S.C. App. Ct. R. 411

As amended through November 6, 2024

Rule 411 - Lawyers' Fund for Client Protection

(a) Statement of Purpose. The Supreme Court is charged with the duty of defining and regulating the practice of law and of organizing and governing the association known as the South Carolina Bar which is composed of the attorneys at law of the State, which association acts as the administrative agency of the Court for the purpose of improving the administration of justice. Attorneys at law in this State, as officers of the Court, have the professional responsibility to preserve and protect the honor and integrity of the profession and have evidenced acceptance of this responsibility by recommending to the Court through the South Carolina Bar the establishment of the Lawyers' Fund for Client Protection of the South Carolina Bar.

The Supreme Court, in the exercise of its exclusive powers, and the attorneys at law in this State, in the exercise of their professional responsibility, have the duty to protect insofar as reasonably possible those persons who may be injured by the infrequent occurrence of attorney dishonesty. Therefore, the following Rule of the Supreme Court, recommended by the South Carolina Bar, is adopted for those purposes.

There is hereby established a special committee of the South Carolina Bar to be known as the Lawyers' Fund for Client Protection Committee whose functions shall be to receive, hold, manage, and disburse such funds as may from time to time be appropriated to it by the House of Delegates of the South Carolina Bar with the approval of the Supreme Court or voluntarily contributed or which may be otherwise received for the purpose of maintaining the integrity and protecting the good name of the legal profession by reimbursing, to the extent deemed by the Committee proper and feasible, losses caused by the dishonest conduct of members of the South Carolina Bar.

(b) Membership and Terms of Office of Lawyers' Fund for Client Protection Committee. The Lawyers' Fund for Client Protection Committee shall consist of thirteen (13) members of the South Carolina Bar and one (1) member selected from the general public appointed by the President and approved by the Supreme Court. The appointments shall be for a term of three (3) years, and no member shall serve more than two (2) consecutive terms. The Court, in its discretion, may appoint members for terms of less than three (3) years so that the number of terms expiring shall be approximately the same each year. Vacancies shall be filled for the unexpired term in the same manner as the original appointments to the Committee.

(c) Duties of Lawyers' Fund for Client Protection Committee.

(1) The Committee shall be authorized, commencing on January 1, 1980, to consider applications for reimbursement of losses which arise after the effective date of this Rule and which are caused by the dishonest conduct of a member of the South Carolina Bar who was acting either as a lawyer or in a fiduciary capacity customary to the practice of law in the matter in which the loss arose, but only to the extent to which these losses are not bonded or to the extent these losses are not otherwise covered; and provided the Bar member has died, has been adjudicated a bankrupt, has been adjudicated mentally incompetent, has been disbarred or suspended from the practice of law, has voluntarily resigned from the practice of law, has left the jurisdiction of this state or cannot be found, or has become a judgment debtor of the applicant based upon his dishonest conduct as a lawyer; or provided that the application has been certified to the Committee by the Commission on Lawyer Conduct of the Supreme Court or the Board of Governors of the South Carolina Bar as an appropriate case for consideration because the loss was caused by the dishonest conduct of a member of the South Carolina Bar. For the purposes of this rule, dishonest conduct of a member of the South Carolina Bar shall include not only dishonest conduct committed by the member, but also dishonest conduct of any person who is not a member of the Bar employed by a member or the firm of a member to assist the member or firm in providing legal services. Reimbursement for losses caused by dishonest conduct of an employee of a member or firm shall only be allowed if the acts giving rise to the loss occurred during the course of that employment. Additionally, for purposes of this rule, dishonest conduct shall include the failure of a lawyer to return an unearned fee after the Resolution of Fee Disputes Board determines the lawyer is not entitled to retain the fee.

The Committee shall investigate applications, which are brought to its attention. The Committee shall be authorized and empowered to reject or allow applications in whole or in part to the extent that funds are available to it. The Committee shall have complete discretion in determining the order, extent, and manner of payments of applications. The payment to any applicant shall not exceed the sum of $40,000 per claim; provided, however, that the aggregate total of claims paid per attorney shall not exceed $200,000. In operating the Lawyers' Fund for Client Protection pursuant to this Rule, the South Carolina Bar does not create or acknowledge any legal responsibility for the acts of individual lawyers in the practice of law. All reimbursements of losses from the Lawyers' Fund for Client Protection shall be a matter of grace in the sole discretion of the Committee and not as a matter of right. No client or member of the public shall have any right in the Lawyers' Fund for Client Protection as a third party beneficiary or otherwise. No attorney shall be compensated for representing an applicant except as authorized by the Committee.

In order for an application to be considered by the Committee, the application must be received by the South Carolina Bar within three (3) years of the date the applicant discovered or reasonably ought to have discovered the dishonest conduct. No application may be considered after the expiration of six (6) years from the date of the dishonest conduct. An application for resolution of a fee dispute which is timely filed under Rule 416, SCACR, shall be considered timely filed for purposes of consideration under this rule in the event an unearned fee is not repaid.

The Committee is further authorized to disburse funds as ordered by the Supreme Court pursuant to Rule 31, RLDE, Rule 413, SCACR. Unless otherwise provided by the order of the Supreme Court, the Committee shall be entitled to reimbursement from the suspended, disbarred, disappeared, or deceased attorney or his estate.

(2) Subject to the approval of the Board of Governors of the South Carolina Bar, the Committee is authorized to prescribe rules of procedure for the management of its funds and affairs, for the presentation of applications, for the processing and payment of applications and for the subrogation or assignment to the South Carolina Bar of all rights of any reimbursed applicant, provided all rules prescribed shall be subject to approval by the Supreme Court.

(3) The Committee may use or employ the Lawyers' Fund for Client Protection for any of the following purposes within the scope of the Committee's objectives:

(A) to make reimbursements on approved applications to clients and members of the public;

(B) to purchase insurance to cover losses in whole or in part as is deemed appropriate, provided that the purchase of the insurance is approved by the Board of Governors of the South Carolina Bar;

(C) to invest any portions of the Fund as may not be needed currently to pay losses, in United States Government Bonds, notes, or bills with interest or other investment income to become a part of the Fund; or

(D) to deposit at interest in federally insured banks or savings and loan associations, with the interest or other income from the deposit to become a part of the Fund.

(4) The Committee shall establish a rule making confidential all applications, proceedings and reports involving applications for reimbursements until the Committee authorizes reimbursement to the applicant unless the lawyer whose alleged conduct predicates the application requests the matter be made public. This provision shall not be construed to deny access to relevant information to appropriate authorized agencies as authorized by the Committee's Rules of Procedure.

(5) The Commission on Lawyer Conduct, the Office of Disciplinary Counsel, and the Receiver's Office of the Supreme Court shall allow a member of the Bar who is assigned to investigate the application for reimbursement to have access, during the investigation, to any information contained in thir files if any pertain to alleged loss.

(6) The Committee shall provide a full report of its activities at least annually to the Board of Governors of the South Carolina Bar and to the Supreme Court. It shall make such other report of its activities and give such publicity to its activities as the Board of Governors or the Supreme Court may deem advisable.

(7) Members of the Committee and staff of the Committee shall be immune from liability and suit while acting within the scope of their duties under this Rule or any rules which may be promulgated by the Committee under (c)(2) above.

(d) Funding.

(1) The South Carolina Bar shall assess each regular member of the South Carolina Bar the sum of thirty ($30.00) dollars in each calendar year and shall make an appropriation to the Lawyers' Fund for Client Protection in that amount for each year of its operation; provided, however, that no assessment or appropriation may be made which will increase the assets of the fund to an amount in excess of $3,000,000. Payment and enforcement of collection shall be in the same manner and at the same time and with the same penalties for nonpayment as provided for payment and collection of license fees under Rule 410, SCACR, but otherwise shall be treated as a separate assessment of regular members.

(2) All sums appropriated by the South Carolina Bar for the use of the Committee shall be held by the Treasurer of the South Carolina Bar in a separate account known as Lawyers' Fund for Client Protection, subject to the written direction of the Committee under Committee rules.

(3) The Committee is authorized to enforce claims which the Fund may have for restitution and to employ and compensate consultants, agents, legal counsel and other employees as it deems necessary and appropriate.

Payment shall be made from the Fund only upon condition that the South Carolina Bar receive a pro-tanto assignment from the payee of the payee's assignable rights against the lawyer involved, the lawyer's personal representative, heirs, devisees and assigns, and against all other persons or legal entities against whom the payee may have a right of recovery by reason of the loss, and upon condition that the Fund shall be entitled to reimbursement on terms the Committee deems proper under the circumstances including reimbursement of costs incurred in prosecuting a claim against the lawyer, the lawyer's personal representative, etc. The net proceeds collected by reason of the assignment shall be for the sole benefit of the Fund and enforcement of this right shall be within the sole discretion of the Committee.

(4) The administrative expenses of the Committee shall be paid out of the general fund of the South Carolina Bar. Provided, however, that any direct administrative expenses, other than staff assistance costs, exceeding $2,000 in any fiscal year shall be paid out of the Lawyers' Fund for Client Protection.

(5) The Fund may be abolished by the same authority which created it. In the event of such abolition, all assets of the Fund shall be and remain the property of the South Carolina Bar to be used for its general purposes as determined by the Board of Governors.

(e) That, in addition to the foregoing, the Fund shall accept and hold on deposit funds received from the Receiver, in addition to monies raised by the assessment established herein for purposes of restitution ordered by the Supreme Court of South Carolina, and shall thereafter disburse these additional monies as directed by order of the Court or upon directive from the Commission on Lawyer Conduct made in accordance with a Plan of Restitution between the Commission on Lawyer Conduct and a lawyer or former lawyer. Amounts disbursed under this paragraph shall not apply toward the maximum limits otherwise available to be paid to any applicant, except to reduce the total amount due for such an applicant, and the disbursement thereof shall not be limited by the time limits otherwise applicable to those making application to the Fund. Nothing in this paragraph shall give any victim of the misconduct of a lawyer or former lawyer a right to make a claim against monies received by the Fund under this paragraph, nor create any cause of action to contest disbursements made under this paragraph by an order of the Supreme Court of South Carolina or a Plan of Restitution arrived at between the Commission on Lawyer Conduct and a sanctioned lawyer or former lawyer. Nothing in this rule shall in any way affect the right of any victim of the misconduct of any lawyer or former lawyer to seek redress against a lawyer or former lawyer's representatives in any legal forum, except to reduce the amount owed by the amount of any payment made to the victim/applicant under the provisions of this rule. Any such Plan of Restitution shall consider and address amounts paid out by the Fund on account of a lawyer or a former lawyer and may, if the parties to that Plan of Restitution agree, include provision for repayment of all or portions of monies paid out by the Fund on account of such lawyer or former lawyer from monies raised by assessments rated under this rule.

S.C. App. Ct. R. 411

Amended by Order dated February 8, 2023; amended by Order dated November 6, 2024.