NC Legal Ethics Minute: Mobile Deposits and Online Trust Accounting
April 13, 2020
Whitney Waldenberg | Comments Off on NC Legal Ethics Minute: Mobile Deposits and Online Trust Accounting
April 3, 2020
The coronavirus pandemic and social distancing measures have
spurred many attorneys to explore remote work and videoconferencing, some for
the first time. These work style choices
have repercussions for the unwary. The
attorneys in our office are fielding many questions about how to remain ethical
For videoconferencing with colleagues, clients, opposing parties,
and even judges, some attorneys and other professionals are turning to
is a flexible, easy-to-use tool for videoconferencing that is available across
multiple computing platforms and operating systems, and it has become quite
popular in recent weeks. It supports
video as well as audio-only connections, and has useful options like allowing
screen sharing, whiteboarding, file transfers, and breakout rooms for different
participants (a nice option for mediators).
The bells and whistles combine to make Zoom very appealing in these challenging times. However, it’s important to know your technology and watch for potential compliance traps and pitfalls. For attorneys, there are risks of leaking attorney-client privileged or confidential information. For all professionals, there are security risks that can be disruptive to relationships and business.
For example, screen sharing can be useful, but we recommend
that you consider changing the default settings before scheduling a Zoom
meeting. The default allows all
participants to screen share. That means
anyone can share their screen with confidential, privileged, or even
inappropriate content. You can change
the default to allow screen sharing only for the conference host.
You should also review Zoom’s options for
password-protecting and locking your meetings to prevent uninvited guests, and for
removing unwanted or disruptive participants.
this recent article reports, Zoom meetings across the country are being
“crashed” by uninvited and unwelcome hijackers engaged in “Zoom
bombing.” It might sound
far-fetched, but it is happening and it only takes a few minutes to change your
settings and minimize the security risks.
Another important aspect of Zoom is that it collects a lot
of data during videoconferences, and it allows the host of the videoconference
to record and monitor more than the other participants might realize. For example, participants have the option of
sending private messages to each other during the meeting. If the host chooses to record a Zoom meeting
to his/her local drive and participates in a private chat with another
participant, then the private chat exchange will be saved to the minutes folder
for that meeting. If that minutes folder is not secured, then anyone with
access to that folder will see what should have been a private chat.
As we adjust to the new normal of remote work and
videoconferencing, it is inevitable that we’ll encounter these kinds of
challenges. Do your research, stay
abreast of the news, and use the available measures to control risk for
yourself and your clients as much as possible.
Unauthorized Practice of Law: Pitfalls for NC Attorneys and Out-of-State Law Firms
February 20, 2020
The more things change, the more they remain the same.
Recently, the ABA Section of Litigation published an article
discussing a 2018
ethics opinion of the Indiana Supreme Court Disciplinary Commission warning
its lawyers about the potential pitfalls in a trend of Indiana attorneys being
approached by nonlawyer companies or out-of-state law firms to establish an
ongoing affiliation for providing legal services in Indiana without registering
with the state bar. The Indiana
commission cautioned that such an affiliation can put the Indiana attorney at
risk of violating multiple ethics rules.
article noted similar warnings issued in other states.
In North Carolina, we have also seen an increase of this
activity and the accompanying allegations of unauthorized practice of law
[“UPL”]. Often, a national or
out-of-state law firm approaches a young or solo NC lawyer to be “of counsel”
to their firm so the firm can then provide legal services in NC.
The details vary, but the fundamentals are consistent. From a UPL standpoint, situations like this can
be a potential pitfall for both sides of the equation.
Under North Carolina law, even if it hires an NC lawyer to
handle NC cases, an out-of-state law firm looking to set up shop in NC must
register as an interstate law firm with the NC State Bar. As part of that registration, the NC lawyer
must certify to the State Bar that all professional services rendered to NC
citizens by the firm are only provided by a duly licensed active member of the
NC State Bar, and that other lawyers in the firm not licensed in NC will abide
by the NC Rules of Professional Conduct.
In addition to registering with the NC State Bar, the law firm will also
likely need a Certificate of Authority to transact business as a foreign
professional corporation from the NC Secretary of State’s office.
For the NC attorney, failure to follow the appropriate
procedure may result in a bar grievance for assisting in the unauthorized
practice of law in violation of the NC Rules of Professional Conduct, Rule 5.5(f). The attorney may also face potential civil
liability for assisting another person to commit the unauthorized practice of
The out-of-state law firm may also be exposed to potential
civil liability and action by the NC State Bar for engaging in the unauthorized
practice of law. The NC State Bar
Council and any of its committees appointed for that purpose (such as the
Authorized Practice Committee) have the authority to investigate UPL
allegations. Following such an
investigation, the State Bar may issue a warning letter, issue a cease and
desist letter, or seek an injunction to prohibit a person or business from
engaging in the unauthorized practice of law depending on the
There are also criminal law implications. District attorneys may investigate and
prosecute unauthorized practice of law as a misdemeanor criminal offense. Other more serious felony offenses, such as
false pretenses, could be involved where an unlicensed person accepts fees
while in engaging in the unauthorized practice of law.
The facts may change, but these laws have remained the
same. Know the potential pitfalls for both
the NC attorney and the out-of-state firm looking to practice in NC. Review and follow NC law and the procedures
outlined by the Administrative Rules of the State Bar, 27 N.C.A.C. Chapter 1E,
Section .0200. Under the right
circumstances, an arrangement like this can be ethical and beneficial to the NC
lawyer, to the interstate law firm, and to clients.
Dauna Bartley | Comments Off on Unauthorized Practice of Law: Pitfalls for NC Attorneys and Out-of-State Law Firms
For Peace of Mind – Part II
November 26, 2019
In our last blog, we talked about Policies and Procedures manuals and the
reasons it is important to have a manual for your firm – no matter the
size. This blog is going to focus on
another important aspect of policies and procedures – your remote workers
More and more firms (and, of course, other businesses) are giving
employees the flexibility of working from home.
In some cases, attorneys will work full time from their home offices. Along with all of the benefits of working
from home, there can be security concerns.
We need to make sure that we are guarding the confidentiality of our
clients just as carefully in these home office situations.
Below is a list of items you may want to consider including in your
remote worker policy:
Employee should have a dedicated workspace.
Computer provided by the firm, accessed by
assigned user only, credentials are never shared, and it is used for work only.
Computer should be locked when not in use and
should be password protected.
Malware/virus software should be maintained and
updated by the firm’s IT personnel.
Wi-Fi/Internet at home – high-speed connection
with ample signal strength and must be secured with WPA or greater encryption.
Laptops should not be accessed in off-site
locations utilizing public/open Wi-Fi connections. If the employee must work at an off-site location,
the employee should use his/her phone as a hot spot.
Laptop should be password protected, encrypted,
and kept safe and secure – preferably never left in the car. If laptop must be left in the car, it should
be put in the trunk or somewhere completely out of sight.
Any documents containing confidential,
privileged or other protected information that are printed at home need to be
No work documents should be accessed from any
When taking work-related phone calls at home (or
at any other location), employee should make certain no one can hear the
Clients should only be contacted using firm
email accounts. Gmail and other
web-based email accounts are not as secure.
Employees should email personal contacts using
only their personal email accounts.
Personal email accounts should not be integrated with the firm email
The above list is certainly not an exhaustive list but instead offers some
suggestions to get you started. We also advise our clients to institute cell
phone and e-security policies. We recommend working with your IT professional to
develop your own comprehensive remote worker and e-security policies.
Since statistics show that remote work is here to stay, it benefits us,
our clients, and our employees to have clear, specific guidelines in
Deanna Brocker | Comments Off on For Peace of Mind – Part II
For Peace of Mind
September 23, 2019
Many small firms or solo practices do not have a written Policies and Procedures Manual (“PPM”). When I ask, attorneys usually respond that it’s just a solo practice with just a couple of employees so they don’t think it is necessary. Some attorneys say they want to do it, but don’t know where to start. Others say they have been meaning to do it and haven’t gotten around to it. And still others can’t see the benefit in having one, as they have never needed it before.
There are very good reasons to create a PPM for your law firm, no matter what the size. First, as an owner of a business, if you are trying to practice law and remember everything you are supposed to do to run your business, something’s gotta give. In other words, tasks may fall through the cracks because your focus is on your clients. A conflict check may get skipped, you might forget some aspect of staff training, or you could miss preparing a trust account reconciliation report. The PPM creates a sort of “to do” list for reference, so you don’t have to remember everything.
Second, the Rules of Professional Conduct require that you have measures in place “giving reasonable assurance” that all lawyers and non-lawyer staff conform to the Rules of Professional Conduct. Rules 5.1 and 5.3. Having a PPM is a reasonable step to help ensure you and your staff are in compliance with the ethics rules.
Third, having a PPM would be good evidence, in a disciplinary proceeding, to show that you do have measures in place to help ensure compliance. While having a written PPM is not specifically required under the ethics rules, it can persuasive evidence of compliance in response to a grievance.
Fourth, it will save you time and money in the long run. As a business owner, you can expect staff changes on a regular basis. You may have had a paralegal or a firm administrator who has been working with you for 20 years, and who has institutional knowledge about how things work at the firm. But what if they suddenly leave? Having a document you can show new hires about how your firm works, and procedures already in place to ensure smooth sailing, will streamline training, saving you time and expense.
Fifth, because a PPM can also serve as your playbook for running your law firm, it can help preserve this institutional knowledge when a longtime employee leaves.
Importantly, any PPM should be a dynamic, not a static, document. As your firm changes, grows, or improves efficiency, you should modify your PPM accordingly. Some topics to address in any PPM include, but are not limited to:
New Client Intake Procedures
Communications with Clients
Record-Keeping; Maintaining Client Files
File Retention and Destruction
Escheatment of Unclaimed and Abandoned Property
Closure of Client File and Disengagement
Client Forms and Engagement Agreements
Time-keeping and Billing
Managing Calendars and Deadlines
Nonlawyer Staff Training and UPL
The PPM can be as detailed as you need, and may cover a variety of law practice management issues or best practices as well. If you want to put together a PPM, it may be as simple as opening a Word document. A good place to start is writing down how you manage (or how you want to manage) a client matter from the first phone call from a client, through intake procedures, engagement letters, staff assignment, billing and collections, trust accounting, communications about the status of the case, until final resolution of the case. Think about what you would want your staff to do in every case, without fail, and write it down. Think about what you want your staff to know and how best to impart that knowledge to each and every new hire.
We regularly assist clients in creating or modifying their PPMs. Know that creating a PPM will take some time and thought on the front end, and will require that you revisit it periodically. An effective PPM will never be finished, but having it should give you some peace of mind.
A consistent question I receive from practice owners and professionals is, “How do I keep good associates?” Lawyers and other professionals come and go, and no law firm or profession is immune from this trend. Young professionals seem to hop from firm to firm, or want to strike out on their own, once they get a bit of experience under their belt. When you are training new associates, ideally, you are training them to be experienced, self-reliant, and productive–in other words–the kind of professional that could leave your firm and start their own practice. The attributes that you want your associates to have are the same attributes that make them ready to practice on their own.
So, how do you keep good
attorneys or any employees for that matter?
There is no magic bullet or sure-fire way to retain talented employees,
but there are things that you can do, beyond paying a fair salary, to encourage
your employees to stay.
1) Open Communication and Teamwork – Let your associates
know that they can come to you with anything.
Foster an environment of open communication and working as a team. Make clear that they can come to you with concerns,
problems, or even if they make a mistake.
You can work together to find a solution.
2) Be a Mentor – In addition to imparting knowledge in your
field of practice, instill your own core values in your employees. Show them how you care about and value your
clients and your employees. Show, by example,
your values of honesty, trust, dedication, and perseverance, or whatever your
core values may be. You can also
encourage your associates to take on more responsibilities and try different
tasks. Then you can show them patience
and trust when working with them in these new areas.
3) Get Feedback – Ask your staff how you are doing as a boss
and listen to what they have to say.
Value their input, because they are part of a team. Then implement changes based upon their
input. If you foster an environment of
trust, employees will be more likely to share this kind of constructive
4) Create a Positive Environment – Again, this positive
environment starts with your positive outlook and attitude. Have a bit of fun or show your sense of humor. Show gratitude for and appreciation of your
employees. Bring in lunch or dessert
once a month. Celebrate employee
birthdays or work anniversaries. Engage in team building activities.
5) Talk about the Future – Many professionals are reluctant
to follow this advice, but it is important.
If you don’t share enough about what you see as the future of the firm,
and how that associate fits into that future, you will likely lose that employee
to a better offer or their willingness to risk starting their own practice. Don’t keep your staff wondering or guessing
about the future. Share your vision with
them and let them know you would like them to be a part of it.
Finally, it all starts with
hiring the right person, i.e., an associate who is a good fit for your firm. A
person who is solely interested in making a buck is not likely the person who
will stay and is not likely a person whom you would want to stay in your
firm. So, choose carefully.
Deanna Brocker | Comments Off on Retaining Good Employees — Begins with You
For the Civil Procedure Pocket of Your Utility Belt
July 30, 2019
I like to believe every attorney has an inner nerd who loves
to pick up cool procedural tips. Maybe
it’s just me. I squirrel them away
because you never know which procedural tidbit will become the difference
between winning and losing a case.
The North Carolina Court of Appeals recently issued a
published opinion that was a little gift to our inner nerds. It was a question of how a voluntary dismissal
without prejudice in another state, and expiration of the time to refile in that
state, affected a later suit on the same claim in North Carolina.
In Barefoot v. Rule, No. COA18-1160 (N.C. Ct. App. May 21,
2019), plaintiff Sheena Barefoot filed a personal injury claim in Tennessee on
June 28, 2016, against defendant Jacquelyn Patricia Rule. The claim arose out of an auto accident that occurred
in North Carolina on July 3, 2015, but both parties were Tennessee residents. The Tennessee statute of limitations for personal
injury claims is one year, while it is three years in North Carolina.
On November 16, 2016, the Tennessee trial court entered an
order granting Plaintiff Barefoot a voluntary dismissal without prejudice under
Tennessee’s rule 41.01, which is similar to North Carolina’s Rule 41(a)(1). Both rules permit re-filing within one year
after the first dismissal even if the limitations period has run on the original
After the statute of limitations ran in Tennessee for both
the original personal injury claim and the one-year period to re-file the
lawsuit, on April 5, 2018, Plaintiff Barefoot filed suit in North Carolina
alleging essentially the same claims.
Although her claim was barred in Tennessee, the statute of limitations
as to the original personal injury claim had not yet run in North Carolina.
In the North Carolina lawsuit, Defendant Rule argued the
claim was barred by the doctrine of res judicata because the plaintiff had
failed to re-file her action within the time allowed after her voluntary
dismissal in the Tennessee lawsuit. The
defendant argued the Tennessee dismissal had become a final judgment with res
judicata effect as to the suit in North Carolina. The trial court agreed and granted judgment
on the pleadings in favor of the defendant.
The Court of Appeals, however, disagreed. The issue at the core of the appeal, as the
Court saw it, was how a voluntary dismissal without prejudice operates between
The Court of Appeals reviewed both Tennessee and North
Carolina case law interpreting the effect of a voluntary dismissal without
prejudice. In both states, a voluntary
dismissal without prejudice returns the parties to their original positions, as
though the first suit had never been filed. This frees a plaintiff to switch from state
court to federal court or to switch from one state’s courts to another state’s
courts to file a new lawsuit, and the rules of the second court will govern the
In this case, after the plaintiff dismissed her lawsuit in
Tennessee, she was left exactly where she was before her Tennessee lawsuit
commenced – she was free to file her lawsuit in Tennessee or North Carolina as
an entirely new claim. The Court therefore
concluded the Tennessee dismissal order did not have res judicata effect as to
the lawsuit in North Carolina. The trial
court’s decision was reversed and the case remanded.
Stash this one away in the civil procedure pocket of your
litigation utility belt. You never know
when it might come in handy.
Dauna Bartley | Comments Off on For the Civil Procedure Pocket of Your Utility Belt
Take a Lawyer to Lunch
June 5, 2019
When I first began practicing law in North Carolina, one of my primary mentors told me about a strict policy he followed concerning filing sanction motions against an opposing attorney. His practice was to invite an opposing lawyer to lunch before potentially filing a motion for sanctions against that attorney. The primary reason for this procedure was to ensure that he had considered the position and other potential facts and circumstances from opposing counsel. It was essentially a private principle of professionalism to make sure he had the rest of the story, and potentially preserve an important professional relationship, before filing any pleading that explicitly or at least implicitly accused another lawyer of improper conduct.
In the many years since getting that
excellent advice, I have followed it consistently and fortunately have never
filed a motion for sanctions against an opposing attorney. However, I’ve also
expanded the principal to include other types of communications. For example, before sending a letter or email
to opposing counsel that might suggest some sort of improper conduct, I’ve
strived to speak with the attorney either in person or at least by phone. While I can’t say that this prevented me from
sending every adverse communication over the years, there have been many
instances where I was very glad that I reached out to make that personal
contact and, in many instances, never sent the letter, email or other
communication. In contrast, on the rare occasions
where I have sent that type of accusatory communication without making personal
contact, I typically regret it and wish that I had done so.
While this principle is not perfect,
I believe that if opposing lawyers would have more personal communications,
including going to lunch or some other meeting, there would be much less
acrimony and fewer unprofessional exchanges among lawyers. It is simply harder
to file pleadings and send other communications making allegations against an
attorney that you know personally. Additionally, understanding others’
positions and being empathetic is a critical part of being a successful
I strive to be like some of my
mentors, Ed Gaskins and Judge Franklin Dupree, who treated all lawyers and
everyone else involved in the legal and judicial process with respect and
professionalism. Taking a lawyer to lunch, or otherwise having direct personal
communication, before making any professional accusation is certainly a good way
Doug Brocker | Comments Off on Take a Lawyer to Lunch
May 21, 2019
Well, now I can say we’ve been audited by the State Bar! You may know that we called up Anne Parkin, the State Bar Auditor, and asked that our trust account be audited this quarter, since we weren’t lucky enough to be chosen randomly. The audit went very smoothly. Here are some takeaways:
Anne likes to see the quarterly reports being done on a monthly basis. When we showed her that we already did this, her eyes lit up.
She will look at all of your cancelled trust checks for the year, and will make sure the signatures are originals (no signature stamps), you have copies of the fronts and backs of all checks, the client matter name/number appears on the memo line, and the checks are the proper size.
She only reports consistent violations, not the occasional oversight, to the Office of Counsel.
If you have a large number of transactions in trust each month, Anne may pick a random transaction to review, and look at all of the supporting source documents (checks, deposit slips, receipts, wire transfer instructions) herself.
She reviews 12 months of records, including all source documents, starting with your current monthly reconciliation and going backwards.
For every audit she does, she prepares an audit report with a list of corrections, if any, and submits the report to the State Bar Trust Account Compliance Counsel for review.
According to Anne, things that will result in a referral to grievance include, consistent failure to reconcile (monthly or quarterly), very poor or woefully inadequate record keeping, a pattern of errors, especially where the errors are not documented and corrected within a quarter, and negative client balances that do not have sufficient explanation and have not been corrected within a quarter.
If Anne does note relatively minor errors/deficiencies in your record-keeping, she will prepare a Trust Corrections Request Form, noting the deficiencies. Then, you will be given 30 days to provide evidence of the correction to the State Bar Trust Account Compliance Counsel, Leanor Hodge.
If Anne finds no errors in her audit of your trust account, she will provide you a copy of her report, with the notation, “No follow up needed.” Woohoo, we passed! Although we were confident that we were following all the trust accounting rules, it is always nice when the State Bar agrees. We regularly assist attorneys in preparing for an upcoming trust audit, but it is a good idea not to wait until the State Bar comes knocking at your door. If your trust account needs a procedural check up, let us know. We’d be happy to take a look.
The Tenth Judicial District was the lucky district selected for the State Bar’s random attorney trust account audit program this quarter. But I didn’t feel lucky–our trust account wasn’t chosen. I decided that I would no longer stand on the sidelines while others had all the fun. So, I called up the State Bar Auditor, Anne Parkin, and asked her to please, please audit our trust account, too. She obliged.
Lost my mind, you say? No, no, there is a method to my madness (and no doubt, some at my firm would call me crazy). I have been advising attorneys about trust accounting issues for 25 years now, including 10 years at the State Bar. I have helped attorneys come into compliance, defended disciplinary matters dealing with trust account issues, helped them prepare the necessary trust reports for State Bar compliance counsel, and performed trust account mini-audits. But, although I know what goes on in a State Bar audit, I have never sat through one myself.
I think this will be a great learning opportunity for me and for the attorneys in my firm who will be advising attorneys on trust accounting. And, yes, I am looking forward to this. Not to worry, I will keep you posted on the outcome. All I can say for now is…bring it on, Anne!
Deanna Brocker | Comments Off on Voluntary Trust Account Audit