It’s around this time of year—when I am paying bar dues—that I always think about client protection funds used to reimburse clients who have been defrauded by lawyers. I always wonder—how many really bad lawyers are out there? What is the intake versus the outgo from these funds? Who are the most likely recipients of money from a client protection fund? What are the funds’ administration costs?
Apparently, others in the legal field have pondered these very issues. ABA Model Rule for Lawyers’ Funds for Client Protection Rule 7 requires client protection funds to provide annual reports to the court and to invest unused portions. A 2010 survey by the Standing Committee on Client Protection of the American Bar Association found that fund administrators in jurisdictions with high numbers of lawyers (more than 40,000) earn a little more than $100,000 annually; those in small jurisdictions (less than 15,000) earn, on average, $71,000.
Another ABA report, 2008-2010 Survey of Lawyers’ Funds for Client Protection, indicates that in 2010, the jurisdiction where I am admitted—Maryland—had a little over $700,000 in revenues from attorney assessments. New York, where I live, had almost $7.5 million. Eighty-one claims were approved in Maryland in that year; 198 in New York. In Maryland, claims for a little more than $1.7 million all told were approved in 2010; in New York, that figure was $8.5 million. There were around 35,000 lawyers admitted in Maryland at the time the report was prepared; there were more than 262,000 in New York.
I’m curious about what client protection fund income and outgo will be for the next couple of years as the legal industry continues to experience a tumultuous economy and a market that is evolving quickly. Will client protection fund revenues decrease and claims spike? Could that be because there are more bad lawyers, or a few lawyers doing worse and more expensive things? Or will they all just stop sinning?
Lawyers—and clients—might just do a bit of researching about client protection funds in their own jurisdictions; lawyers to see where their assessments go, and clients to understand the protections afforded them.
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