Mich. Client Protection Fund Rule 7

• As used in these Rules, "dishonest conduct" means wrongful acts committed by a lawyer, including, but not limited to:

• Failing to refund unearned fees as required by Rule 1.16 of the Michigan Rule of Professional Conduct (MRPC), including failure to return an excessive fee as determined under MRPC 1.5, or the failure to safeguard funds and fees paid and unearned in an appropriate trust account pursuant to MRPC 1.15 during the lawyer’s lifetime so that excessive or unearned fees may be refunded upon the lawyer’s death.

• Theft or embezzlement of money or the wrongful taking or conversion of property that came into the possession of the lawyer as the result of a lawyer-client or other fiduciary relationship related to the practice of law.

• Borrowing money from a client without the intent to repay it or with disregard of the lawyer’s reasonably anticipated inability to repay it.

• Receiving funds or property from a client to invest the funds or property where:

• The lawyer knew the client(s) had funds to invest because of information acquired through a lawyer-client relationship regardless of whether there was an ongoing or existing lawyer-client relationship at the time of the investment, and

• The lawyer possessed a higher degree of sophistication and knowledge than the client or where there is a historical relationship of trust and reliance on the lawyer by the client, and

• The investment vehicle or project:

• did not exist, or

• the actual nature and characteristics of the investment vehicle or project differed substantially from the representations made to the client regarding the investment vehicle or project, or

• the disbursement was made directly to the lawyer, friend, relative of the lawyer, or an entity controlled by either, where the investment vehicle or project could reasonably be viewed as a non-legitimate investment vehicle or project under the totality of the facts.

• To be eligible for reimbursement from the Fund:

• The loss must have arisen out of a lawyer-client or other fiduciary relationship related to the practice of law.

• At the time of the dishonest conduct, the lawyer was admitted or licensed to practice law in Michigan or was suspended or disbarred less than six months prior to the dishonest conduct. If the lawyer was suspended or disbarred more than six months prior, the claim shall be denied unless the client demonstrates a reasonable belief that the lawyer was licensed to practice law at the time of the dishonest conduct.

• The loss must have arisen from the lawyer’s practice of law in Michigan. In making this determination, the Committee may consider all relevant factors including, but not limited to, the parties’ domiciles, the location of the lawyer’s office, the location where the attorney-client relationship was formed, the location where legal services were rendered, and the jurisdiction in which the matter is pending.

• The dishonest conduct stated in the claim must either have been reported to the Attorney Grievance Commission or a law enforcement authority or the subject of a lawsuit filed in any court or tribunal having jurisdiction, within two years after the dishonest act occurred, or, if the dishonest act could not then have reasonably been discovered, within six months after the dishonest conduct was discovered or reasonably should have been discovered, whichever is later. Or within one year of notice of respondent’s death.

• A claimant must report an otherwise eligible claim over $20,000 to a law enforcement authority before the claim will be considered by the SBM. The SBM has discretion to require any claimant to report the dishonest conduct to a law enforcement authority before a claim is considered.

• Claimants do not have to wait for a determination by the Attorney Grievance Commission, Attorney Disciplinary Board, law enforcement authority, or a court to file a claim with the Fund. A claim must be filed with the Fund no later than one (1) year after a determination by the Attorney Grievance Commission and/or Attorney Discipline Board related to the dishonest conduct alleged in the claim.

• The SBM may require the claimant to seek reimbursement from any other source that may be legally responsible for the loss before payment of an approved claim.

• Except as provided in these rules, the Fund does not reimburse:

• consequential or incidental damages such as lost interest, attorney's fees, or other costs incurred in seeking recovery of a loss.

• losses arising from malpractice or inadequate, insufficient, or negligent rendition of services.

• claims based on a dispute regarding the correctness or applicability of the attorney fees invoiced.

• losses incurred by a spouse, child, parent, grandparent, sibling, heir, partner, associate, employer, or employee of the lawyer responsible for the loss.

• losses covered by any bond, banker’s blanket bond, surety agreement, or insurance contract to the extent covered, including any loss to which any bonding agent, surety or insurer is subrogated, to the extent of that subrogated interest.

• losses incurred by any business entity controlled by the lawyer.

• losses incurred by any governmental entity or agency.

• money paid directly to an individual who is not the lawyer or a company that is not the lawyer’s law firm, such as fees paid to a court, fees paid to a different attorney, statutory interest and costs awarded in a lawsuit filed against the lawyer, or wages for missed work time.

• current or future values.

• money due to a third-party other than the payor where the claimant receives no benefit from the reimbursement.

• attorney fees for services rendered or to be rendered, unless:

• there was a failure to refund unearned legal fees.

• the fee was unreasonable in light of the work performed under the factors set forth in MRPC 1.5 or SBM Ethics Opinions regarding attorney's fees.

• the lawyer settled a case without the knowledge and authorization of the client and misappropriated the settlement proceeds. In such instances the Committee may, in its discretion, find that attorney fees are waived by the lawyer if it is determined that the lawyer: 1) settled the matter without claimant’s permission, 2) did not inform claimant of the settlement, and 3) misappropriated the settlement proceeds. In all other matters, the lawyer shall receive credit for any attorney fees earned that are not deemed excessive.