Proposed Rule Amendments

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. Please send a written response to L. Thomas Lunsford II, The North Carolina State Bar, PO Box 25908, Raleigh, NC 27611, or comments@ncbar.gov, by September 30, 2015.

 

Amendments Pending Approval by the Supreme Court

At its meetings on April 17, 2015, and July 17, 2015 (unless otherwise noted), the council of the North Carolina State Bar voted to adopt the following rule amendments for transmission to the North Carolina Supreme Court for approval (for the complete text of all proposed rule amendments see the Spring and Summer 2015 editions of the Journal unless otherwise indicated):

Proposed Rules to Create a Procedure for Permanent Relinquishment of Membership in the State Bar

27 N.C.A.C. 1A, Section .0300, Election and Succession of Officers; Section .0400, Duties of Officers

Proposed new rules create a procedure for relinquishing membership in the State Bar. The effect of relinquishment is the loss of all privileges of membership in the State Bar and, should the person desire to practice law in North Carolina again, the requirement that the person apply to the North Carolina Board of Law Examiners as if for the first time. To include the relinquishment rules in an appropriate location within Subchapter 1A of the State Bar rules, the rules currently in Section .0300, Election and Succession of Officers, are moved to the beginning of Section .0400, which is renamed “Election, Succession and Duties of Officers.” Section .0300 is renamed “Permanent Relinquishment of Membership in the State Bar,” and devoted to the proposed rules on permanent relinquishment.

Proposed Amendments to the Rules Governing the Training of Law Students

27 N.C.A.C. 1C, Section .0200, Rules Governing Practical Training of Law Students

The proposed rule amendments eliminate the requirement that supervising lawyers in a law school clinic be full-time faculty members. This allows law schools to employ, on a part-time basis, adjunct faculty to supervise students in a clinic.

Proposed Amendments to the Rule on Pro Bono Practice by Out–of-State Lawyers

27 N.C.A.C. 1D, Section .0900, Procedures for Administrative Committee

The proposed amendments allow an out-of-state lawyer employed by a nonprofit corporation rendering legal services to indigent persons to obtain pro bono practice status during the pendency of the lawyer’s application for admission to the North Carolina State Bar. In addition, the proposed amendments clarify that an out-of-state lawyer employed as in-house counsel for a business organization with offices in North Carolina may petition and qualify for pro bono practice status.

Proposed Amendments to the Rules of the Board of Legal Specialization

27 N.C.A.C. 1D, Section .1800, Hearing and Appeal Rules of the Board of Legal Specialization;

Section .1900, Rules Concerning the Accreditation of Continuing Legal Education for the Purposes of the Board of Legal Specialization

The proposed amendments to the specialization hearing and appeal rules explain that an “incomplete application” does not include an application with respect to which fewer than five completed peer review forms have been timely filed with the Board of Legal Specialization; increase the time an applicant has to review a failed examination after receiving notice of failure; and shorten the time an applicant has to file a petition for grade review.

The proposed amendments to the specialization CLE rules make the rules consistent with the general CLE accreditation rules by allowing an applicant for specialty certification or recertification to satisfy the CLE requirements by attending prerecorded, simultaneously broadcast, and online programs.

Proposed Amendments to Rule 5.6 of The Rules of Professional Conduct

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

The proposed amendments to Rule 5.6, Restrictions on Right to Practice, clarify that the prohibition on participation in a settlement agreement that restricts a lawyer’s right to practice applies to settlement agreements between private parties and the government, not just to agreements between private parties. A proposed amendment to the official comment explains that the prohibition does not apply to a plea agreement or other settlement of a criminal matter or to a disciplinary case in which the accused is a lawyer.

Proposed Amendments to the Rules of Professional Conduct

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

In the Spring 2014 edition of the Journal, proposed amendments to several Rules of Professional Conduct were published for comment. The amendments were proposed after study of the ABA Ethics 20/20 Commission’s recommended amendments to the ABA Model Rules of Professional Conduct in response to changes in technology and globalization. The proposed amendments to the North Carolina Rules included amendments to the titles of three rules. Unfortunately, the title amendments were not forwarded to the Supreme Court when the proposed rule amendments were sent to the Court for approval. Amendments to the text of the rules were approved by the Court on October 2, 2014. The following amendments to rule titles are now pending approval of the Court:

Rule 5.3, Responsibilities Regarding Nonlawyer Assistants Assistance

Rule 5.5, Unauthorized Practice of Law; Multijurisdictional Practice of Law

Rule 7.3, Direct Contact with Potential Solicitation of Clients

For the complete text of the related amendments to the Rules of Professional Conduct, see the Spring 2014 edition of the Journal or visit the State Bar website.

Proposed Amendments
Below are the rule amendments from the most recent meeting of the State Bar Council in July 2015.


Proposed Amendments to the Rules Governing the Board of Law Examiners

27 N.C.A.C. 1C, Section .0100, Board of Law Examiners

 

Proposed amendments to Rule .0101, Election, are recommended by the North Carolina Board of Law Examiners to modernize the outdated rule and to conform  provisions of the rule to current practice in regard to the appointment of members of the board.

 

Proposed amendments to Rule .0105, Approval of Law Schools, are recommended by the Board of Law Examiners to eliminate the experience requirement from the rule.  The rule was amended last year to allow a graduate of a non-ABA accredited law school to be considered for admission to the State Bar if the graduate was previously admitted to the bar of another jurisdiction and remained in good standing with that bar for ten years.

 

.0101 Election

 

(a) At the first meeting of the council, it shall elect as members of the Board of Law Examiners, two members of the State Bar to serve for a term of one year from July 1, 1933; and two members of the State Bar to serve for a term of two years from July 1, 1933; and two members of the State Bar to serve for a term of three years from July 1, 1933. The council, at its regular meeting, in April of each year, beginning in 1934, shall elect two members of the Board of Law Examiners to take office on the 1st day of July of the year in which they are elected, and such members shall serve for a term of three years or until their successors are elected and qualified. Beginning with the year 1935 and every third year thereafter the council shall elect three members for a term of three years or until their successors are elected and qualified.  The Board of Law Examiners shall consist of 11 members. The members are elected for three-year terms to serve until expiration of the term, resignation, death, or other cause for termination of members’ service.

 

(b) No member of the council shall be a member of the Board of Law Examiners, and no member of the Board of Law Examiners shall be a member of the council.  The council, in making appointments to the Board of Law Examiners, shall make appointments for no more than four consecutive three-year  terms, not counting any partial term which may have previously been served.

 

(c) The council shall elect board members for three-year terms at its annual meeting in October, with the term of service to begin on the following January 1. Election of a board member to complete an unexpired term shall be conducted at the next meeting of the council following the termination of service by the member and the giving of notice of the vacancy.

 

(d) When vacancies occur for the Board of Law Examiners, notice shall be published in the official publication of the North Carolina State Bar giving the date by which any person desiring to make a suggestion for someone to be considered as a possible member of the Board of Law Examiners must submit the name to the North Carolina State Bar.

 

(e) In the selection process for an appointment to the Board of Law Examiners, the council may consult with current members of the Board of Law Examiners and consider factors such as geography, practice area, gender, and racial diversity.

 

(f) No member of the council shall be a member of the Board of Law Examiners.

 

(g) Any former Board of Law Examiners member being considered for appointment as emeritus member shall have served on the Board of Law Examiners for not less than five years.


.0105 Approval of Law Schools

 

Every applicant for admission to the NC State Bar must meet the requirements set out in at least one of the numbered paragraphs below:

 

(1)...

 

(4) The applicant holds an LL.B. or JD degree from a law school that was approved for licensure purposes in another state of the United States or the District of Columbia, and was licensed in such state or district and, at the time of the application for admission to the North Carolina State Bar, has been an active member in good standing of the Bar in that state or District for the 10 years immediately preceding the application.


Proposed Amendments to the Rules on Reinstatement from Inactive Status and Administrative Suspension

27 N.C.A.C. 1D, Section .0900, Procedures for Administrative Committee

 

Proposed amendments to the rules on reinstatement from inactive status and administrative suspension eliminate from the CLE requirements for reinstatement the condition that 5 of the 12 CLE credit hours required for each year of inactive or suspended status must be earned by taking practical skills courses.  Sponsors and the Board of CLE do not designate courses as practical skills courses; therefore, it is difficult for petitioners for reinstatement to identify courses that will satisfy this requirement. 

 

.0902 Reinstatement from Inactive Status

 

(a) Eligibility to Apply for Reinstatement.

...

 

(c) Requirements for Reinstatement.

 

(1) Completion of Petition.
...

 

(4) Additional CLE Requirements.

If more than 1 year has elapsed between the date of the entry of the order transferring the member to inactive status and the date that the petition is filed, the member must complete 12 hours of approved CLE for each year that the member was inactive up to a maximum of 7 years. The CLE hours must be completed within 2 years prior to filing the petition. For each 12-hour increment, 6 hours may be taken online; and 2 hours must be earned by attending courses in the areas of professional responsibility and/or professionalism; and 5 hours must be earned by attending courses determined to be practical skills courses by the Board of Continuing Legal Education or its designee. If during the period of inactivity the member complied with mandatory CLE requirements of another state where the member is licensed, those CLE credit hours may be applied to the requirements under this provision without regard to whether they were taken during the 2 years prior to filing the petition.

 

(5) Bar Exam Requirement If Inactive 7 or More Years.

...

 

(d) Service of Reinstatement Petition.

...

 

.0904 Reinstatement from Suspension

 

(a) Compliance Within 30 Days of Service of Suspension Order.

...

 

(d) Requirements for Reinstatement.

 

(1) Completion of Petition.

 

...

(3) Additional CLE Requirements

If more than 1 year has elapsed between the effective date of the suspension order and the date upon which the reinstatement petition is filed, the member must complete 12 hours of approved CLE for each year that the member was suspended up to a maximum of 7 years. The CLE must be completed within 2 years prior to filing the petition. For each 12-hour increment, 6 hours may be taken online; and 2 hours must be earned by attending courses in the areas of professional responsibility and/or professionalism; and 5 hours must be earned by attending courses determined to be practical skills courses by the Board of Continuing Legal Education or its designee. If during the period of suspension the member complied with mandatory CLE requirements of another state where the member is licensed, those CLE credit hours may be applied to the requirements under this provision without regard to whether they were taken during the 2 years prior to filing the petition.

(4) Bar Exam Requirement If Suspended 7 or More Years.
...

 

(e) Procedure for Review of Reinstatement Petition.

...

 

 


Proposed Amendments to the Rules and Regulations Governing the Administration of the CLE Program

27 N.C.A.C. 1D, Section .1500, Rules Governing the Administration of the Continuing Legal Education Program; Section .1600, Regulations Governing the Administration of  the Continuing Legal Education Program

 

Proposed amendment to Rule .1517, Exemptions, clarifies that the exemption from CLE requirements for members who teach law-related courses at professional schools has reference only to graduate level courses. 

 

Proposed amendments to Rule .1513, Fiscal Responsibility, and Rule .1606, Fees, increase the CLE credit hour fee (the attendee or sponsor fee) from $3 to $3.50 per hour of approved credit and allocated the additional $0.50/credit hour to the North Carolina Equal Access to Justice Commission to support the administration of the activities of the commission.  The effective date of the amendments will be January 1, 2016.

 

.1517 Exemptions

 

(a) Notification of Board.

...

 

(e) Law Teachers. An exemption from the requirements of these rules shall be given to any active member who does not practice in North Carolina or represent North Carolina clients on matters governed by North Carolina law and who is:

 

(1) …

 

(3) A full-time teacher of law-related courses at a graduate level professional school accredited by its respective professional accrediting agency. 

 

(f) Special Circumstances Exemptions.

...

 

.1513 Fiscal Responsibility

 

All funds of the board shall be considered funds of the North Carolina State Bar and shall be administered and disbursed accordingly.

 

(a) Maintenance of Accounts:

 

...

 

(d) All revenues resulting from the CLE program, including fees received from attendees and sponsors, late filing penalties, late compliance fees, reinstatement fees, and interest on a reserve fund shall be applied first to the expense of administration of the CLE program including an adequate reserve fund; provided, however, that a portion of each sponsor or attendee fee, in an amount to be determined by the council but not to exceed $1.00 for each credit hour, shall be paid to the Chief Justice’s Commission on Professionalism and to the North Carolina Equal Access to Justice Commission for administration of the activities of the commission these commissions.  Excess funds may be expended by the council on lawyer competency programs approved by the council.

 

.1606 Fees

 

(a) Sponsor Fee - The sponsor fee, a charge paid directly by the sponsor, shall be paid by all sponsors of approved activities presented in North Carolina and by accredited sponsors located in North Carolina for approved activities wherever presented, except that no sponsor fee is required where approved activities are offered without charge to attendees. In any other instance, payment of the fee by the sponsor is optional. The amount of the fee, per approved CLE hour per active member of the North Carolina State Bar in attendance, is $3.00 $3.50. This amount shall be allocated as follows: $1.25 to the Board of Continuing Legal Education to administer the CLE program; $1.00 to the Chief Justice’s Commission on Professionalism; $.050 $1.00 to the North Carolina Equal Access to Justice Commission; and $0.25 to the State Bar to administer the funds distributed to the commissions. The fee is computed as shown in the following formula and example which assumes a 6-hour course attended by 100 North Carolina lawyers seeking CLE credit:

 

Fee: $3.00 $3.50 x Total Approved CLE Hours (6) x Number of NC Attendees (100) = Total Sponsor Fee ($1800 $2100.00)

 

(b) Attendee Fee - The attendee fee is paid by the North Carolina attorney who requests credit for a program for which no sponsor fee was paid. An attorney will be invoiced for any attendees fees owed following the submission of the attorney’s annual report form pursuant to Rule .1522(a) of this subchapter.  Payment shall be remitted within 30 (thirty) days of the date of the invoice.  The amount of the fee, per approved CLE hour for which the attorney claims credit, is $3.00 $3.50. This amount shall be allocated as follows: $1.25 to the Board of Continuing Legal Education to administer the CLE program; $1.00 to the Chief Justice’s Commission on Professionalism; $.050 $1.00 to the North Carolina Equal Access to Justice Commission; and $0.25 to the State Bar to administer the funds distributed to the commissions.

 

It is computed as shown in the following formula and example which assumes that the attorney attended an activity approved for 3 hours of CLE credit:

 

Fee: $3.00 $3.50 x Total Approved CLE hours (3.0) = Total Attendee Fee ($9.00 $10.50)

 

(c) Fee Review - The board will review the level of the fee at least annually and adjust it as necessary to maintain adequate finances for prudent operation of the board in a nonprofit manner. The council shall annually review the assessments for the Chief Justice’s Commission on Professionalism and the North Carolina Equal Access to Justice Commission and adjust them as necessary to maintain adequate finances for the operation of the commissions.

 

(d) Uniform Application and Financial Responsibility –

...


Proposed Amendments to the Rules on Certification of Paralegals

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

 

Proposed amendments to the standards for certification of paralegals add the disciplinary suspension or revocation of an occupational or professional (nonlegal) license and the unauthorized practice of law to the list of conduct that may be considered by the board when determining whether an applicant is honest, trustworthy, and fit to be certified as a paralegal.

 

.0119 Standards for Certification of Paralegals

 

(a) To qualify for certification as a paralegal, an applicant must ….

 

(b) Alternative Qualification Period.

...

 

(c) 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:

 

(1) the individual’s certification or license as a paralegal in any state is under suspension or revocation;

 

(2) the individual’s license to practice law in any state is under suspension or revocation;

 

(3) the individual has been

 

(A) was convicted of a criminal act that reflects adversely on the individual’s honesty, trustworthiness, or fitness as a paralegal,; or

 

(B) has engaged in conduct involving dishonesty, fraud, deceit, or misrepresentation,;

 

(C) engaged in the unauthorized practice of law; or

 

(D) has had a nonlegal state or federal occupational or professional license suspended or revoked for misconduct; Provided however, the board may certify an applicant whose application discloses conduct described in Rule .0119(c)(3) if, after consideration of mitigating factors, including remorse, reformation of character, and the passage of time, the board determines that the individual is honest, trustworthy, and fit to be a certified paralegal; or

 

(4) the individual is not a legal resident of the United States.

 

(d) ...

 


Proposed Amendments to the Rules on Trust Accounting in the Rules of Professional Conduct

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

 

In the Spring and Summer 2015 editions of the Journal, proposed amendments to Rule 1.15, Safekeeping Property (and its subparts, Rule 1.15-1, Rule 1.15-2, and Rule 1.15-3) and to Rule 8.5, Misconduct, were published.  The amendments are proposed primarily to add requirements that will facilitate the early detection of internal theft and errors.  A new subpart, Rule 1.15-4, Trust Account Management in Multiple-Lawyer Firm, creates a procedure whereby a firm with two or more lawyers may designate a firm principal to serve as the “trust account oversight officer” to oversee the administration of the firm’s general trust accounts in conformity with the requirements of Rule 1.15. 

 

In response to comments received after publication, additional amendments are proposed to adjust the recordkeeping requirements to accommodate “paperless” work environments.  The proposed amendments permit a lawyer to create and maintain records electronically without any immediate printing requirements as long as the records otherwise comply with Rule 1.15-3.  The proposed amendments also permit the use of secure, digitally encrypted, electronic signatures on reconciliation reports and reviews.

 

Only the paragraphs of Rule 1.15-3, Records and Accountings, that contain additional proposed amendments are published below.  Although no changes to the text of proposed new Rule 1.15-4 are proposed, a proposed new title for the rule appears below.  For the text of all proposed amendments to Rule 1.15 and its subparts see the Spring and Summer 2015 editions of the Journal.

 

Rule 1.15-3 Records and Accountings

 

(a) Check Format...

 

(b) Minimum Records for Accounts at Banks. The minimum records required for general trust accounts, dedicated trust accounts, and fiduciary accounts maintained at a bank shall consist of the following:

 

(1) ...;

 

(2) all cancelled checks or other items drawn on the account, or printed digital images thereof furnished by the bank, showing the amount, date, and recipient of the disbursement, and, in the case of a general trust account, the client name, file number, or other identifying information of the client from whose client balance against which each item is drawn, provided, that:...

 

(d) Reconciliations of General Trust Accounts.

 

(1) Quarterly Reconciliations. At least quarterly, the individual client balances shown on the ledger of a general trust account must be totaled and reconciled with the current bank statement balance for the trust account as a whole. For each general trust account, a printed reconciliation report shall be prepared at least quarterly. Each reconciliation report shall show all of the following balances and verify that they are identical:

 

(A)  The balance that appears in the general ledger as of the reporting date;

 

(B) The total of all subsidiary ledger balances in the general trust account, determined by listing and totaling the positive balances in the individual client ledgers and the administrative ledger maintained for servicing the account, as of the reporting date; and

 

(C)  The adjusted bank balance, determined by adding outstanding deposits and other credits to the ending balance in the monthly bank statement and subtracting outstanding checks and other deductions from the balance in the monthly statement.

 

(2) Monthly Reconciliations.

...

 

(3) The lawyer shall review, sign, date, and retain a printed copy of the reconciliations of the general trust account for a period of six years in accordance with Rule 1.15-3(g).

 

(e) Accountings for Trust Funds.

...

 

(i) Reviews.

 

(1) Each month, for each general trust account, dedicated trust account, and fiduciary account, the lawyer shall review the bank statement and cancelled checks for the month covered by the bank statement.

 

(2) Each quarter, for each general trust account, 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) The lawyer shall take the necessary steps to investigate, identify, and resolve within ten days any discrepancies discovered during the monthly and quarterly reviews.

 

(4) A report of each monthly and quarterly review, including a description of the review, the transactions sampled, and any remedial action taken, shall be prepared. The lawyer shall sign, date, and retain a copy of the report and associated documentation for a period of six years in accordance with Rule 1.15-3(g).

 

(j) Retention of Records in Electronic Format.

 

Records required by Rule 1.15-3 may be created, updated, and maintained electronically, provided

 

(1) the records otherwise comply with Rule 1.15-3, to wit: electronically created reconciliations and reviews that are not printed must be reviewed by the lawyer and electronically signed using a “digital signature” as defined in 21 CFR 11.3(b)(5); 

 

(2) printed and electronic copies of the records in industry-standard formats can be made on demand; and

 

(3) the records are regularly backed up by an appropriate storage device.

 

Rule 1.15-4 Trust Account Management in Multiple-Lawyer Firm Alternative Trust Account Management Procedure for Multi-Member Firm

 

(a)...

 

Comment [following Rule 1.15-4]

 

[1] ...

 

Responsibility for Records and Accountings

 

[17] The rules permit the retention of records in electronic form.  A storage device is appropriate for backing up electronic records if it reasonably assures that the records will be recoverable despite the failure or destruction of the original storage device on which the records are stored. For storage methods not solely under the control of the lawyer, see 2011 FEO 6.

[17][18] ...

 

[Renumbering remaining paragraphs.]

 

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