Joint Committee on Attorney Standards Minutes (Unofficial until approved)
Supreme Court’s Front Conference Room, Bismarck
December 9, 2011
Members Present Judge Michael Sturdevant, Chair George Ackre Dann Greenwood Jean Hannig Petra Mandigo Hulm Mark Hanson Dianna Kindseth Ryn Pitts Justice Dale Sandstrom Dan Ulmer Pat Ward
Members Absent Carol Johnson Sandra Keller Jason Vendsel
Staff Jim Ganje Bill Neumann
Also Present Justice Daniel Crothers
Chair Sturdevant called the meeting to order at 10:00 a.m. and drew Committee members’
attention to Attachment B (December 1, 2011) - minutes of the September 16, 2011, meeting.
It was moved by Justice Sandstrom, seconded by Ryn Pitts, and carried that the
minutes be approved.
Credit Card Payments for Legal Fees and Costs - Cont’d
Chair Sturdevant explained that following the September 16 meeting the subcommittee
consisting of Pat Ward, Petra Mandigo Hulm, Dann Greenwood, and Jean Hannig further discussed
possible alternative amending language for Rule 1.15 to address the issue of credit card use. The
following draft language, which would be added to Rule 1.15(b), was distributed by email for review
by Committee members:
“A lawyer may accept credit card payments or wire transfer payments for unearned fees as
temporary deposits into the lawyer’s general operating account if the funds in which a client
or a third-party has an interest are transferred from the general operating account to the client
trust fund account as soon as reasonably possible under the circumstances.”
Petra Hulm explained that the draft language would be an addition to the existing language
in Rule 1.15(b). Staff noted that the draft language had been reviewed by Disciplinary Counsel and
the concerns about draft language discussed at the September 16 meeting have been addressed in the
revised language now before the Committee.
Petra Hulm asked whether the current language in Rule 1.15(b) would be necessary if the
revised language would require the lawyer to deposit payments for unearned fees in the operating
account. Justice Sandstrom observed that there may still be various fees or charges that could be
incurred and the existing language describes how those fees or charges would be paid by the lawyer.
Dan Ulmer reiterated and agreed with Dianna Kindseth’s comment at the September 16
meeting that service charges related to credit card payments should be regarded as a regular cost of
doing business if a lawyer elects to receive such payments. Ryn Pitts agreed also.
Dann Greenwood agreed generally with the concept of the cost of doing business, but said
the focus of the draft amendments is the safekeeping of client funds and the prohibition against
Judge Sturdevant noted that a possible alternative is the Minnesota’s approach, which
requires fees to be deposited in the operating account and then transferred immediately to the client
trust account, with the lawyer assuming the risk of any chargebacks from the credit card company.
He said the reference in the draft language to transferring fees to the trust account “as soon as
reasonably possible under the circumstances” seems to suggest retaining the fees for a time in the
event there is a chargeback. Petra Hulm said the draft language is intended to be essentially similar
to the Minnesota approach. She said the reference to “as soon as reasonably possible” is meant to
indicate that the transfer must occur in a very short time period without regard to possible
Justice Sandstrom asked whether there is a substantive purpose to “under the circumstances”
as set out in the draft language. Jean Hannig suggested requiring transfer “promptly” as an
alternative. Justice Sandstrom said there is a possibility that “under the circumstances” may be
regarded as relating to the possible time within which a chargeback could occur, with the result that
the fees could be retained in the operating account for a longer time.
Jean Hannig suggested that the draft language be revised to require that the funds be
“promptly” transferred from the operating account to the client trust account. She said the reference
to “as soon as reasonably possible under the circumstances” could then be deleted. She said that
approach would be more in keeping with the lawyer’s obligation to keep the funds separate.
Justice Crothers noted that current Rule 1.15(b) and the draft language refer to “wire transfer
payments” and wondered whether that phrase, which is something of a word of art, would encompass
electronic funds transfers. Pat Ward said “electronic funds transfer” would likely include both kinds
of transfers if there is uncertainty about the inclusiveness of “wire transfer payments”.
After further discussion, it was moved by Pat Ward, seconded by Jean Hannig, and
carried that Rule 1.15(b) be amended to read as follows:
“A lawyer may accept credit card payments or electronic funds payments for unearned fees
as temporary deposits into the lawyer’s general operating account if the funds in which a
client or a third-party has an interest are promptly transferred from the general operating
account to the client trust account. A lawyer may deposit the lawyer’s own funds in a client
trust account only for the purpose of paying bank service charges;and fees associated with
credit card payments; or wire transferselectronic funds payments related to that account, but
only in an amount necessary for that purpose.”
Petra Hulm asked whether related language in the comment should be considered by the
Dann Greenwood said Comment  appears to be limited to an explanation of the purpose
of existing paragraph (b). He said it may be worthwhile to expand the comment language discuss
permissible deposits in the operating account so long as the funds are promptly transferred to the
client trust account. Petra Hulm suggested language could be added to Comment  to emphasize
that paragraph (b) describes the only circumstances in which commingling of funds may occur.
Chair Sturdevant asked that the subcommittee review possible changes to Comment  for
Rules for Client Trust Account Records - Rule 1.15 Draft Amendments
Chair Sturdevant then drew Committee members’ attention to Attachment D (December 1,
2011) - draft amendments to Rule 1.15 to incorporate the Model Rules for Client Trust Account
Records. He noted that the Committee had initially considered the Model Rules at its September 16
At the request of Chair Sturdevant, staff reviewed the draft amendments. He explained that
the black-letter portions of the Model Rules are added as new paragraphs (p) through (t) and the
comment portions of the Model Rules are added as new comments  through . He noted that
the Model Rule time frame for retention of financial records [5 years] on page 2, line 21, of the draft
amendments is changed to six years, which is consistent with the general six-year requirement in
paragraph (h) of current Rule 1.15 rule. He said the Model Rule provision suggests retaining copies
of “monthly” trial balances and “quarterly” reconciliations - paragraph (p)(9), page 7, line 17 - but
the Committee may wish to consider whether those time frames are appropriate. Committee
members agreed the time frames were acceptable.
Following the review of draft amendments, staff summarized the manner in which the Model
Rules have been adopted in other jurisdictions. He said ABA information regarding implementation
of the Model Rules indicates that three jurisdictions are regarded as having adopted the Model Rules
- Connecticut, North Carolina, and Virginia. He said Connecticut appears to have adopted the Model
Rules with very few changes. He said North Carolina and Virginia appear to have adopted parts of
the black-letter Model Rule and parts of the Model Rule comments. He noted that the North Carolina
Bar Association had developed what appears to be a fairly thorough handbook on lawyer trust
account management to assist in complying with particular rule requirements. He said the District
of Columbia Bar Association considered but did not recommend the Model Rules, concluding that
including detailed record-keeping requirements in professional conduct rules could serve as a “trap
for the unwary” and could be administratively burdensome in some instances, particularly with
respect to small law firms or solo practitioners.
Justice Sandstrom asked whether it is possible to determine how burdensome the Model Rule
requirements would be on solo practitioners and small law firms. He said there likely is value in
having the detailed guidance set out in the model rules.
George Ackre said the draft amendments would appear to enable compliance through a fairly
simplified procedure. He stressed the need to have someone within the office regularly monitor
Dann Greenwood noted his concern expressed at the previous meeting regarding the possible
burden and duplication of effort that may occur under the model rules. He said the District of
Columbia Bar Association concern about creating a trap for unsuspecting lawyers is a relevant
concern. However, he said most small law offices may already have or can develop an office practice
that could satisfy the model rule provisions. He drew attention to Comment , which explains that
records required to be retained must be “readily accessible” and “readily available”. That, he said,
suggests compliance may require a considerable amount of work and may result in duplication of
In response to a question from Chair Sturdevant, Justice Crothers said the ABA Standing
Committee on Client Protection, when developing the Model Rules, discussed concerns about
whether the rule requirements would represent a significant burden. He said while current records-keeping practices may be considered adequate, law offices should consider the evolving nature of
financial practices and the increasing transition to electronic processing of financial transactions. He
noted that Rule 1.15(h) currently requires that lawyers maintain records “sufficient” to comply with
the rule, but there is essentially no guidance regarding the kinds of records that must be maintained
or how they must be maintained. He said questions about what constitutes a “sufficient” record will
likely increase as the use of electronic financial transactions increases. He said the goal of the model
rules is to provide some objective measure regarding what is considered a “sufficient” record.
In response to a question from Chair Sturdevant, Petra Hulm said the rules may offer some
level of practical assistance to younger or new lawyers and a detailed list of the kinds of records that
should be retained would likely be helpful. She said most law offices would probably turn the record-keeping responsibility over to an accountant.
Dianna Kindseth said the record-keeping requirements should be helpful to lawyers in that
lawyers would essentially be asked fulfill normal, accurate business accounting responsibilities.
Following further discussion, it was moved by Justice Sandstrom, seconded y Pat Ward,
and carried that the draft amendments to Rule 1.15 to incorporate the Model Rules for Client
Trust Account Records be approved.
Chair Sturdevant asked whether the proposed amendments should be held and combined with
the revised amendments to Rule 1.15 regarding credit card payments for lawyer fees.
Justice Sandstrom said the two sets of amendments address two distinct issues and probably
should be considered separately. Committee members agreed.
It was moved by Justice Sandstrom, seconded by Pat Ward, and carriedthat the
proposed amendments to Rule 1.15 be approved for submission to the Board of Governors for
review and, in the absence of any Board comment requiring Committee action, be approved
for submission to the Supreme Court for its consideration.
Model Rule on Provision of Legal Services Following Determination of a Major Disaster
Chair Sturdevant next drew attention to Attachment E (December 1, 2011) - a draft
admission to practice rule incorporating the ABA Model Rule on Provision of Legal Services
Following Determination of a Major Disaster and accompanying amendments to add a new comment
to Rule 5.5 of the Rules of Professional Conduct. Staff explained that the draft rule simply sets out
the model rule, with various style revisions, as a new admission to practice rule. He said the
amendments to Rule 5.5 follow the ABA amendments to Model Rule 5.5. He noted that Section (D)
of the draft rule contains 60 days as the time frame suggested in the model rule for when the
authority to practice law conferred under the rule would end. There is, he said, a corollary reference
in Comment . He said the Committee should consider whether that time frame is acceptable.
In response to a question from Justice Sandstrom, staff said the logical placement for the rule
in the Admission to Practice Rules would likely be as new Rule 3.2.
Petra Hulm drew attention to Section (G), which requires that a lawyer seeking temporary
admission under the rule file a registration statement with the Clerk of the Supreme Court in a form
prescribed by the Supreme Court. She said it may be more appropriate to have the statement filed
with the Board of Law Examiners.
Following further discussion, it was moved by Justice Sandstrom, seconded by Pat Ward,
and carried that the draft be revised to require filing of the registration statement with the
Board of Law Examiners in a form prescribed by the Board and that references to “pursuant
to” be replaced with “under” throughout the draft.
It was moved by Justice Sandstrom, seconded by Pat Ward, and carriedthat the draft
rule, as revised, be titled as proposed Rule 3.2 of the Admission to Practice Rules and that the
proposed rule and related amendments to Rule 5.5 of the Rules of Professional Conduct be
approved for submission to the Board of Governors for review and, in the absence of any
Board comment requiring Committee action, approved for submission to the Supreme Court
for its consideration.
Credit Card Payments for Legal Fees and Costs - Comment Language
Dann Greenwood suggested that the Committee not postpone submission of the proposed
amendments pending development of related revisions to Comment  of Rule 1.15. He suggested
that Comment  be amended to provide that commingling funds is “permissible” under paragraph
(b), as the Comment currently provides, “when temporarily depositing identified credit card or
electronic funds transfer payments into the general operating account pending transfer to the client
trust account or”, with the balance of the Comment retained.
It was moved by Dann Greenwood and seconded by Jean Hannig that Comment  be
amended in the manner described.
Petra Hulm observed that the suggested language would essentially restate the substance of
the revised rule. She suggested as an alternative that Comment  be revised to simply provide that
paragraph (b) provides “the only situations in which it [commingling] is allowed”.
Dann Greenwood asked whether it is clear that there are no instances, other than those
identified in the proposed amendments to paragraph (b), in which permissible commingling of funds
may occur. Pat Ward said if commingling is to be permitted, it should be within narrowly defined
limits, which the suggested language seems to address. Committee members generally agreed.
With the consent of the second, the motion was withdrawn.
It was moved by Petra Hulm, seconded by Pat Ward, and carried that Comment  to
Rule 1.15 be amended as follows:
“ While normally it is impermissible to commingle the lawyer’s own funds with client funds,
paragraph (b) provides that it is permissible when necessary to pay bank service charges on
that accountthe only situation in which it is allowed. Accurate records of the funds must be
kept regarding which part is the lawyer’s.”
It was moved by Dann Greenwood, seconded by Pat Ward, and carriedthat the
proposed amendments to Rule 1.15(b) and Comment  be approved for submission to the
Board of Governors for review and, in the absence of any Board comment requiring
Committee action, be approved for submission to the Supreme Court for its consideration.
There being no further discussion the meeting was adjourned at 11:30 a.m.