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THE PROCESS AND YOUR COMMENTS

Proposed amendments to the Rules of the North Carolina State Bar are published for comment during the quarter after the council of the North Carolina State Bar approves their publication. The proposed amendments are published in the North Carolina State Bar's Journal and on this website. After publication for comment, the proposed rule amendments are considered for adoption by the council at its next quarterly meeting. If adopted, the rule amendments are submitted to the North Carolina Supreme Court for approval. Amendments become effective upon approval by the court. Unless otherwise noted, proposed additions to rules appear in in bold and underlined print, deletions are interlined. Proposed amendments to the Rules of Professional Conduct appear at the end of the page.

The State Bar welcomes your comments regarding proposed amendments to the rules. The comment period for the proposed amendments below closed on October 18, 2017. The State Bar Council will be meeting the week of October 23, 2017. Proposed amendments approved by the council during their meeting will be posted on this page by November 14, 2017.

Highlights

  • Electronic signatures allowed on trust account checks under proposed amendment to Rule 1.15-2. 
  • Comprehensive re-write to Rule 3.5 provides better guidance on the prohibition on ex parte communications with a judge.
  • New exception to fee-sharing prohibition in Rule 5.4 explicitly permits payment of a portion of a fee to credit card processors and other businesses.

Amendments Pending Approval by the Supreme Court

At its meetings on April 21, 2017, and July 28, 2017, the North Carolina State Bar  Council voted to adopt the following rule amendments for transmission to the North Carolina Supreme Court for approval (for the complete text of the proposed rule amendments see the Spring 2017 and Summer 2017 editions of the Journal or visit the State Bar website):

Proposed Amendments to the Rule on Prehearing Procedure in Proceedings Before the DHC       

27 N.C.A.C. 1B, Section .0100, Discipline and Disability of Attorneys

The proposed amendments require a settlement conference with the parties before a DHC panel may reject a proposed settlement agreement.

Proposed Amendment to IOLTA’s Fiscal Responsibility Rule

27 N.C.A.C. 1D, Section .1300, Rules Governing the Administration of the Plan for Interest on Lawyers’ Trust Accounts (IOLTA)

The proposed amendment clarifies that the funds of IOLTA may only be used for the purposes specified in the IOLTA rules.

Proposed Amendment to the Rule on Uses of the Client Security Fund

27 N.C.A.C. 1D, Section .1400, Rules Governing the Administration of the Client Security Fund of the North Carolina State Bar

The proposed amendment clarifies that the Client Security Fund may only be used for the purposes specified in the Client Security Fund rules.

Proposed Amendments to The Plan of Legal Specialization

27 N.C.A.C. 1D, Section .1700, The Plan of Legal Specialization

A proposed new rule in The Plan of Legal Specialization allows certified specialists with special circumstances to be placed on inactive status for a period of time and to regain their status as certified specialists upon satisfying certain conditions. A proposed amendment to the rule on the annual meeting of the Board of Legal Specialization changes the date for the meeting to the date of the board’s spring retreat.

Proposed Standards for New Specialty in Privacy and Information Security Law

27 N.C.A.C. 1D, Section .3300, Certification Standards for the Privacy and Information Security Law Specialty

A proposed new section of the specialization rules creates a specialty in privacy and information security law, and establishes the standards for certification in that specialty.

Proposed New Retired Status Rule in The Plan for Certification of Paralegals

27 N.C.A.C. 1G, Section .0100, The Plan for Certification of Paralegals

The proposed new rule creates a retired status for certified paralegals subject to certain conditions.

Proposed Amendments to the Rules of Professional Conduct

27 N.C.A.C. 2, The Rules of Professional Conduct

Proposed amendments to Rule 1.3, Diligence, and Rule 8.4, Misconduct, of the Rules of Professional Conduct, clarify the standards for imposition of professional discipline under each rule. The proposed amendments to the comments to Rule 7.2, Advertising, and Rule 7.3, Direct Contact with Potential Clients, explain the terms “electronic communication(s)” and “real-time electronic contact” as used in the rules, and alert lawyers to state and federal regulation of electronic communications.

Proposed Amendments to the Rules Governing Admission to the Practice of Law

The Board of Law Examiners’ comprehensive rewrite of the Rules Governing the Admission to the Practice of Law includes proposed amendments expressly adopting the Uniform Bar Examination as the official bar examination for general applicants to the North Carolina Bar.

Proposed Amendments for Publication 

At its meeting on July 28, 2017, the council voted to publish the following proposed amendments to the governing rules of the State Bar for comment from the members of the Bar:

Proposed Amendments to the Rule on Standing Committees of the Council

27 N.C.A.C. 1A, Section .0700, Standing Committees of the Council

The proposed amendments eliminate the Technology and Social Media Committee and establish the Communications Committee as a standing committee of the State Bar Council.

 

Rule .0701, Standing Committees and Boards

(a) Standing Committees. Promptly after his or her election, the president shall appoint members to the standing committees identified below to serve for one year beginning January 1 of the year succeeding his or her election…..

(1) Executive Committee...

(8) Technology and Social Media Communications Committee. It shall be the duty of the Communications Committee to develop and coordinate official North Carolina State Bar communications to its membership and to third parties, including the use of printed publications, emerging technology, and social media. It shall be the duty of this committee to stay abreast of technological developments that might enable the North Carolina State Bar to better serve and communicate with its members and the public, and to develop processes, procedures and policies for the deployment and use of social media and other means of disseminating official information.

Proposed Amendments to the Plan for Certification of Paralegals

27 N.C.A.C. 1G, Section .0100, The Plan for Certification of Paralegals

The proposed amendments allow applicants for paralegal certification who hold national certifications from qualified national paralegal organizations (including the CLA/CP certification from the National Association of Paralegals and the PACE-Registered Paralegal Certification from the National Federation of Paralegal Associations) to sit for the certification exam although the applicants have not satisfied the educational requirement for certification. The proposed amendments also delete a provision that allowed alternative qualifications for certification during the first two years of the program. Another proposed amendment requires certain qualified paralegal studies programs to include the equivalent of one semester’s credit in legal ethics.

Rule .0119 Standards for Certification of Paralegals

(a) To qualify for certification as a paralegal, an applicant must pay any required fee, and comply with the following standards:

(1) Education...

(2) National Certification. If an applicant has obtained and thereafter maintains in active status at all times prior to application (i) the designation Certified Legal Assistant (CLA)/Certified Paralegal (CP) from the National Association of Legal Assistants; (ii) the designation PACE-Registered Paralegal (RP)/Certified Registered Paralegal (CRP) from the National Federation of Paralegal Associations; or (iii) another national paralegal credential approved by the board, the applicant is not required to satisfy the educational standard in paragraph (a)(1).

(3) Examination...

(b) Alternative Qualification Period. For a period not to exceed two years after the date that applications for certification are first accepted by the board, an applicant may qualify by satisfying one of the following:

(1) earned a high school diploma, or its equivalent, worked as a paralegal and/or a paralegal educator in North Carolina for not less than 5000 hours during the five years prior to application, and, during the 12 months prior to application, completed three hours of continuing legal education in professional responsibility, as approved by the board;

(2) obtained and maintained at all times prior to application the designation Certified Legal Assistant (CLA)/Certified Paralegal (CP), PACE-Registered Paralegal (RP), or other national paralegal credential approved by the board and worked as a paralegal and /or a paralegal educator in North Carolina for not less than 2000 hours during the two years prior to application; or

(3) worked as a paralegal and/or a paralegal educator in North Carolina for not less than 2000 hours during the two years prior to application and fulfilled one of the following educational requirements:

(A) as set forth in Rule .0119(a)(1), or

(B) earned an associate’s or bachelor’s degree in any discipline from any institution of post-secondary education that is accredited by an accrediting body recognized by the United States Department of Education and successfully completed at least the equivalent of 18 semester credits at a qualified paralegal studies program, any portion of which credits may also satisfy the requirements for the associate’s or bachelor’s degree.

(c)(b) Notwithstanding an applicant’s satisfaction of the standards set forth in Rule .0119(a) or (b), no individual may be certified as a paralegal if:  

(d)(c) ...

(e)(d) Qualified Paralegal Studies Program. A qualified paralegal studies program is a program of paralegal or legal assistant studies that is an institutional member of the Southern Association of Colleges and Schools or other regional or national accrediting agency recognized by the United States Department of Education, and is either

(1) approved by the American Bar Association;

(2) an institutional member of the American Association for Paralegal Education; or

(3) offers at least the equivalent of 18 semester credits of coursework in paralegal studies as prescribed by the American Bar Association Guidelines for the Approval of Paralegal Education including the equivalent of one semester credit in legal ethics.

(f)(e) ...

Proposed Amendments to the Rules of Professional Conduct

27 N.C.A.C. 2, The Rules of Professional Conduct

Amendments to three Rules of Professional Conduct are proposed.

Proposed amendments to Rule 1.15, Safekeeping Property, specify that certain restrictions on the authority to sign trust account checks also apply to the initiation of electronic transfers from trust accounts. The proposed amendments define “electronic transfer” and make clear that lawyers are permitted to sign trust account checks using a “digital signature” as defined in the Code of Federal Regulations. In addition, a proposed new comment explains the due diligence required if a lawyer uses an intermediary (such as a bank, credit card processor, or litigation funding entity) to collect a fee.

The proposed comprehensive revision of Rule 3.5, Impartiality and Decorum of the Tribunal, improves the clarity of the rule overall and provides better guidance on the prohibition on ex parte communications with a judge.

The proposed amendments to Rule 5.4, Professional Independence of Lawyer, add an  exception to the prohibition on fee sharing and a new comment to the rule. The exception allows a lawyer to pay a portion of a legal fee to a credit card processor, group advertising provider, or online platform for hiring a lawyer if the business relationship will not interfere with the lawyer’s professional judgment. The proposed comment lists factors to be considered when evaluating whether a business relationship under this exception will interfere with the lawyer’s professional judgment.

Rule 1.15, Safekeeping Property

Rule 1.15-1, Definitions

(a)…

(e) “Electronic transfer” denotes a paperless transfer of funds.

[Re-lettering remaining paragraphs.]

 

Rule 1.15-2, General Rules

(a) …

(s) Signature on Trust Checks Check Signing and Electronic Transfer Authority.

(1) Every trust account check Checks drawn on a trust account must be signed by a lawyer, or by an employee who is not responsible for performing monthly or quarterly reconciliations and who is supervised by a lawyer. Prior to exercising signature authority, a lawyer or supervised employee shall take a one-hour trust account management continuing legal education (CLE) course approved by the State Bar for this purpose. The CLE course must be taken at least once for every law firm at which the lawyer or the supervised employee is given signature authority.

(2) Every electronic transfer from a trust account must be initiated by a lawyer, or by an employee who is not responsible for performing monthly or quarterly reconciliations and who is supervised by a lawyer.

(3) Prior to exercising signature or electronic transfer authority, a lawyer or supervised employee shall take a one-hour trust account management continuing legal education (CLE) course approved by the State Bar for this purpose. The CLE course must be taken at least once for every law firm at which the lawyer or the supervised employee is given signature or transfer authority.

(4) Trust account checks may not be signed using signature stamps, preprinted signature lines on checks, or electronic signatures other than “digital signatures” as defined in 21 CFR 11.3(b)(5).

(t) ...

 

Rule 1.15, Safekeeping Property

Comment to Rule 1.15 and All Subparts

[1] ….

Prepaid Legal Fees

[12] ….

[13] Client or third-party funds on occasion pass through, or are originated by, intermediaries before deposit to a trust or fiduciary account. Such intermediaries include banks, credit card processors, litigation funding entities, and online legal service platforms. A lawyer may use an intermediary to collect a fee. However, the lawyer may not participate in or facilitate the collection of a fee by an intermediary that is unreliable or untrustworthy. Therefore, the lawyer has an obligation to make a reasonable investigation into the reliability, stability, and viability of an intermediary to determine whether reasonable measures are being taken to segregate and safeguard client funds against loss or theft and, should such funds be lost, that the intermediary has the resources to compensate the client. Absent other indicia of fraud (such as the use of non-industry standard methods for collection of credit card information), a lawyer’s diligence obligation is satisfied if the intermediary collects client funds using a credit or debit card. Unearned fees, if collected by an intermediary, must be transferred to the lawyer’s designated trust or fiduciary account within a reasonable period of time so as to minimize the risk of loss while the funds are in the possession of another and to enable the collection of interest on the funds for the IOLTA program or the client as appropriate. See 27 N.C.A.C. 1B, Sect. .1300.

Abandoned Property

[13] [14] ...

[Renumbering remaining paragraphs.]

 

Rule 3.5 Impartiality and Decorum of the Tribunal

(a) A lawyer representing a party in a matter pending before a tribunal shall not:

(1) seek to influence a judge, juror, member of the jury venire prospective juror, or other official by means prohibited by law;

(2) communicate ex parte with a juror or member of the jury venire prospective juror except as permitted by law;

(3) unless authorized to do so by law or court order, communicate ex parte with the judge or other official regarding a matter pending before the judge or official; communicate ex parte with a judge or other official except:

(A) in the course of official proceedings;

(B) in writing, if a copy of the writing is furnished simultaneously to the opposing party;

(C) orally, upon adequate notice to opposing party; or

(D) as otherwise permitted by law;

(4) ...

(b) All restrictions imposed by this rule also apply to communications with, or investigations of, family members of the family of a juror or of a member of the jury venire prospective juror.

(c) A lawyer shall reveal promptly to the court improper conduct by a juror or a member of the jury venire, prospective juror, and improper conduct or by another person toward a juror, a member of the jury venire prospective juror or a member or the family members of a juror or of a member of the jury venire’s prospective juror’s family.

(d) For purposes of this rule:

(1) Ex parte communication means a communication on behalf of a party to a matter pending before a tribunal that occurs in the absence of an opposing party, without notice to that party, and outside the record.

(2) A matter is “pending” before a particular tribunal when that tribunal has been selected to determine the matter or when it is reasonably foreseeable that the tribunal will be so selected.

Comment

[1] ...

[2] To safeguard the impartiality that is essential to the judicial process, jurors and members of the jury venire prospective jurors should be protected against extraneous influences. When impartiality is present, public confidence in the judicial system is enhanced. There should be no extrajudicial communication with members of the jury venire prospective jurors prior to trial or with jurors during trial by or on behalf of a lawyer connected with the case. Furthermore, a lawyer who is not connected with the case should not communicate with a juror or a member of the jury venire prospective juror about the case.

[3] ...

[4] Vexatious or harassing investigations of jurors or members of the jury venireprospective jurors seriously impair the effectiveness of our jury system. For this reason, a lawyer or anyone on the lawyer’s behalf who conducts an investigation of jurors or members of the jury venire prospective jurors should act with circumspection and restraint.

[5] Communications with, or investigations of, members of the families of jurors or the families of members of the jury venireprospective jurors by a lawyer or by anyone on the lawyer’s behalf are subject to the restrictions imposed upon the lawyer with respect to the lawyer’s communications with, or investigations of, jurors or members of the jury venire prospective jurors.

 

Rule 5.4 Professional Independence of Lawyer

(a) A lawyer or law firm shall not share legal fees with a nonlawyer, except that:

(1) ...;

(4) ...; and

(5) ...; and

(6) a lawyer or law firm may pay a portion of a legal fee to a credit card processor, group advertising provider, or online platform for identifying and hiring a lawyer if the amount paid is for payment processing or for administrative or marketing services, and there is no interference with the lawyer’s independence of professional judgment or with the client-lawyer relationship.

(b) ...

Comment

[1] ...

[2] A determination under paragraph (a)(6) of this rule as to whether an advertising provider or online marketing platform for hiring a lawyer (jointly “platform”) will interfere with the professional independence of judgment of a lawyer requires consideration of a number of factors. These factors include, but are not limited to, the following: (a) the percentage of the fee or the amount the platform charges the lawyer; (b) the percentage of the fee or the amount that the lawyer receives from clients obtained through the platform; (c) representations made to prospective clients and to clients by the platform; (d) whether the platform communicates directly with clients and to what degree; and (e) the nature of the relationship between the lawyer and the platform. A relationship wherein the platform, rather than the lawyer, is in charge of communications with a client indicates interference with the lawyer’s professional judgment. The lawyer should have unfettered discretion as to whether to accept clients from the platform, the nature and extent of the legal services the lawyer provides to clients obtained through the platform, and whether to participate or continue participating in the platform. The lawyer may not permit the platform to direct or control the lawyer’s legal services and may not assist the platform to engage in the practice of law, in violation of Rule 5.5(a).

[2][3] ...

[Renumbering remaining paragraphs.]

Republication of Proposed Amendments to Rule 1.15-3

27 N.C.A.C. 2, The Rules of Professional Conduct

The version of the proposed amendments to Rule 1.15-3, a subpart of Rule 1.15, Safekeeping Property, that was published in the Summer 2017 edition of the Journal contained a substantive error. Therefore, a corrected version is published below. The proposed amendments reduce the number of quarterly reviews of fiduciary accounts that must be performed by lawyers who manage more than ten fiduciary accounts on the assumption that the accounts are managed in the same manner, and reviews of a random sample of the accounts is sufficient to facilitate the early detection of internal theft and correction of errors.

 

Rule 1.15-3 Records and Accountings

(a) Check Format.

...

(i) Reviews.

(1) ...

(2) Each quarter, for each general trust account, and dedicated trust account, and fiduciary account, the lawyer shall review the statement of costs and receipts, client ledger, and cancelled checks of a random sample of representative transactions completed during the quarter to verify that the disbursements were properly made. The transactions reviewed must involve multiple disbursements unless no such transactions are processed through the account, in which case a single disbursement is considered a transaction for the purpose of this paragraph. A sample of three representative transactions shall satisfy this requirement, but a larger sample may be advisable.

(3) Each quarter, for each fiduciary account, the lawyer shall engage in a review as described in Rule 1.15-3(i)(2); however, if the lawyer manages more than ten fiduciary accounts, the lawyer may perform reviews on a random sample of at least ten fiduciary accounts in lieu of performing reviews on all such accounts.

(3)(4) ...

[Renumbering remaining paragraphs.]

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