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Tuesday, July 28, 2009

Raid on Client Security Funds

Desparate times lead to desparate measures. Blame it on the recession as state governments strapped for cash look for ways to balance the budget. The August 2009 issue of The ABA Journal "Fast Moves in the Nutmet State" reports how the Connecticut legislature signed into law a measure that would allow it to siphon $2 million from the Client Protection Funds established by the Connecticut Bar Association. Fortunately, the bar fought the law and won!

Like the Virginia State Bar, the Connecticut Bar Association (CBA) collects dues from the lawyers and uses some of those dues to fund the Client Protection Fund (CPF). The purpose of the CPF is to remimburse clients who have suffered a loss of money due to dishonest conduct by their lawyer. Often the CPF is the only resort or remedy because malpractice insurance does not pay claims involving dishonesty by a lawyer. A CPF also does not generally pay claims involving negligence by a lawyer. The client will have to sue the lawyer for malpractice. Only the state of Oregon requires lawyers to have malpractice insurance although many lawyers have malpractice insurance anyway.

The CBA attempted to negotiate with the legislature but had to file suit and also launched a campaign to educate the legislators and the public about the nature and purpose of the CPF, emphasizing that the legislature's impoundment of those funds was an improper exercise of governmental power and an inappropriate way to bail out the state budget no matter how dire the circumstances. Not long after the CBA filed suit, the Connecticut General Assembly agreed to restore the funds to the CPF. The CBA lobbied successfully for a statute that would prohibit any future attempts to use CPF funds for any other purpose except as specified by the state supreme court which oversees the CPF.

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