Bar News - June 18, 2014
Court News: Rules Panel Considers Trust Overdraft Notification
By: Kristen Senz
New Hampshire may join other states in requiring that overdrafts on lawyers’ trust accounts are automatically reported to the attorney discipline agency.
At a June 6 public hearing of the NH Supreme Court Committee on Rules, Janet DeVito, general counsel for the NH Attorney Discipline Office, said notification from banks about trust account overdrafts could alert the ADO to potential problems sooner.
“We think this is a really important rule,” DeVito said, adding that the ADO has sought such a change for several years.
In other states that have adopted a similar rule, banks usually send 50 or fewer such notices per year to attorney discipline officials, DeVito told the committee.
The NH Bankers Association submitted amended language to avoid heightened liability related to the new notification, expressing concern in a letter to the committee that, without the amendment, if a notice is “not furnished on a timely basis or not at all for any reason, the possibility exists that the attorney or law firm or their clients could seek to hold the bank liable for any losses that could have been avoided but for the failure to provide the notice.”
Representing the NH Bankers Association at the public hearing, attorney John Funk said the association also wanted to maintain support for the IOLTA program among the state’s banks and hoped to do so by eliminating any potential ambiguity from the proposed rule.
NH Supreme Court Justice Robert Lynn, chair of the rules committee, agreed with the sentiment, saying the IOLTA program, which supports civil legal aid programs in New Hampshire, “is important to the legal community and the state as a whole.”
Because the Judicial Branch does not have jurisdiction over banks, the proposed rule is addressed to lawyers, requiring that they maintain trust accounts only at banks that agree to provide automatic notification to the ADO in the case of overdrafts.
The overdraft notification rule re-surfaced among other attorney discipline process changes suggested in 2012 by an ABA committee. The Supreme Court then sought input from the NH Bar Association and the ADO on which changes were suitable for New Hampshire. The NH Bar Foundation convened a work group to consider the overdraft notification rule’s potential impact on banks, especially smaller banks, to avoid any administrative hardship.
ADO Rule Changes Proposed
Also at the hearing, proposed rules on the attorney discipline process were discussed, including one that would make warnings issued to attorneys confidential.
Attorney David Rothstein, chair of the Professional Conduct Committee, said the warnings, which have been available to the public via the ADO website for the past four years, are unfairly prejudicial to attorneys who have not engaged in misconduct.
“The warnings became more public than they normally would be when the ADO decided to put them on their website,” Rothstein said. Because of the potential economic consequence to a lawyer with a public warning, Rothstein added, “It was thought that it does more harm than it does public good.”
DeVito said she believes that if warnings are issued to attorneys, they should be public, at least at the ADO office, if not on the web.
Rothstein said the potential rule change might provide an “opportunity to evaluate” the practice of issuing warnings to attorneys when there is no finding of misconduct.
Justice Lynn inquired about the Judicial Conduct Committee’s rules related to judicial warnings, saying the rules committee tries to keep PCC and JCC rules consistent.
Other proposed ADO-related rules include appointing counsel for the PCC when the PCC and ADO disagree on a proper penalty and enabling the court to order restitution in serious cases of attorney misconduct. DeVito said she would like a more narrow definition of “restitution” in the rule and language that states the ADO won’t enforce such orders.
At least 30 other jurisdictions in the country have some form of restitution in ADO orders, DeVito said. “They’re all over the board over how it’s enforced and what can be ordered,” she said.
The full list of proposed rules can be found on the NH Judicial Branch website in the rules committee section as part of the public hearing notice.
The rules committee is expected to submit its annual report recommending rule amendments to the court in August. Following another potential comment period, the court will then decide whether or not to permanently adopt some or all of the proposals, likely by early next year, according to committee Secretary Carolyn Koegler.