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Client Protection Fund Rules


  1. The purpose of the Michigan Client Protection Fund (Fund) is to promote public confidence in the administration of justice and integrity of the legal profession by reimbursing losses caused by the dishonest conduct of lawyers admitted and licensed to practice law in Michigan. Reimbursable losses must have occurred in the course of the lawyer-client or other fiduciary relationship between the lawyer and claimant and the reimbursable loss must have a significant contact with Michigan.
  2. For purposes of the Client Protection Fund Rules (Rules), the term “lawyer” includes a person:
  1. licensed to practice law in Michigan, including Federal Courts;
  2. admitted under a Special Certificate;
  3. admitted temporarily under MCR 8.126;
  4. admitted as a special legal consultant;
  5. admitted only in a non-United States jurisdiction but who is authorized to practice law in Michigan; or
  6. suspended or disbarred whom the client reasonably believed to be licensed to practice at the time the dishonest conduct occurred.


  1. The Fund is established to reimburse claimants for losses that arise out of dishonest conduct as defined herein. The dishonest conduct must have a significant contact with Michigan and must be committed by a lawyer or lawyers.
  2. The Fund is operated by the State Bar of Michigan (SBM).
  3. The Fund is supervised by the Board of Commissioners of the SBM (Board), which shall accept, hold, and manage money received by the Fund and make disbursements from the Fund.
  4. These Rules are effective for claims filed with the Fund on or after January 1, 2024.


  1. The Fund is financed through an annual assessment of all Michigan lawyers and a charge to lawyers seeking temporary admission under MCR 8.126.
  2. The Fund also receives surplus judicial campaign contributions pursuant to Canon 7(B) of the Michigan Code of Judicial Conduct, Legal Defense Fund, donations, subrogation collection, and court ordered contributions for unaccounted for lawyer trust account funds.
  3. The Board shall:
  1. Ensure that the Fund is financed at an amount adequate to provide for the payment of claims and costs of administering the Fund, including recommending adjustments to the lawyer assessment as needed to carry out the purpose of the Fund.
  2. Supervise the prudent investment of Fund money.
  3. Ensure sufficient reserves to pay reasonably expected claims, within the limits of the resources dedicated to the Fund and pursuant to any policies adopted by the Board.
  4. Ensure the employment of adequate staff and consultants to carry out the Fund’s functions and purposes effectively and efficiently.
  5. Monitor recovery of restitution to which the Fund is entitled.


All money or other assets of the Fund constitutes a trust and must be held in the name of the Fund, subject to the direction of the Board.


The Standing Committee on Client Protection Fund (Committee) makes recommendations to the Board concerning the Fund, including claims administration processes, amendment of the rules, and subrogation matters. The Committee will meet as frequently as necessary to conduct the business of the Fund and make recommendations in accordance with the SBM’s Bylaws, Committee’s jurisdiction and policies, these rules, and Rules Concerning the SBM.


  1. Consistent with and subject to the SBM Board Policy 15, Conflict of Interest, a Board member who has any known existing or potential conflict of interest must report the conflict to the President of the Bar. A Board member shall abstain from investigating, recommending, or voting on any matter on which the member has any known or existing or potential conflicts of interests. Conflicts may include, but are not limited to, situations where a Board member has a lawyer-client, financial, or close familial relationship with a claimant or a lawyer who is the subject of a claim.
  2. A Committee member who has any known existing or potential conflict of interest must report the conflict to the Committee Chair. The Committee member shall abstain from investigating, recommending, or voting on any matter on which the member has any known or existing or potential conflicts of interests. Conflicts may include, but are not limited to, situations where a Committee member has a lawyer-client, financial, or close familial relationship with a claimant or a lawyer who is the subject of a claim.


  1. As used in these Rules, "dishonest conduct" means wrongful acts committed by a lawyer, including, but not limited to:
  1. Failing to refund unearned fees as required by Rule 1.16 of the Michigan Rule of Professional Conduct (MRPC), including failure to return an excessive fee as determined under MRPC 1.5, or the failure to safeguard funds and fees paid and unearned in an appropriate trust account pursuant to MRPC 1.15 during the lawyer’s lifetime so that excessive or unearned fees may be refunded upon the lawyer’s death.
  2. Theft or embezzlement of money or the wrongful taking or conversion of property that came into the possession of the lawyer as the result of a lawyer-client or other fiduciary relationship related to the practice of law.
  3. Borrowing money from a client without the intent to repay it or with disregard of the lawyer’s reasonably anticipated inability to repay it.
  4. Receiving funds or property from a client to invest the funds or property where:
  1. The lawyer knew the client(s) had funds to invest because of information acquired through a lawyer-client relationship regardless of whether there was an ongoing or existing lawyer-client relationship at the time of the investment, and
  2. The lawyer possessed a higher degree of sophistication and knowledge than the client or where there is a historical relationship of trust and reliance on the lawyer by the client, and
  3. The investment vehicle or project:
  1. did not exist, or
  2. the actual nature and characteristics of the investment vehicle or project differed substantially from the representations made to the client regarding the investment vehicle or project, or
  3. the disbursement was made directly to the lawyer, friend, relative of the lawyer, or an entity controlled by either, where the investment vehicle or project could reasonably be viewed as a non-legitimate investment vehicle or project under the totality of the facts.
  1. To be eligible for reimbursement from the Fund:
  1. The loss must have arisen out of a lawyer-client or other fiduciary relationship related to the practice of law.
  2. At the time of the dishonest conduct, the lawyer was admitted or licensed to practice law in Michigan or was suspended or disbarred less than six months prior to the dishonest conduct. If the lawyer was suspended or disbarred more than six months prior, the claim shall be denied unless the client demonstrates a reasonable belief that the lawyer was licensed to practice law at the time of the dishonest conduct.
  3. The loss must have arisen from the lawyer’s practice of law in Michigan. In making this determination, the Committee may consider all relevant factors including, but not limited to, the parties’ domiciles, the location of the lawyer’s office, the location where the attorney-client relationship was formed, the location where legal services were rendered, and the jurisdiction in which the matter is pending.
  4. The dishonest conduct stated in the claim must either have been reported to the Attorney Grievance Commission or a law enforcement authority or the subject of a lawsuit filed in any court or tribunal having jurisdiction, within two years after the dishonest act occurred, or, if the dishonest act could not then have reasonably been discovered, within six months after the dishonest conduct was discovered or reasonably should have been discovered, whichever is later. Or within one year of notice of respondent’s death.
  5. A claimant must report an otherwise eligible claim over $20,000 to a law enforcement authority before the claim will be considered by the SBM. The SBM has discretion to require any claimant to report the dishonest conduct to a law enforcement authority before a claim is considered.
  6. Claimants do not have to wait for a determination by the Attorney Grievance Commission, Attorney Disciplinary Board, law enforcement authority, or a court to file a claim with the Fund. A claim must be filed with the Fund no later than one (1) year after a determination by the Attorney Grievance Commission and/or Attorney Discipline Board related to the dishonest conduct alleged in the claim.
  7. The SBM may require the claimant to seek reimbursement from any other source that may be legally responsible for the loss before payment of an approved claim.
  1. Except as provided in these rules, the Fund does not reimburse:
  1. consequential or incidental damages such as lost interest, attorney's fees, or other costs incurred in seeking recovery of a loss.
  2. losses arising from malpractice or inadequate, insufficient, or negligent rendition of services.
  3. claims based on a dispute regarding the correctness or applicability of the attorney fees invoiced.
  4. losses incurred by a spouse, child, parent, grandparent, sibling, heir, partner, associate, employer, or employee of the lawyer responsible for the loss.
  5. losses covered by any bond, banker’s blanket bond, surety agreement, or insurance contract to the extent covered, including any loss to which any bonding agent, surety or insurer is subrogated, to the extent of that subrogated interest.
  6. losses incurred by any business entity controlled by the lawyer.
  7. losses incurred by any governmental entity or agency.
  8. money paid directly to an individual who is not the lawyer or a company that is not the lawyer’s law firm, such as fees paid to a court, fees paid to a different attorney, statutory interest and costs awarded in a lawsuit filed against the lawyer, or wages for missed work time.
  9. current or future values.
  10. money due to a third-party other than the payor where the claimant receives no benefit from the reimbursement.
  11. attorney fees for services rendered or to be rendered, unless:
  1. there was a failure to refund unearned legal fees.
  2. the fee was unreasonable in light of the work performed under the factors set forth in MRPC 1.5 or SBM Ethics Opinions regarding attorney's fees.
  3. the lawyer settled a case without the knowledge and authorization of the client and misappropriated the settlement proceeds. In such instances the Committee may, in its discretion, find that attorney fees are waived by the lawyer if it is determined that the lawyer: 1) settled the matter without claimant’s permission, 2) did not inform claimant of the settlement, and 3) misappropriated the settlement proceeds. In all other matters, the lawyer shall receive credit for any attorney fees earned that are not deemed excessive.


  1. In cases of extreme hardship or special and unusual circumstances, the Committee may recommend, and the Board may authorize, payment of a claim that would otherwise be excluded under these Rules.
  2. The Board may approve payment of a claim in an amount that exceeds the maximum limits where the totality of the circumstances, based on the purposes and policies of the Fund, warrants doing so.
  3. In cases where the Board, in its sole discretion, determines that an otherwise reimbursable claim would create unjust enrichment or the claimant unreasonably or knowingly contributed to the loss, the Board shall deny the claim.
  4. The Board has discretion to pursue subrogation in a manner that deviates from these rules or not to pursue subrogation when the totality of the circumstances warrant.


  1. A claimant must submit a claim on the SBM claim form and provide sufficient evidence of a reimbursable loss.
  2. A claimant must, during the pendency of the claim, remain in contact with the SBM and provide updates and additional information as necessary or requested by staff.
  3. Claimants do not need to hire an attorney to file a claim; however, all SBM licensees are urged to provide pro bono assistance to any claimant who requires assistance in presenting a claim to the Fund, and no attorney may be compensated for services regarding the CPF application process or the CPF claim administration process beyond a fee of $250, except as authorized by the Board.


  1. Service of Process. A copy of the claim shall be served in a manner set forth in Michigan Court Rules 2.103 – 2.107 for service of a civil complaint on the lawyer whose conduct is the subject of the claim, at the lawyer’s address on file with the SBM, or last known address, or on the lawyer’s representative, if known. If served by certified mail and returned “unclaimed” or “refused,” all future documents may be sent to the lawyer via first class mail or electronic means. If documents are returned as undeliverable and no forwarding address can be obtained, then the Fund is exempt from mailing a copy of the claim to the lawyer until a current address can be obtained or a final determination has been mailed to the claimant.
  2. Response. The lawyer or representative has 30 days to respond or, upon request, within the timeframe specified by the SBM. If the lawyer or representative does not timely respond to the notice of claim, the lawyer will not be given further opportunity to respond or otherwise defend the claim, including a request for review, unless good cause is shown.
  3. Attorney Grievance Commission and Attorney Discipline Board.
  1. The SBM will notify the Attorney Grievance Commission of the filing of a claim unless the lawyer is deceased, disbarred, or suspended for a term exceeding 179 days.
  2. Unless the totality of the circumstances warrants otherwise, no claim should be approved during the pendency of a disciplinary proceeding involving the same conduct alleged in the complaint.
  3. The SBM will promptly notify the Attorney Discipline Board of payment of any claim and request that any restitution first be made to the Fund until such time the Fund is paid in full unless the lawyer is deceased.
  1. Finding of Dishonest Conduct. The evidentiary standard for a finding of dishonest conduct is a preponderance of evidence.
  1. An order disciplining a lawyer or a final non-default judgment imposing civil or criminal liability for the dishonest act or conduct that comports with Rule7(A) is conclusive evidence that the lawyer engaged in the dishonest conduct. Conversely, a determination from a disciplinary authority or court that the lawyer did not engage in the dishonest conduct bars recovery from the Fund.
  2. Rules of evidence do not apply to any claim proceeding. All relevant evidence that a responsible person would rely upon in the conduct of serious affairs will be admitted.
  3. The claimant has the duty to provide sufficient evidence to support the claim. Evidence supporting a claim may be provided by other sources such as the Attorney Grievance Commission, law enforcement, or court proceedings.
  1. Expedited Proceedings. The Committee may give final approval of an award of less than $3,000 subject to the Respondent’s right to review provided below. The Committee shall submit regular reports to the Board of all awards approved by the Committee.
  2. Notification of Committee’s Recommendation. The claimant and the lawyer will be notified of the Committee's recommendation or decision under the expedited proceeding as soon as practicable. The notice must include the reasons for the recommendation or decision under the expedited proceeding and information regarding claimant’s and the lawyer’s respective right to request review.
  3. Request for Review. The claimant or respondent must submit a request for review in writing within 30 days of the notice of a recommendation or decision under the expedited proceeding denying the claim or determining the amount of a claim by the Committee. When a determination has been made by SBM staff or the Committee that a claim is not eligible for reimbursement, the claimant will be notified why the claim is not eligible for reimbursement and that unless additional facts to support eligibility are submitted to the Fund within 30 days, the file will be closed. Requests for review are subject to the following policies and procedures:
  1. A timely request for review of the Committee’s recommendation shall be submitted to the Board for review.
  2. A de novo standard of review applies to a request for review. The requestor must show by a preponderance of the evidence that the recommendation was incorrect.
  3. Typically, the record established for review by the Board is the sole record to be reviewed. The Board may consider newly discovered evidence that, by due diligence, could not reasonably have been discovered before the Committee made its recommendation. If the claimant or lawyer fails to make a request, the decision of the Board or Committee, in the case of expedited proceedings, concerning the claim is final.
  1. Notice of final determination. The claimant and the lawyer will be notified of the Board’s final determination. If the Board alters the recommendation of the Committee, the claimant and lawyer may submit a request for review in writing within 30 days of notice of the Board’s final determination. If the final determination notice to either party is returned and a forwarding address cannot be obtained from the post office, then the period to submit a request for review, if applicable, begins to run 5 days after the date on the correspondence.


  1. Claim Reimbursement Maximum. Only one claim will be processed for any person or group of persons who has or have a mutual or common interest in the relationship with the lawyer or group of lawyers acting in collusion, even though each member of such group may have separately sustained a loss. “Group of Persons” may include: corporations, partnerships, associations, estates of decedents, and persons having mutual, common, or joint interests in property. The Board determines the maximum amount that the Fund may reimburse for losses arising from any incident or series of incidents constituting dishonest conduct by a single lawyer or group of lawyers acting in collusion; the current claim reimbursement maximum is $150,000.
  2. Aggregate Maximum Reimbursement. The Board determines the aggregate maximum amount that the Fund may reimburse for losses as the result of the dishonest conduct of a single lawyer or group of lawyers acting in collusion; the current aggregate maximum reimbursement is $375,000.
  1. When SBM staff forecasts that claims may exceed this limit, all claims against the lawyer or lawyers shall not be paid for two years following the filing of the initial claim against the lawyer or lawyers. The Board will review each claim individually and determine the “Actual Claim Loss,” which is the total loss calculated under these Rules.
  2. If the total of the combined Actual Claim Losses suffered by all claimants exceeds the aggregate maximum amount approved by the Board, then the reimbursable losses will be apportioned on a pro rata basis as provided below:
  1. The percentage of the aggregate maximum will be calculated by dividing the actual Claim Loss by the total of all Actual Claim Losses, then
  2. Multiplying the percentage by the aggregate maximum.

Actual Claim Loss ÷ Total of all Actual Claim Losses = percentage of aggregate maximum

Actual Claim Loss multiplied by percentage of aggregate maximum = reimbursement amount

  1. If any payment would exceed the maximum amount payable to a single claimant as defined by 11(A) above, the maximum recommended payment will be capped at the Claim Reimbursement Maximum and the remainder will be prorated between the remaining claimants.
  1. If a payment is to be made to a minor or a protected individual, reimbursement may be paid to any person or entity authorized by applicable law to receive the reimbursement for the benefit of the payee.
  2. Payments are made in such amounts and at such times as the Board deems appropriate and may be paid in a lump sum or installment payments.


No person has the legal right to reimbursement from the Fund.


  1. A lawyer whose dishonest conduct has resulted in reimbursement shall make restitution to the Fund including interest and the expense incurred by the Fund in collection of reimbursement. A lawyer’s failure to make a satisfactory arrangement for restitution may be cause for suspension, disbarment or denial of an application for reinstatement.
  2. As a condition of reimbursement, and to the extent of the reimbursement provided by the Fund, a claimant, and where applicable the other person receiving reimbursement from the Fund (payee), must enter into an agreement that provides that the payee:
  1. transfers the payee’s rights against the lawyer, the lawyer’s legal representative, estate, or assigns; and of the payee’s rights against any third party or entity who may be liable for the payee’s loss, up to the amount paid by the Fund, any related collection costs incurred by the Fund, and interest to the State Bar of Michigan Client Protection Fund unless the Board decides otherwise.
  2. agrees to cooperate in all efforts that the SBM undertakes to achieve restitution for the Fund.
  3. agrees to repay the Fund if the payee is subsequently reimbursed from another source in an amount that exceeds the difference between the amount of total loss identified by the Fund and the Fund award. Such repayment shall not exceed the amount of the Fund award, unless the Board decides otherwise.
  1. The SBM will undertake all reasonable efforts to recover payments made by the Fund from responsible or related entities that caused the loss to the claimant.
  1. The Fund may retain an attorney to pursue recovery.
  2. The Fund will pay fees and costs, including attorney’s fees, to attempt to recover payments made by the Fund. Any recovery obtained by the Fund will first be used to reimburse the Fund for fees and costs, including attorney’s fees, and second, to reimburse the Fund for the amount paid to the payee.
  3. If the payee has sustained a loss in excess of the amount of reimbursement received from the Fund, the SBM as subrogee or assignee of a claim, must advise the payee of litigation attempting to recover fund payments, and the payee may join in the action to recover the payee’s unreimbursed losses.
  1. In the event that an action is commenced by anyone other than the SBM to recover unreimbursed losses against the lawyer or another entity that may be liable for the loss, the payee must notify the SBM.


  1. Claims, proceedings, and reports involving claims for reimbursement are confidential until the Board authorizes reimbursement, except as provided herein or unless otherwise provided by law or other rules governing the SBM. After payment of the reimbursement, the SBM may publicize the name of the lawyer, nature of the claim, and the amount of reimbursement. The name and address of the claimant will remain confidential except for recovery purposes or when otherwise authorized in writing by the claimant.
  2. The SBM may use any Client Protection Fund information to pursue its right to recover for payments made by the Fund.
  3. The SBM may disclose any relevant information to professional discipline agencies, law enforcement authorities, or other state’s client protection/security funds. The SBM may also disclose statistical information that does not disclose the identity of the lawyer or Claimant.