Certified Legal Manager (CLM) Legal Industry, Ethics, and Risk Management Flashcards

24 sample cards from the Legal Industry, Ethics, and Risk Management deck

Sampled from the end of the deck, so these are different cards from the ones shown on the syllabus page.

1. What is 'commingling' and why is it an ethics violation?

   Commingling is mixing client trust funds with the lawyer's own operating funds in the same account. It violates Rule 1.15 because it endangers client funds and obscures whether the lawyer has misappropriated them, even if no money is actually misused.

2. What is the difference between commingling and conversion (misappropriation) of trust funds?

   Commingling is improperly mixing client and lawyer funds; conversion/misappropriation is actually using client trust funds for the lawyer's own purposes—conversion is far more serious and frequently results in disbarment.

3. What is a 'three-way reconciliation' of a trust account?

   A monthly trust accounting control that reconciles three figures so they match: the adjusted bank statement balance, the trust account checkbook/ledger balance, and the total of all individual client ledger balances.

4. May a lawyer deposit earned fees into a client trust account? Why or why not?

   No. Earned fees belong to the lawyer and must be withdrawn promptly; leaving them in the trust account constitutes commingling. Only unearned fees, retainers, and client/third-party funds belong in trust.

5. What does ABA Model Rule 1.5 say about legal fees?

   A lawyer shall not charge an unreasonable fee or expense; reasonableness is judged by factors such as time/labor, novelty/difficulty, customary fees, amount involved/results, time limitations, nature of the relationship, and the lawyer's experience and reputation.

6. What are the special requirements for contingency fee agreements under Rule 1.5?

   They must be in writing, signed by the client, state the method of calculation (including the percentage at each stage and how expenses are deducted), and the lawyer must provide a written statement of the outcome and remittance at the end.

7. In what types of cases are contingency fees prohibited under the Model Rules?

   In domestic relations matters where the fee is contingent on securing a divorce or on the amount of alimony/support/property settlement, and in representing a defendant in a criminal case.

8. What is fee splitting and when is it permitted between lawyers in different firms?

   Sharing a fee between lawyers not in the same firm is allowed only if the division is proportional to services performed OR each lawyer assumes joint responsibility, the client agrees in writing, and the total fee is reasonable (Rule 1.5(e)).

9. What does ABA Model Rule 7.1 establish about lawyer advertising?

   A lawyer shall not make false or misleading communications about the lawyer or the lawyer's services—a communication is misleading if it contains a material misrepresentation or omits a fact needed to make it not materially misleading.

10. Under the Model Rules, what disclosure must lawyer advertisements include?

    Communications must include the name and contact information of at least one lawyer or firm responsible for the content (Rule 7.2(c)), and may not imply guaranteed results.

11. What does Rule 7.3 restrict regarding solicitation of clients?

    It prohibits live person-to-person solicitation (in-person, live phone, or real-time electronic) of prospective clients for the lawyer's pecuniary gain, with exceptions for other lawyers, family, close personal/prior professional relationships, and routine business contacts.

12. Generally, may a lawyer pay a non-lawyer for referring clients?

    No—Rule 7.2(b) generally prohibits giving anything of value for a recommendation, with narrow exceptions such as paying reasonable advertising costs, qualified lawyer referral service fees, reciprocal referral agreements (non-exclusive, disclosed), and nominal gifts of appreciation.

13. What is legal malpractice and what are its four required elements?

    Legal malpractice is professional negligence by an attorney. Elements: (1) duty (an attorney-client relationship), (2) breach (failure to meet the standard of care), (3) causation (the breach caused harm, often requiring 'case within a case' proof), and (4) damages (actual loss).

14. What is the 'case within a case' (suit within a suit) doctrine in legal malpractice?

    To prove causation and damages in a litigation malpractice claim, the plaintiff must show that but for the lawyer's negligence they would have won (or done better in) the underlying case—essentially trying the original case inside the malpractice suit.

15. What is the single most common cause of legal malpractice claims?

    Administrative/substantive errors led by missed deadlines and blown statutes of limitations (calendaring/docketing failures), along with failure to know or properly apply the law and failure to file documents.

16. What are the most common practice areas generating malpractice claims?

    Plaintiff's personal injury, real estate, family law, estate/trust/probate, and collection/bankruptcy work consistently generate the highest frequency of malpractice claims.

17. What is Lawyers' Professional Liability (LPL) insurance?

    Malpractice insurance that covers a firm's liability for negligent acts, errors, or omissions in rendering professional legal services, typically including defense costs; it is the legal industry's form of errors & omissions (E&O) coverage.

18. Why is most legal malpractice insurance written on a 'claims-made' basis, and what is the implication?

    Claims-made policies cover claims first made and reported during the policy period (not when the act occurred), so continuous coverage matters; a gap or non-renewal can leave past work uncovered unless 'tail' (extended reporting period) coverage is purchased.

19. What is 'tail coverage' (extended reporting period) in malpractice insurance?

    An endorsement to a claims-made policy that extends the time to report claims after the policy ends, covering claims made after cancellation/retirement for work done while the policy was active—critical when a firm dissolves or a lawyer retires.

20. What is the difference between 'occurrence' and 'claims-made' liability policies?

    Occurrence policies cover incidents that happen during the policy period regardless of when the claim is filed; claims-made policies cover claims reported during the policy period (subject to a retroactive date), regardless of when the underlying act occurred.

21. Name common loss-prevention practices firms use to reduce malpractice risk.

    Engagement and disengagement letters, robust conflict checking, docket/calendar systems with redundancy, client intake screening, clear scope-of-work documentation, file documentation, supervision of staff, and continuing legal education.

22. Why are engagement and non-engagement (declination) letters important for loss prevention?

    Engagement letters define the scope, fees, and parties to clarify duties and limit liability; non-engagement letters confirm that no attorney-client relationship was formed and warn of deadlines, preventing claims by prospective clients who assumed representation.

23. What is a corporate compliance program and what are its core components?

    A structured system to prevent, detect, and respond to legal/regulatory violations. Core components (per the U.S. Sentencing Guidelines): standards/procedures, high-level oversight, due care in delegation, training/communication, monitoring/auditing and reporting (e.g., hotlines), consistent enforcement, and response/remediation.

24. How can an effective compliance program benefit an organization facing prosecution under the U.S. Federal Sentencing Guidelines?

    Maintaining an effective compliance and ethics program can reduce an organization's culpability score, lowering potential fines, and may influence prosecutors' charging decisions (per DOJ guidance) and support deferred or non-prosecution agreements.

What this deck covers

Legal Industry, Ethics, and Risk Management flashcards FAQ