Editorial

A PROPOSAL FOR A CLIENTS’ PROTECTION FUND

By William F. Gallagher

We believe that no member of the public should be out ten cents as a result of the misconduct of a lawyer. The facts are indisputable. A very small number of lawyers engage in fraud, deceit and theft. The existence of these lawyers necessarily means that there are victims. This misconduct is repugnant to a system that mandates honesty and integrity. Lawyers are the keepers of society’s laws. When they steal and victims suffer, who can blame the public for its loss of confidence in the legal profession and the legal system?

The traditional response to attorney misconduct, disciplinary measures and criminal prosecution, do well to make the members of the profession and the general public feel as though justice has been done. But what of the victims of a dishonest and insolvent lawyer? Can a betrayed client who has lost a lifetime's savings find solace in the disbarment of the lawyer or a criminal conviction? The fact is the consequence of attorney theft can be economically devastating to the client-victim.

A client protection fund is an essential element of a well-structured and public-minded lawyer disciplinary enforcement system. The profession works effectively only in an atmosphere where clients extend full trust to its practitioners. Breach of that trust by even one lawyer fouls the environment for every lawyer.

Connecticut has had in place since 1960 a Client Security Fund for the protection of the victims of embezzling lawyers. The fund is maintained and controlled by the Connecticut Bar Association. At present it collects an estimated $450,000 annually from approximately 11,000 members of the CBA. Since its inception in 1960, the fund has paid out a total of $4.5 million. The fund currently contains over $600,000, with $3 million in claims pending, and up to $10 million in the offing. Because contributions to the fund come from a portion of CBA dues, only members of CBA contribute.

We propose legislation which changes the source and amount of money collected for the fund, and puts control in the hands of the Chief Justice, administered by members of the bar and members of the public.

All attorneys who practice in Connecticut must by statute pay $450 per year as an occupational tax. This money goes into the state’s general fund. The proposed legislation would raise the amount of the tax to $500 per year per lawyer and place the money in a Client Protection Fund. The money would come not only come from members of the CBA, but from every lawyer who is licensed to practice in the state.

As the statute is drafted, control and decision-making functions would be in the hands of a five-member board of three attorneys and two non-attorneys appointed by the Chief Justice and the House and Senate co-chairs of the Judiciary Committee. This board adopts rules, regulations and procedures. It would have discretion in deciding the merits of a claim, the amount paid if the claim is meritorious, and the terms under which reimbursement would be made. Its rules, regulations and procedures are subject to the approval of the Chief Justice.

The fund would compensate victims for losses resulting from misconduct so long as the lawyer was acting as a lawyer at the time of the misconduct, or had obtained the client’s funds or property as a result of lawyer conduct.

There has been suggestion that instead of requiring honest lawyers to pay for the indiscretions of dishonest lawyers, we adopt a bonding requirement for all lawyers. This would not work for three reasons: First, what bond coverage limits are set, by whom, for what transaction, and by what criteria? A comprehensive system of bonding would be complex and cumbersome to administer. Second, there is nothing to prevent a lawyer from ignoring the requirement of bonding. If the requirement is ignored and the lawyer steals, what then of the victim? Third, insurance companies set the premium for bonds. How can a novice attorney be expected to pay a substantial bond premium when his or her assets and income are limited?

And why not require honest lawyers to pay for the misconduct of dishonest lawyers? Full compensation creates a positive public image of a profession which cares, and which will not let a member of the public suffer economically for the misconduct of one of its own. We may not be able to prevent dishonest lawyers from entering the profession, but we can take measures to protect the public from them.

The success of the Client Protection Fund depends on the cooperation of all members of the Connecticut bar. With that cooperation we not only compensate the victims, but heighten and restore the public's image of the legal profession.