Muldoon, Getz & Reston

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The Lawyer’s Fund for Client Protection

by Gary Muldoon

Where a lawyer’s dishonesty results in financial loss to a client, one possible source for reimbursement is the Lawyers’ Fund for Client Protection. The Fund’s authority derives from Judiciary Law § 468-b. Regulations are found at 22 NYCRR Part 7200. The system in New York is not unique; every state and the District of Columbia have a similar type of fund.

In existence since 1982, the Fund (formerly known as the Clients’ Security Fund) has reimbursed over $100 million. While this amount is large, the number of lawyers whose dishonesty was responsible for it is small: less than 750 lawyers out of more than 200,000 attorneys now registered in New York State. Trustees are appointed by the New York Court of Appeals. The Fund receives $60 out of the $350 biennial attorney registration fee, which provides most of its revenue, 22 NYCRR § 118.1(g). Additional sources are court-ordered sanctions under Part 130-1, as well as reimbursement from restitution orders.

Applicants may seek reimbursement for losses caused by "dishonest conduct." Defined by regulation, this term includes "the misappropriation or wilful misapplication of money, securities or property in the practice of law; and unlawful acts in the nature of theft, larceny, embezzlement, fraud or conversion." § 7200.8(c).

Where an attorney refuses or fails to refund an unearned legal fee, the term includes "an attorney’s misrepresentation or false promise, to provide legal services to a law client in exchange for the advance payment of a legal fee." However, an attorney’s failure to perform or complete a legal engagement is not in itself evidence of misrepresentation, false promise or dishonest conduct. § 7200.8(d),(e).

Not covered by the Fund are damages from negligence or malpractice; losses incurred by governmental agencies; and losses arising from financial transactions with attorneys that do not occur within the attorney-client relationship and the practice of law. § 7200.8(d). A simple fee dispute is outside the Fund’s purview. Plater v O’Sullivan, 294 AD2d 719, 741 NYS2d 749 (3d Dept 2002).

For a claim to be considered (unless the fund’s trustees order otherwise), the attorney must have been suspended or removed from practice, have died, or the attorney’s whereabouts cannot be determined. § 7200.8(a)(5). A claim for reimbursement may be made on a form provided by the Fund, which is available on the Web. A claim should be filed within two years of when the conduct occurred, or was first discovered. A late filing may be allowed, in the discretion of the trustees. § 7200.9.

After the claim is filed, an investigative report is prepared. Unless previously notified of the claim, the attorney shall be provided with the report. The attorney is invited to respond to the report within 20 days. § 7200.10(e). Both claimant and attorney have an opportunity to be heard. § 7200.10(f). Both may be represented by counsel. § 7200.14. Compensation for representing a client before the Fund is not allowed, except as approved by the Fund. 22 NYCRR § 1022.35 (Fourth Dept).

Challenge to Fund’s decision

An article 78 proceeding challenging a final determination of the Fund is governed by a four-month statute of limitations. Saferstein v Lawyers’ Fund for Client Protection, 298 AD2d 726, 748 NYS2d 438 (3d Dept 2002). The standard of review is whether the trustees’ determination was arbitrary and unreasonable and an abuse of discretion. Haskins v Lawyers Fund for Client Protection, 286 AD2d 440,729 NYS2d 499 (2nd Dept 2001); see also, Beutz v Lawyers’ Fund for Client Protection, 187 Misc2d 359, 722 NYS2d 708 (Sup Ct 2000).

Appellate Division disciplinary action

An Appellate Division order of censure, suspension or disbarment may require an attorney to reimburse the Fund. Judiciary Law § 90(6-a). Where no finding is made that the misapplication or misappropriation was wilful, an order to reimburse the Fund is inappropriate. Matter of Reis, 291 AD2d 185, 739 NYS2d 148 (1st Dept 2002).


Confidentiality attaches to all claims, proceedings and records of the Fund. The final determination, and facts relating to the claimant’s loss, are public, however. The attorney may waive confidentiality. § 7200.15.

Where money is owed to a client who cannot be located, the client’s attorney may seek an order directing payment to the attorney of any fees and disbursements, and the balance to be paid to the Fund for safeguarding and disbursement. 22 NYCRR § 1200.46(f).

Fee for representing claimant

In the Second and Fourth Departments, a lawyer representing a claimant against the Lawyers’ Fund for Client Protection may not charge a fee or accept compensation for representation without approval of the trustees of the fund. 22 NYCRR 691.24, 1022.35.

© 2008 by Gary Muldoon