WSR 12-13-023



[ June 7, 2012 ]











NO. 25700-A-999

The Washington State Bar Association having recommended the adoption of New Comment 21 to RPC 1.15A-Safekeeping Property and the proposed amendments to APR 15-Lawyers' Fund for Client Protection Rule 5-Eligible Claims and Rule 11-Restitution and Subrogation, ER 501-General Rule, and the Court having considered the amendments and comments submitted thereto, and having determined that the new comment and proposed amendments will aid in the prompt and orderly administration of justice;

Now, therefore, it is hereby


(a) That the new comment and amendments as shown below are adopted.

(b) That the amendments will be published in the Washington Reports and will become effective September 1, 2012.

DATED at Olympia, Washington this 7th day of June, 2012.
Madsen, C.J.

C. Johnson, J.

Owens, J.

J. M. Johnson, J.

Stephens, J.

Wiggins, J.

Fairhurst, J.

Gonzalez, J.

RPC 1.15A Comment 21

Washington Comments

Comments [1] - [20] are unchanged.

[21] A unilateral deposit of funds belonging in part to a client or third party into a lawyer's non-trust account does not constitute a violation of paragraph (c) of this Rule if the lawyer promptly identifies the portion of the funds belonging to the client or third party, deposits those funds into a trust account, and notifies the client or third party of the deposit. A unilateral deposit of funds belonging in part to a lawyer into a trust account does not constitute a violation of paragraph (h) of this Rule if the lawyer promptly identifies the lawyer-owned funds and withdraws them from the trust account. For purposes of this provision, a unilateral deposit refers to funds deposited directly by a client or third party by means of electronic funds transfer where the lawyer has not directed, invited, or encouraged a deposit that would constitute a violation of this Rule and has taken reasonable precautions to prevent such a deposit.




Rule 5 - Eligible Claims

A. Eligibility. To be eligible for payment from the Fund, the loss must be caused by the dishonest conduct of a lawyer or the failure to account for money or property entrusted to a lawyer as a result of or directly related to the lawyer's practice of law (as defined in GR 24). The loss must also have arisen out of and by reason of a client-lawyer relationship or a fiduciary relationship in a matter directly related to the lawyer's practice of law.

B. Time Limitations. Any application must be made within three years from the date on which discovery of the loss was made or reasonably should have been made by the applicant, and in no event more than three years from the date the lawyer dies, is disbarred, is disciplined for misappropriation of funds, or is criminally convicted for matters relating to the applicant's loss, provided that the Board or Trustees in their discretion may waive any limitations period for excusable neglect or other good cause.

C. Dishonest Conduct. As used in these rules, "dishonest conduct" or "dishonesty" means wrongful acts committed by a lawyer in the nature of theft or embezzlement of money or the wrongful taking or conversion of money, property or other thing of value, including but not limited to refusal to refund unearned fees or expenses as required by the Rules of Professional Conduct.

D. Excluded Losses. Except as provided by Section E of this Rule, the following losses shall not be reimbursable:

(1) Losses incurred by related persons, law partners and associate attorneys of the lawyer causing the loss. For purposes of these Rules, "related persons" includes a spouse, domestic partner, child, grandchild, parent, grandparent, sibling, or other Relative or individual with whom the lawyer maintains a close, familial relationship;

(2) Losses covered by any bond, surety agreement, or insurance contract to the extent covered thereby, including any loss to which any bonding agent, surety, or insurer is subrogated, to the extent of that subrogated interest;

(3) Losses incurred by any financial institution which are recoverable under a "banker's blanket bond" or similar commonly available insurance or surety contract;

(4) Losses incurred by any business entity controlled by the lawyer or any person or entity described in Rule 5 D (1), (2) or (3);

(5) Losses incurred by an assignee, lienholder, or creditor of the applicant or lawyer, unless application has been made by the client or beneficiary or the client or beneficiary has authorized such reimbursement;

(6) Losses incurred by any governmental entity or agency;

(7) Losses arising from business or personal investments not arising in the course of or arising out of the client-lawyer relationship;

(8) Consequential damages, such as lost interest, or attorney's fees or other costs incurred in seeking recovery of a loss.

E. Special and Unusual Circumstances. In cases of special and unusual circumstances, the Board may, in its discretion, consider an application which would otherwise be excluded by reason of the procedural requirements of these rules.

F. Unjust Enrichment. In cases where it appears that there will be unjust enrichment, or that the applicant contributed to the loss, the Board may, in its discretion, recommend the denial of the application. No rule should be interpreted as to provide a financial windfall to a claimant from the fund.

G. Investment Victims. When considering gifts to claimants who were victimized after investing with a lawyer, the Board may consider such factors as the sophistication of the investor, the length of the relationship with the lawyer, and whether the investor was aware that the lawyer had non-lawyer partners.

G.H. Exhaustion of Remedies. The Board may consider whether an applicant has made reasonable attempts to seek reimbursement of a loss before taking action on an application. This may include, but is not limited to, the following:

(1) Filing a claim with an appropriate insurance carrier;

(2) Filing a claim on a bond, when appropriate;

(3) Filing a claim with any and all banks which honored a financial instrument with a forged endorsement;

(4) As a prelude to possible suit under part (5) below, demanding payment from any business associate or employer who may be liable for the actions of the dishonest lawyer; or

(5) Commencing appropriate legal action against the lawyer or against any other party or entity who may be liable for the applicant's loss.




Rule 11 - Restitution and Subrogation

A. Restitution. A lawyer whose conduct results in payment to an applicant shall be liable to the Fund for restitution, and the Trustees may bring such action as they deem advisable to enforce restitution.

B. Subrogation. As a condition of payment, an applicant shall be required to provide the Fund with a pro tanto transfer of the applicant's rights against the lawyer, the lawyer's legal representative, estate or assigns; and of the claimant's rights against any third party or entity who may be liable for the applicant's loss. Failure to return a signed subrogation agreement to the Fund within three years of approval of the application will result in revocation of that approval.

C. Action to Enforce Restitution. In the event the Trustees commence a judicial action to enforce restitution, they shall advise the applicant who may then join in the action to recover any unreimbursed losses. If the applicant commences such an action against the lawyer or another entity who may be liable for the loss, the applicant shall notify the fund who may join in the action.

D. Duty to Cooperate. As a condition of payment, the applicant shall be required to cooperate in all efforts that the Fund undertakes to achieve restitution.



Rule 501 - General Rule

The following citations are to certain statutes and case law that make reference to privileges or privileged communications. This list is not intended to create any privilege, nor to abrogate any privilege by implication or omission.

(a) Attorney-Client. (Reserved. See RCW 5.60.060(2).)

(b) Clergyman or Priest. (Reserved. See RCW 5.60.060(3), 26.44.060, 70.124.060.)

(c) Dispute Resolution Center. (Reserved. See RCW 7.75.050.)

(d) Counselor. (Reserved. See RCW 18.19.180.)

(e) Higher Education Procedures. (Reserved. See RCW 28B.19.120(4).)

(f) Husband-Wife Spouse or Domestic Partner. (Reserved. See RCW 5.60.060(1), 26.20.071, 26.21.355(8) 26.21A.275(8).)

(g) Interpreter in Legal Proceeding. (Reserved. See RCW 2.42.160; GR 11.1(e).)

(h) Journalist. (Reserved. See Senear v. Daily Journal-American, 97 Wn.2d 148, 641 P.2d 1180 (1982); State v. Rinaldo, 102 Wn.2d 749, 689 P.2d 392 (1984) RCW 5.68.010.)

(i) Optometrist-Patient. (Reserved. See RCW 18.53.200, 26.44.060.)

(j) Physician-Patient. (Reserved. See RCW 5.60.060(4), 26.26.120, 26.44.060, 51.04.050, 69.41.020, 69.50.403, 70.124.060, 71.05.250.)

(k) Psychologist-Client. (Reserved. See RCW 18.83.110, 26.44.060, 70.124.060.)

(l) Public Assistance Recipient. (Reserved. See RCW 74.04.060.)

(m) Public Officer. (Reserved. See RCW 5.60.060(5).)

(n) Registered Nurse. (Reserved. See RCW 5.62.010, 5.62.020, 5.62.030.)

Reviser's note: The brackets and enclosed material in the text of the above section occurred in the copy filed by the agency and appear in the Register pursuant to the requirements of RCW 34.08.040.

Washington State Code Reviser's Office