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Major Changes In Pennsylvania

By Michael Frisch

A significant announcement from the web page of the Pennsylvania Disciplinary Board.

To my mind, this is an example of how a responsible disciplinary system maintains public confidence in the profession. We will see the extent to which these proposals are adopted.  (Mike Frisch)

The Disciplinary Board has published an extensive proposal for comment, which sets forth a number of changes to the Rules of Professional Conduct and Rules of Disciplinary Enforcement, intended to reduce the risk of large-scale misappropriation of funds causing severe stress on the Pennsylvania Lawyers Fund for Client Security and losses to individuals. The proposal was published September 27, 2014, at 44 Pa.Bull. 6070.

After several incidents of large-scale losses, including cases in which 20 or more claims were filed and millions of dollars in losses identified, the Board convened a working group comprised of the Board Chair, the Chair of the Rules Committee, the Board Secretary and representatives of the Office of Disciplinary Counsel. The group considered disciplinary mechanisms to prevent large-scale defalcations, beyond the deterrent effect of discipline and short of barring attorneys from handling fiduciary funds.

Several significant changes are set forth in the rulemaking intended to:

  • impose certain restrictions on the brokering, offer or placement of investment products in relation to the provision of legal services;
  • clarify required financial records, specify account reconciliations on a monthly basis, mandate prompt availability and production of records upon request or demand, and allow for the temporary suspension of an uncooperative respondent-attorney;
  • require attorneys to provide on the annual fee form additional account information to assist ODC in the investigation of misappropriation cases and the preservation of fiduciary funds and other property;
  • streamline procedures that impede investigations and that unnecessarily extend the time from initial detection of signs of theft to successful prosecution; and
  • compel a suspended or disbarred attorney to promptly and completely disengage from the practice of law, and give ODC enhanced oversight authority to ensure that a formerly admitted attorney is not practicing.

Significant amendments to the following rules are proposed:

  • Rule 1.15, RPC:
    • Extensive changes to required records;
    • Keep RPC 1.5(b) fee agreement with records;
    • Individual ledgers for each client whose funds are kept in an account;
    • Records must be electronically backed up daily;
    • Trial balance must be performed on at least a monthly basis and kept for five years;
    • Only lawyer or person directly responsible to a lawyer may be signatory or authorized to make transfers.
  • Rule 5.6, RPC:
    • New Paragraph (b) prohibits brokering, offering, selling, or placing any investment product in relation to the provision of legal services unless so licensed.
    • New Paragraph (c) prohibits recommending or offering an investment product or investing fiduciary funds if the lawyer or a relative has an interest in the product
  • Rule 208, RDE, Procedure: the Board may seek temporary suspension of an attorney who has failed to maintain or produce records required by RPC 1.15.
  • Rule 213, RDE, Subpoena power, depositions and related matters: changes to procedure for challenging a subpoena.
  • Rule 215, Discipline on Consent:
    • The fact of disbarment by consent becomes public immediately upon delivery of the resignation statement to Disciplinary Counsel;
    • Upon entry of the order disbarring the attorney on consent, the attorney must promptly comply with the notice, withdrawal, resignation and cease-and-desist provisions of Rule 217, RDE.
  • Rule 217, RDE, Formerly Admitted Attorneys:
    • Notice of suspension or disbarment is delivered to clients by the most efficient means available that provides for proof of delivery;
    • Wards, heirs and beneficiaries must be notified;
    • Any tribunal, court, agency or jurisdiction in which the attorney is admitted to practice must be notified;
    • Formerly admitted attorney must:
      • Resign all appointments as personal representative, executor, administrator, guardian, conservator, receiver, trustee, agent under a power of attorney, or other fiduciary position;
      • Close every IOLTA, trust, client and fiduciary account;
      • Properly disburse or otherwise transfer all client and fiduciary funds;
      • Cease and desist from using all forms of communication that express or imply eligibility to practice law in the state courts of Pennsylvania, including professional titles, letterhead, business cards, signage, websites, and references to admission to the Pennsylvania Bar;
      • Cancel or discontinue the next regular publication of all advertisements and telecommunication listings stating or implying eligibility to practice in Pennsylvania;
      • Cooperate with Disciplinary Counsel and respond completely to questions by Disciplinary Counsel regarding compliance with Rule 217.
  • Rule 218, RDE, Reinstatement: The waiting period for eligibility to apply for reinstatement to the practice of law does not begin until the formerly admitted attorney files the verified statement required by Rule 217.
  • Rule 219, RDE, Annual Registration of Attorneys:
    • All attorneys must report all accounts that held funds of a client or third party;
    • Must report business operating accounts;
    • The statement that attorney understands RPC 1.15 and RDE 221 requirements is made subject to the penalties of 18 Pa.C.S. § 4904 relating to unsworn falsification to authorities, and attorney is subject to discipline for a false statement.
  • Rule 221, RDE, Funds of Clients and Third Persons:
    • Echoes record-keeping requirements of Rule 1.15;
    • If Disciplinary Counsel requests production of required records, an attorney must produce them within five business days (eight under some circumstances);
    • Failure to produce required records may result in the initiation of proceedings for emergency temporary suspension.

Written comments by mail, email, or facsimile regarding the proposed amendments should be sent on or before November 3, 2014, to:

Office of the Secretary
The Disciplinary Board of the Supreme Court of Pennsylvania
601 Commonwealth Avenue, Suite 5600
PO Box 62625, Harrisburg, PA 17106-2625
E-mail address Dboard.comments@pacourts.us
Facsimile number (717-231-3382)

Posted in:
Bar Discipline & Process