Supreme Court Orders

Clients' Security Fund

In the Matter of the Amendment of Supreme Court Rules, SCR 12.04(2) and (3) - Clients' Security Fund

Order 96-15

On Dec. 12, 1996, the Board of Governors of the State Bar of Wisconsin filed a petition requesting the amendment of SCR 12.04(2) and (3) to increase from $150,000 to $250,000 the balance required to be maintained in the Clients' Security Fund. The proposed amendment would not increase the maximum amount of any annual assessment of attorneys.

IT IS ORDERED that a public hearing on the petition be held in the Supreme Court Room in the State Capitol, Madison, Wis., on April 15, 1997, at 1:30 p.m.

IT IS FURTHER ORDERED that the court's conference in the matter shall be held promptly following the public hearing.

IT IS FURTHER ORDERED that notice of the hearing be given by a single publication of a copy of this order and of the petition in the official state newspaper and in an official publication of the State Bar of Wisconsin not more than 60 days nor less than 30 days before the date of the hearing.

Dated at Madison, Wis., this 22nd day of January, 1997.

By the court:
Marilyn L. Graves, Clerk

Petition

To the Justices of the Wisconsin Supreme Court:

The Board of Governors of the State Bar of Wisconsin hereby petitions the Wisconsin Supreme Court to amend SCR 12.04(2) and (3) as follows:

(2)Annual Assessments. Commencing with the state bar's July 1, 1982, fiscal year, every attorney shall pay to the fund such annual assessments as are necessary to maintain a balance in the fund of $150,000 250,000, but in no event shall any annual assessment exceed $15. An attorney whose annual state bar membership dues are waived for hardship shall be excused from the payment of the annual assessment for that year. An attorney shall be excused from the payment of the annual assessment for the fiscal year during which he or she is admitted to practice law in Wisconsin.

(3)Certificate of Sufficiency. The committee shall determine the net value of the fund as of May 1 of each year. Whenever the value of the fund shall equal or exceed $150,000 250,000, after deducting all claims which the committee has determined to pay and which are not disposed of at the date of valuation and all expenses properly chargeable against the fund, the committee shall file with the supreme court prior to May 31 of that year a certificate of sufficiency to that effect. When a certificate of sufficiency is filed with the supreme court, there shall be no annual assessment for the next fiscal year.

DISCUSSION. 1. Background. The Clients' Security Fund (Fund) was established in 1981 to financially compensate clients who have lost money or other property because of the dishonest conduct of their attorneys. Since 1981, the Fund has made more than $1.2 million in reimbursements to over 170 clients.

The Fund is financed by mandatory annual assessments on all licensed Wisconsin attorneys. Each year, the State Bar Clients' Security Fund committee determines the amount of the assessment based upon past and anticipated future claims experience and the current Fund balance. By rule, the committee cannot set the annual assessment in excess of $15. SCR 12.04(2). In addition, if, on May 1 of a given year, the Fund balance equals or exceeds the fund sufficiency level of $150,000, there may be no assessment for the next fiscal year. SCR 12.04(3).

In 1992, the committee requested, and the Court approved, an increase in the fund sufficiency level from $100,000 to $150,000. At that time, the committee advised that an increase in the fund sufficiency level was required to offset the effects of inflation as well to counteract the potential for increased Fund activity due to the rising number of attorneys practicing law in Wisconsin.

In addition, since 1981 the committee has increased the maximum reimbursement amount allowed for an individual claim from $25,000 to $45,000 to provide more complete compensation to clients who have suffered large financial losses at the hands of their attorneys. In 1996, the Board of Governors, following the recommendation of the State Bar/BAPR Joint Trust Account committee, requested the Clients' Security Fund committee to further increase this maximum reimbursement amount to $75,000 to more fully protect clients who have suffered extreme financial hardship. The committee has agreed to increase the maximum reimbursement amount to $75,000 if the fund sufficiency level is proportionally increased.

2.Current Request to Increase Fund Sufficiency Amount. The Clients' Security Fund committee advises that an increase in the fund sufficiency level is necessary to keep pace with the need to increase the maximum reimbursement amount allowed per claim. Under the current fund sufficiency requirements, the committee would have to approve three maximum-level claims of $45,000 each before the Fund, carrying a minimum reserve of $150,000, would be nearly depleted. An increase in the fund sufficiency level to $250,000 would allow the committee to increase the maximum reimbursement amount to $75,000 while keeping that amount at 30 percent of the fund sufficiency level. While it has no realistic way of predicting the number of payable claims that will exceed the maximum reimbursement amount, the committee feels that the proposed higher level of reserve will help to avoid surges in assessments in the future to cover unanticipated high levels of claims activity. Increasing the fund sufficiency amount should also permit the mandatory attorney assessment to remain at no more than $15 per year.

The undersigned respectfully submits this petition on behalf of the Board of Governors and prays for an order accordingly this 9th day of December, 1996.

David A. Saichek, President
State Bar of Wisconsin