Judge Michael Sturdevant George Ackre Dann Greenwood Petra Mandigo Hulm Jean Hannig Sandra Keller Dianna Kindseth Ryn Pitts Justice Dale Sandstrom Dan Ulmer Jason Vendsel Pat Ward
Members Absent Carol Johnson Mark Hanson
Staff Jim Ganje Bill Neumann
Also Present Justice Daniel Crothers
Chair Sturdevant called the meeting to order at 10:00 a.m. and welcomed Sandra Keller , a Board of Governor’s appointee, as a new Committee member. He then drew Committee members’
attention to Attachment B (September 8, 2011) - minutes of the March 4, 2011, meeting. It was noted
that Dianna Kindseth did attend the meeting and the minutes should be corrected to reflect her
It was moved by Pat Ward, seconded by Petra Mandigo Hulm, and carried that the
minutes, as corrected, be approved.
Rule 3.8 Amendments (Responsibilities of a Prosecutor) - Mentoring Programs -Update
Chair Sturdevant explained that following the Committee’s last meeting and submission of
the proposed amendments to the Board of Governors for comment, the Board met to review the
amendments. He said comments were submitted to the Board by the criminal defense bar and the
state’s attorneys. He said the Board ultimately voted to take no position on the proposed
amendments. Following the Board decision, he said, the amendments were submitted to the Supreme
Court for its consideration. The amendments were circulated for comment by the Court and have
been set for hearing in October.
With respect to a possible lawyer mentoring program, Chair Sturdevant said he had
forwarded to the Chief Justice the Committee’s initial conclusions that while a mandatory program
is likely not feasible, the mentoring concept is a sound one and ways of implementing a program
should be discussed further. He said the Board of Governors also discussed the mentoring concept
and decided to assign the matter to a study group.
Bill Neumann said the Board of Governors has asked the Young Lawyers Section to establish
a working group to formally develop a proposal. He said the Section’s Executive Board of met
recently to discuss how to proceed. He said the tentative goal is to identify a system or program that
would work independent of a formal rule framework and through the Bar Association. He said a
report to the Board of Governors is expected by early 2012.
Credit Card Payments for Legal Fees and Costs - Cont’d
Chair Sturdevant explained that a subcommittee consisting of Pat Ward, Petra Mandigo
Hulm, Dann Greenwood, and Jean Hannig had agreed to review the issue of credit card use further
and consider possible amending language for Rule 1.15. He said draft rule language was developed
and is included in the material for initial discussion as Attachment C (September 8, 2011).
Pat Ward said the subcommittee further discussed the issues and problems associated with
the acceptance of credit card payment for legal retainers, fees, and costs, which were reviewed at
length in the earlier SBAND Ethics Opinion. He said the draft language included in Attachment C
is his first attempt to address the issue and is drawn primarily from the substance of the Ethics
Opinion. He said there is still some level of discomfort with permitting an activity that is disallowed
by the current rules. He said the draft language attempts to address whether credit card payments are
deposited in the general operating account during the time period that there is a possibility of a
charge-back and then transferred to the trust account, or deposited directly into the lawyer’s trust
account. The draft language, he said, essentially directs the lawyer to temporarily deposit credit card
payments for advance retainers in the general operating account until the charge-back period expires
or into a separate trust account, and then provides that after the charge-back period has expired the
lawyer must transfer credit card payments for unearned fees and costs from the operating account
to the client trust fund. He said the draft language will require further revision but is a first attempt
to develop rule language to address the issue.
Staff noted that Brent Edison, Assistant Disciplinary Counsel, had called to relate concerns
about the draft language. He said the concerns were 1) the language appears to be directed at
different things in its references to “refundable advance retainers” and later to “client advances for
unearned fees and costs” and 2) the general concern that the phrase “refundable advance retainer”
has been found to be confusing in meaning and use. He said Mr. Edison and Paul Jacobson,
Disciplinary Counsel, were unable to attend the Committee meeting as they were involved in Inquiry
Committee and Disciplinary Board meetings.
Justice Sandstrom noted the draft language indicating the payment may be deposited in the
general operating account for a “reasonable time” until the charge-back period expires. He asked
what a reasonable charge-back period might be. Pat Ward responded that the time period is
somewhat uncertain but can range from 60 to 90 days. Dann Greenwood said he had concerns about
that particular language in the draft amendments but otherwise considered the draft language
generally responsive to the issue.
Judge Sturdevant noted Arizona Rule 1.15 (Attachment C, pp. 2-4) appears to direct that the
credit card payment is deposited in the trust account and the lawyer, then, is to have sufficient funds
in the lawyer’s trust account to cover any potential charge-back. Pat Ward said the subcommittee
considered the Arizona rule and generally concluded that it would be unrealistic to require a lawyer
to retain that level of funds, which could be substantial, in the lawyer’s own account. Dann
Greenwood recalled that the Ethics Committee reviewed the Arizona approach at length in
developing the ethics opinion and his conclusion then was that the Arizona approach was simply too
With respect to the general concerns forwarded by disciplinary counsel, Pat Ward said the
ethics opinion and other information reviewed by the subcommittee suggested there was little
concern about “earned” fees being deposited into the general operating account. Similarly, he said,
there should be little concern about the deposit of a nonrefundable retainer, which is a kind of earned
fee, into the general operating account. More problematic, he said, are situations in which the client
pays an advance retainer, payable against an hourly rate, and the lawyer agrees to refund any unused
balance of the retainer. The balance, he said, and how it is retained is the greater concern. He said
the draft language reflects generally the language used in the ethics opinion, but additional comment
language would be necessary to fully explain application of the rule provision.
Pat Ward said an additional issue is with respect to the direction to deposit advance retainers
in the general operating account or in a trust account for the particular client, with the latter already
addressed in Rule 1.15. He said the subcommittee was uncertain whether it was necessary to
mandate that the deposit must be placed in the client’s trust account in every instance.
In response to a question from Justice Sandstrom about charge-back time periods, Dann
Greenwood said there is a fairly long period of time during which the credit card holder, and others,
can challenge the charge. Consequently, he said there is a long period of time during which the credit
card company could disallow the charge.
Petra Mandigo Hulm said the concern is, for example, that after a month a lawyer takes out
of the account earned fees and afer two months takes out unearned fees, and then it could be as much
as 60 or 90 days later that a charge-back for the entire amount may occur. The problem, she said, is
that the lawyer may be using another client’s funds to address the charge-back. She said there would
be less concern if the lawyer left the entire payment amount in the account for the full period of time
during which a charge-back could occur.
Jean Hannig noted that a charge-back by the credit card company is assessed against the
money due the merchant for a given month and the charge-back may relate to a card payment made
much earlier. That process, she said, makes it very complicated to handle credit card payments
through a trust account.
Bill Neumann said there is general discomfort in some quarters that running credit card
payment through the lawyer’s general operating or merchant account is a commingling of fees that
should never occur. He said there may be a concern that the draft language permitting deposit in the
operating account for a “reasonable time” may result in a commingling of fees for an even longer
Dann Greenwood agreed with the concern about the possible length of time fees from credit
card payments can remain in the operating account. He said his preference is for a very limited black-letter rule that would permit the deposit for a very short time period. He said concerns about the
impact of a charge-back should be a business decision by the lawyer about whether the lawyer is
willing to take the risk. George Ackre agreed the credit card payment should be held in operating
account for as short a time as possible so that there is no risk to the trust account from a charge-back.
Jean Hannig said Minnesota’s rule permits a lawyer to deposit the credit card payment in the
general operating account, with the lawyer paying any associated fees, but the client money must be
transferred to the client trust account without waiting for the end of the charge-back period.
Pat Ward noted that the draft rule language does not address credit card fees, which may
require further attention in a future draft.
Dann Greenwood suggested the draft language be modified to read: “Credit card payments
of already earned fees and advanced costs shall be deposited in the lawyer’s general operating
account. A lawyer may temporarily deposit credit card payments of refundable advance retainers in
the lawyer’s general operating account and shall transfer any credit card payments for client advances
for unearned fees and costs from the general operating account to the lawyer’s client trust fund
account as soon as reasonably possible under the circumstances.” He said the language pertaining
to deposit of payments for advance retainers in a separate interest-bearing trust account for the
particular client could be added if appropriate.
Dianna Kindseth agreed with the suggested change and observed that if a lawyer elects to
accept credit card payments, then the lawyer should accept the business consequences of accepting
a credit card. She said the decision should have nothing to do with the fact that the fees belong in
a trust account. She said permitting the commingling of the fees essentially works to protect the
lawyer, while the purpose of the trust account is to protect the client.
Pat Ward wondered whether additional language should be considered to address the issue
of credit card fees.
In response to a question from Chair Sturdevant, there was Committee consensus that the
draft be modified as suggested and that the subcommittee consider further how to address the issue
of credit card fees.
Model Rules for Client Trust Account Records
Chair Sturdevant then drew Committee members’ attention to Attachment D (September 8,
2011) - the Model Rules for Client Trust Account Records, which were recently adopted by the ABA
House of Delegates. He asked Justice Crothers, as past Chair of the ABA Standing Committee on
Client Protection, to provide a general summary of the rules and their purpose.
Justice Crothers noted that current Rule 1.15 on safekeeping of client property requires that
a lawyer keep complete records of account funds kept by the lawyer [paragraph (a)] and directs that
the records be maintained for at least six years after representation ends [paragraph (h)]. But, he
said, those provisions are the extent of the direction about maintenance of complete records. He said
every jurisdiction has adopted the “complete records” provision of Rule 1.15. He said the ABA had
earlier adopted the Model Rule on Financial Recordkeeping to further address the issue and that rule
was subsequently amended, which resulted in the Model Rules for Client Trust Account Records.
He noted that a number of jurisdictions have studied, or are studying, the new Model Rules but
current information indicates that none have yet adopted them. With respect to the earlier Model
Rule on Financial Recordkeeping, he said approximately twenty-eight jurisdictions added rules or
comments to their rules further describing the kinds of records to be retained and used the Model
Rule as a basis for those additions.
Petra Mandigo Hulm noted that the subcommittee reviewing the credit card payment issue
had also been asked to provide an initial assessment of the Model Rules for Client Trust Account
Records. She said since apparently no jurisdictions have adopted the model rules at this point, the
question is whether the model rules should be recommended as entirely new rules or whether to
incorporate them into current Rule 1.15.
With respect to the previous Model Rule on Financial Recordkeeping, Justice Crothers
explained that jurisdictions took various approaches to adopting the rule’s provisions. Some, he said,
included language in their black-letter Rule 1.15, some included language in their Rule 1.15
comment, and some adopted a combination of both.
Staff said that a review of current Rule 1.15 and the new model rules on trust account records
suggests the model rules could fairly easily be incorporated within Rule 1.15. Justice Crothers
observed that the new model rules were intended to complement Rule 1.15.
With respect to application of the new model rules, Dann Greenwood said that while lawyers
may already be doing much of what the rules contemplate in terms of recordkeeping, the new rules
seem to direct that recordkeeping be specific to the trust account. He said there may, as a
consequence, be a considerable duplication of effort.
Justice Crothers said the model rules are not intended to increase the burden on lawyers, but
are instead intended to provide guidance to lawyers regarding the type of records related to trust
activities that must be available. He said the rules will not require that lawyers recreate records, but
may require the creation of records that are not currently generated. For example, he said, with the
advent of a check-less, electronic society if a lawyer does not have a copy of a canceled check when
some activity has occurred in a trust account, the lawyer will have to take the affirmative step of
having evidence of the transaction.
Chair Sturdevant asked that staff prepare for review at the next meeting a draft that
incorporates the new model rules into current Rule 1.15.
Model Rule on Provision of Legal Services Following Determination of a Major Disaster
Chair Sturdevant next drew attention to Attachment E (September 8, 2011) - the Supreme
Court’s referral of the ABA Model Rule on Provision of Legal Services Following Determination
of a Major Disaster, with recent amendments to the model rule. The attachment also includes
excerpts from previous Committee discussions concerning the model rule and an implementation
chart indicating jurisdictions in which the model rule has been adopted. Chair Sturdevant noted the
Committee’s earlier conclusions that adoption of the model rule was likely unnecessary in light of
how the legal community and the judicial system responded to the 1997 Grand Forks flood.
Justice Crothers explained that in light of the current flooding in the state the Supreme Court
has discussed initiatives in three general areas that would enable moving from a reactive to proactive
position in terms of responding to disaster situations. He said consideration of the model rule is one
of these possible initiatives. He said the model rule would generally address disaster-related
situations in which a non-North Dakota lawyer could provide pro bono legal services to North
Dakota residents from within the state or outside the state and situations in which a non-North
Dakota lawyer is displaced by a disaster and comes to North Dakota to temporarily establish an
office or provide legal services in the lawyer’s home jurisdiction. He noted that approximately
twenty jurisdictions took in lawyers following the disaster associated with Hurricane Katrina.
Justice Crothers explained further that the Supreme Court is also reviewing possible
administrative rules and orders to establish a basis for what the judicial system should be prepared
to do in the event of future disasters. He said there is also consideration of whether any enabling
legislation would be necessary to assist in implementing the Supreme Court’s authority to address
Following further discussion, Committee members agreed to proceed with a review of the
model rule. Staff suggested that since the rule essentially deals with the temporary practice of law
within the state by non-resident lawyers, a proposed rule could likely be reviewed as an addition to
the Admission to Practice Rules. He noted that those rules already address various kinds of
temporary or conditional licensure.
Chair Sturdevant asked that staff prepare a draft rule for Committee review at the next
There being no further discussion the meeting was adjourned at 11:30 a.m.