Client Security Fund Claims
The Client Security Fund (more formally known as the Pennsylvania Lawyers Fund for Client Security, but referred to hereafter as simply “The Fund”) was created in the early 1980’s to reimburse clients who had suffered financial loss as the result of the misappropriation of entrusted funds or property by their attorneys.The Fund considers two types of matters. The most common type of matter handled by The Fund is a claim made by a client or other person to whom the lawyer had a fiduciary duty. An attorney should understand that if he or she is notified of a claim made to The Fund by a client or other party, there is automatically a collateral Disciplinary Board complaint. The Fund requires, as part of its consideration of any claim, that the claimant also file a Disciplinary Board complaint. Moreover, the Fund and the Disciplinary Board share information with each other, so great care should be taken in any explanations given to The Fund in responding to the claim.
The second type of matter that is considered by The Fund is a notification of an overdraft on an IOLTA account received by The Fund from a financial institution. In order to be an approved depository for IOLTA accounts, financial institutions must agree to report to The Fund any overdraft on IOLTA accounts, regardless of whether or not the financial institution honors the check or whether the check is subsequently made good.
Frequently Asked Questions:
How do I know when a claim has been filed against me?
The Fund will notify you in writing of the claim, enclose a copy of the claim filed by the claimant, and request that you respond in writing with supporting documentation.
Since the filing of a claim requires that the claimant file a collateral disciplinary complaint, do The Fund and the Disciplinary Board work together on the matter?
The two agencies do not work together per se, but they are permitted to, and in fact do, share information with each other.
Am I entitled to a hearing before The Fund on a claim made against me?
This is an interesting question. The Fund takes the position that an attorney has a right to request a hearing, but that The Fund does not have to honor the request. I am aware of instances in which an attorney has requested a hearing, and The Fund has awarded a claim to the claimant without affording the attorney a hearing.
Can The Fund award a claim even if the Disciplinary Board finds that I engaged in no mishandling of funds?
Yes. The Fund takes the position that the awarding of a claim is not dependent upon a finding of misconduct by the Disciplinary Board. I am aware of at least two cases where The Fund has awarded a claim and the Disciplinary Board has found no misconduct.
Does The Fund consider claims in matters other than pure embezzlement or defalcation of funds or property of the claimant?
Yes. The Fund considers claims of an attorney not performing work (or a sufficient amount of work) for which he or she was paid in advance, on the theory that such conduct constitutes embezzlement of client funds.
Do I have to pay The Fund back if a claim is awarded against me?
Yes. Moreover, if you have been suspended or disbarred, restitution to The Fund is a prerequisite to filing a Petition for Reinstatement.
What if The Fund awards a claim where the Disciplinary Board found no misconduct?
This is another interesting question. In the two cases of this nature of which I am aware, my clients came to me after The Fund awarded the claim, but before the Disciplinary Board resolved the collateral disciplinary complaint in their favor. The Fund has taken the position that my clients owe the money to The Fund; my clients have taken the position that if The Fund wants to recoup the funds it paid out, it should seek reimbursement from the parties that were unjustly enriched, namely, the claimants. Those matters have not been resolved.
How does The Fund handle a dishonored IOLTA check notification?
The Fund will send a notice of the dishonored check to the attorney, and request an explanation of the dishonored check, with supporting documentation.
Does The fund require anything else in the event of a dishonored check notification?
Yes. Although there is nothing in the procedural rules granting The Fund authority to do anything other than make a preliminary inquiry into the reason(s) why the check was dishonored,The Fund routinely requests that the attorney provide it with copies of the last three monthly periodic statements for the attorney’s IOLTA account.
Does a dishonored check notification also result in a collateral disciplinary complaint?
Not necessarily. There are two instances in which a dishonored check notification results in a report by The Fund to the Disciplinary Board. The first is if The Fund is not satisfied with the attorney’s explanation of the NSF check. The second instance is if the attorney refuses to provide copies of the last three monthly statements for the IOLTA account.
Will The Fund notify me if a claim is denied?
Yes. The Fund will notify you in writing whether a claim is awarded or denied. In the event of a dishonored check notification, The Fund will notify you whether or not it found your explanation to be satisfactory.
Other Practice Areas:
- Disciplinary Board Matters
- Pennsylvania Board of Law Examiners Matters
- Judicial Conduct Board Matters
- Reinstatement Proceedings
- Ethics Advice/Consultation
If you have been contacted by the Disciplinary Board, the Client Security Fund, the Board of Law Examiners, the Judicial Conduct Board, or if you have any other ethical concerns or questions, contact Attorney Craig Simpson at 412-731-3100 to arrange an appointment at our convenient and confidential office. All inquiries are strictly confidential.