Proposed Rule Amendments

The Process and Your Comments

Proposed amendments to the Rules of the North Carolina State Bar are published for comment during the quarter after the council of the North Carolina State Bar approves their publication. The proposed amendments are published in the North Carolina State Bar's Journal and on this website. After publication for comment, the proposed rule amendments are considered for adoption by the council at its next quarterly meeting. If adopted, the rule amendments are submitted to the North Carolina Supreme Court for approval. Amendments become effective upon approval by the court. Unless otherwise noted, proposed additions to rules appear in in bold and underlined print, deletions are interlined. Proposed amendments to the Rules of Professional Conduct appear at the end of the page.

The State Bar welcomes your comments regarding proposed amendments to the rules. Please send a written response to L. Thomas Lunsford II, The North Carolina State Bar, PO Box 25908, Raleigh, NC 27611, or comments@ncbar.gov, by June 30, 2012.

Below are the rule amendments from the most recent meeting of the State Bar Council in April 2012.

Proposed Amendments to Discipline and Disability Rules

27 N.C.A.C. 1B, .0100 Discipline and Disability of Attorneys

 

The proposed amendments make the Grievance Committee’s procedure for referring cases to the Trust Account Supervisory Program consistent with the procedures for referrals to approved law office management programs and the Lawyer Assistance Program.

 

.0105 Chairperson of the Grievance Committee: Powers and Duties

 

(a) The chairperson of the Grievance Committee will have the power and duty

 

(1) ….;

 

(16) in his or her discretion, to refer grievances primarily attributable to unsound law office management to a program of law office management training approved by the State Bar and to so notify the complainant;

 

(17) except in cases involving possible misappropriation of entrusted funds, criminal conduct, dishonesty, fraud, misrepresentation, or deceit, or other cases deemed inappropriate by the chair, in his or her discretion to refer lawyers who are found during random auditing or otherwise to be significantly out of compliance with the Rules of Professional Conduct to a trust accounting supervisory program administered by the State Bar on terms and conditions approved by the council.

 

[Re-numbering remaining paragraphs.]

 

(b) ….

 

.0106 Grievance Committee: Powers and Duties

 

The Grievance Committee will have the power and duty…

 

(1) ….

 

(13) in its discretion to refer grievances primarily attributable to the respondent’s failure to employ sound trust accounting techniques to the trust account supervisory program in accordance with Rule .0112(k) of this subchapter.

 

.0112 Investigations: Initial Determination; Notice and Response; Committee Referrals

 

(a) Investigative Authority

 

…

 

(i) Referral to Law Office Management Training –

 

(1) If, at any time before prior to a finding of probable cause, the chair of the Grievance Committee, upon the recommendation of the counsel or of the Grievance Committee, determines that the alleged misconduct is primarily attributable to the respondent’s failure to employ sound law office management techniques and procedures, the chair committee may , with the respondent’s consent, refer the case to a program of offer the respondent an opportunity to voluntarily participate in a law office management training program approved by the State Bar before the committee considers discipline.

 

If the respondent accepts the committee’s offer to participate in the program, Tthe respondent will then be required to complete a course of training in law office management prescribed by the chair which may include a comprehensive site audit of the respondent’s records and procedures as well as attendance at continuing legal education seminars. If the respondent does not accept the committee’s offer, the grievance will be returned to the committee’s agenda for consideration of imposition of discipline.

 

(2) Completion of Law Office Management Training Program – If the respondent successfully completes the law office management training program, Tthe Grievance Ccommittee may consider the respondent’s successful completion of the law office management training program as a mitigating circumstance and may, but is not required to, dismiss the grievance for good cause shown. If the respondent fails to successfully complete the program of law office management training program as agreed, the grievance will be returned to the committee’s agenda for consideration of imposition of discipline at the Grievance Committee’s next quarterly meeting. The requirement that a respondent complete law office management training pursuant to this rule shall be in addition to the respondent’s obligation to satisfy the minimum continuing legal education requirements contained in 27 NCAC 1D .1517.

 

(j) Referral to Lawyer Assistance Program

 

(1) If, at any time before prior to a finding of probable cause, the Grievance Committee determines that the alleged misconduct is primarily attributable to the respondent’s substance abuse or mental health problem, the committee may offer the respondent an opportunity to voluntarily participate in a rehabilitation program under the supervision of the Lawyer Assistance Program Board before the committee considers discipline.

 

If the respondent accepts the committee’s offer to participate in a rehabilitation program, the respondent must provide the committee with a written acknowledgement of the referral on a form approved by the chair. The acknowledgement of the referral must include the respondent’s waiver of any right of confidentiality that might otherwise exist to permit the Lawyer Assistance Program to provide the committee with the information necessary for the committee to determine whether the respondent is in compliance with the rehabilitation program. If the respondent does not accept the committee’s offer, the grievance will be returned to the committee’s agenda for consideration of imposition of discipline.

 

(2) Completion of Rehabilitation Program – If the respondent successfully completes the rehabilitation program, the Grievance Committee committee may consider successful completion of the program as a mitigating circumstance and may, but is not required to, dismiss the grievance for good cause shown. If the respondent fails to complete the rehabilitation program or fails to cooperate with the Lawyer Assistance Program Board, the Lawyer Assistance Program will report that failure to the counsel and the grievance will be returned to included on the Grievance Committee’s committee’s agenda for consideration of imposition of discipline. at the Grievance Committee’s next quarterly meeting.

 

(k) Referral to Trust Accounting Supervisory Program –

 

(1) If, at any time before a finding of probable cause, the Grievance Committee determines that the alleged misconduct is primarily attributable to the respondent’s failure to employ sound trust accounting techniques, the committee may offer the respondent an opportunity to voluntarily participate in the State Bar’s trust account supervisory program for up to two years before the committee considers discipline. The chair of the Grievance Committee, in his or her sole discretion, may refer a lawyer whose trust account record keeping is found, during random auditing or otherwise, to be significantly out of compliance with the Rules of Professional Conduct into a supervisory program for two years.

 

If the respondent accepts the committee’s offer to participate in the supervisory program, During the lawyer’s two-year participation in the program, the lawyer respondent must fully cooperate with the Trust Account Compliance Counsel and must provide to the Office of Counsel quarterly proof of compliance with all provisions of Rule 1.15 of the Rules of Professional Conduct. Such proof shall be in a form satisfactory to the Office of Counsel. If the respondent does not accept the committee’s offer, the grievance will be returned to the committee’s agenda for consideration of imposition of discipline.

 

(2) Completion of Trust Account Supervisory Program - If a lawyer the respondent agrees to enter the supervisory program, timely complies with all rules of the program, and successfully completes the program, the Grievance Committee will not open a grievance file on the issue of the lawyer’s pre-referral noncompliance with trust account record-keeping rules committee may consider successful completion of the program as a mitigating circumstance and may, but is not required to, dismiss the grievance for good cause shown. If the lawyer respondent does not fully cooperate with the Trust Account Compliance Counsel and/or does not agree to enter the program or agrees to enter the program but does not successfully complete it the program, the grievance will be returned to the Grievance Committee’s committee’s agenda for consideration of imposition of discipline. a grievance file will be opened and the disciplinary process will proceed.

 

(3) The chair of the Grievance Committee committee will not refer to the program any case involving possible misappropriation of entrusted funds, criminal conduct, dishonesty, fraud, misrepresentation, or deceit, or any other case the chair committee deems inappropriate for referral. The committee will not refer to the program any respondent who has not cooperated fully and timely with the committee’s investigation. If the Office of Counsel or the Grievance Committee committee discovers evidence that a lawyer respondent who is participating in the program may have misappropriated entrusted funds, engaged in criminal conduct, or engaged in conduct involving dishonesty, fraud, misrepresentation, or deceit, the chair will terminate the lawyer’s respondent’s participation in the program and the disciplinary process will proceed. will instruct the Office of Counsel to open a grievance file. Referral to the Trust Accounting Supervisory Program is not a defense to allegations that a lawyer misappropriated entrusted funds, engaged in criminal conduct, or engaged in conduct involving dishonesty, fraud, misrepresentation, or deceit, and it does not immunize a lawyer from the disciplinary consequences of such conduct.

Proposed Amendments to the Procedures for Fee Dispute Resolution

27 N.C.A.C. 1D, Section .0700, Procedures for Fee Dispute Resolution

 

The proposed amendments clarify that the Fee Dispute Resolution Program does not have jurisdiction over fees or expenses established by private arbitrators.

 

Rule .0702 Jurisdiction

 

(a) The [Grievance Committee] has jurisdiction over a disagreement arising out of a client-lawyer relationship concerning the fees and expenses charged or incurred for legal services provided by a lawyer licensed to practice law in North Carolina.

 

(b) The committee does not have jurisdiction over the following:

 

(1) a dispute concerning fees or expenses established by a court, federal or state administrative agency, or federal or state official, or private arbitrator or arbitration panel;

 

(2) ….

 

(3) a dispute over fees or expenses that are or were the subject of litigation or arbitration unless

 

 

(i) a court, arbitrator, or arbitration panel directs the matter to the State Bar for resolution mediation, or

 

(ii) both parties to the dispute agree to dismiss the litigation or arbitration without prejudice and pursue resolution through the State Bar’s Fee Dispute Resolution program mediation;

 

(4) ….

Proposed Amendments to the IOLTA Rules

27 N.C.A.C. 1D, Section .1300, Rules Governing the Administration of the Plan for Interest on Lawyers’ Trust Accounts (IOLTA)

 

The accounts of lay “settlement agents” are now required by law to be IOLTA accounts. The proposed rule amendments clarify that a settlement agent account may be established at a bank outside of North Carolina provided the account is not maintained by a North Carolina lawyer, the bank is FDIC insured, and the bank has a certificate of authority to transact business from the North Carolina Secretary of State.

 

.1316 IOLTA Accounts

 

(a) IOLTA Account Defined.

 

….

 

(b)  Eligible Banks. Lawyers may maintain one or more IOLTA Account(s) only at banks and savings and loan associations chartered under North Carolina or federal law, as required by Rule 1.15 of the Rules of Professional Conduct, that offer and maintain IOLTA Accounts that comply with the requirements set forth in this subchapter (Eligible Banks). Settlement agents shall maintain any IOLTA Account as defined by N.C.G.S. 45A-9 and paragraph (a) above only at an Eligible Bank; however, a settlement agent that is not a lawyer may maintain an IOLTA Account at any bank that is insured by the Federal Deposit Insurance Corporation and has a certificate of authority to transact business from the North Carolina Secretary of State provided the bank is approved by NC IOLTA. The determination of whether a bank is eligible shall be made by NC IOLTA, which shall maintain (i) a list of participating Eligible Banks available to all members of the State Bar and to all settlement agents, and (ii) a list of banks approved for non-lawyer settlement agent IOLTA Accounts available to non-lawyer settlement agents. A bank that fails to meet the requirements of this subchapter shall be subject only to termination of its eligible or approved status by NC IOLTA. A violation of this rule shall not be the basis for civil liability.

 

(c) ….

Proposed Amendments to the CLE Rules

27 NCAC 1D, Section .1600, Regulations Governing the Administration of the Continuing Legal Education Program

 

The proposed amendments provide CLE credit to lawyers who teach classes at accredited law and paralegal schools and who teach classes or courses on topics of substantive law at accredited graduate schools.

 

.1605 Computation of Credit  

 

(a) Computation Formula

 

….

 

(d) Teaching Law Courses

 

(1) Law School Courses. If a member is not a full-time teacher at a law school in North Carolina who is eligible for the exemption in Rule .1517(b) of this subchapter, the member may earn CLE credit for teaching courses a course or a class in a quarter or semester-long course at an ABA accredited law school. A member may also earn CLE credit by teaching courses a course or a class at a law school licensed by the Board of Governors of the University of North Carolina, provided the law school is actively seeking accreditation from the ABA. If ABA accreditation is not obtained by a law school so licensed within three years of the commencement of classes, CLE credit will no longer be granted for teaching courses at the school.

 

(2) Graduate School Courses. Effective January 1, 2012, a member may earn CLE credit by teaching a course on substantive law or a class on substantive law in a quarter or semester-long course at a graduate school of an accredited university.

 

(2) (3) Courses at Paralegal Schools or Programs. Effective January 1, 2006, a member may earn CLE credit by teaching a paralegal or substantive law courses course or a class in a quarter or semester-long course at an ABA approved paralegal school or program.

(3) (4) Credit Hours. Credit for teaching courses activities described in Rule .1605(d)(1) and (2) – (3) above may be earned without regard to whether the course is taught online or in a classroom. Credit will be calculated according to the following formula:

 

(A) Teaching a Course. 3.5 Hours of CLE credit for every quarter hour of credit assigned to the course by the educational institution, or 5.0 Hours of CLE credit for every semester hour of credit assigned to the course by the educational institution. (For example: a 3-semester hour course will qualify for 15 hours of CLE credit).

 

(B) Teaching a Class. 1.0 Hour of CLE credit for every 50 – 60 minutes of teaching.

 

(4) (5) Other Requirements. ….

Proposed Amendments to Trust Accounting Rules

27 NCAC 2, Rules of Professional Conduct, Rule 1.15, Safekeeping Property

Rule 1.15-2 requires a lawyer maintaining a trust or fiduciary account to file a written directive that requires the depository bank or other financial institution to report to the State Bar when an instrument drawn on the account is presented for payment against insufficient funds. The proposed amendments clarify that the bank directive requirement is limited to trust and fiduciary accounts with demand deposit.

 

Rule 1.15-1, Definitions

 

(a) ….

 

(d) “Demand deposit” denotes any account from which deposited funds can be withdrawn at any time without notice to the depository institution.

[Re-lettering remaining paragraphs.]

 

Rule 1.15-2, General Rules

 

(a) ….

 

(k) Bank Directive.


Every lawyer maintaining a trust account or fiduciary account with demand deposit at a bank or other financial institution shall file with the bank or other financial institution  a written directive requiring the bank or other financial institution to report to the executive director of the North Carolina State Bar when an instrument drawn on the account is presented for payment against insufficient funds. No trust account or fiduciary account shall be maintained in a bank or other financial institution that does not agree to make such reports.

 

(l)….

THE NORTH CAROLINA STATE BAR
208 Fayetteville Street • PO Box 25908 • Raleigh, NC 27611-5908 • 919.828.4620
Copyright© North Carolina State Bar. All rights reserved.