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INSIGHT: Legal Malpractice—Reducing Your Law Firm’s Exposure

Dec. 2, 2019, 9:00 AM

Over the years, legal malpractice claims have significantly evolved and changed—and the risks to your firm have increased correspondingly. We’ve seen changes in the nature of claimants and the quality of plaintiffs’ lawyers bringing these claims, changes in the types of claims being asserted, and changes in the way cases are litigated and defended.

The following are tips for reducing your firm’s risk.

Check Your Consumer Protection Statute Liability

Nearly every state now has a mini-FTC consumer protection statute that broadly prohibits “unfair or deceptive” trade practices. Those statutes are very attractive to plaintiffs’ lawyers.

In addition to the murky standard of liability, they typically provide for an automatic award of attorneys’ fees if the plaintiff prevails, and include the possibility of recovering multiple damages. Some statutes have more generous statutes of limitations than those governing conventional malpractice claims.

Law firms should check their insurance policies and make sure there isn’t an exclusion for statutory consumer protection claims. Many policies also contain exclusions for “fines or penalties” —and some jurisdictions take the view that multiple damages under consumer protection laws are akin to punitive damages and may fall within such an exclusion.

These statutes often come into play when something has gone wrong in the representation—the lawyer missed a patent filing deadline or failed to record a mortgage—and the lawyer attempts to “fix” the problem without promptly informing the client. Then, when the “fix” proves ineffective, the client sues and alleges that the lawyer didn’t simply make a mistake, but also deceived the client.

To the fullest extent possible, try to foster a culture in which lawyers reach out for advice from the firm’s general counsel sooner rather than later if they think they may have made a mistake. General counsel can decide whether the firm has a conflict and what may need to be disclosed to the client in order to minimize the firm’s exposure to a consumer protection claim.

Consider Arbitration

Large law firms are increasingly writing mandatory arbitration clauses into their standard engagement letters. Arbitration in malpractice cases has some obvious advantages. It is private and can produce a faster and potentially less expensive resolution.

Arbitration rules from the American Arbitration Association and JAMS now contain provisions allowing for dispositive motions and have optional appellate procedures. If you like the advantages of arbitration, you should consider writing an alternative dispute resolution clause that incorporates both of these features.

One caveat: when you draft an arbitration clause, make sure to include a warning that the client is giving up the right to have disputes heard by a judge and jury. You should also encourage the client to seek independent counsel before agreeing to submit any disputes to arbitration. That will foreclose any claim that the client did not give informed consent. Be sure to check the law in your jurisdiction for any additional requirements that may apply.

Reducing Lateral Hiring Risks

While most firms realize they have to do a careful background investigation of a lateral hire’s qualifications and review potential conflicts of interest, other risks are often missed. When a lateral lawyer brings a book of business to a new firm, the firm may find itself doing work for clients it would not have accepted in the first place, and those clients may embroil the new firm in malpractice actions arising from work that started at the old firm and carried over.

Lateral partners also sometimes get into trouble because they fail to follow the new firm’s procedures, for example, clearing conflicts, checking new client quality, or getting the firm’s sign-off on engagement letters.

To avoid these pitfalls, make sure you conduct the same critical quality check on the prospective lateral hire’s clients that you perform for other new clients. It’s also important to educate lateral lawyers on the firm’s policies and procedures, and check to make sure they are following through.

Whenever possible, do not allow new lateral lawyers to handle matters on their own, or matters outside their demonstrated expertise.

E-Discovery Best Practices

This mass of information drives up the cost of defending even routine cases, but it can also create other headaches for defense lawyers. Careless language in emails can be used to create issues of fact that delay or preclude summary judgment, even in cases where the lawyer ultimately prevails.

Alternatively, the absence of information from the electronic record can create opportunities for a wily plaintiff’s lawyer: every communication is documented, the lawyer might argue, except the critical advice that the lawyer now claims was given.

Emails are permanent and almost always must be produced. Your lawyers need to be reminded constantly that email and text messages are no place to ventilate emotions or talk about how difficult or stupid their clients—or colleague—are.

However, in this era of real-time electronic communication about almost everything, judges and juries have come to expect that all important advice, such as whether or not to assert a claim or defense; make, accept or reject a settlement proposal; or even whether or not to retain an expert witness, will be documented somewhere in the electronic record.

There will always be sensitive issues to talk to your client about on the phone or face-to-face, but your case file should also reflect that the conversations took place and define the issues that were addressed.

Following these tips cannot protect your firm from every claim, but they can help put your firm in the best position to efficiently and cost effectively resolve matters when they do arise.

This column does not necessarily reflect the opinion of The Bureau of National Affairs, Inc. or its owners.

Author Information

Richard M. Zielinski is a director at Goulston & Storrs in Boston and New York, where he is a nationally known trial lawyer who handles a wide range of complex, bet-the-company commercial litigation. He is sought out by AmLaw 100 and 200 firms for his specific expertise in legal malpractice defense, partnership disputes and attorney discipline cases.