Clients’ Security Fund’s Rules of Procedure
Pursuant to Section 6 of Rule XII of the District of Columbia Court of Appeals creating the Clients’ Security Fund of the District of Columbia Bar, the following Rules of Procedure are adopted by the Trustees of such Fund for the management of the Trustees’ funds and affairs and for the presentation of claims and the processing and payment thereof.
For the purpose of these Rules of Procedure, the following definitions shall apply:
1. The “Fund” shall mean the Clients’ Security Fund of the District of Columbia Bar.
2. The “Trustees” shall mean the Trustees of the Clients’ Security Fund of the District of Columbia Bar.
3. The “Chair” shall mean the Chairman of the Trustees appointed by the District of Columbia Court of Appeals.
4. The "Board" shall mean the Board of Governors of the District of Columbia Bar.
5. The term “lawyer” shall mean a member of the District of Columbia Bar at the time of the alleged dishonest conduct that is the basis of the application for reimbursement from the Fund.
6. The words “dishonest conduct” shall mean wrongful acts committed by a lawyer in the manner of defalcation or embezzlement of money, or the wrongful taking or conversion of money, property or other things of value (amended 7/24/93). The dishonest conduct need not have taken place within the District of Columbia in order for an application to the Fund to be made or to be granted (amended 2/7/84, edited 5/4/89).
7. “Reimbursable Losses” are those losses of money, property or other things of value which meet all of the following tests:
1. The loss was caused by the dishonest conduct of a lawyer when
a. acting as a lawyer; or
b. acting in a fiduciary capacity customary to the practice of law, such as personal representative, administrator, executor, trustee of an express trust, guardian or conservator (amended 2/7/84); or
c. acting as an escrow holder or other fiduciary, having been designated as such by a client in the matter in which the loss arose or having been so appointed or 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 possession (actual or constructive) of the lawyer by reason of his or her having acted in the capacity described in paragraph G 1 of this Rule.
3. The dishonest conduct occurred on or after April 1, 1972.
4. The loss, or reimbursable portion thereof, was not covered by any insurance or by any fidelity or similar bond or fund, whether of the lawyer of the applicant or otherwise.
a. the lawyer
i. has died or has been adjudicated as bankrupt or mentally incompetent;
ii. has been disbarred or suspended from the practice of law or has voluntarily resigned from the practice of law in the District of Columbia;
iii. has become a judgment debtor of the applicant or has been adjudicated guilty of a crime, which judgment or judgments shall have been predicated upon dishonest conduct while acting as specified in paragraph G 1 of this Rule and which judgment or judgments remain unsatisfied in whole or in part; or
b. The Board has certified the claim for the alleged loss to the Trustees as an appropriate case for consideration because the loss was caused by the dishonest conduct of a member of the District of Columbia Bar.
6. The maximum amount which any one claimant may recover from the Fund arising from an instance or course of dishonest conduct is $75,000.00. This limit is effective for claims filed or pending with the Fund as of April 10, 1990 (amended 2/7/84 and 4/10/90).
8. The following shall be ineligible to apply to the Fund for reimbursement of losses:
1. The spouse or other close relative, partner, associate or employee of the lawyer causing the loss; or
2. An insurer, surety or bonding agency or company, or
3. Any business entity controlled by
a. the lawyer,
b. any person described in paragraph 1 hereof, or
c. any entity described in paragraph 2 hereof or in turn controlled by the lawyer or a person or entity described in paragraphs 1 or 2 hereof; or
4. A governmental entity or agency.
2. Application for Reimbursement.
1. The Trustees shall prepare a form of application for reimbursement.
2. The form shall require, as minimum information:
1. The name and address of the applicant.
2. The name and address of the lawyer.
3. The nature and amount of the alleged loss.
4. The date or period of time during which the alleged loss was incurred.
5. The date upon which the alleged loss was discovered.
6. A general statement of facts relative to the alleged loss.
7. A statement that the claimant has no other remedy available against the attorney or any other person responsible for the loss and that the loss was not covered by any insurance, indemnity, or bond; or, if another remedy was, is, or may be available, the extent to which it was pursued and the result. In the case of an insurer, state the name and address of the insurer, insurance or bonding company, if known, and the extent of such coverage and the amount of payment, if any, made (amended 2/7/84).
8. A statement that the claim has not been presented to the Clients’ Security Fund of any other jurisdiction, or if it has, the status of the claim. A statement that if another claim is thereafter filed, the District of Columbia Clients’ Security Fund will be notified and advised of all actions taken (amended 2/7/84).
9. Verification by the applicant.
3. The application shall
contain the following statement in bold type:advise claimants that reimbursement from the Fund is a matter of discretion rather than a matter of right, and that reimbursement from the Fund is ordinarily a remedy of last resort (amended 5/9/95). "NOTICE TO APPLICANT: THE DISTRICT OF COLUMBIA BAR HAS NO LEGAL RESPONSIBILITY FOR THE ACTS OF INDIVIDUAL LAWYERS. THE CLIENTS’ SECURITY FUND IS ORDINARILY A FUND OF LAST RESORT. PAYMENTS FROM THE CLIENTS’ SECURITY FUND SHALL BE MADE IN THE SOLE DISCRETION OF THE TRUSTEES ADMINISTERING THE FUND AND NOT AS A MATTER OF RIGHT. NO CLIENT OR MEMBER OF THE PUBLIC SHALL HAVE ANY RIGHT IN THE CLIENTS’ SECURITY FUND AS A THIRD PARTY BENEFICIARY OR OTHERWISE."(amended 2/7/84).
4. Copies of the application form shall be obtainable from the Office of District of Columbia Bar and from each Trustee.
Processing of Applications.
1. Applications for reimbursement shall be addressed to the Office of the District of Columbia Bar and shall be transmitted forthwith by such office to the Chair of the Trustees.
2. The Chair shall promptly cause each application for reimbursement to be sent to a Trustee for investigation and report. Such Trustee shall be reimbursed for reasonable out-of-pocket expenses incurred by him or her in making such investigation. The Chair or other Trustee conducting the investigation may request of the applicant additional information with respect to the alleged loss. A copy of the application shall be sent by certified mail to the last known address of the lawyer who is alleged to have committed the dishonest conduct.
3. The Trustee to whom an application has been referred shall conduct such investigation as he or she shall deem necessary and desirable to determine whether the claim is for a reimbursable loss and to guide the Trustees in deciding the extent, if any, of reimbursement from the Fund. The Disciplinary Board of the District of Columbia Bar may allow the Trustees to have access, during consideration of an application, to the Disciplinary Board files and records, if any, pertaining to the dishonest conduct alleged. Information or documents obtained by the Trustees from said files or records shall be used solely for the purpose of determining the validity of the application, but otherwise shall constitute confidential information.
4. Reports with respect to applications shall be submitted by the Trustee conducting the investigation to the Chair within a reasonable time. The Chair shall promptly send a copy of each report to the Trustees.
5. The Trustees shall consider each report submitted at their next meeting. The Trustees shall hear the applicant and/or the lawyer alleged to have caused the loss if any Trustee requests that such testimony be presented. Absent such request, a claim shall be processed on the basis of the information contained in the application for reimbursement and in the report of the Trustee who investigated the claim; provided, however, that in all cases, the lawyer accused of dishonest conduct, or his or her personal representative, shall be given reasonable opportunity to be heard by the Trustees if the lawyer so requests.
6. The Trustees may in their discretion authorize payment or any reimbursable losses forthwith, or defer payment of any such loss until the Trustees shall have ascertained the amount remaining in the Fund at the end of the fiscal year, the necessary expenses of administration, and the aggregate reimbursable losses during such year, or until such other time as the Trustees may deem appropriate.
7. The Trustees may, in their sole discretion, allow further payment of a reimbursable loss which was partially allowed in a prior year.
8. A Trustee may disqualify himself or herself from participating in the processing of a claim for any reason the Trustee deems appropriate.
4. Reimbursement at the Discretion of Trustees. All reimbursements from the Fund shall be a matter of grace and not of right and shall be in the sole discretion of the Trustees. No client or member of the public shall have any right in the Fund as a third party beneficiary or otherwise.
5. Assignment of Applicant’s Right and Subrogation. Payments on approved applications shall be made from the Fund only upon condition that the applicant shall execute the assignment of rights ana subrogation agreement required by Section 13 of Rule XII of the District of Columbia Court of Appeals. Upon commencement of an action by the District of Columbia Bar, pursuant to its subrogation rights, it shall give written notice thereof to applicant at his or her last known address. The applicant may join in such action to press a claim for his loss in excess of the amount of the payment from the Fund, but any recovery shall first be applied to offset such payment.
In their discretion, the Trustees may require that before receiving a payment from the Fund, the person who is to receive such payment, or his or her legal representative shall execute and deliver to the Trustees a written agreement. This agreement shall state that in the event the reimbursed client, or his or her estate, should ever receive any restitution from the lawyer or the estate of the lawyer involved, the reimbursed client shall agree to repay to the Fund (up to the amount of the original reimbursement from the Fund) the amount of the original reimbursement from the Fund plus the present restitution from the lawyer or his or her estate exceeds the reimbursed client’s actual loss, as that actual loss is or was determined by the Trustees.
6. Meetings of the Committee.
1. Regular meetings of the Trustees shall be held from time to time upon call of the Chair upon not less than five (5) days written notice.
2. Special meetings of the Trustees shall be called on at least five (5) days written notice by the Chair at the request of at least two (2) Trustees. Notice of any meeting may be waived by a Trustee, either before or after the meeting.
3. A majority of the Trustees shall constitute a quorum at any meeting. The concurrence of a majority of the Trustees in attendance shall be requisite to the action of the Trustees (amended 2/7/84).
7. Amendments. These rules may be amended at any duly held meeting of the Trustees, subject to the approval of the Board.
Amended by the Board of Governors February 7, 1984, April 10, 1990, December 14, 1993 and May 9, 1995. Amended by the Trustees of the Fund on July 24, 1993.
Contact the D.C. Bar Clients’ Security Fund
Address: 1101 K Street NW
Washington, DC, 20005
Telephone: 202-737-4700, ext. 3216