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What is the Client Protection Fund?
The Fund is a public service of the legal profession in Michigan. In 1966, the State Bar of Michigan established this program to provide monetary relief to clients who have suffered financial losses as a result of the few attorneys who violate the profession’s ethical standards misappropriating funds entrusted to them. Acts of attorney dishonesty are the exception and not the rule. The Fund was established to show the good faith of all members of the State Bar of Michigan. The Fund is a remedy of last resort for a client who cannot obtain reimbursement form other sources such as insurance companies or the attorney involved.
Why was the Client Protection Fund established?
The legal profession depends upon the trust of its clients. Although it is a very small number of attorneys who breach that trust, nonetheless, it is important that the profession’s reputation for honesty be maintained and protected. The Fund serves this purpose by providing reimbursement to clients whose money or property was stolen by an attorney admitted to practice law in the state of Michigan.
How is the Client Protection Fund financed?
No tax dollars are used. The Client Protection Fund is financed through a direct annual assessment from each attorney licensed to practice law in Michigan on active or inactive status. Unspent judicial election campaign funds are also contributed.
Can I get money if my lawyer did a bad job?
If your lawyer was negligent, you may be able to sue him or her in civil court for your losses. The Client Protection Fund is set up to reimburse only clients whose lawyer committed a dishonest act such as theft or embezzlement. The Client Protection Fund does not have the authority to discipline attorneys for misconduct; this is a function of the Attorney Grievance Commission. The Client Protection Fund does not have the authority to resolve fee disputes or determine legal malpractice claims.
What happens after a claim is filed?
Each application is screened to determine if the loss is eligible for reimbursement. An eligible claim will be investigated and a report will be prepared for the Standing Committee. Any ineligible claims will be dismissed and the claimant will be advised of the reasons why the claim is ineligible for reimbursement. Claims involving fee disputes or malpractice are examples of ineligible claims.
The Standing Committee, which meets three or more times a year, will determine the merit of all eligible claims. If after reviewing a claim, the Committee determines that the claim is not reimbursable, a written explanation is issued to the claimant. If the Committee determines that the claim is reimbursable, the Committee will make a recommendation regarding the amount of reimbursement to the State Bar Board of Commissioners. The amount of reimbursement is based on the actual amount of funds embezzled by the dishonest attorney within the limits discussed in Client Protection Fund Rule 12. The fact that you have filed a claim does not ensure that you will receive a monetary award, or that an award will be in the amount you requested.
In some instances, review of the claim by the Standing Committee may be delayed pending pursuit by the claimant of other possible sources of recovery (such as forgery claims or estate proceedings) or until the Attorney Discipline Board has made a final determination regarding the lawyer’s conduct. A finding of misconduct is an important factor for a recommendation of payment, but not a guarantee of a payment recommendation. It is important that clients cooperate fully in all official investigations involving dishonesty in the practice of law.
What losses does the Client Protection Fund cover?
The Board of Commissioners may reimburse losses caused by the dishonest conduct of lawyers admitted to the practice of law in Michigan, up to a maximum of $150,000 for each client loss; however, the aggregate maximum amount for which the Fund will reimburse losses resulting from an individual lawyer is $375,000.
"Dishonest conduct" means the wrongful taking of clients' money or other property, in the course of an attorney-client relationship. Clients must have reported the dishonest conduct to either the Attorney Grievance Commission, or a law enforcement authority, filed a claim in any court or tribunal having jurisdiction within two years after the dishonest act, or, if the dishonest act could not then have reasonably been discovered, within six months after the claimant did or reasonably should have discovered the dishonest conduct.
Typical losses covered include the theft of money from estates of dead clients; escrow funds in real property closing; settlements in personal injury actions; and money embezzled from clients in investment transactions.
Is there a time limit for filing claims?
Yes, claimants must apply for reimbursement within two years after the loss occurred or six months after discovery, which ever is later.
How do I file a claim?
A client must complete and return a notarized application form for reimbursement. Application forms and other information are available from the Fund's offices at the State Bar of Michigan, Client Protection Fund, 306 Townsend St., Lansing, MI 48993-2012. Telephone (517) 346-6379.
There is no application fee and claimants are not required to be represented by counsel.
Are other complaints required?
Yes, the misuse of client money or property is professional misconduct that generally results in suspension or disbarment from the practice of law. It is also a crime. A law client who accuses a lawyer of misusing money and property must report the loss to the Attorney Grievance Commission. The client should also report the dishonest act to their local law enforcement authority.
Where can I get more information?
State Bar of Michigan
Client Protection Fund
306 Townsend St.
Lansing, MI 48993-2012
Phone (800) 968-1442 or (517) 346-6379
What types of claims are not eligible for reimbursement from the fund?
Claims for legal malpractice, negligence, or fee disputes.
What happens if my claim is eligible?
A claimant must sign a Subrogation Agreement prior to receiving the award money. You will be required to assign to the Fund your right to collect from the attorney.
How much is reimbursed?
The Fund only reimburses the actual amount embezzled or misappropriated by the attorney up to $150,000 for a single claimant with the aggregate maximum for an individual lawyer being $375,000. The Fund does not reimburse any related additional losses or damages, such as interest, fees paid to another attorney to represent the applicant against the attorney or to assist with the filing of the Client Protection Fund application, penalties for late payment of taxes, and the like.
Are there dollar limits on reimbursements?
Yes, the Fund does not reimburse otherwise reimbursable losses sustained by any one applicant as a result of dishonest conduct of one attorney in an amount exceeding $150,000.
What evidence must an applicant provide?
An applicant must provide sufficient evidence to support the allegation of dishonest conduct or unearned fees and the resulting loss of money, property, or other thing of value. Example evidence includes such items as retainer agreements, cancelled checks (front and back), receipts, invoices indicating payment, contracts, or any other documents related specifically to the allegation of dishonest conduct and resulting loss. Please note that the applicant should retain originals of these documents, forwarding only copies to the Fund.
Who can file a claim?
Almost anyone who has lost money due to a lawyer's dishonesty can apply for reimbursement. You do not have to be a United States citizen or live in Michigan. However, if you are the spouse or close relative of the lawyer, or a business partner, employer, or employee of the lawyer, or a business controlled by the lawyer, the fund will not reimburse you. Additionally, the fund does not reimburse for losses suffered by government entities or agencies.
How long does it take to process my claim?
It depends upon the length of time that is required to obtain enough information, including a final determination by the Attorney Discipline Board or Attorney Grievance Commission, for the Client Protection Fund Standing Committee to make a decision regarding your claim. The average processing time for a claim is fourteen months; however, it may take several months longer. In all cases, you will receive written notification of the Committee’s decision regarding your claim.