R. Regul. Fl. Bar 7-1.4

As amended through November 4, 2024

Rule 7-1.4 - DEFINITIONS

For this chapter these terms have the following meanings:

(a) Claimant. "Claimant" means a person or entity that has filed a claim with The Florida Bar for a grant of monetary relief from the fund based on a claim that the person or entity has suffered a reimbursable loss.

(b) The Bar. "The bar" means The Florida Bar.

(c) The Board. "The board" means the board of governors of The Florida Bar.

(d) The Committee. The "committee" means the Clients' Security Fund Committee, a standing committee of the bar.

(e) The Fund. "The fund" means the Clients' Security Fund of The Florida Bar.

(f) Reimbursable Loss. "Reimbursable loss" means an actual loss suffered by a claimant by misappropriation, embezzlement, or other wrongful taking or conversion of money or other property by a member of The Florida Bar when acting:

(1) as a lawyer;

(2) in a fiduciary capacity customary to the practice of law as a lawyer for the claimant and related to the representation of the claimant as the claimant's lawyer;

(3) as an escrow holder or other fiduciary having been designated as such by a client in the matter in which the loss arose or having been so appointed or selected as the result of a lawyer and client relationship;

(4) as a lawyer within a law firm of the member of The Florida Bar who was hired by the claimant to provide the legal service; or

(5) as the claimant's lawyer where a nonlawyer employee commits the misappropriation, embezzlement, or other wrongful taking or conversion.

(g) CSF Contribution. "CSF Contribution" means the total amount of the annual membership fee allocated to the fund as determined each fiscal year.

(h) Fee Claim. "Fee claim" means a reimbursable loss based on fees paid to a member of The Florida Bar for services to be rendered.

(i) Misappropriation Claim. "Misappropriation claim" means a reimbursable loss for misappropriation, embezzlement, or other wrongful taking or conversion of money or other property by a member of The Florida Bar.

R. Regul. Fl. Bar 7-1.4

Amended July 23, 1992, effective 1/1/1993 (605 So.2d 252); Amended May 29, 2009 by the Board of Governors of The Florida Bar, effective 7/1/2009; amended May 28, 2010, by the Board of Governors of The Florida Bar, effective 7/1/2010; amended 7/27/2012 by the Board of Governors of The Florida Bar, effective 7/27/2012; amended and effective 3/29/2019 by the Board of Governors of The Florida Bar; amended March 3, 2022, effective 5/2/2022 (SC20-1467). Amended and effective 12/2/2022 by The Florida Bar Board of Governors.

Comment

Rule 7-1.4 is the definitional section of the Clients' Security Fund rules. Subdivision (f) defines what is a reimbursable loss. If a claim does not fall within the definition of a reimbursable loss, a claim cannot be paid.

Central to the definition of a reimbursable loss is the existence of a lawyer-client relationship. If the lawyer was not acting in the capacity of a lawyer, the loss is not reimbursable. For this reason, subdivision (f)(2) states that the lawyer must be acting in a fiduciary capacity customary to the practice of law. This requires that but for the fact that the individual was a lawyer, the individual would not have been acting in the fiduciary capacity. For instance, if the lawyer is appointed by the court to act as personal representative, the relationship would be customary to the practice of law and the loss reimbursable. On the other hand, if an individual is acting in a capacity unrelated to a lawyer-client relationship where that person's status as a lawyer is not material to the claim, the loss would not be reimbursable. For example, if the lawyer was acting as a financial advisor or was involved in a business transaction outside of the lawyer-client relationship, even if there otherwise is a lawyer-client relationship between the claimant and the lawyer, the loss would not be reimbursed by the fund.

As noted in the Rules of Professional Conduct, when a client contracts for legal services, the client establishes a relationship not only with the individual lawyer but may also establish a relationship with the law firm. Subdivision (f)(4) recognizes this. As a result, for purposes of determining whether the claimed loss is a reimbursable loss, it is assumed that the relationship is with both the individual lawyer and the law firm. Therefore, if a client enters into a lawyer-client relationship with lawyer A but another lawyer in the law firm commits the misappropriation, embezzlement, or other wrongful taking or conversion of money or other property, the claim may be considered a reimbursable loss. All other prerequisites to payment apply to the claim and will be considered in analyzing the claim and recommending denial or payment. This includes, but is not limited to, the requirement that the defalcating lawyer no longer be a member in good standing. However, it is not required that the lawyer the claimant hired, lawyer A, be disciplined or no longer be in good standing as lawyer A may be innocent of any ethical wrongdoing not having taken part in the theft. Failure to consider such a loss a reimbursable loss will unjustly penalize the claimant and subject lawyer A to discipline for theft by others over whom the lawyer has no control.

Subdivision (f)(5) creates an exception for the requirement that a lawyer-client relationship exist if the theft is by a nonlawyer employee of the lawyer or law firm. As noted above, the claimant has hired the lawyer or law firm and should not be penalized for theft by a nonlawyer employee of the firm over whom The Florida Bar does not have disciplinary jurisdiction. Consequently, if the theft is by a nonlawyer employee, the claim may be considered a reimbursable loss and analyzed as provided elsewhere in this chapter.