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A Lawyer’s Duty to Self-Report?

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Years ago, when I was on the ethics staff at the State Bar, I used to get the question, “Am I required to self-report conduct?” I still get that question from time to time when lawyers call me for advice.  Here’s the skinny.  There are two instances where the Rules of Professional Conduct require that you self-report your conduct, and they both have to do with handling trust funds for clients.  First, you have a duty to self-report under Rule 1.15-2(p) if you know or reasonably believe that trust funds have been misappropriated or misapplied.  The term “misapplied” is not defined in the Rules, but it appears from the context that it involves the use of client funds for a wrongful or inappropriate purpose.  Second, the Rule indicates that if an unintentional or inadvertent error results in the “use of one client’s trust funds to pay the obligations of another client, the event must be reported unless the misapplication is discovered and rectified on or before the next quarterly reconciliation required by Rule 1.15-3(d)(1).” So, if you discover an error in your trust account reconciliation resulting in a negative balance for a client, but you fix it within a quarter (e.g., replacing the funds), you are not required to report that error to the State Bar.  If you don’t correct it, you must self-report. Comment [26] makes clear that this rule requires a lawyer to self-report, even if the disclosure of confidential information is necessary to comply with the Rule.  The appropriate person at the State Bar to self-report to is the Trust Account Compliance Counsel (TACC).

Let’s contrast Rule 1.15-2(p) with Rule 8.3, which is generally known as the reporting rule.  Rule 8.3 provides that a lawyer “who knows another lawyer has committed a violation of the Rules of Professional Conduct that raises a substantial question as to that lawyer’s honesty, trustworthiness or fitness as a lawyer in other respects, shall inform the North Carolina State Bar or the court having jurisdiction over the matter.”  This Rule, unlike Rule 1.15-2(p), does not require disclosure of information otherwise protected by Rule 1.6.  That means if a client insists that the information required to make the report remain confidential, you cannot report it. The Comment does say that a lawyer should encourage his or her client to allow the lawyer to report, if it would not harm the client to do so. Rule 8.3, by its very terms, applies only to the report of another lawyer.  It is not a self-reporting rule.

It is up to you whether you self-report conduct other than what is required under Rule 1.15-2(p).  If you do decide to self-report to the State Bar, understand that if you disclose conduct that would constitute a violation of the Rules of Professional Conduct, no matter how minor, the State Bar must open a grievance file and investigate the matter.