To carry out the purposes of the Order of the Court of Appeals of Maryland, passed on March 28, 1966, establishing the Client Protection Fund, the Trustees have adopted the following regulations pursuant to Md. Rule 16-811d.(iii). The Trustees will be guided, but not necessarily bound, by such regulations.
1. Attorney-client or fiduciary relationship.
No claim will be recognized by the Trustees unless an attorney-client or fiduciary relationship existed with a member of the Bar of the Court of Appeals of Maryland when the loss was incurred as a result of a defalcation by the said Maryland attorney. The Trustees consider that a “fiduciary relationship” means, for example, a lawyer acting in a fiduciary capacity traditional and customary in the practice of law in Maryland, such as a court-appointed lawyer, a personal representative of a probate estate, a trustee of an express trust, a guardian, a custodian acting per statute, or an attorney-in-fact by written appointment.
2. Businesses with ten or more employees.
Notwithstanding the existence of a fiduciary or client-attorney relationship with a Maryland attorney and the occurrence of defalcation(s) by said Maryland attorney, no claim by a corporation, limited liability company, proprietorship, partnership, business trust or similar entity will be recognized by the Trustees unless the claimant proves to the satisfaction of the Trustees that at the time of the loss and the filing of the claim it (i) had fewer than ten (10) employees, (ii) took reasonable steps to discover, limit and recover its loss, and (iii) had no source of recovery other than this Fund. The Trustees consider that entities having ten (10) or more employees generally have the ability and capacity to protect themselves, with insurance, fidelity bonds, etc. and do not need protection from this Fund.
3. Profit making businesses.
The Trustees further consider that the fundamental purposes of the Fund do not include the guaranty of profit-making business such as small loan companies, title insurance companies, banks and similar enterprises, and that the Fund is not, and will not act as, a collection agency for all claims against Maryland lawyers.
4. Persons in close relationship to the defaulting attorney.
The spouse, law partner of or conspirator with any defaulting attorney shall not have any right to file claims for reimbursement from the Fund.
5. Investment losses.
With regard to claims for investment losses or investment-type claims, the Trustees will consider for payment only those claims arising out of an attorney-client or attorney-fiduciary relationship. Investment advice given by the claimant's attorney is not, in and of itself, a ground for seeking reimbursement from the Fund, even though such advice may result in the loss of claimant's money. In considering such claims, the Trustees will consider, in addition to all other factors, (i) the circumstances under which the claim arose; and (ii) whether the attorney came into possession of the claimant's money by virtue of an attorney-client relationship with the claimant and thereafter retained the money for investment during the course of which he misappropriated claimant's money to his own use. Additionally, in evaluating losses resulting from loan and investment transactions with attorneys, the Trustees will consider any disparity in bargaining power between the attorney and the claimant; their respective educational backgrounds and business experiences; whether the attorney became privy to the client's financial affairs while representing the claimant; whether the attorney initiated the transaction; and whether the attorney provided the claimant with necessary financial disclosure and independent counsel. In no event will lost interest or other profit on investments be reimbursed. All payments on the investment, representing principal or interest received by the claimant, will be deducted from the claimant's initial investment in order to determine, for Fund purposes, the eligible amount of the loss.
Claims for losses must be presented to the Trustees within six (6) months after the discovery by the claimant of the defalcation, or at a later date in the discretion of the Trustees.
The Trustees shall require that claims be submitted in writing upon the official claim form of the Fund. Claim forms may be obtained from any one of the Trustees or from the office of the Fund.
3. With whom filed.
All claims shall be filed with the Administrator of the Fund whose name and address shall appear on the claim form.
1. Attorney Grievance Commission.
Prior to consideration, the Trustees shall refer or require the claimant to refer the matter to the Attorney Grievance Commission of Maryland. As a condition precedent to the payment of any claim, it shall, wherever practicable, be required that final action be taken on the grievance by said Commission.
2. Civil remedies.
The Trustees have established, as a general policy, that no claim shall be recognized by the Trustees until the claimant has exhausted all other remedies reasonably available to the claimant for payment of part or all of his claim from sources other than the Client Protection Fund. Claimants are cautioned, however, that since settlements of claims against third parties usually foreclose the Fund's subrogation rights, the Fund will generally not pay any amounts over and above the amount for which the claimant has settled.
Notwithstanding the foregoing, the Trustees reserve the right in their sole and absolute discretion to recognize exceptions to their usual requirement of exhaustion of other remedies in cases presenting unusual circumstances or extreme hardship. In exercising such discretion, the Trustees shall consider all relevant facts including the following: (i) the amount of the claim; (ii) the age, education and experience or sophistication of the claimant; (iii) the extent to which the claimant has or has not acted to help himself; (iv) the probable expense of self-help, relative to the amount claimed; (v) the likelihood of a monetary recovery from self-efforts; (vi) the possible application of limitations or laches; and (vii) the self-help experience of other claimants in like situations.
Upon receipt of a claim, the staff will give it a number and docket it. The staff will then advise the claimant of any additional documents or information required, and will mail, by regular mail, a copy of the claim to the alleged defalcating attorney (hereinafter in this regulation d, the “Attorney”) at the Attorney's last known address as such address appears from the records of the Fund, along with a request for the Attorney's comments on the claim and a warning to the Attorney that any amount awarded to a claimant must be repaid to the Fund as a condition precedent to readmission to good standing with the Court of Appeals and a warning that a failure to respond to the claim constitutes a waiver of any further notice of any development in the matter. A Trustee will be assigned to review the claim with the assistance of the administrator and to investigate the statements in the claim and report on it to the Trustees. When review of the claim is complete, a report will be prepared, complete with all documentation available and forwarded to each Trustee.
The Trustees will decide claims based on the evidence in the claim file, including the statements contained in the claim form, any other written statements by the claimant or other witness (including the Attorney), and any other information obtained. The Trustees may in their discretion request appearance by any person or the production of additional information. The Trustees shall promptly notify each claimant of the decision and of the right to request reconsideration if such claimant is dissatisfied with the decision. The decision and notice of right to reconsider must be mailed, by regular mail, to the claimant.
The decision of the Trustees on the claim becomes final unless the claimant files a request for reconsideration with the Trustees. The request for reconsideration must be in writing and postmarked within 30 days from the date of the decision. The request for reconsideration shall contain such additional information the claimant wants the Trustees to consider. A request for hearing may be included with the request for reconsideration.
Any evidence submitted in connection with the request for reconsideration, including any sworn statements made at a hearing, shall be considered in addition to evidence used to make the original decision.
A hearing on reconsideration will take place at a location that the Trustees, in their discretion, determine. Generally, the claimant may personally appear before the Trustees at such a hearing, but the Trustees, in their discretion, may determine otherwise if a claimant is unable to appear or chooses not to appear. By way of example, and not limitation, when a claimant cannot (or chooses not to) appear personally, the Trustees may, in their discretion defer such a hearing and disposition of the claim until the claimant is able to personally appear, or allow an agent, designated in writing, to appear for the claimant or resolve the issue in any other manner. In such a case, the notice of the hearing shall require the claimant to elect in writing, within 30 days of the notice of the hearing, the form of hearing from amongst the choices offered by the Trustees. If the claimant elects to defer the hearing until the claimant is able to personally appear, the claimant shall be advised to supply the Fund with any subsequent change of address and to advise the Fund of the approximate date when the claimant will be able to personally appear.
The hearing on reconsideration shall be recorded and the statements of the claimant (or anyone appearing on the claimant's behalf) and any witnesses, will be under oath or affirmation. Disposition of the request for reconsideration results in a final decision and must be in writing and contain findings of fact.
4. Judicial review.
The final decision must be mailed to the claimant. If the claim is denied, in whole or in part, a notice of right to judicial review of the final decision of the Trustees pursuant to Md.R. 16-811(I) and Md.R. 7-200 et seq. shall be mailed with the final decision.
(As Amended Pursuant To Resolution Dated September 16, 2006)
The Trustees hereby establish the following expedited procedures for preliminary decision of certain classes of claims, and direct the Chair and Secretary to implement such expedited procedures in the interval between meetings of the Trustees:
(1) The Chair and Secretary shall act hereunder only by their joint concurrence and agreement.
(2) The Chair and Secretary hereby are authorized to recommend preliminary approval of the following two classes of claims: (i) claims for refunds of collected but unearned retainers and (ii) claims for amounts less than Twenty-five Hundred Dollars ($2,500.00). Every such recommendation, together with a brief synopsis of the pertinent facts, shall be submitted by them to the other Trustees for their concurrence or ratification, either by mail between meetings or at the next regular Trustees' meeting. Upon concurrence or ratification by at least five (5) Trustees, including the Chair and Secretary, such claims may be paid.
(3) The Chair and Secretary hereby are authorized to recommend preliminary denial of those claims which are, in their joint opinion, either (i) clearly ineligible for payment from the Fund or (ii) fee disputes as opposed to defalcations. They shall in every such case promptly notify each claimant of such preliminary denial of his claim, and simultaneously shall notify such claimant that he has the right within thirty (30) days to submit such additional written documents or argument as the claimant desires to submit. Every such preliminary denial, together with a brief synopsis of the pertinent facts and copies or summaries of any timely additional information/argument submitted by the claimant, shall be submitted by them to all the Trustees for their concurrence and approval, either by mail between meetings or at the next regular Trustees' meeting. Upon concurrence and approval by at least five (5) Trustees, including the Chair and Secretary, the denial of such claims shall be final, subject however, to reconsideration pursuant to Regulation d.3.
The maximum cumulative amounts which shall be paid in respect to any one claim or multiple claims by a single claimant arising from the same attorney involved in either a client or fiduciary relationship shall not, at the time of payment, exceed 10% of the net fund balance, including sums in the Operating Expenses account, as of the close of the preceding fiscal year.
If at any time, in the opinion of the Trustees, there are not sufficient funds on hand to pay all claims in full, the Trustees may, in their discretion, pay the approved claims pro rata or defer payment until such times as adequate funds are on hand.
Where a claim is allowed by the Trustees, the Fund shall be subrogated in writing to the amount paid on such claim.
Where a claim is allowed by the Trustees, the staff of the Fund shall give notice, in writing, to the attorney. Such notice shall also advise such attorney that the Fund is now subrogated to the rights of the claimant against such attorney, shall direct such attorney not to make any further payments to such claimant, shall instruct such attorney to make payments to the Fund that would otherwise have been made to such claimant, and shall warn such attorney that if such attorney has been disbarred or suspended, payment of all money paid by the Fund to any claimant of such attorney is a precondition to readmission. If the attorney is associated with a law firm, the Fund shall send a copy of the notice to the law firm which shall also warn that the law firm may have derivative liability for the amount paid to the claimant.
(As Amended Pursuant To Resolution Dated September 16, 2006)
No attorney's fees shall be paid by a claimant in connection with any allowance made by the Trustees, and any attorney representing a claimant shall be required to give the Trustees a written statement that he will accept no fee from the claimant for services rendered in connection with any recovery from the Fund.
1. Subject to paragraphs (2) and (4) of this regulation, an individual shall pay the Fund assessment, as required in this regulation, if the individual;
(i) is admitted to practice before the Court of Appeals or is issued a certificate of special authorization under Rule 15 of the Rules Governing Admission to the Bar of Maryland, or
(ii) holds himself or herself out as being admitted to practice in Maryland by any means, including:
A. being listed as authorized to practice law in Maryland in a directory such as the MSBA's Maryland Lawyer's Manual, Martindale-Hubbell, a telephone directory, or an internet listing;
B. being listed on the letterhead of a firm engaged in the practice of law in Maryland, whether as a “partner emeritus”, “of counsel”, or otherwise;
C. having a law practice that is located outside of Maryland but is based on admission to practice law in Maryland or uses a Maryland address; or
D. holding employment conditioned on being admitted to practice law in Maryland
2. An individual is exempt from the requirement to pay the Fund assessment if the individual:
(i) files with the Fund an affidavit that the individual:
A. practices law only in performing judicial or quasi-judicial functions, as a federal judge, magistrate, judge of a Maryland appellate, circuit, district, or orphan's court, court commissioner, master, judicial law clerk, clerk of court, administrative law judge or otherwise; or
B. is on family leave; and during the period covered by the affidavit, does not engage in the practice of law or hold himself or herself out as engaging in the practice of law.
3. Lawyers admitted before December 31 of any fiscal year shall be charged the full fiscal year assessments, but shall not be charged any late charges if payment is made by March 31; lawyers admitted after January 1 of any fiscal year shall not be charged any part of the assessments for such fiscal year, but shall be billed assessments for succeeding fiscal years.
4. The Fund shall maintain a category of “Retired/Inactive” lawyers, who shall not be charged assessments or late charges for any fiscal year after they are approved for such category; after transfer to such category, any such lawyer may be reinstated to active practice upon written notice to the Fund of his intent to resume active practice and upon payment to the Fund of all assessments due for the then current fiscal year.
5. A lawyer seeking to change from active practice to “Retired/Inactive” status with the Fund shall furnish to the Fund written evidence in form satisfactory to the Fund of his cessation of all active practice, directory listings, etc. Unless such written evidence is received by the Fund by August 31 of such fiscal year, such lawyer shall pay full assessments for the fiscal year in which such change occurs and shall pay in addition any and all sums due the Fund for prior assessments, late charges, etc.
6. Any claim for refund of any amount paid to the Fund will not be honored retroactively, and the honoring of prospective claims for refund shall be in the complete discretion of the Chair or Treasurer.
7. A lawyer who seeks reinstatement to good standing, after suspension, disbarment, or decertification shall pay to the Fund, as a precondition to reinstatement to good standing, all sums paid out by the Fund as a result of such lawyer's defalcation and all sums due the Fund for its current fiscal year and in addition such amount (not exceeding $50) as the Trustees by resolution fix from time to time as the estimated cost to the Fund of handling, processing and recording the requested reinstatement.
8. The Trustees may fix in their discretion, from time to time, subject to the approval of the Court of Appeals, reasonable charges for late payment of mandatory contributions to the Trust Fund; all disputes with contributors concerning such late charges or penalties shall be resolved by the Chair and Administrator in their discretion.
9. Payment must be received and collected in Fund's bank account on or before the due date (currently August 31 to avoid a late fee and December 31 to avoid an additional late fee). December admittees who are billed for the whole fiscal year are allowed a due date of March 31 of the following year to avoid a late fee.
10. Unemployment, financial hardship, other person's failure to forward bill, employer's failure to pay, looking for work, failure to receive bill, belief of being on retired/inactive list, postmark before due date, post office's neglect, secretary's fault, failure to receive bill, etc., are not acceptable excuses. In practice, only one excuse is regularly approved: verified medical hardship of lawyer.
11. The Trustees may fix in their discretion from time to time a reasonable penalty for any bad check tendered to the Fund for payment of any billing by the Fund, and such penalty shall be in addition to every other charge or penalty applicable on account of such bad check.
1. Fiscal year.
The Trustees will operate on a fiscal year beginning July 1 and ending June 30.
2. Operating Expenses account.
Pursuant to Rule 16-811d. (vii) and 16-811 h.1-2, the treasurer shall establish and maintain a special bank account of the Fund designated “Operating Expenses” for the payment of routine and recurring operating expenses such as rent, utility bills, office supplies and printing, mailing and postage charges, as authorized from time to time by the Trustees, but such account shall not be used for claims payments, payroll costs, or capital expenditures. The said Operating Expenses account shall have such balance not exceeding $10,000 as the Trustees, by resolution, shall fix from time to time, shall be replenished to such authorized balance from time to time by the Trustees from the trust fund, and shall be subject to the order of the fund administrator or deputy administrator and one of the Trustees.
The Trustees shall keep accurate records of their actions, which records shall be open to inspection at any and all times by any trustee or by any member of the Court of Appeals of Maryland or by any person or persons designated in writing by the said Court to inspect such records. Nothing set forth in this Regulation shall preclude the inspection of such records by any person or persons designated as auditors of the Fund. No person other than those heretofore referred to shall have any right to inspect the records of the Trustees, but the Trustees in their discretion may disclose information from their records to any person employed by the Trustees for the purpose of seeking restitution of any claim paid by the Fund.
No disbursements on account of a claim shall be made by the Trustees of the Fund unless the same is approved by at least five (5) Trustees.
Meetings of the Trustees shall be subject to the call of the Chair or the call of a majority of the Trustees. The Trustees shall meet at least annually for the consideration of claims.
6. Unavailability of Chair or Secretary.
In case either the Chair or Secretary shall be unavailable for a protracted period of time, a majority of the Trustees, by informal action and agreement, may designate another Trustee to act for the unavailable person during his or her absence.
Use of words such as “he”, “his”, “himself”, “herself” and similar words in these Regulations is for brevity and clarity only and shall not disqualify any person; all persons whether male, female or entities (such as corporation or partnerships) shall be considered equally unless they are entities having ten (10) or more employees.
A twenty-five cents per page charge shall be imposed for documents produced by the Fund pursuant to a subpoena or public information act request. A reasonable fee shall be charged for the search and preparation of such documents, such fee to be the cost to the Fund of the Administrator's time spent on such search and preparation as measured by the Administrator's annual salary and by the cost to the Fund of reasonable counsel fees incurred in relation to such search and preparation.
No search and preparation fee shall be charged for the first two hours of the Administrator's time nor for the first two hours of counsel's time. The Fund shall prepare an invoice for the search, preparation, and/or copying fees. The invoice must be paid in cash, money order, cashier's check or travelers check prior to release of the documents by the Administrator. If the applicant, in a public information act request, asks for a waiver of the fees described in this regulation, the Administrator may waive such fees after consideration of the ability of such applicant to pay such fees and any other relevant factors.
(As Amended Pursuant To Resolution Dated September 16, 2006)
The foregoing regulations may be amended at any time and from time to time by the Trustees.