The VLW Blog

What if the bank in which an attorney has his trust account goes under? As a general rule, if the account is set up properly, each of the attorney’s clients has $100,000 of FDIC protection, even if the trust account holds substantially more than that.

It gets much more complicated, as Virginia State Bar Ethics Counsel James M. McCauley points out in an article on the VSB Web site, if the attorney is holding more than $100,000 of an individual client’s funds or the client has other accounts at the bank.

McCauley has some suggestions for ways to minimize the possibility of personal liability for an attorney if a bank goes belly up. First on the list is staying away from any bank that appears to be in financial difficulty.

By Alan Cooper

Payee notification of insurance checks and random audits of trust accounts are two proposals under active study as the Virginia State Bar this month convened a meeting to deal solely with protecting the public from dishonest lawyers.

As we reported last month, recent attorney defalcations in Virginia have been costly to clients and others.  The damage exceeds $10 million, according to bar president Manuel A. Capsalis.

Other ideas circulated at the recent bar meeting include:

• Quicker resolution of disciplinary matters and accountability to victims, complainants, and witnesses.
• A possible fast-track process for embezzlement receiverships. The former Receivership Task Force could be reconstituted to deal with these issues and the possibility of statutory authority for a less formal receivership when a lawyer dies or becomes disabled.
• Mandatory participation by lawyers in fee dispute resolution, which is rarely used.
• Providing pro bono assistance to clients who are victims of lawyer defalcations, to assist them through the Clients’ Protection Fund application process.
• Requiring lawyers to carry a universal fidelity bond that would protect clients from defalcation.

By Peter Vieth

The Virginia State Bar is seeking comments to the proposal that all active VSB members engaged in the private practice of law representing clients (either individuals or entities) drawn from the general public be covered under a professional liability (malpractice) insurance policy.  The linked page includes a link to the text of the proposal.

By Peter Vieth

Irving M. Blank, a Richmond attorney and member of the Virginia State Bar executive committee, has announced that he is running for president-elect of the VSB.

VSB bylaws require candidates for the position to submit a petition with the names of 50 attorneys by Oct. 1. The bylaws also require the candidate to have been an active VSB member for seven years and to have served at least two years on bar council within the five years before election.
If only one candidate files, he or she becomes president-elect when the current president-elect becomes president the following June. If more than one candidate files, a ballot is mailed to VSB members by Nov. 5.

Blank, 64, is a partner in the three-attorney firm of ParisBlank LLP. He was elected to bar council in 2003 and appointed to the executive committee three years later.
By Alan Cooper

The Supreme Court of Virginia has told the Virginia State Bar not to put any information about disciplinary complaints on its Web site “until a decision has been made adverse to the lawyer and the the time for filing an appeal from that decision to the Supreme Court has expired.”

“The Supreme Court would like this policy implemented immediately,” Chief Justice Leroy Rountree Hassell Sr. said in a letter to VSB President Howard W. Martin Jr. last month that included other topics.

“That creates some issues for us,” VSB President Howard Martin told the agency’s executive committee yesterday. He said the a response is being prepared that will explain the ramifications of the new policy.

Martin said he understood the action was in response to a complaint by an attorney who had a disciplinary citation dismissed on appeal.

Under VSB rules, disciplinary matters become public only after a disciplinary committee finds probable cause that a disciplinary violation has occurred. Once that happens, the VSB publishes hearing dates for the attorney before the Disciplinary Board or three-judge panels on the Web site.

When a finding of misconduct that warrants at least a public reprimand is made, the VSB posts the case on the “Disciplinary Actions” page of the site. Appeals and other matters that occur after the posting appear at the bottom of the posting with an asterisk and an explanation in contrasting red type.

Since Martin received the letter, no new listings of pending disciplinary actions have been posted on the Web site. The information remains public at the bar offices.

That bothered Theophani Stamos, a Fairfax prosecutor who is a member of the EC. “If it’s a public record, it’s a public record” and ought to be readily available, she said.

Judy Rosenblatt wanted her colleagues on the executive committee of the Virginia State Bar to send a letter to General Assembly members stating the committee’s displeasure at the failure of the legislature to fill judicial vacancies.

Almost 30 appointments are pending, but Rosenblatt was most upset yesterday about Court of Appeals Judges Robert J. Humphreys and Jean Harrison Clements. All the other appointments involve open seats, but Humphreys will go off the bench for at least eight days on April 15. Clements’ term doesn’t expire until June.

The General Assembly will reconvene April 23 and is expected to take up the appointments then.

EC member Irv Blank disagreed with Rosenblatt. “The best thing we can do is not put our foot in that tar baby. . . . That is a lose-lose situation” for the VSB, he said.

“I think we need to support our own judiciary,” Rosenblatt insisted.

Blank responded, “If it’s not taken care of on the 23rd, we ought to raise holy hell. It’s really silly juvenile politics.”

VSB President Howard Martin sided with Blank and, with that, the committee moved on to another topic.

The CRESPA bond requirement is being increased, according to this announcement from the Virginia State Bar.

An amendment to Code § 6.1-2.21 increasing the minimum CRESPA surety bond from $100,000 to $200,000 will be effective on July 1, 2008.

UPDATE: Here’s an update on Thursday afternoon, direct from the VSB Executive Committee which is meeting in Smithfield. VSB leaders anticipated that they would be able to provide a grace period for compliance, but the bar has determined that that’s not possible.

The VSB site now contains this statement: “An original rider or a replacement bond must be received in the office of the Virginia State Bar by July 1, 2008, or your CRESPA registration will be revoked, and you will not be able to perform residential real estate closings.”

As the poet once said, govern yourself accordingly.

George A. Chabalewski, the head of the Virginia State Bar’s disciplinary system since June 2006, has submitted his resignation, effective July 9.

Chabalewski joined the bar staff after 20 years as a civil litigator in the Virginia attorney general’s office. He had worked earlier as a prosecutor and public defender in Kane County, Ill.

In an e-mail sent to some of those involved in the disciplinary system, Chabalewski said, “I trust that the time period between now and then will permit the bar sufficient time in which to hire my replacement. It is my intention to continue to have the Professional Regulation Department perform to the best of its capabilities until my replacement comes on board, and to afford my successor as smooth a transition as possible. It has been a pleasure working with all of you.”

He said he is leaving for personal reasons.

The Virginia State Bar will seek comments on a proposal for mandatory legal malpractice insurance for attorneys who represent clients drawn from the public.

The VSB executive committee and council will get the proposal as an informational item at their meetings next week and is expected to vote on the proposal at its June 19 annual meeting. Comments on it are due by May 23.

Under the proposal, an attorney would have to purchase a policy on the open market with a minimum coverage of $100,000 per claim with a claim expense allowance of at least $50,000 outside the policy limits.

“While higher levels of per claim coverage would be desirable in most instances, as would an aggregate limit reflecting some multiplier of the pre claim limit, the Committee’s focus was on making the transition from uninsured to uninsured as economical as possible,” said Darrel Tillar Mason, the Richmond lawyer who chairs the Special Committee on Legal Malpractice Insurance.

The committee submitted the proposal to council this week without a recommendation on its adoption. That’s consistent with what Mason has said is a split on the committee over a “data driven” or “principle driven” view of the issue. Evidence of a serious problem for lawyers or their clients is slim, she acknowledges, but some lawyers believe that insurance against their own negligence is part of their fiduciary duty to their clients.

The committee has studied the issue for more than two years, and the VSB Council surprised many observers in October what it opted to continue the effort rather than to abandon it.

A Virginia State Bar disciplinary subcommittee has dismissed a complaint by Virginia Beach circuit judges that Commonwealth’s Attorney Harvey L. Bryant III violated legal ethics.

Bryant announced the dismissal Saturday at the same event that led to the complaint—a Republican prayer breakfast.

Ethical proceedings typically remain confidential unless and until the VSB’s disciplinary apparatus finds misconduct serious enough to at least warrant a public reprimand.

Bryant and his attorney, Rodney G. Leffler of Fairfax, said the investigation ended well short of that point. An attorney in the VSB’s disciplinary office summarized the case for a subcommittee composed of two lawyers and a layman, who decided that it did not warrant further attention, Leffler said.

Leffler said the investigator interviewed 26 people, only one of whom recalled that Bryant had used the phrase “illegal conduct” at the February breakfast to describe the practice of taking cases under advisement without explicit legislative authority to do so.

The case was somewhat unusual in that The Virginian-Pilot obtained a copy of the complaint signed by all nine circuit judges and Bryant made public his written response to it.

Bryant said he responded to a question about drunken driving cases by noting that he believed that judges at times exceeded their authority by deferring judgment and dismissing or reducing the charge if a defendant had no further legal difficulty over the next few months of a year. He added that he kept a record of such instances in case members of the city legislative delegation might be interested in them when judges come up for reappointment.

“It is not against the rules to say something true about a judge,” Leffler said.