News
State Bar Ethics Committee Report: April 2025
Below are the most pressing items addressed at the latest Ethics Committee meeting of the State Bar. I am including links to the proposed amendments and opinions, which also include the address and email address to provide comments if you choose to do so. Feedback is open until June 20.
Proposed Rules Amendments Open for Comment Until June 20, 2025
27 N.C.A.C. 1D, Section .1500, Rules Governing Continuing Legal Education Program: Requirement that CLE sponsors (not lawyers) provide approval applications for all online programs (not just on-demand programs).
27 N.C.A.C. 1B, Section .0100, Rules Governing Discipline and Disability of Attorneys: Continuing to implement the suggestions of the State Bar Grievance Review Committee, this proposal would prevent complainants from receiving notice when attorneys receive private discipline or warning. Instead, such a complainant would be informed that the matter “has been resolved privately, either by dismissal, deferral, or private action.” This is intended to prevent complainants from publicizing discipline that is intended to be private.
27 N.C.A.C. 1C, Section .0200, Rules Governing Practical Training of Law Students: Allows and sets forth the requirements for law school graduates with pending licensure applications to engage in limited supervised practice.
27 N.C.A.C. 1D, Section .1400, Rules Governing the Administration of the Client Security Fund of the North Carolina State Bar: The proposal makes several changes to the Client Security Fund (CSF). Notably, it allows the CSF to receive funds from attorney trust accounts frozen due to trust account violations, where it cannot be determined to whom the funds properly belong. In addition, CSF would be allowed to reimburse claimants who sustain losses due to mismanagement that does not necessarily rise to the level of dishonesty, and in cases in which attorneys accept fees but fail to perform services.
27 N.C.A.C. 02, Section .0100, Rules of Professional Conduct: Replaces references to the position Trust Account Compliance Counsel, as that position has been eliminated. References are now to the Trust Account Compliance Department.
Proposed Ethics Opinions Open for Comment Until June 20, 2025
Proposed 2025 Formal Ethics Opinion 2, Negotiating Licensure Reporting Capability During Mediation: The proposed opinion addresses seven (7) separate inquiries, all related to the primary issue of negotiating limitations during mediation on the ability of a lawyer or party to report unethical conduct. The primary focus of the opinion is that it is unethical for an attorney to condition a settlement on barring someone from reporting misconduct, and it is similarly unethical for the mediator to participate in the negotiation of such a settlement term (because to do so would be facilitating unethical behavior by the party attorneys). If the parties did not reach a settlement at mediation but did discuss the grievance ban provision in the presence of the mediator, and the mediator then learns that an agreement was later reached including such a provision, the mediator would not be required to report the lawyers if such a disclosure would violate the mediator’s obligation to keep information obtained at mediation confidential under the North Carolina Supreme Court Standards of Professional Conduct for Mediators. However, in order to avoid assisting the lawyers in committing unethical behavior, the mediator should consider actions such as informing the lawyers that their conduct is unethical, providing a copy of the subject ethics opinion, encouraging the lawyers to contact the Bar for ethics advice, or withdrawing from the mediation.
Proposed 2025 Formal Ethics Opinion 3, Client Consent to Annual Rate Increase: The proposed opinion addresses five (5) separate inquiries related to attorneys increasing their rates during the course of representation. An attorney may not unilaterally increase rates without communicating the same to the client “before or within a reasonable time after commencing the representation.” See Rule 1.5(b). The inclusion of a provision in the fee agreement allowing unlimited unilateral rate increases without additional notice to the client does not satisfy this obligation. Accordingly, a lawyer cannot immediately withdraw based upon a client’s refusal to pay unilateral rate increases without sufficient notice. The lawyer could avoid this problem by providing the client with reasonable advance notice – such as thirty days’ notice – prior to the rate increase becoming effective. If the client is sufficiently informed and does not object, the lawyer may infer consent. Similarly, the lawyer could avoid these difficulties by drafting a fee agreement which limits the amount and timing of rate increases (such as no more than 3% and not more often than annually), because this would satisfy the communication requirement of Rule 1.5(a). Although additional advance notice is not required, it would still be best practice. Throughout the proposed opinion, it is also noted that any rate increases are subject to the prohibition on clearly excessive fees.
