Effective March 1, 1986
Including Amendments Received Through January 1, 2004
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Amendments to these rules are published, as received, in the North Eastern 2d and the Massachusetts Decisions advance sheets.
Table of Rules
RULE 1. GENERAL STATEMENT
These rules and regulations have been adopted pursuant to Rule 4:06, Section 1, of the Rules of the Supreme Judicial Court. They provide for the administration of the Clients' Security Fund of the Bar of the Commonwealth of Massachusetts, the procedures for the presentation, consideration and payment of claims, and the exercise of the Board's powers and duties under the Rules of the Supreme Judicial Court. (Whenever herein "he," "him," or "his" is referred to, it shall be intended to refer also to "she," "her," or "hers.")
RULE 2. DEFINITIONS
For the purpose of these rules and regulations, the following definitions shall apply:
(a) An "attorney" or "lawyer" shall mean (1) one who was, at the time the claim arose, a member of the bar of the Commonwealth with an office within the Commonwealth and engaged in active practice and who shall have died, shall have been disbarred or suspended from the practice of law, or shall have resigned from the bar of the Commonwealth (S.J.C. Rule 4:05, Section 2); or (2) one who while under suspension or disbarment continued to hold himself out to be a member of the bar in good standing and while so holding himself out caused a reimbursable loss.
(b) The "Board" shall mean the Clients' Security Board established pursuant to S.J.C. Rule 4:04, Section 1.
(c) "Client" shall mean a person engaging the professional legal services of a lawyer as an attorney or fiduciary as provided in S.J.C. Rule 4:04, Section 1.
(d) "Dishonest Conduct" shall mean a wrongful act committed by a lawyer against a person by defalcation or embezzlement of money or the wrongful taking or conversion of money, property, or other things of value.
(e) The "Fund" shall mean the Clients' Security Fund held by the Board pursuant to S.J.C. Rule 4:04, Section 1.
(f) A "Reimbursable Loss" shall mean only a loss of money or other property of clients that meets all of the following tests: (1) The defalcation that caused the loss occurred on or after September 1, 1974; (2) The loss was caused by the dishonest conduct of the lawyer, acting either as a lawyer or as a fiduciary arising out of a lawyer-client relationship; and (3) The lawyer has died, or has been disbarred or suspended, or has voluntarily resigned from the bar of the Commonwealth;
except that there shall be excluded from a reimbursable loss any loss to the extent it has been recovered or may be recoverable from a collateral source, and except that in cases of hardship, the Board may, in its discretion, recognize as a reimbursable loss a claim that would otherwise be excluded hereunder.
RULE 3. ORGANIZATION
(1) The Board shall hold an organizational meeting each year in January, at such time and place as the chairman shall specify, at which the Board shall elect a treasurer and a secretary to serve until the next organizational meeting.
(2) Other meetings of the Board shall be held from time to time upon the call of the chairman or a majority of the members, upon reasonable notice to the members.
(3) A majority of duly appointed members of the Board shall constitute a quorum. A majority of the members present at a duly constituted meeting may exercise any powers held by the Board.
B. Duties of Officers.
(1) The chairman shall preside at all meetings of the Board and shall coordinate and supervise the administration of the activities of the Board and of the Fund. The vice-chairman shall preside at meetings in the absence of the chairman and shall have such additional duties as the chairman or the Board shall designate.
(2) The treasurer shall have custody of the money and other assets of the Fund, receive all payments to the Fund, make disbursements from the Fund authorized by the Board, invest the monies of the Fund in the manner authorized by the Board, cause an annual audit to be made of the Fund and maintain appropriate financial records and file such tax or information returns as may be required. Each year immediately after the organizational meeting, the treasurer shall obtain and file with the secretary a surety company bond in the amount of at least $200,000, and covering all members of the Board.; provided, however, that the Board may delegate some or all of its duties under this paragraph (2) to the Administrator of the Board of Bar Overseers.
(3) The secretary shall prepare and maintain minutes of each meeting of the Board. He shall have such other duties as the chairman or the Board shall designate.
C. Staff of the Board.
(1) The Board may employ and cause to be compensated consultants, agents, legal counsel, and employees and may make contracts for the performance of administrative and similar services.
(2) The Board may appoint an administrator who shall perform those duties either assigned to him by the Board or imposed upon him by these rules. The administrator shall supervise all the staff of the Board except legal counsel and legal counsel's staff.
Amended October 1, 1998, effective November 2, 1998.
RULE 4. INVESTMENT OF THE FUND
Money paid into the Fund may, upon authorization by the Board, be invested in any of the following: (a) Bonds, notes, or other securities of or guaranteed by the United States or any Federal agency; (b) Bonds, notes, or other securities of or guaranteed by the Commonwealth of Massachusetts; (c) Interest-bearing accounts or certificates of any federally insured bank, trust company, savings bank, or savings and loan association; and (d) Any fund insured by the Federal Deposit Insurance Corporation, provided, however, that not less than twenty-five percent (25%) of the Fund shall be in investments maturing or disposable at par within three months.
RULE 5. CLAIMS FOR REIMBURSEMENT
A. The Filing of Claims.
(1) No formalities with respect to claims are required, but a claimant shall make application to the Board in writing, on a form supplied by the Board, containing the following information:
(a) The name, home and business address, and occupation of the claimant;
(b) The name and address (including the address at the time the claim arose) of the lawyer involved;
(c) A summary statement of the actions of the lawyer giving rise to the claim, with any supporting documents;
(d) The date and circumstances under which the claimant discovered his loss;
(e) The efforts made to secure redress from the lawyer;
(f) The total amount of the loss incurred by the claimant, including the method of its computation;
(g) The name and address of any lawyer or other person assisting or representing the claimant in connection with the claim;
(h) The signature or verification by the claimant.
(2) A financial statement shall be filed by each claimant in a form approved by the Board.
(3) The application form shall contain the following statement in bold face type:
"IN ESTABLISHING THE CLIENTS' SECURITY FUND, THE SUPREME JUDICIAL COURT OF MASSACHUSETTS DID NOT CREATE OR ACKNOWLEDGE ANY LEGAL RESPONSIBILITY FOR THE ACTS OF INDIVIDUAL LAWYERS IN THE PRACTICE OF LAW. ALL REIMBURSEMENTS OF LOSSES BY THE CLIENTS' SECURITY BOARD SHALL BE A MATTER OF GRACE IN THE SOLE DISCRETION OF THE CLIENTS' SECURITY BOARD AND NOT A MATTER OF RIGHT. THE CLAIMANT REPRESENTS THAT NO FEE HAS BEEN OR WILL BE PAID TO ANY LAWYER FOR SERVICES RENDERED IN THE PREPARATION OR FILING OF THIS APPLICATION FOR REIMBURSEMENT, NOR FOR OR ON ACCOUNT OF THE PAYMENTS OF ANY SUMS AS A RESULT OF THIS APPLICATION. NO CLIENT OR MEMBER OF THE PUBLIC SHALL HAVE ANY RIGHT IN THE CLIENTS' SECURITY FUND AS A THIRD PARTY BENEFICIARY OR OTHERWISE."
(4) The form shall be sent to the Clients' Security Board at its office at 99 High Street, 2nd Floor, Boston, Massachusetts 02110, or to such other office as the chairman shall designate.
(5) The Board may, in its discretion, require the exhaustion of some or all civil remedies before processing or paying a claim.
(6) The Board may require that a claimant prosecute or cooperate in appropriate civil proceedings as a prerequisite to the grant of relief to such claimant from the Fund. The claimant's cooperation in disciplinary proceedings against the lawyer shall be a prerequisite to the grant of relief from the Fund.
Amended October 1, 1998, effective November 2, 1998.
RULE 6. PROCESSING APPLICATIONS
A. The chairman or his designee shall cause reasonable investigation to be made of any claim coming to the attention of the Board.
B. Any member of the Board who has or has had a lawyer-client or financial relationship with a claimant or respondent, or is related by blood or marriage to either the claimant or respondent, shall not participate in the investigation or adjudication of any claim involving that claimant or that respondent.
C. A copy of the claim shall be served upon or sent by mail to the last known address of the lawyer who is complained of having engaged in dishonest conduct as soon as practicable after it has been filed with the Board, and the lawyer will have twenty days within which to file an answer.
D. If the secretary or designee of the chairman finds that the requirements of Rule 4:05, Section 2, have been met, he shall then ask the claimant to supply such additional information and documentation as he deems appropriate for the presentation of the claim to the Board and, upon receipt of such information, shall notify the chairman that the claim is ready for adjudication. If the requirements of Rule 4:05, Section 2, have not been met, but proceedings are pending, he shall notify the claimant of the requirements of the Rule and shall maintain the claim in an inactive status and periodically determine from the Board of Bar Overseers the status of such proceedings. Any information obtained from the Board of Bar Overseers file by the secretary or the designee of the chairman shall be used solely by or for the Clients' Security Board and shall constitute confidential information. The secretary or the designee of the chairman shall thereafter, if the requirements of Section 2(2) of Rule 4:05 have been met, reinstate the claim and notify the Board and the claimant.
RULE 7. CONSIDERATION AND PAYMENT OF CLAIMS
A. Upon being notified that the claim is ready for adjudication, the Board shall determine the matter upon the record before it or after such hearing as the Board in its discretion deems necessary. In the event the Board determines that a hearing is not necessary, it shall cause the parties to be notified that the Board will consider the claim without hearing.
B. If the chairman determines that a hearing is required, he shall designate one or more members of the Board as hearing members, who shall be furnished with the Board's file thereon by the secretary or his designee to hear the claim, to make further investigation as they may deem appropriate and to make recommendations to the Board for disposition of the claim, including recommendations as to agreements, if any, into which the claimant should enter.
C. Hearings shall be held at places mutually convenient to the hearing member or members and the claimant. A recording shall be made or a transcript taken of each hearing, when feasible.
D. Notice of hearing shall be sent by mail to both the claimant and his counsel and to the respondent and his counsel.
E. The Board, in acting on each claim, shall take into account the standards and factors set forth in Rule 4:05, Section 3.
F. Payment of an approved claim shall be made as soon as practicable following its adjudication.
G. A claimant and respondent may be advised of the status of the Board's consideration of his application, and the claimant shall be advised of the final determination of the Board. Notice of the Board's final determination shall be mailed to the respondent at his last known address.
H. All applications, proceedings, investigations, claims, and reports involving specific applications for reimbursement from the Fund and all financial statements furnished by the claimant shall be kept confidential. The Board and its staff shall conduct themselves so as to maintain the confidentiality of the application, investigation, and proceeding. This provision shall not be construed (1) to deny relevant information to the Board of Bar Overseers, to a court or investigative agency of proper jurisdiction, to an authorized agency investigating the qualifications of a judicial candidate, or to another jurisdiction investigating qualifications for governmental employment; (2) to prohibit the release of statistical information that does not disclose the identity of the parties; or (3) to prohibit the release of publicity as provided in section 11 herein.
I. Upon the request of a claimant, respondent or member of the Board, the Board, in its discretion may reconsider its adjudication of a claim. Unless the time is extended by the board, a request by a claimant or respondent shall be filed with the Board within thirty days following the date of the Board's adjudication, and shall state in writing and with particularity the facts on which reconsideration is sought. Except as provided herein, an adjudication of the Board is final and the Board shall give no further consideration to the application or another application based upon substantially the same allegations.
Amended September 29, 1993, effective November 1, 1993; amended effective August 1, 1994; amended December 11, 2003, effective January 1, 2004.
RULE 8. SUBROGATION FOR REIMBURSEMENT MADE
A. The Board shall be subrogated to the rights of a claimant to the extent of the amount of reimbursement made by the Board, and, where practicable, will seek recovery for the Fund. An action may be brought either in the name of the claimant or in the name of the Board, and, as a condition of reimbursement, the claimant shall agree to cooperate with the Board in the prosecution of such action.
B. As a condition of reimbursement, a claimant must execute a subrogation agreement on a form prepared by the Board. Upon commencement of an action by the Board pursuant to its subrogation rights, it shall advise the reimbursed claimant of such action at his last known address. A reimbursed claimant may then join in such action to press an application for his loss in excess of the amount of the reimbursement.
Amended October 1, 1998, effective November 2, 1998.
RULE 9. ATTORNEY'S FEES
No part of any award of the Board shall be paid to any attorney acting on behalf of the claimant, and any attorney so acting shall do so as a public service.
RULE 10. INSURANCE OF APPROVED CLAIMS
The Board may insure the payment of claims approved by the Board with such insurance carrier or carriers as it may from time to time elect and may, in such event, authorize the treasurer to pay out of the Fund such premiums as it shall approve.
RULE 11. PUBLICITY
A. All publicity regarding the activities, decisions and awards of the Board shall be within the discretion of the Board.
B. The Board, in appropriate cases, may publicize decisions and awards made by it, and any information concerning its decisions and awards may contain the name of, and other information pertaining to, a lawyer who has caused a reimbursable loss. The Board may withhold such information in those cases in which it finds the existence of mitigating circumstances.
RULE 12. GENERAL PROVISIONS
A. The Board may waive technical adherence to these rules and regulations in order to achieve the objectives of Supreme Judicial Court Rules 4:04 to 4:08, inclusive.
B. These rules and regulations may be amended at any time by a majority vote of the Board, subject to the approval of the Supreme Judicial Court.