyer
C, since 1982, has had four warnings (four points),
three cautions (six points), 10 reprimands (30 points)
and a six-month suspension in 1992 and a three-month
suspension in 2000 (eight points), for a total of 48
"career" points. Somewhere in these records
is a possible need for more deterrence than the present
system appears to deliver for repeat offenders who do
not appear to correct their behavior.
Arkansas (Model) Rules
Update. As a result of the American Bar Association's
adoption in August 2002, the Professional Ethics Committee
of the Arkansas Bar Association has been engaged in
a review of the Arkansas Rules. A state recommendation,
which can be viewed at the Association's website at
www.arkbar.com/
whats_new/new_model_rules.html, was approved by
the Association's House of Delegates at the June Annual
Meeting, and will result in a petition to the
Supreme Court. Among the major proposed changes from
the current Arkansas Rules are: (1) MR 1.5(e), by which
the client must agree to any division of fees between
lawyers in different firms, and that agreement must
be confirmed in writing, (2) MR 1.6, giving the lawyer
more discretion in disclosing confidential information
to prevent a future crime, (3) MR1.7(b) and MR 1.8(a),
requiring waivers of conflicts of interest to be signed
by the client in certain situations, (4) new MR 1.8(j),
prohibiting sexual relationships with clients that did
not predate the attorney-client relationship, (5) clarification
of MR 1.15 on attorney trust accounts, (6) new MR1.18,
on duties to prospective clients, and (7) major changes
to MR 5.5 on unauthorized practice of law and multi-jurisdictional
practice, essentially to approve a "house
counsel" exception to Arkansas licensure.
The ABA revised Model Rules makes frequent use of the
concept "confirmed in writing" in attorney-client
dealings. Any petition from the Association to the Supreme
Court will likely be put out for public comment by the
Court. Lawyers need to familiarize themselves with the
proposed changes, so they can timely offer comment and
be ready to incorporate any changes into their law practices.
If you would like the
Office of Professional Conduct to present a program
in your area or to your organization on these, or other
relevant issues, please contact us at 501-376-0313 or
1-800-506-6631. We had rather spend time sharing information
with you that may help lawyers avoid complaints than
spending even more time dealing with the complaints.
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