The State Bar seeks public comment regarding a proposed amendment to Client Security Fund rules, Rule 3.434 to implement a procedure for the reimbursement of monetary sanctions actually collected by the State Bar pursuant to attorney disciplinary orders.
Comments should be submitted using the online Public Comment Form. [Link removed; this comment process is archived.] The online form allows you to input your comments directly and can also be used to upload your comment letter and/or other attachments.
Deadline: August 17, 2020
The CSF is designed to reimburse victims who lost money or property due to theft or equivalent dishonest conduct committed by a California attorney acting in a professional capacity customary to the practice of law.
A.General CSF Requirements for Reimbursement
To receive reimbursement from the Fund under the CSF rules, an applicant generally must establish a loss of money or property that was actually received by the attorney and the loss must have been caused by the dishonest conduct of the attorney. (Client Security Fund rules, Rules 3.430 and 3.431.)
B.General Types of Losses Not Reimbursable
The CSF is not an insurer of attorneys and does not provide reimbursement for malpractice, negligence, or consequential losses. Likewise, the CSF does not pay criminal or disciplinary restitution orders or civil judgments against attorneys.
C.Monetary Sanctions Actually Received by CSF
Business and Professions Code section 6086.13(e) provides a narrow exception to the requirements that the attorney actually receive the money or property and that such money or property be lost due to dishonest conduct as defined in the CSF rules.
Section 6086.13(e) provides that the Client Security Fund may reimburse monetary sanctions imposed by the Supreme Court against an attorney, but only in the limited circumstances where the State Bar actually collects those monetary sanctions from the attorney and where the victim of the conduct that resulted in the sanctions is unable to collect criminal penalties or civil judgments held by them related to the sanctioned conduct.
Monetary sanctions collected by the State Bar do not constitute money or property received by the disciplined attorney from or on behalf of the applicant. Accordingly, the threshold Rule 3.430 reimbursement eligibility requirement that the attorney actually receive the money or property at issue cannot be met with respect monetary sanctions deposited into the CSF, necessitating an exception to that requirement.
D.Proposed CSF Rule, Rule 3.343(B)(5)
Proposed CSF rule, Rule 3.434(B)(5) implements the provisions of Business and Professions Code section 6086.13(e) by providing that the CSF may reimburse victims who hold such uncollectible criminal penalty orders or civil judgments with monetary sanctions actually collected against the attorney by the State Bar.
Proposed Rule 3.343(B)(5) preserves the discretionary nature of CSF reimbursement provided by Business and Professions Code section 6140.5(a) and the CSF rules, and ensures that the total amount that may be reimbursed with respect to any attorney cannot exceed the total monetary sanctions actually collected by CSF with respect to that attorney.
This proposal, if adopted, would amendRule 3.434(B)(5) to provide that the CSF may distribute monetary sanctions actually collected by the State Bar to victims who are unable to collect criminal penalties or civil judgments awarded to them related to the conduct for which the sanctioned attorney was disciplined. The rule amendment sets forth criteria for the reimbursement of such collected monetary sanctions.
If adopted, the proposed rule may necessitate additional resources in the Client Security Fund in order to receive, evaluate, and decide applications requesting reimbursement of monetary sanctions collected from disciplined and disbarred respondent attorneys, to consider and make decisions on objections from applicants and/or respondents, and to implement final decisions.
Regulation and Discipline Committee
August 17, 2020