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Ch. 9 Important Malpractice Traps

Ch. 9 Important Malpractice Traps. Client Relations Errors (17% 1995; 14% 2003; 11% 2007): steadily downward trend: lawyers getting better “Top Ten Traps” See, fn. 3, p. 289 (1995, 2003 & 2007 studies). A. Client Relations Errors. Ineffective Screening:

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Ch. 9 Important Malpractice Traps

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  1. Ch. 9 Important Malpractice Traps Client Relations Errors (17% 1995; 14% 2003; 11% 2007): steadily downward trend: lawyers getting better “Top Ten Traps” See, fn. 3, p. 289 (1995, 2003 & 2007 studies)

  2. A. Client Relations Errors • Ineffective Screening: Avoid “difficult clients” (trust gut instinct; consistently use standard office-wide screening procedures). U.S.: lawyers are not public utility; no “cab rank rule.” Corollary: discretionary right to w/d, but must comply w/ standards (e.g., advance notice to cl.; leave of ct required if in litigation) See generally RPC 1.16. “1st to fire”

  3. A. Client Relations Errors • Client Communication & Failure to Keep Clients Reasonably Informed (& Duty to Follow Lawful Instructions w/in Scope of Authority) N.B. Both fiduciary and ethical duty. See Rstmt LGL §§20-23, RPC 1.2, 1.4 Breakdown in communications/respect often basis for C bringing LM claim (accord, med mal), file grievance

  4. B. Conflicts of Interest (COI) pp.293-96 Failure to recognize, analyze and deal properly with a conflict is high risk malpractice trap. ABA Standing Committee on Prof’l Liability: 6.28 % (2003); 5.31% (2007). 1995-2003: 66.6% increase Texas Lawyers’ Insurance Exchange (TLIE), Jett Hanna: 16.4% all claims filed; 22.5% all losses (1996-2007) Harris Poll: most significant error or omission in largest claims v. firms w/ ≥35 Lawyers (1996); Richmond/ALAS accord; 20% losses > $20M involve COI(1980-2010)

  5. COI give disgruntled C’s/former C’s “wild card” Played to: Avoid paying outstanding bill; seek fee forfeiture; move for disqualification; bring legal malpractice claim Potential consequences: m/b basis for excluding coverage; if carrier pays for loss > premium surcharges; fee forfeiture (Burrow v. Arce, pp. 112-16) ; discipline; ct-imposed sanctions; loss of clients; firm splits; bad reputation among L’s & C base

  6. Current Reports • In re Marriage of Newton (Ill. App. 6/30/11)(initial consult w/ H as prospective C tainted representation of W; both DQ and complete fee forfeiture in representing W) • Spence v. Wingate (S.C. 10/17/11)(L who formerly advised W about disposition of dying H’s probate estate owed continuing fiduciary duty not to adversely affect her interest in H’s life ins., when L later became attorney for estate)

  7. LM for COI Evans v. Baker & McKenzie, Joel Held (Dallas Sr. Counsel)(10/2010, Miss.)(multi-million dollar verdict) P claimed firm concurrently represented him & partner in oil-rig drilling business; P unaware that partner insolvent & used P’s assets to get millions in loans. Further alleged firm secretly drafted docs creating subsidiaries in P’s name, but controlled by partner. When accounting showed partner’s insolvency, P tried to dissolve busn., firm represented partner, devising “a litigation strategy to bring [P] to his knees.”

  8. 2. Analyzing COI, where “consentable” how to obtain “informed consent” (IC) • Rstmt §§ 121-135 similar to RPC 1.7-1.13. Concepts of informed consent & nonconsentable conflicts • §121 a COI is present if “…a substantial risk that L’s representation of the C would be materially & adversely affected by the L’s own interests or by the L’s duties to another current C, a former C, or a third person”

  9. 2. Analyzing COI, evaluating whether “consentable” conflict Suni: “The key is whether the L’s exercise of independent prof’l judgment is likely to be unduly influenced by other interests….[A]sk yourself…[b/c of that] interest, am I likely to do or be tempted to do something different from what a truly independent L [w/o such interest] …would do in the same circumstances? (text at 297-98) See also, RPC 1.7 Cmts 8, 14-15, 18; RPC 1.0(e) defines informed consent.

  10. 3. Practical Issues Re Written Disclosure & Informed Consent RPC 1.7 COI: Current Clients • concurrent COI if (1) representation of 2 C’s “directly adverse” or (2) signif risk that repre’n of 1 or more Cs will be “mat’ly ltd by L’s responsibilities to another C, a former C” or T/P or a psnl int. of L. • If COI per (a), L/firm may represent if L rsnbly believes it is consentable per (1-3) and (4) each affected C gives informed consent, confirmed in wrtg. See text p. 303, Hazard & Hodes on disclosure

  11. Who is the Client? (for purpose of COI analysis) Suni, text p. 298 Who is it I am representing? “Accommodation clients” Rstmt §§122 cmt. d, 132 cmt. i. Have I actually undertaken representation, or am I dealing with a prospective C? Is the C an individual, or the entity for which that individual works? Is it the insured or ins. co. paying the bill? Am I representing one party to the transaction, both parties, or the entity they are forming?

  12. Prob. 9-1 Know Your Conflicts & ClientsC retained you to evaluate LM claim pp.302-03 • Who was M&M’s Client (Chassen or Tyson)? How to determine? If both, was there COI between? Consentable? • What possible LM claims? • Relevant questions/information in evaluating possible LM? • Risk prevention steps firm might have taken?

  13. COI: Estate Planning Problem H&W marry in 1980s; 2d marriage for both; H has 3 children & substantial busn. assets. W has 2 children & minimal assets. 0 children born of this marriage. 1999-2005: H executed various estate planning devices, including trust & will. General theme: Homestead to W (joint tenancy by entireties, right of survivorship); $25K specific devise to each of H’s 6 grandchildren; trust income to W for life, R to H’s 3 children per stirpes.

  14. COI: Estate Planning Problem 2006: H&W go to Lawyer, estate planner, who created documents fulfilling their agreement (mere scrivener?) Simplified: • LLP: proceeds from sale of H’s busn., homestead. Lawyer as manager; each of 5 children get 20% interest. W has LE in homestead, R to LLP. • Trust (H Settlor & T’ee): all other H assets, on H’s death distribution to H’s 3 children

  15. COI: 2008 H dies, estate administration 1. Distribution of trust corpus to H’s children (0 income for W) 2. Homestead: W only has life estate, not fee simple interest. Q: what’s wrong with this picture?

  16. Does W have c/a for LM v. L? RPC 1.7(a)(2) current COI, significant risk L’s representation of W mat’ly ltd by L’s responsibilities to H. Is this a consentable conflict? (RPC 1.7(b)(1) & Cmt. 15: only if L RSNBLY believes that L will be able to provide competent & diligent repre’n to each client) Analysis? 1.7(b)(4) Did L obtain informed consent from H & W, confirmed in writing?

  17. COI: Estate Planning Problem Rstmt Analysis §§121-22 accord: §121 “substantial risk” L’s repre’n of W “would be materially & adversely affected by L’s … duties to another current C (H) Cmts. c. (adverse effect on quality of repre’n; likelihood of subst’l risk; evaluate using objective std, on facts & circumstances L knew/shd have known when undertook repre’n)

  18. COI: Estate Planning Problem Rstmt §122(2) N/w/stdg IC of ea. affected C, L m/n represent if [i.e., its nonconsentable], (c) in the circumstances, it is not reasonably likely that the L will be able to provide adequate representation to one or more of the clients. (similar to 1.7(b)(1)) Rstmt §130 (current COI, nonlitigated matter; substantively similar to 122) cmt. c. illus. 2?

  19. Bottom line, under both Rstmt & RPC L didn’t see obvious conflict, didn’t attempt to obtain H&W informed consent. Even if L had done so, any consent would be ineffective because it was nonconsentable. Reason: no reasonably competent L could believe it possible to represent both H & W in this estate planning b/c their interests were so diverse. W clueless that the estate plan deprived her of all rights of survivorship to homestead & no life estate in trust income, limited right to corpus. (as is common in joint estate plan).

  20. Widow v. Lawyer Breaches of fiduciary duty: impermissible COI between W, H & L, adversely affected repre’n of W, deprived of relevant info needed to protect her interests. Harm: left w/ almost nothing after 20+ marriage. Proximate cause + but for Damages: what would her rights have been if H died intestate? Probable rights if she had been competently represented by independent counsel?

  21. 4. Advance Waivers pp. 304-06 RPC 1.7 Cmt 22 might allow, under limited circumstances. Anthony Davis, on ABA F. Op. 05-436: general, open-ended advance waiver usually ineffective. But advance waiver w/o fresh IC, m/b effective if: 1) rsnbly informed about potential risks if future conflict arises; 2) C is sophisticated consumer of legal services; 3) C actually consulted independent counsel about advisability of signing future waiver.

  22. C. Litigation Errors pp. 306-26 ABA 2003 study: 44% all claims Most in πp.i. (2003: 19.96%; 2007: 21.56% Δp.i. (2003: 9.96%; 2007 2.93%!) Reason: so many judgment calls, strategic & tactical decisions, often made with little time to deliberate, research, confer w/ C. (Hence, Rstmt §§20-23). B/c adversary benefits from raising technical defects on appeal, C learns about. LM claims akin to “Monday morning quarterbacking”; C dissatisfied w/ outcome says L “shoulda, coulda” done differently

  23. 1. Missed Litigation Deadlines # 1 of Top 10 Malpractice Traps (ABA Desk Guide, 1999) 2003 ABA Study: now 16% of claims arise from untimely commencement of action (prima facie evidence of negligence). 2007: 7.44% fail. to calendar properly; 3.75% fail. to react to calendar; 10.73% fail. to file doc. where 0 deadline. Many other litigation deadlines w/ major impact on outcome Malpractice Carriers: annual application requires description of calendar/docketing system, including cross-check or dual control, ultimate responsibility of L handling matter.

  24. 1. Missed Deadlines 3 types of errors: Failure to calendar accurate deadline Ignorance or misinterpretation of correct deadline Failure to file in accordance w/ correctly calendared deadline

  25. 1. Missed DeadlinesThar, “Ways not to Blow S. of L” pp. 308-10 -Calculate immediately, while considering whether to undertake matter (ltd research duty?) -THINK & CONFIRM you correctly determined applicable s. of l. (foreign jurisdiction – confirm w/ local counsel); RESEARCH -VERIFY date of incident from independent source, PLAN AHEAD -- never wait til last day! -Multiple calendaring system w/ >1 person tracking

  26. 1. Missed DeadlinesThar, “Ways not to Blow S. of L” -Avoid 11th hour clients (e.g., Geary; 10/25 cert. w/drawn, improvidently granted) -**Calendar matters where you receive referral fee (remember, joint responsibility) -Periodic tickler dates to remind well in advance -Don’t procrastinate!!! Plan ahead & do what’s necessary before filing, including pro hac vice application. “Virtual nullity doctrine” -Law practice management: routinely send letters of non-engagement & termination when work complete.

  27. 2. Appellate Malpractice • Evaluate scope of retainer; retained only for trial, not appeal? If so, preserve record for appeal, written reminder to C re deadline for filing, retain appellate counsel. • If retained for whole case, tend to details preserving appeal: in trial, make record objections, take exception; preserve record for appeal; evaluate & discuss w/ C whether viable appealable issues; file timely notice of appeal/perfection; timely file record for appeal; post any required bond; timely file all briefs

  28. 2. Appellate Malpractice • Rstmt §§ 21-23 Authority Reserved to C (both civil & criminal): whether to settle or appeal; • Authority Reserved to L: refuse unlawful assistance; compliance with applicable law, orders of tribunal • Joint decisions, after consultation: selecting which non-frivolous issues to raise on appeal

  29. Appellate Malpractice pp. 311-13 • Mistakes in handling all aspects of appeal • Failure to file timely appeal • Failure to raise important issue needed for reversal (vs. professional judgment call, selection of best issues to raise on appeal) • Practical reality: difficulties in showing “but for” & “proximate cause”; appellate analogue to “case within a case” > limits risk of appellate malpractice liability.

  30. Questions, p. 313 • S/ retained only for trial. What should you do after unsuccessful outcome to avoid risk of appellate malpractice? • Confirm that written retainer states such limited scope representation • Written confirmation again at end of trial; need new L; remind of upcoming deadlines, possible grounds for appeal.

  31. Questions, p. 313 • s/ trial L refers C to appellate L; risk management steps? Avoid negligent referral risks (3 names, current objective information about each, stress that C choice)

  32. Questions, p. 313 • S/ Retained for appeal; discover LM by trial L. Legal & ethical duties to C? - carefully evaluate; can appeal correct earier error? - disclose to C? - refer to LM L? Recent cases where trial counsel’s mistakes foreclosed successor counsel’s options: 1st L liable but successor not.

  33. Questions, p. 313 4. Normative question: should proximate cause in appellate LM be Q of law for court, or Q of fact that can be decided by jury w/ aid of EW? • Maj.: Q of law made by Judges, as trained legal minds. • Min. (N.M.): jury can decide, aided by EW testimony, predicting outcome of hypothetical appeal, based on preponderance of evidence.

  34. 3. The Exercise of Judgment in Litigation pp. 314-15 “judgmental immunity” (long history now eroding; thought to protect v. L’s errors on strategic & tactical decisions). Some jurisdictions treat as affirmative defense. M/b proximate cause obstacles. Fla. “predicate” for LM defense: L 1) exercised informed judgment; 2) d/n ignore applicable statutes, court procedures or established legal principles; 3) must inform C of KNOWN PENDING resolution of unsettled legal propositions. Prob. 9-2, p. 314: Which of listed “failures” may be protected by judgmental immunity?

  35. 4. Settlement Errors: Many possible types pp. 315-16 • Not consider settlement; lose at trial Leflar v. Cooper • Recommend C accept inadequate settlement • Draft or approve release of rights that should have been reserved • Force C to settle for cheap, to cover up L’s serious litigation errors (negl., failure to resch, investigate, conduct discovery) • Falsely claim matter settled to hide L’s errors; L pretends payment from D • Not communicate settlement offer Missouri v. Frye • C fires L for cause, successor L recommends bad settlement b/c of 1st L’s errors.

  36. 4. Settlement Errors pp. 315-26 Traditional view: Muhammad v. Strassburger, 587 A.2d 1346 (Pa. 1991)(former C m/n bring LM v. former L where underlying matter settled, unless L knowingly committed LM and then fraudulently induced C to settle) i.e., settlement usually insulates L from LM risk. N.B. *Ziegelheim v. Apollo (N.J. 1992)(cited in Thomas at p. 322) began change of tide (despite pro-settlement policy, C entitled to competent legal advice about whether to accept or reject settlement offer)

  37. 4. Settlement Errors Thomas v. Bethea (Md. Ct. App. 1998) pp. 316-25 Facts: L sued 3 slum landlords for lead poisoning of Minor (M); recommended C settle v. 2 for $2500. Never served 3d landlord. Broad form release executed by Mom relinquished claims v. all 3, tho $0 from 3d landlord who made material misrepresentation of fact, had ample insurance . M (now adult) sued L for LM (negligently persuaded Mom to accept grossly inadequate settlement) Tr. Ct: special verdict, $125K; tr. ct. JNOV for D L.

  38. Thomas v. Bethea Issue: whether Md. Ct. App. Should adopt Prande (Ct. of Spec. App.)(allowing LM for negligent recommendation to settle, using heightened std: no rsnbleatty who rsnbly investigated f’s & law would have recommended this settlement) ? Holding: Yes, following strong trend of other state ctsthat treat nego’n & settlement same as other prof’lnegl., where rec’dn is product of negl. & C can prove harm. (Muhammad now distinct minority view)

  39. Thomas v. Bethea Rationale: General policy favoring settlements shd not insulate L’s from liab. where 1) L’s deficient representation forced C to accept unrsnbly low settlement or 2) L’s deficient investig’n into facts & law resulted in L significantly undervaluing settlement value. @320-21 Damages: Difference btwn settlement amount and likely recovery from adjudication. (avoids guesswork on reasonable settlement value)

  40. Contrast Thomas (Md. ‘98)and Muhammad (Pa. ‘91) Policy considerations for & against allowing LM where C settled underlying claim? -encourage settlements; efficiency; finality (Q: does non-mutual collateral estoppel bar?) -fairness to C, right to competent representation -incentives & disincentives for lawyers Q: on balance, as matter of policy, prefer minority view (Muhammad) or new majority view (Thomas)?

  41. Measure of Damages for “Wrongful Settlement”? Difficulties in proving “case w/in case” for such claims. Possibilities: • Difference between actual settlement and what a reasonable settlement would have been? Too speculative? How prove? (Thomas jury found settlement value v. unserved D was $25K, but fixed dmges @ $125K; trial ctJNOV b/c no ev. on rsnble settlement value.) • Difference between actual settlement and probable recovery at trial of underlying matter.

  42. Problem 9-3 Inadequate Settlements p. 326 Wrongful death action filed against County w/in 2 year general statute of limitations, but after expiration of shorter limitations period for actions against governmental entities. County moved for summary judgment on limitations grounds. Estate administrator settled for $10K (probable cost to county of litigating summary judgment). Should C/administrator have LM c/a vs. L?

  43. D. Business Transactions with Clients • Fraught with danger; if does not work well, to client’s satisfaction, C often looks to L as guarantor. • Jurors see & condemn L’s who engage in self-dealing, prefer own interests over that of C. • That said, why do so many lawyers engage in business transactions with clients?

  44. Rstmt §126 C/L Business Transactions Generally prohibits business or financial transactions w/ C, NOT involving delivery of legal services UNLESS • C has adequate information about the terms of transaction & risks presented by L’s involvement in it; • Terms & circumstances of transaction are fair & reasonable TO THE C; • C gives informed consent to consentable conflict involving L’s role in transaction after encouraged to seek & given rsnble opportunity to seek independent legal advice about transaction. (incorporates §122)

  45. 2. Fee arrangements • When agreed at outset, before C/L relationship begins, generally treated as arms-length transaction. Scrutinize only under RPC 1.5(a) (prohibiting unreasonable fees or expenses; open-ended list of factors bearing on reasonableness). • If fee dispute between L & C, cts may use K principles to construe ambiguous language v. L, as drafter (contra proferentem); or shift BOP to L that fee fair & reasonable to C.

  46. 2. Fee Arrangements • Non-traditional fee arrangements, e.g. in which L takes ownership or security interest in C property, or stock: closely scrutinized as L/C business transaction. E.g., L helped C obtain financing for holographic baseball card, took % interest in venture as “finder’s fee.” Ct set aside.

  47. 2. Fee Arrangements • Reminder: RPC 1.5 (c) Requires that contingent fee agreements be in signed writing, state method by which fee is determined including % accruing if resolved by settlement, at trial or appeal, and whether expenses for which C is responsible are calculated before (fairer to C) or after determining % fee. On conclusion, L must provide written disbursal statement.

  48. 2. b. Modifying Fee Agreements pp. 332-41 Rstmt LGL §18 (re C/L Ks concerning the rela’shp) • any K or modification “made beyond a reasonable time after the L has begun to represent the C in matter, the C may avoid it unless the L shows that the K and the circumstances of its formation were fair and reasonable to the C; and • if K after Ls services complete, C may avoid if not informed of facts needed to evaluate appropriateness of L’s compensation or other benefits that K gives the L.

  49. 2. b. Modifying Fee Agreements, Richmond Excerpt S/1: Complex tax matter, seeking large refund from state. Firm regularly billed & was paid > $120K using standard hourly rate & customary expenses. Superb outcome: $7 M refund. Q: may firm retroactively charge 10% premium where fee agreement contained language “to render a fair and reasonable bill”?

  50. S/1 Beatty v. NP Corp., 581 N.E. 2d 1311 (Mass. App. Ct. 1991) H: ambiguous language construed against drafter (contra proferentem); firm’s “subjective & unexpressed expectations” could not refute objective agreement to charge by hour. Q: To avoid this outcome, how should original engagement letter read? (see pp. 336-37)

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