Bar Issue Papers
Clients' Security Fund
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II. Bar Position
IV. Facts and Statistics
The Clients' Security Fund was created to enable the organized Bar to help compensate for the monetary losses that some clients experience because of the disreputable actions of a few unethical attorneys. The payment budget for the Clients' Security Fund is calculated by a yearly allocation of $25 from the dues of each member in good standing.
II. Bar Position
A. American Bar Association:
The ABA first recommended creating client security funds in 1959. Such funds represent a significant response from the legal profession to an expectation of public trust and the lawyer's obligation to the public. This duty was reaffirmed by the ABA House of Delegates when it adopted the Model Rules of Professional Conduct in August 1983.
The ABA has gone beyond merely advocating the use of funds by assisting jurisdictions in determining what structure and operation is best for them. Through its Standing Committee on Clients' Security Fund (now the Standing Committee on Client Protection), the ABA has formulated model rules for funds. The committee monitors funds throughout the nation and has published a kit to help groups publicize their clients' security funds.
B. The Florida Bar:
The Florida Bar Board of Governors approved the Fund in 1965 and it was authorized by the Florida Supreme Court in May of 1966. It went into operation on Jan. 1, 1967, and has been aiding Floridians ever since.
C. The National Client Protection Fund Organization:
The National Client Protection Organization, Inc. (NCPO) is a not-for-profit membership corporation that was organized in May 1998. NCPO is foremost an educational resource for the exchange of information among law client protection funds throughout the United States and Canada. NCPO's purposes include providing help and support to protection funds and programs to protect legal consumers from dishonest conduct in the practice of law.
A. Judicial History:
Several court cases have directly affected the Clients' Security Fund or could have had a significant procedural impact on its operations. A synopsis of some important cases from Florida follows.
The Florida Bar In re Amendment to the Integration Rule and Bylaws Respecting Clients' Security Fund, 346 So.2d 537 (Fla. 1977)
In 1977, the Board of Governors of the Bar petitioned the Supreme Court to extend the Fund's coverage to include misappropriations by attorneys acting in fiduciary capacities unrelated to an attorney-client relationship. The Court declined to expand the Fund, reasoning that, although they may take disciplinary action against an attorney who acted criminally even if there was no attorney-client relationship, it would be almost impossible to establish a fund to recompense all persons who are injured by someone who also happens to be a lawyer. The Court's opinion also said that lower bond requirements for attorney-fiduciaries were not necessarily unfair, because a fiduciary is selected for his character, not his status in society. The Rules Regulating The Florida Bar, adopted by the Florida Supreme Court on July 17, 1986, expands CSF coverage to include fiduciary relationships customary to the practice of law.
Southeast First National Bank of Miami vs. The Florida Bar, 389 So.2d 1222 (Fla. 3d DCA 1980)
In 1980, the Bar brought suit against a bank to make recoveries for a claim paid that involved the forging of the claimant's name on a check by his attorney. The case held that the Integration Rule does not limit the Bar, after making payment from the Fund, to proceed only against an offending attorney. Second, the case confirms that reimbursements from the Fund are a matter of grace, not of right or obligation, and the Bar has total discretion in deciding whether or not to pay a claim and sue on an assignment.
The Florida Bar v. Allstate Insurance Company, 391 So.2d 238 (Fla. 3d DCA 1980)
The Court ruled in favor of the Bar. In the case, the insurance company paid drafts on an attorney's false endorsements and the Court held it liable to the client for the conversion.
In The Florida Bar v. Rogowski, 399 So.2d 1390 (Fla. 1981) it was decided the Court cannot require a payment from an attorney that is not for restitution or the payment of costs, when no payment has been made by the Fund.
B. The Florida Bar:
In 1965, the Board of Governors of The Florida Bar petitioned the Florida Supreme Court to amend the Integration Rule so that a Clients' Security Fund could be created. In May 1966 the Fund was authorized and it went into operation on Jan. 1, 1967.
The Fund is administered by the Bar's Clients' Security Fund Department. Payments from the fund are made at the discretion of the Bar and are not a matter of right on the part of the claimant.
Claims based on attorney's fees, defined as a reimbursable loss based on fees paid to a member of The Florida Bar for services to be rendered, may be reimbursed the amount of the fees paid up to $5,000 if no useful services were provided. Claims for misappropriation, may be reimbursed the amount of misappropriated or embezzled funds up to a total of $250,000. All claim payments are held until the end of each fiscal year (June 30) and if the funds exist to pay all approved claims in full those payments are made. If there are not enough funds available to pay all claims in full, payments are made to all claimants on a pro rata basis with no misappropriation reimbursement exceeding $250,000.
Chart showing Client Security Fund Payments 1987/1988 to 2009/2010
|Fiscal Year||Claims Filed||Attorneys claimed against||Claims Paid||Total Amount Approved ($)|
Fifty states and the District of Columbia offer Clients' Security Funds. Although some local bar groups have their own funds in other states, no local bar associations in Florida offer such a fund.
The Fund is administered by the Clients' Security Fund Committee, which consists of approximately 25 Florida Bar members.
Throughout the years, the most common reasons for Fund payments include attorneys taking money from an escrow account or trust fundproviding no significant service, keeping settlements and general misappropriations.
The most common reasons for denial of Fund payments include a fiduciary relationship unrelated to the practice of law, untimely, fee disputes, no client/attorney relationship, no misappropriation of funds, and a business relationship.
Prepared by The Florida Bar Clients' Security Fund Department.