Formerly Admitted Attorneys as Fiduciaries

The Pennsylvania Supreme Court has adopted new ethics rules and disciplinary rules intended to address the problem of misappropriation of client and third-party funds, generally effective in 60 days.  In re: Amendments to the Pennsylvania Rules of Professional Conduct and the Pennsylvania Rules of Disciplinary Enforcement, 45 Pa.B. 279 (1/17/2015), D.R. No. 132 (12/30/2014) (with text of amendments in Annex A and Annex B).  Public notice of the amendments was provided by publication of “Proposed Amendments to the Pennsylvania Rules of Professional Conduct and the Rules of Disciplinary Enforcement to Reduce Loss Resulting from the Misappropriation of Client and Third Party Funds,” 44 Pa.B. 6070 (9/27/2014).

I (and others) had submitted comments to the Disciplinary Board objecting to proposed amendments to Enforcement Rule 217 that would require every “formerly admitted attorney” to resign from all fiduciary positions, even if the attorney was merely retiring from practice or moving out of the jurisdiction and so assuming inactive status.  As actually amended, Enforcement Rule 217(d)(3) will require fiduciary resignations by attorneys who are disbarred, suspended for more than one year, suspended under Rule 208(f) (emergency suspensions) or 213(g) (enforcement of subpoenas), or inactive due to disability.

The new Note to Rule 217(d)(3) states that the amended rule does not prevent a retired or inactive attorney from serving as a fiduciary, but a formerly admitted attorney serving as a fiduciary or accepting a fiduciary appointment must still give notice in accordance with Rule 217(c)(1) to persons to whom a fiduciary is owed, as well as “supervising judges and courts” and “other recipients of the formerly admitted attorney’s fiduciary services” so that interested parties will have “an opportunity to consider replacing the formerly admitted attorney.”

The reference in the Note to attorneys on retired status is puzzling because Rule 219(i) states that Rule 217 generally does not apply to attorneys who have applied for, and received, a transfer to retired status.  It is therefore not clear whether the Note negates Rule 219(i) and retired attorneys are not required to comply with Rule 217(a), (b), and (c), or whether the reference in the Note to retired status was a mistake and Rule 217 continues to be inapplicable to attorneys on retired status.

If Rule 219(i) continues to make Rule 217 inapplicable to attorneys on retired status, then there is the additional question of why attorneys on inactive status (to which Rule 217 clearly applies) should be treated so differently from attorneys on retired status.

The order adopting the amendments states that the amendments to Rule 217(c) and (d) and the Note after Rule 217(d)(3) shall apply to persons who are formerly admitted attorneys on the effective date of the order and to persons becoming formerly admitted attorneys on or after the effective date of the order.    So, every lawyer who is currently inactive who is serving as a fiduciary must give the notices required by Rule 217(c)(1) regardless of when the lawyer became inactive.  Whether notices under Rule 217(c)(1) are required of attorneys on retired status is not clear, for reasons explained above.

[Note:  This article was updated on 1/13/2015 to include references to the conflict between Rule 219(i) and the note to Rule 217(d)(3).  Also updated on 1/19/2015 to include citation and link to the publication of the amendments in the Pennsylvania Bulletin.]

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